Natural Gas’s Dilemma – How to Respond to the National Climate Assessment?

The day the world changed concept

On Black Friday, the Trump Administration released Volume II of the National Climate Assessment. Running 1,600 pages, the report is the second volume of the fourth National Climate Assessment, which was mandated by Congress in the late 1980’s and is required to be prepared every four years by scientists from 13 designated government agencies. It is being referred to as NCA4 Vol. II.

According to initial press headlines, the warnings contained in NCA4 Vol. II are dire. They include:

  • The “earth’s climate is now changing faster than at any point in the history of modern civilization, primarily as a result of human activities.”
  • Average sea levels along the United States coast have increased by about 10 inches since the early 20th century as the oceans have warmed and land ice has melted.
  • More than 100 million people in the United States live in places with poor air quality – and climate change will “worsen existing air pollution levels.”
  • Climate change will “disrupt many areas of life” by affecting trade and exacerbating overseas conflicts.

It is conceivable that the initial press reports will turn out to be exaggerated and that the actual language in NCA4 Vol. II is more nuanced than what has been reported. This Update specifically is being written before full examination of the 1,600 pages can be made, although we will certainly correct any errors or omissions in what the press has written about the Assessment as soon as a more fulsome review of the report is possible.

However, for most members of the public, the press reports may be the only information that they will ever receive about the Assessment because it is unlikely that most people will take the time to pore over 1,600 pages of dense text. They will only remember headlines like those listed above. Whether fair or not, this is the environment that the natural gas industry finds itself in during 2018. It must adapt to that reality. While the industry can, and should, pick apart reports and assessments, including NCA4 Vol. II, to the extent that they contain erroneous data or jump to conclusions unwarranted by the evidence, the industry must realize the impact that the overall public mindset has on national, state, and local energy policy and initiatives.

To that end, the industry needs to recalibrate its message. For too long, what little public relations the industry as a whole has engaged in has concentrated almost only on the economic benefits of natural gas to consumers. While certainly not inaccurate, that overly simple message no longer will carry the day. The economic argument now is framed as: “We all can spend $X for energy which will destroy our planet, or we can spend $X time Y and save our planet. Nobody likes paying higher costs for anything, but if it will save our children’s futures, why shouldn’t we do it?”

It is imperative for the industry now to do two things. First, it must concentrate on the environmental case for natural gas, both over other fossil fuels and until so-called renewable energy becomes more universally available. The natural gas industry has a terrific story to tell, but it needs to tell it. The public does not know what the industry has not told it. America leads the world in greenhouse gas reductions since the fracking revolution. We’re producing massive new quantities of oil and gas, yet our greenhouse gas emissions have dropped over 10% to levels not seen since the 1980’s.

There is no harm in admitting that natural gas may not be the be all and end all of energy use to save the planet, but as a bridge fuel it is unsurpassed. If, as NCA4 Vol II states, we must do something positive fast for the environment to lessen any climate change impacts, there is no better way than to build out the natural gas pipeline infrastructure. This will allow the massive switch from coal to natural gas to occur as quickly as possible.

Second, the industry must point out, gently, that currently there is no feasible alternative. All proposals to power our economy via renewables still are speculative at best. Even if it can be done, we are decades away from a realistic plan to power the world with net neutral sources. Germany is a great example of this. In 2010 it refined its renewable energy policy to limit most, if not all, power projects not involving renewables. Despite this, over the last few ytears, German carbon emissions have increased, not decreased. Now, despreate for energy, Germany is helping the Russians build a new pipeline directly to Germany and it is involved with Dow Chemical to erect a new liquefied natural gas power plant in Strade. Good intentions are one thing. NCA4 Vol. II makes it clear they are not enough.

If the industry truly believes in itself and what it’s doing, it should take up the challenge. Engage on the playing field where the battle is taking place. Target our message to the mindset of the audience, and don’t be afraid to amid there are things we don’t know. Despite NCA4 Vol. II’s warnings, fossil fuels will be with us for decades moer, at least. Wishful thinking about promoting more renewables will not change that stark reality. Until such time as renewables can effectively and completely power our modern economy, we all will benefit from clear headed policies that encourage increased natural gas development, transportation and usage while simultaneously establishing a priority to develop and implement a nationwide renewable energy strategy. Isn’t that really what we all should want?

