Is Pipeline Opposition Delaying Appalachian Gas Price Recovery By Prolonging the Negative Basis Differential?: This and Other Pipeline Opposition Issues

Is Pipeline Opposition Delaying Appalachian Gas Price Recovery By Prolonging the Negative Basis Differential? This and Other Pipeline Opposition Issues\

The answer I think is YES. The Constitution Pipeline going north from northeastern Pennsylvania through upstate New York to New England initially had a planned in service date of early 2015. Now it appears it will be late 2017 due to FERC delays regarding environmental impacts. These delays were undoubtedly influenced by the significant public opposition to this and virtually every other major pipeline project. It is no secret that environmentalists are stepping up protests of pipelines with one goal being getting them delayed. Basically, it is a pretty common environmentalist tactic. When I heard CELDF lawyer and founder Thomas Linzey speak recently he stated that their common approach to any project they were asked by the opposing public (in actuality usually a small group of activists although it varies by project) to try and stop usually involved finding some small technicality which they could use not to stop the project but to delay it. Usually the technicality could easily be addressed by the company promoting the project but the delays could be significant. In an odd sort of way it reminded me of terrorists or saboteurs blowing something up and calling it a victory.

Perhaps the issue that spurred more anti-pipeline activism was the prominent opposition to the Keystone XL Pipeline but I really think that was a different issue. For one it was set to deliver very large quantities of foreign oil that would be harder to clean up if spilled (due to the bitumen) – oil that is produced in a fairly carbon intensive process so the overall carbon and environmental footprints of tar sands oil are significantly higher than typical convention or unconventional shale oil. Proponents, like author Ezra Levine could argue that it is “ethical oil” from a friendly country rather than “conflict oil” from the Middle East and weighing all of these factors makes it quite debatable. 

For me personally, if these pipeline delays are delaying Appalachian price recovery, they are delaying a return to drilling, which is basically keeping me from being employed as most of my work is tied to drilling wells. Taking away one’s livelihood is pretty personal one could say. Pipeline in-service date delays mean for many of us, delays in getting our paychecks.

Modern pipelines are well built with long established safety features and best practices. New methods of leak and corrosion detection offer added protection. Older pipelines are generally safe but are of course more vulnerable to problems. I have a pretty old 20” gas transportation pipeline going through my property and it has never been a problem. It is not close enough to any houses in the near vicinity to cause damage if there was an explosion. There was an explosion on one of these old pipelines in the next county to the north that did cause significant damage to a few houses and one in West Virginia that damaged part of the Interstate so explosions do occur, probably from small leaks that somehow get sparked. But generally speaking they are rare and with better leak and corrosion detection and repair capabilities they should become rarer. 

One issue that emboldens anti-pipeline activists is that some pipelines are destined to export gas and natural gas liquids. In particular the Sunoco pipeline slated to take up to 450,000 Bbls per day of propane and butane to Marcus Hook, PA, to be exported, is targeted as an unnecessary pipeline by activists, and not worthy of eminent domain status. There may be a reasonable argument there about eminent domain. The Obama administration has been supportive of nat gas and NGL exports and there are geopolitical advantages to LNG exports, particularly for European countries. Many of the pipeline routes have been altered by FERC (Federal Energy Regulatory Commission who has domain over interstate pieplines) and others and the pipeline companies have been compliant with such changes but an issue with pipelines is that one or two small landowner holdouts to an approved route can disrupt a major project without proof that it would cause any lasting harm.

Meanwhile, those who want to make Philadelphia a regional and international energy hub are calling for more pipelines. The recently stated goal of a couple Philadelphia energy and business groups is to double the amount of natural gas and natural gas liquids used every year in the tri-state region of PA, Delaware, and New Jersey. Current usage is at 3BCF per day. The newly available energy could supply factories that make direct use of natural gas: fertilizer, aluminum, paper, and glass, for instance. One company has plans for a new cogeneration nat gas power plant but has yet to secure gas supply in order to move forward with the plant. That is one case, likely among several others, where one could argue that opposition to pipelines is delaying coal-to-gas switching and thus delaying guaranteed reductions in carbon emissions, not to mention air pollutants and coal ash accumulations. While so-called clean energy advocates are arguing for more solar and wind instead of gas they are also aiding continued high carbon emissions by delaying gas projects. Are they “climate criminals?” 

