Is West Virginia Prioritizing The Past Over The Future?

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West Virginia Governor Jim Justice made one of the most curious gubernatorial moves in recent years recently, when he vetoed a bill that would have directed money to plug the Mountain State’s approximately 4,000 abandoned gas wells.

The bill, which had strong bipartisan support, would have decreased the State’s severance tax on low producing wells and directed other monies to a fund for the plugging of the abandoned ones.

To show how strong support was for the legislation, the House passed the bill 89-11 and the Senate 33-1. At a time when different political camps have difficulty agreeing on anything, the bill was supported by the oil and gas industry, landowners, the West Virginia Farm Bureau, and the environmental community. That kind of agreement from notoriously warring factions is almost unheard of.

Given that level and breadth of support, why did Governor Justice veto the bill? In his veto letter, the Governor objected to the tax rate cut on the low-producing wells and stated that the money to plug the abandoned wells should come from West Virginia’s General Fund. That seems a curious position given the positive environmental goal and the amount of public support.

Some see a nefarious purpose behind the Governor’s move. The “Marcellus Drilling News” suggested that the Governor vetoed the bill as a payoff to his supporters in the coal industry, specifically big coal mine operator Robert Murray. Indeed, last week the Governor signed a bill lowering the tax rate on steam coal used in power plants, but then turned around and rejected a cut in the gas tax rate payable by low producing wells and raising other funds to help clean up West Virginia.

It’s not a pretty picture. At best, the Governor committed political malpractice by blindsiding nearly everyone in the State. At worst, the Governor made a terrible choice to reward certain large coal operators at the expense of the citizens of West Virginia.

This all comes at a time when West Virginia is about to receive a massive $2.5 billion investment in an ethane cracker plant to support the gas industry. How Governor Justice explains his veto to the industry that is plowing money and resources into his economically depressed State will be interesting to watch in the weeks to come.

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.

Marcellus Shale Update – When the Snow Turns Green

When the snow turns green in russia

Residents of the Siberian town of Pervouralsk have been horrified by a sight they never expected – green colored snow.  Vladimir Putin’s Russia, in the same way as the Communist Soviet Union, industrializes with little regard to the environment.  Now, pollution from a chrome factory in Pervouralsk turns snow a poisonous green.  Elsewhere in Siberia, pollution from open air coal pits in Kemerovo falls as toxic black snow and makes streets black and grimy.  Meanwhile, residents of Sibai in the Urals must wear masks due to choking smog from a copper factory.  Protests have broken out throughout Siberia and elsewhere.  Meanwhile, the Russian citizens’ trust in Putin has plummeted more than 33 percent since 2006.  The environmental mess, together with a stagnant economy and related issues, means that Putin now has popularity ratings south of Donald Trump’s.

The Russian environmental disaster shows the folly of American states like Massachusetts and New York that rely in any way on Russian oil or natural gas, then claim that this is environmentally superior to building pipelines from the Marcellus Basin.  Simultaneously, it’s a cautionary tale for the pipeline builders and the natural gas industry themselves about the importance of environmental responsibility in their operations.

New York and New England continue to pursue policies destined to produce both energy deficiency and environmental destruction.  The Boston Globe reported that two Massachusetts towns, Holyoke and Middleborough, have issued moratoria on new natural gas hookups due to lack of supply.  This follows Con Edison’s moratorium in Westchester County, New York.

Massachusetts’s supply constraint is the result of the Bay State’s failure to allow the build out of natural gas pipelines from the Marcellus Shale region of Northeastern Pennsylvania.  The Globe warned that many energy experts believe that while the State’s two largest gas suppliers, National Grid and Eversource, claim their natural gas supplies are adequate for now, that won’t last long.