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

Pipelines and Politics

Marcellus Shale Update by Daniel Markind of Flaster Greenberg

The tortured story of the Mariner East 2 Pipeline construction may be coming to an end.  If so, it will end the way it began, mired in controversy and inconsistent with what had been proposed and promised by the developers.

Last Thursday, Energy Transfer Partners announced that it will start shipping natural gas liquids through the pipeline by the end of the year.  That pipeline, however, will look different from what had been expected.  The original plans called for a 16-inch pipeline (Mariner 2X) and a 20-inch pipeline (Mariner 2) that each would run along the same right-of-way as the original Mariner East Pipeline from 1931.  ETP now says it only will construct one pipeline, that will merge an existing 12-inch pipe with certain areas of 16-inch pipe and other areas of 20-inch pipe, and this will be called Mariner East 2.  ETP did not explain why its plans had changed, how much of each size pipe will be used, and why the final route through Delaware and Chester Counties in Pennsylvania will be slightly different than previously stated.

Not surprisingly, local residents and elected officials were not pleased.  Pennsylvania State Senator Andy Dinniman, who has been a longtime critic of the pipeline and has also pointed out instances of ETP’s failure to follow State regulations, released a statement that said in part “the cobbling together of new and antiquated pipelines of varying sizes appears to have the potential for even more safety risks and concerns.”

As Mariner East limps toward the finish line, natural gas prices surged this week to five-year highs.  The early storm combined with low stockpiles to produce spot market prices over $4/Mcf.  With winter still a month away, this should be a good time for the natural gas industry to redouble its efforts to convince the Northeast public about the virtues of the pipeline buildout.  The industry has an excellent case to make, both economically and ecologically.  Stories like Mariner 2 however, put the industry in a deep hole.  It’s hard to convince the public of the environmental benefits when a feature project is recycling antiquated pipe at the last minute without explanation.  If the gas industry wants to thrive in the Marcellus, it might try doing itself a favor and treating the public like the concerned residents most are.

Elsewhere, judicial and administrative rulings affected other Marcellus pipelines.  Last Wednesday, the 4th Circuit Court of Appeals ordered a temporary halt to a water crossing permit in West Virginia needed to build the Atlantic Coast Pipeline from West Virginia to North Carolina.  The Court ruled that two conditions required by the West Virginia Department of Environmental Protection to protect the state’s water quality, including a requirement that the stream crossing must be completed within 72 hours, had not been met.  The three judge panel in Charleston, which in October had issued a similar stay to the Mountain Valley Pipeline, overruled an Army Corps of Engineers grant which was issued following a route change.  This should be worked out without much difficulty, but it adds to the suspicion with which pipeline projects currently are viewed.

Finally, FERC granted the Constitution Pipeline, which would run from Dimock, Pennsylvania to Schoharie County, New York, a two-year extension to complete the project.  The unanimous ruling came from two Democratic commissioners and one Republican commissioner.  The Constitution is much needed and was the source of the original power grab by New York Governor Andrew Cuomo regarding the Section 401 Clean Streams Permit, a power play that has been copied by other activist governors (and in spirit by Premier John Horgan of the Canadian Province of British Columbia).

The ruling may be prophetic.  Just one week after winning reelection, Cuomo is in serious political trouble.  Details of the extraordinary giveaways New York State made to the richest man in the world, Amazon’s Jeff Bezos, so that Amazon would locate one of its new headquarters in Long Island City have put Governor Cuomo squarely on the defensive.  From an Upstate New York perspective, Amazon is another case of Upstaters getting taxed heavily and having their industry stymied so that New York State Government literally can give their money away to a multi-billionaire for the benefit of Downstaters.