Ground Zero for the pipeline wars is Pennsylvania and to a slightly lesser extent Ohio and West Virginia. 90% of new natural gas production is occurring in these areas and with newly identified vast supplies that is likely to remain the case. Even so, many of the opposition is coming from other states, particularly in the northeast where the anti-fracking contingency is powerful and has been emboldened by success in banning fracking statewide in New York and Vermont.  Many projects have been delayed and have had to postpone their estimated in-service dates.

The results of pipeline opposition are delays in gas availability for many, including residents and businesses that would save substantial amounts of money over fuel oil and electricity for heat. There are delays in gas availability for power plants and industries too. These delays prolong the Appalachian gas glut which hurts local gas producers and keeps them from developing the needed carbon emissions reducing resource. CO2 reductions are delayed. Natural gas industry recovery is delayed. Business health of companies ancillary to the nat gas industry is delayed. Overall regional economic improvements are delayed. Are these desirable? Are the specific concerns of pipeline activists warranted enough to delay these processes? I would say in most cases, no, although there may be legitimate issues here and there. Most of these tactics have to do with politics: the so-called “democracy over corporations” issue that pits local opposition (which can be the consensus but not always) against state law and in the case of pipelines against federal law as well. There is a strong component of NIMBYism as well. With the help of dedicated environmental lawyers and many regional activist orgs these well-organized activists have a pretty big support network with the stated goal of banning and delaying industrial activity. These groups want public participation. They want a voice in the process. That would not be an issue if they understood the risks, the technologies, and the impact. In reality they don’t want participation, they want more leverage to ban and delay. Little delays can become big delays since in some places the provisions of the Endangered Species Act prohibit tree cutting for six months – from April 1^st to Nov 1^st. This tactic in combination with the delay in obtaining a state water quality permit from the New York Department of Environmental Conservation (due to pressure from anti-pipeline environmental groups) has resulted in a one year delay of the Constitution Pipeline, putting the pipeline nearly 2.5 years behind schedule. That is perhaps a victory for the environmentalists but such delays are a defeat to those of us reliant on improving gas prices.  

Some anti-pipeline activist calling for more public participation, creation of a FERC public participation office (an idea from 1978), and funds set aside (get this) to pay successful public opposition groups to pipelines (presumably for legal and other costs) through funds set aside (citing a similar type fund in California). Speaking of money set aside, the pipeline companies do set aside money for to fix any impact they would have on roads and other local infrastructure (usually an overall improvement to the area from previous to pipeline development). Pipelines also bring vast sums of money to local communities in the form of ad valorum tax revenue. Some of this is well into the hundreds of millions of dollars for larger projects. While stories about someone having maple trees that produce syrup cut on their property for a pipeline may make people sympathetic, if there was a previous pipeline right-of-way on the property the owners should have already been aware of the possibility. As a landowner having a significant size pipeline running through my property I can say the environmental impact seems to be pretty minimal overall, after the disruption of construction, of course.  Hunters like to shoot deer along the pipeline since there is a little open space to get a good shot. I am not a hunter nor do I allow it here and find this a lazy way to do it. Pipeline right-of-ways actually make nice walkways through wooded areas. While environmentalists might claim it fragments the forest I think the widths (usually about 30 ft) are way too small to cause any significant ecosystem fragmentation. The deer like to eat the grass and greenery along the ROW. 

As I contemplate re-entering the low wage, possibly minimum wage job market after 24 years of experience in a professional capacity I can’t help but wonder about the hatred of corporations so entrenched in these opposition groups. This is playing out quite much in the current presidential campaigns, particularly on the left. Corporations, I think, do bear some of the blame for this: insane CEO pay, too much focus on short-term profits, poor public relations, lax safety and environmental cultures, and lack of preparedness for all contingencies are some of the issues. These issues should be addressed. Some of them are being addressed. If they are addressed satisfactorily then opposition to corporate activity will be weakened.  

  

References:

Too Big to Fight: In PA Pipeline Wars, Landowners Lose Before Judge Rules On Eminent Domain – by Candy Woodall and Colin Deppen, posted on Penn Live, March 31, 2016

Philadelphia’s Shale Boosters Want More Pipelines – by Susan Phillips, in State Impact (NPR), March 29, 2016

Pipelines: The New Battleground Over Fracking – by Susan Phillips, in State Impact (NPR), 

Massachusetts Attorney General Picks Up Fight Against Natural Gas Pipeline That Would Serve Connecticut – by Clarence Fanto, in New Haven Register, March 21, 2016

Fight Over Proposed Pipeline Continues, in Binghamton Home Page (Binghamtohomepage.com), March 21, 2016

Constitution Pipeline Delayed Absent NY Permit – by Jon Campbell, at pressconnects.com, March 2016