Environmentalists in Massachusetts call for increasing supplies from Canadian hydropower and offshore wind, but fail to state what the grid to store and transmit that power would look like.  Skeptics also note that whenever a large offshore wind farm project is proposed there is mass opposition from many of the same environmentalists who oppose shale drilling.  Martha’s Vineyard, Nantucket, the New Jersey Shore, Chesapeake Bay, Vermont and others are places where offshore wind farms have been proposed but dropped due to local opposition.  Where exactly do we build the wind farms that the environmentalists want?

It is this type of idealistic, irrational thinking that results in environmental destruction.  Alexandria Ocasio-Cortez’s “Green New Deal” calls for eliminating fossil fuels in ten years.  Were this concept to pass, how would that occur?  Presumably, a politically appointed group would be authorized to decide unilaterally how and where energy is created, where transmission lines go, and how it gets stored.  To make this work at all, there could be little opportunity for public input.  There wouldn’t be enough time.  But how happy could the public possibly be ceding this kind of decision making to a politically appointed body?  And what about things like eminent domain and the need to seize private property for wind turbines, solar panels and the like; where and how will power storage occur when battery storage technology simply does not exist at present to meet the demands of the system; etc.  The result would be a disaster for our environment, if it could even work at all which is most dubious.

Of course, the opposite also is true.  The energy industry must show continually that it can preserve the environment as it performs its tasks.  Those who wish to see the end of the fossil fuel industry will not hesitate to point to every mistake that the industry makes as rationalization for its elimination.  This week the CEO of Energy Transfer Partners, the company building the Mariner East 2 pipeline, admitted that “we’ve made mistakes and we are correcting those mistakes and will not make those mistakes again.”  Let’s hope he means it.  Mariner East has been plagued with problems, and ETP has done little before to show it cares or that it even is aware of the depth of suspicion that exists toward its performance.

From a political standpoint, environmental degradation can have enormous consequences.  Putin, already facing dissention over his economic performance, must deal with the people who can’t understand why their snow now is poisonous.  The air in Beijing is so bad that Chinese Communist leaders no longer can just add more factories to China’s enormous metropolises.  Ironically, the pollution itself is the only thing capable of putting a stop to its creation.

It remains true that the greatest environmental destruction occurs in places wholly run by government.  The Massachusetts and Mariner situations remind us we need to seek the proper balance.  That will be a continuous but evolving process in which both public and private interests must participate.  Without both, our planet will not be safe.

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.

Venezuela, Iran and American National Failure

While President Trump and House Speaker Pelosi bicker about nonsense, two very important parts of the world are on a hair trigger today.

The country with the largest supply of oil reserves, Venezuela, is teetering on the brink of revolution, while the country with the fourth largest oil reserves, Iran, is threatening all out war against Israel over Israeli bombing of Iranian positions in Syria.  Both of these situations could spiral out of control any minute, with profound consequences for the world’s energy supply, American national interests, and indeed our own security.

Both Iran and Venezuela are led by deeply unpopular governments.  In Venezuela, it is the socialist government of Nicolás Maduro.  In Iran, it is the theocratic government of Ali Khamenei.  Khamenei has as his underpinnings the concept of Shiite Islamic Fundamentalism.  Maduro only has his economic system.

Both governments have run their countries into the ground.  Khamenei has spent so much of his country’s wealth on seeking nuclear weapons and financing military adventures – creating Hezbollah in Lebanon, arming Hamas in Gaza, backing Assad in Syria and supporting the Houthi Rebels in Yemen – that the world slapped sanctions on the country.  President Obama, whose foreign policy team was Class D at best, lifted those sanctions in 2015 as part of a multi-party Joint Comprehensive Plan of Action, but President Trump reestablished them in 2018.

Maduro, successor to the socialist revolution of Hugo Chavez, has established government control over the energy sector and many other parts of the Venezuelan economy.  In doing so, he has turned what once was one of the richest countries in South America into such an economic basket case that the average Venezuelan has lost over twenty pounds in the last year from malnutrition and starvation.

In a desperate attempt to stave off national default on Venezuela’s foreign debt, Maduro has given the Russians large ownership interests in his country’s energy industry and raised the possibility of establishing a Russian military base in Venezuela.  That would be the first in the Western Hemisphere and a direct challenge to the Monroe Doctrine.