New York’s natural prices already are rising.  A difficult winter possibly is approaching and New York needs gas, which it may have to import again from Vladimir Putin.  None of this looks good for Governor Cuomo, especially with the 2020 Presidential Election season approaching.  It is possible that the Governor may have to do something that actually helps the Southern Tier and build the pipeline.  This will begin to unlock the Marcellus potential for the benefit of New York, New England and the entire United States.  If so, it means we could be less dependent on the Russian dictator for our energy.  That should strike all of us as a good thing.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

Pre-Election Update

Marcellus Shale UpdateSeptember 11, 2018 (8)

Just a day before one of the most consequential elections in a generation, there are fewer major races and ballot initiatives pertaining to shale and hydraulic fracturing than in recent years.

Here in Pennsylvania, Democratic Governor Tom Wolf is cruising to reelection.  The most recent polls have him up double digits.  In the 2014 gubernatorial election, then little-known State Treasurer Tom Wolf shot to prominence by running ads focusing on Pennsylvania’s lack of a mineral extraction tax (while ignoring the local impact fee structure) and positioning himself as a foe of the gas industry.  In return, the industry has matched that opposition, and so far has beaten back all attempts to enact an extraction tax, in addition to the local impact fee.

Effective Tuesday, it appears both sides will have four more years to work together and try to figure this out, or not to work together and continue to serve no one’s interest.  They came very close to a resolution in 2017 during the eternal budget negotiations of that year but were ultimately not successful.  Now with Wolf freed from reelection constraints, expect the extraction tax to come back with a vengeance.  Once again, we shall see if the industry considers its most important legislative priority in Pennsylvania to oppose the tax, or whether it decides there are other issues in which it can deal with the Governor that will work better for the industry, the Governor and all Pennsylvanians.

Just north, New York Governor Andrew Cuomo also is way ahead in his reelection bid.  Cuomo, who banned hydraulic fracturing by gubernatorial edict, can rely on the immense power of the downstate environmental lobby without worrying about its effect on the southern tier, where all the gas is and where struggling family farms also are.  However, if there is another severe winter, the failure of Governor Cuomo to address the pipeline issue may cause him trouble.  In order to grow, New York needs gas.  Cuomo has made that very difficult, if not impossible.

He has wanted it both ways.  He can play to his environmental base without having to worry about the economic effect to the State as a whole.  That will cease soon.  As the State, and especially New York City, try to keep growing, they’ll need power.  They’ve closed their nuclear reactors, the hydro from Quebec has not been sufficient, and they’re ideologically opposed to coal.  What’s left?  There is no real plan for renewables and how they’d power New York’s economy.  Could it be that statewide groups like “Chefs Against Fracking” may get their wish, and have to live with the consequences?

The most important ballot initiative is in Colorado.  Proposition 112 would mandate a state setback of 2,500 feet on any drilling operations from most inhabited buildings.  It is five times larger than previous and from the standard nearly everywhere else in the country.  Even in rural areas, plotting 2,500 feet setbacks from any inhabited building would make it very difficult to engage in any drilling activities.

As usual, the industry has spoken with many voices.  Just last week, an internal paper was leaked suggesting the increased setback actually would have little impact on the gas and oil that could be extracted in Colorado.  That was heatedly rebutted with another study – again “leaked” to the press – which stated the original paper was misrepresented.

Despite almost no support from the political establishment on both sides of the aisle, Proposition 112 is leading coming up to election day.  If it passes, expect similar pressure in other states, even in ones with entirely different geography.  Yet, some of the companies, including ones headquartered in Colorado, have been slow to make their case.  This is no surprise given the history of energy company public relations and the industry’s lack of understanding of where its long-term damage may be coming from.

Of course, the major event will be what happens to the US House and Senate.  If we have divided government once again, it will fall to both private industry and local governments to chart the path forward.  For the good of the economic, ecologic, and security health of the country, let’s hope they’re up to the job.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

Foreign Policy Realism and the Importance of Shale

Pennsylvania Shale

Just six months after the Chinese Communist leadership massacred hundreds of their own people at Tiananmen Square in 1989, President George H. W. Bush sent his envoy Brent Scowcroft on a secret mission.  When pictures of National Security Advisor Scowcroft raising glasses for a champagne toast with the Butchers of Beijing leaked out, Americans were outraged.  However, Bush and Scowcroft realized that the Chinese relationship was too important and that the Communist leaders weren’t going anywhere.

Today, critics of President Trump, especially the conservatives, wish he were surrounded by international “realists” like Mr. Scowcroft.  Instead, they see Mike Pompeo and John Bolton.  It is curious, however, that the same crew which praised the Bush/Scowcroft team for their “skillful” handling of the aftermath of Tiananmen and the fall of the Soviet Union now criticize Mr. Trump for not immediately taking steps to isolate Saudi Arabia following what appears to be the murder of a Saudi journalist inside the Saudi consulate in Istanbul, Turkey.

For reasons ranging from oil to Iran, the US/Saudi relationship is important.  Trump has to exert a price from Crown Prince Muhammed bin Salman (MbS), but he has to be careful not to risk the overall relationship.  Whatever decision the President makes will affect the energy industry.  Will the Saudis retaliate by withholding oil supplies?  Will they do the opposite?  Will increased Saudi supply of oil be part of the overall “price” that Mr. Trump extracts from MbS for this sordid affair?  We don’t know the answers yet, and we may never know.

What we do know is that the future of many Pennsylvanians will both impact and be impacted by the intrigue playing out over the Saudi journalist.  That’s a remarkable accomplishment when you think about it.  The Saudis will have to consider places like Washington County and Tunkhannock, Pennsylvania in their calculations of how to respond to American anger.  Who would have thought that ten years ago?

While the international situation plays out, elections loom in this country.  Fewer than three weeks before election day, it looks increasingly likely that Pennsylvania Governor Tom Wolf will win a second term.  That will put both the Governor and the gas industry in a bind.  The industry has been loath to engage with the Governor after he bludgeoned them during his 2014 campaign and after they had some dealings with him in the early days of his administration that the industry felt were not up front.  The Governor is bitter that the industry fought him so hard on his extraction tax, robbing him of one of his most important campaign promises.

Both the industry and the Governor may be in a pivotal international position in a few months if things spin out of control in the Middle East or elsewhere.  Pennsylvania gas production may prove to be a critical bulwark against mass economic dislocation that would please no one as much as the Russians and the Iranians.

First comes the approaching winter.  New York and New England are more vulnerable than ever to energy shortages due to their short-sighted policies on pipeline infrastructure and their closing of their nuclear plants.  Will they have to import gas again from Russia?  If they do it will it limit the President’s ability to deal with Russian involvement in the Middle East? What if the Saudis respond to American pressure by just moving closer to Vladimir Putin?  Meanwhile, as this is happening will New Englanders be forced again to go hat in hand to Putin to save them from freezing to death this winter?  It could happen.  By making themselves vulnerable to energy shocks – especially when the answer is five hours away in Pennsylvania, the New Englanders have weakened us all.  Domestic miscalculations often have international implications.

In Pennsylvania we have a separate problem.  Pennsylvania’s shale producers are notorious for their inability to develop common positions.  This limits their effectiveness when dealing with state government.   Assuming he wins, Governor Wolf will owe the industry nothing for his reelection.  Still, the industry provides a critical service at an unsettled time.  There is a lot that can be accomplished on both sides given any willingness to engage based on the new international and electoral realities.  There’s no time like the present.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

 

The DRBC and the Limits of Administrative Agency Power

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There are two lessons from the petition by Pennsylvania State Senators Lisa Baker and Gene Yaw and Senate President Pro Tempore Joseph Scarnatti to intervene on behalf of a Wayne County landowner in his challenge to new rules by the Delaware River Basin Commission that would ban hydraulic fracturing in the entire Basin. The first is that there is a limit to how far administrative agencies can go and how far their power extends.  The second is that it is imperative for the industry to engage with the citizens of the State to enforce its rights and not just speak to some residents or concentrate on only one issue.

The move by the State Senators is the latest in a series of maneuvers related to proposed rules by the DRBC that stretch back years. In their current manifestation, the DRBC announced on September 13, 2017 it would publish new rules that would ban fracking throughout the Basin. The Commission claimed that fracking anywhere in the Basin constitutes a “water project” that is within the DRBC’s power to regulate. Earlier, in 2016, a landowner in Wayne County had sued the DRBC claiming that it did not have jurisdiction to prevent the drilling of a natural gas well on his property. The lawsuit was dismissed in US District Court but overturned by the Third Circuit, which in July 2018 sent it back to the District Court.