Khamenei at least can fall back on his religious fanatical supporters.  Large demonstrations broke out last year in many Iranian cities, but the Iranian Revolutionary Guard put them down.  The mullahs use a combination of religious fervor and selective payments to favored political and military supporters to maintain their control.

Maduro has no such religious backing.  That he continues to hold power shows two things.  First, there remains a deep seated sense of class division in Venezuela to the point that many people will accept the catastrophic state of the economy so long as those who formerly were on the top of the economic and social pyramid no longer remain there.  Second, the opposition is so fractured it has been unable to convince the junior officers in the Venezuelan military and the regular soldiers, who after all are the ones that must put down any rebellions, that Maduro is driving the country to ruin and they can provide a better future.  Whatever happens, this does not portend well for the future.  The Venezuelan energy sector is so rundown it will take time, and massive investment, to rehabilitate.

In the Middle East, Iran has been trying to establish a permanent military presence in Syria, right on Israel’s border.  Israel, facing Hezbollah in the North and Hamas in the South, has reached its red line.  It has begun carrying out continuous military raids against Iranian positions in Syria.

Yesterday, Maduro broke off diplomatic relations with the United States.  Also yesterday, Iranian Air Force Commander Brigadier General Azaz Nasirzadeh stated that the Iranian Air Force is “ready and impatient to confront the Zionist regime and eliminate it from the Earth.”  Of course, both Iran’s and Israel’s actions are complicated by the large presence of Russia in Syria, another byproduct of incoherent Obama era foreign policy.

So now we have two grave crises happening simultaneously in different parts of the globe affecting the world’s largest sources of energy.  Attempting to manage this will be an untried President with little respect at home or abroad and with a government partially shut down over a petty squabble between two politicos, each of whom make themselves look smaller by the minute.  Fortunately, we have our shale gas and oil to cushion the economic blow sure to come from such international uncertainty, but we still can’t move the oil and gas where we need it.  Despite an abundance of domestic energy, whole geographic areas of our nation, most notably New York and New England, rely on imports.  If President Trump embargoes all Venezuelan oil, who will pick up the slack?  Putin?

All of this was foreseeable.  That it is happening at the same time may be some bad luck, but anyone looking at the world over the last few years could anticipate these problems occurring.  The fact that as a nation we are where we are is an example of national failure.  Perhaps it partially explains why both political parties revolted against their establishment candidates in 2016, and why they might do so again in 2020.

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 Governors Face Real World Energy Choices

Hand holding light bulb in front of global show the world's consumption with icons energy sources for renewable, sustainable development. Ecology concept

Last week, New York City area utility Consolidated Edison notified regulators that, as of March 15, it would accept no new natural gas customers in Westchester County due to supply shortages.  It is possible that cutoffs in the City itself may follow.  While this is happening, New York City is requiring customers to switch out of dirtier burning fuel oil.  Most are seeking natural gas.  Already, over 5000 buildings in the City have made the switch.  Meanwhile, as prior commentary in this blog has noted, New York Governor Andrew Cuomo and his administration have stymied all attempts to build a new pipeline that would be capable of supplying the City and other areas, like New England, with plentiful and inexpensive natural gas from the nearby Marcellus Shale region.

Once again we are seeing the Alice in Wonderland effects of New York State environmental incoherence.  It desperately needs energy to grow, and also to improve environmental air quality, but does everything possible to prevent that energy from being available.

New York’s inconsistent energy policies make Amazon’s decision to build massively in Long Island City quite curious.  The metropolitan New York area has numerous advantages, but it simply may not have access to enough energy needed to power the growth it seeks.

The energy dilemma cannot just be wished away.  The implications of not building pipelines and securing our energy future are real and starting to bite.  Without reliable energy supply, regions can’t grow.  Without growth, there will be no jobs for an expanding population.  Intellectual discussions and arguments about the large job opportunities available in the renewable sector are nice, but where are they?  More to the point, where is the consistent supply of energy that will be provided by these renewable sources?

Out west in Oregon, newly reelected Governor Kate Brown, who ran on a progressive, clean energy platform, faces a challenge from her left with a new Clean Energy Jobs bill.  Back in 2007, Oregon set goals for reducing its carbon emissions in 2010, 2020 and 2050.  It met its goals for 2010 but admits it will not do so for 2020.  In fact, the Oregon Global Warming Commission predicts the State will over-pollute in 2020 by 20%.  There is an interim goal for 2035, but lawmakers may choose to ignore that and concentrate on 2050.  This has environmental advocates alarmed.

Ironically, one proven way for the environmental advocates to reduce CO2 emissions is through increased use of natural gas.  They have not been inclined to accept that option, however, putting all their eggs in the basket of renewables.  Governor Brown then likely will face the problem Governor Cuomo faces.  She will run a left-leaning state with a well-meaning yet unrealistic program for achieving goals about which most of us can agree.  Governor Cuomo has chosen one path.  It won him electoral platitudes but now faces future trauma.  It will be interesting to see which way Governor Brown goes.

In Pennsylvania, the long battle over the Mariner East 2 pipeline appears over.  Last week the Public Utility Commission ruled that a landowner group had failed to show that safety concerns necessitated an emergency shutdown of the pipeline.  In typical fashion for this matter, two days later another sinkhole exposed a section of the older Mariner 1 pipeline.  Chester County emergency service officials stressed there was no damage to the pipeline and no danger, but the entire situation continues to be messy and delicate.  It does not help public perception that a horrific gasoline pipeline explosion in central Mexico predated the Mariner 1 sinkhole occurrence by a few days.

Internationally, and ironically, the country with the world’s largest proven oil reserves, Venezuela, falls deeper and deeper into turmoil.  President Nicolas Maduro’s security forces put down another mini-uprising Monday, but nationwide demonstrations have been called for Wednesday, the anniversary of the end of the most recent military dictatorship in 1958.  Venezuela’s oil production has plummeted along with the rest of its economy, and President Maduro has given away large amounts of it to Russia in exchange for needed foreign reserve to service its enormous debt.

Despite starving his nation, Maduro retains the loyalty of large segments of the military command.  Those commanders don’t carry the guns that fire on the starving people, however.  The weapons themselves are in the hands of individual soldiers commanded on the street by junior officers.  It remains a confounding question as to why the opposition, which still exists in Venezuela, has been so unsuccessful in convincing the junior officers that their long term interests do not lie with Maduro and the senior military commanders but with the starving people in the streets.

Of course, should Maduro’s regime eventually fall, it would set in motion the need for some fancy diplomatic footwork and military readiness, something neither the Trump Administration, nor its predecessor, have shown much capability to implement.  Under those circumstances, energy markets would be thrown another huge curve ball.  Both our government and companies retaining any interest in Venezuela, either directly or indirectly, should be planning for these scenarios right now.

For those of you in most of the country, try to stay warm.  I’ll be in Texas in two weeks.  Hopefully the wind chill will be in the positive numbers down there at that time.

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.

 

2018, The Year in Review

Year in Review - Marcellus Shale Update by Daniel Markind of Flaster Greenberg PC

2018 began with the United States producing immense amounts of oil and natural gas; pipeline companies struggling to build out the national pipeline system but not being transparent about how they are doing it; Europe, led by Germany, continuing to move toward 100% reliance on renewable energy yet becoming even more dependent on Russian gas as a result; and New York and New England continuing to block energy generation and pipeline construction in their areas so that they, too, had to import gas from Vladimir Putin.

2018 ended with the United States still producing immense amounts of oil and natural gas; pipeline companies still struggling to build out the national pipeline system but not being transparent about how they are doing it; Europe, led by Germany, still continuing to move toward 100% reliance on renewable energy yet becoming more dependent still on Russian gas as a result; and New York and New England still continuing to block energy generation and pipeline construction in their areas so that they, too, may have to continue to import gas from Vladimir Putin.