The current landowner argues that the DRBC interprets the term “Project” so broadly that it can regulate anything that happens within the Basin. I made that same argument at a public meeting in Philadelphia in January 2018. One person from the American Petroleum Institute came, but nobody from any of the natural gas producers showed up. Because there was no one there to advance the industry position, all we heard was a series of truths, half-truths and plain falsehoods. It was a propaganda session for those who oppose any natural gas development. Given a chance to engage with Southeastern Pennsylvanians who know little about the subject, the energy industry punted. It was yet another missed opportunity.

The industry could have made the point that the DRBC’s position is so overbroad it puts them in virtual control of, or at least gives them a veto over, any development, whether fracking related or not, that happens anywhere within the Basin – which extends the length of the 330 mile Delaware River. Supporters of the ban were thrilled, but cooler heads in the Third Circuit asked whether the 1961 interstate compact granting power to the DRBC was meant to be so broad. Using the DRBC standard, it could prevent the erection of a gas station 30 miles away from the river.

All three Pennsylvania State Senators seeking to intervene are Republican, but we need to ask ourselves whether this truly is a partisan issue. Are our citizens truly comfortable with an administrative agency comprised of five unelected but appointed individuals claiming so much power to regulate our lives, even for activities outside the natural gas industry? There are those who think fracking should not be permitted in the area within the jurisdiction of the DRBC – or anywhere else for that matter. Regardless, they should not be so sanguine about the enormous power grab being attempted by the DRBC.  Over subscribed power has a way of appearing fickle when the next project comes along that we do not oppose but actually support.

One other area where those opposed to natural gas development should not be so sanguine is in their ultimate reliance on Russian gas exports for their winter power.  Heading into the 2018-9 winter, New York and New England may be even more reliant on gas imports than they were last winter. As you recall, that meant Boston had to turn to Moscow for gas drilled in the environmentally sensitive Arctic. The Russian supply may not be as available this winter. While all eyes have been focused on the Supreme Court confirmation, the United States and Russia are edging closer to confrontation in the Middle East.

Last week, Israel attacked a Syrian rocket facility in Latakia, on the Mediterranean coast north of Lebanon.  The area is well outside of the normal Israeli area of operation, and indicates the importance the Israelis placed on the target. Syrian anti-aircraft guns erupted, missing all of the Israeli planes but shooting down a Russian military transport plane, killing 15 Russians. The Russian military blamed Israel, claiming it did not follow the normal rules for informing Russia when Israel conducts military operations in Syria.  Although Russian President Putin played down the issue, the Russian military continued to accuse Israel. Last week Russia announced that new, more sophisticated anti-aircraft weapons were being transferred to Syria. National Security Advisor John Bolton warned Russia that such a transfer would be a “significant escalation”.

Oil prices rose over $70/barrel. While not moving in step with natural gas prices, the coming of further Iran sanctions adds to the price pressure on fuel. If Russia and the United States grow further estranged in the Middle East, it could affect the ability of Massachusetts to call on Russian gas now that it has effectively banned Pennsylvania gas. Both short term and long term, I doubt that is a good move economically, ecologically or national security-wise for New Englanders.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

The Lawrence, MA Pipeline Explosions

20180914_Marcellus Shale Update

On January 11, 1912, women weavers shut down the Everett Mill in Lawrence, Massachusetts.  Earlier that day, they opened their pay envelopes to find their wages cut by 4%.

A recently enacted Massachusetts law had reduced the workweek for women and children from 56 hours to 54. Mill owners reacted by cutting the pay of their already lowly-paid workers.  The women revolted.

The strike soon engulfed the city.  Workers slashed machine belts, threads and cloth. Mill owners hired strike breakers and militiamen.  That only ratcheted up the tension.

Known in history as the “Bread and Roses Strike”, the bitter work stoppage lasted nine weeks.  When it was over, Congressional hearings had galvanized the public against the working conditions allowed by the owners, and the workers gained a 15% pay raise.  The political earthquake would be one of the seminal moments of the American labor movement.

A century later, a more literal earthquake in Lawrence, Massachusetts may portend a seminal movement for the natural gas industry.

Just three days after a gas pipeline exploded in Western Pennsylvania, at least 70 explosions tore through a Columbia Gas pipeline in Lawrence.  Fires broke out throughout the city.  One person is dead, at least twelve are injured, and 60-100 homes burned.  A large geographic area around Lawrence has been evacuated.

It is far too early to tell what caused the explosions, but certain things are clear.

First, our national infrastructure is deplorable.  Decades of disinvestment leave us with power lines, electrical grids, roads, airports and bridges that would embarrass a third world country.  The nation is falling apart.

Second, it is the responsibility of the owners of natural gas pipelines to ensure their safety.  That means adequately maintaining lines that already exist, properly building new pipelines, and informing the authorities when pipelines begin to decay or show damage.

Third, pipelines carrying pressurized gas are inherently dangerous.  To deny that is to deny reality.  It is up to the owners of the pipelines to show that they are safe, and not up to the public to show they are not.

Fourth, “renewable energy” will not solve this transmission problem.  Solar and wind power can create electricity, but it takes high-tension lines to transmit it.  To those who propose offshore solar and wind as a major source of the nation’s power, imagine the situation in the Carolinas right now if they obtained a significant amount of their power through offshore solar and wind farms transmitted by high-tension lines.  Even inland, think about the aftermath of Hurricane Florence in a “renewable energy’ world.  How many of those solar and wind installations would survive intact, and what would be the result of the storm on the transmission lines?  For how long would the area be unlivable?

Fifth, given modern political realities, the natural gas industry in the Northeast could be in serious trouble.  It must get a handle on its pipeline situation.  Andrew Cuomo defeated Cynthia Nixon in the New York Gubernatorial primary, but Nixon pushed Cuomo even further to the left than before.  With two pipelines blowing up in four days, what chance does the industry have of convincing the public or political leaders that natural gas pipelines are a good idea?

For the last decade, gas industry workers have produced an energy revolution in the Marcellus Region.  Whole parts of Pennsylvania, Ohio and West Virginia that faced economic depression have been revitalized; the grip on our economic lifeline of tyrannical regimes in the Middle East, Africa, South America and Russia has been broken.  American consumers throughout the country have saved tens of billions in energy costs.

All of that will be at risk if the gas industry doesn’t get serious about policing its own.  The boards of directors of our major gas producers should think about the tens of billions of dollars in investment they’ve made in our region.  Are they prepared to see it vanish because they refused to hold the pipeline companies to the highest standards of construction and maintenance?  If they abdicate their responsibility at this most delicate moment, they will have only themselves to blame.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.

When Gas Pipelines Explode

20180911_Marcellus Shale Update

At 5:00 a.m. yesterday, a portion of the newly-built Revolution pipeline exploded in Center Township, Beaver County, western Pennsylvania.  Luckily nobody was hurt, but one home, two garages, a barn and several vehicles were destroyed.  Nearby residents described what at first sounded like an airplane crash or a freight train, then a fireball.  The fire burned out by 7:00 a.m., but parts of Interstate 376 were closed for hours and the Central Valley school district cancelled classes.

The Revolution Pipeline is a 24 inch gathering line owned by the star-crossed Energy Transfer Partners.  It is used to feed ETP’s Rover and Mariner East 2 pipelines.  Officials believe that a mudslide occurred in the vicinity and may have caused the explosion.

ETP of course, is the same company that has had such difficulty with Mariner East 2.  It is instructive that fear of moving earth in the form of sinkholes in Chester County caused the suspension of construction of Mariner East 2 earlier this year.  If a mudslide was sufficient to cause such a fireball in the Revolution, then ETP has some serious explaining to do about how Mariner East 2 will be safe given the geology of Chester County.

As I’ve written numerous times before, ETP has done itself no favors with its dismissive attitude toward governmental oversight and regulation.  Now, at perhaps the worst possible time (right before an election and with Mariner East 2 still not completed and operational) and with little to no goodwill among Pennsylvania State legislators or DEP officials, ETP must show how and why the Revolution exploded, why this won’t happen again and why residents near Mariner East 2 shouldn’t be suspicious of that pipeline.

The leaders of this demand for explanation should come from the industry itself.  The people at the Marcellus Shale Coalition and at the major producers like Cabot, Range Resources, Chesapeake and EQT need to be insisting that all work on such important projects be done correctly, without cutting corners, with maximum transparency and giving safety ultimate priority.  It is their industry that is at risk, and all of our futures.  It must be the industry standard to insist that all companies use best practices and to demand that any company which fails to do so not be allowed to continue operating in Pennsylvania.

There is no risk free method of energy generation and transmission.  We all know about the dangers of nuclear power.  You can generate electricity by solar and wind but you need dangerous high tension wires to transmit it.  Given the modern political realities regarding fracking and natural gas, however, it is in the industry’s interest to show that it will not tolerate anyone who won’t walk the extra mile for the safety of all Pennsylvanians.

In more mundane legal news, last week the industry received a split decision from Pennsylvania Commonwealth Court.  Ruling in the case of Marcellus Shale Coalition v. Pennsylvania Department of Environmental Protection, the Court struck down part of the Act 78a Regulations  which stated that as part of the well-permitting process the DEP had to consider comments and recommendations submitted by municipalities.

The background is a little confusing.  Previously in the Robinson case, the Pennsylvania Supreme Court invalidated what was known as Section 3215(d) of the regulations that said the Environmental Quality Board of the DEP “may” take such comments into account.  This was considered improperly minimizing local input.  The new regulation sought to cure this defect, but the Court said this fix would not work because the clause in the Act 13 Oil and Gas Law that gave the DEP the right to promulgate such regulations in the first place no longer exists.

The result of the ruling is hard to predict.  The Court also said the DEP did not exceed its authority in the regulations when it allowed applicants and public resource agencies, including municipalities, to provide information that could assist the Agency in deciding whether or not to grant a permit.  A lot of this seems inherently contradictory.

On the plus side for the industry, the Court ruled that the expansion of the definition of “public resources” in the Act 78a Regulations to include “common areas of a school’s property” and “playgrounds” was unlawful as it was “unduly burdensome” on the applicants.  The Court noted that a McDonald’s playground or a school parking lot utilized as a playground would be covered by this definition.  These uses were not of the same class or nature as a scenic river or public park.

Finally, north and east of the Pennsylvania border New York State goes to the polls today for its primary election.  Two-term Governor Andrew Cuomo has run an uninspired campaign against challenger Cynthia Nixon.  Ms. Nixon, known most for her role in Sex and the City, has forced Cuomo even more to the left than before.  Specifically, Nixon proposes that New York adopt a law requiring it to obtain all of its energy through renewable sources by 2050.  In her platform, Ms. Nixon criticizes the Governor by saying “his plan still won’t fully halt all new fossil fuel infrastructure.”

Cuomo’s policies already have led to a halt in the pipeline infrastructure for New York and New England, as well as a stoppage of much power plant construction.  Events like today’s explosion in western Pennsylvania can only add to the pressure on natural gas proponents.  Unfortunately for New York, their governmental officials have been overly optimistic in describing the current science for renewable energy.  New York officials will shut down Indian Point Nuclear Power Plant by 2021.  Given Massachusetts’s sad experience in predicting how it will make up the energy shortfall from mothballed nuclear plants, expect New York’s energy situation to become dire quite soon.

With Massachusetts likely to import more natural gas from Russia this winter, New Jersey and Maryland officials limiting construction of offshore wind and solar farms and Pennsylvania natural gas pipelines exploding, the time is more critical than ever to have an honest conversation on energy.  It needs to be led not by Cynthia Nixon, Josh Fox or the executives at ETP but by people who recognize the pluses and minuses of all forms of energy generation, storage and transmission, and who are not afraid to ask the stupid questions.

Questions? Let Dan know.

Daniel Markind of Flaster Greenberg

Daniel Markind is a shareholder at Flaster Greenberg PC with over 35 years of experience as a real estate and corporate transactional attorney. He has represented individuals and companies in the energy industry for over 20 years. Dan is a frequent lecturer on Marcellus Shale and other mineral extraction issues and is regularly asked to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.