As the saying goes, the more things change….

Meanwhile, here in Pennsylvania, the biggest news was the reelection of Governor Tom Wolf and the confusion over the time-honored “rule of capture”. Wolf’s reelection, along with Democratic gains in the State House and Senate, mean the severance tax issue will be back on the table come budget season. The Governor almost had his severance tax in 2017 but threw it away in a move that remains inexplicable following agreement from Senate Republicans to support it. The “rule of capture” means that whatever gas flows into the producer’s pipes belong to the producer, subject to paying royalties to the landowner. In the hydraulic fracturing context, the argument is that the gas may have been taken illegally because it emanated from an adjacent landowner’s property. How an adjacent landowner could prove any of this, or more importantly how a gas company could disprove it, remains a mystery. Now, it will be up to the Pennsylvania Supreme Court to make a decision.

In West Virginia, the State Legislature in 2018 voted overwhelmingly to uphold the State’s “marketable product” doctrine for paying royalties. The votes followed a 2017 West Virginia Supreme Court decision in the Leggett case changing the calculation rule, which is unusual but also used in states such as Oklahoma and Kansas. The difference between “at the wellhead” states like Ohio and Pennsylvania and “marketable product” states like West Virginia is that in West Virginia a producer cannot deduct its costs from the overall royalty payments it makes to the landowner until the gas has been reduced to a “marketable product”. Of course, exactly what that means often is a subject of controversy. Regardless, West Virginia made sure it stayed in the “marketable product” group of states, and the overwhelming votes in both houses of the State Legislature shows how popular that concept is.

Ohio ended 2018 leading the region in development of the Utica Shale. The Utica is deeper than the Marcellus. Companies such as Cabot Oil and Gas now actively are exploring the Utica in Ohio. Combined with the Marcellus, the two basins portend an enormous potential for energy production in the Marcellus-Utica Region.

Then there’s New York. Governor Andrew Cuomo won reelection easily in 2018 so we can expect his anti-natural gas policies to continue. The Governor is about to shut the Indian Point nuclear reactor and claims there will be sufficient power from renewable sources – mostly hydroelectric from something called the “Champlain Hudson Power Express” – to make up the shortfall. That hasn’t worked in New England and is unlikely to work in New York. Already New York is importing gas from Russia.

In November, FERC gave Governor Cuomo and unusual setback when it granted the Constitution Pipeline a rare time extension to finish construction. The Constitution remains stalled solely because of Governor Cuomo’s power grab regarding the Section 401 Clean Streams Permit.

New York has refused other pipeline permits and seems determined to follow its renewable idealism regardless of the practical consequences. While the Mueller Commission continues to investigate the possibility of collusion between Vladimir Putin and President Donald Trump, Putin’s best friends in the United States may be Andrew Cuomo and the other New England governors. They insist on ensuring that Russia will continue to have influence over the energy security of the Northeastern United States.

Cuomo’s international energy champion is German Chancellor Angela Merkel. Since 2010 Merkel has pursued her energy policy of “Energiewende”, trying to shift the German economy from nuclear power and fossil fuels to renewable energy. It hasn’t worked. Germany now has the highest energy prices in Europe, is increasingly dependent on Russia for supply (hence “Nord Stream 2”), needs to burn coal for decades in order to make up for the intermittent nature of solar and wind, and actually has to pay foreign governments to offload extra supply from solar and wind sources when they actually are producing because the supply is so uneven it would damage the German power grid.

Merkel and Cuomo are environmental “Idealists”. They are not to be confused with true “Environmentalists”, for whom improvements to the environment are paramount. Environmentalists likely will encourage the switch to natural gas from coal as a bridge to hopefully even cleaner fuels in the future. Idealists like Merkel and Cuomo will fight it at every turn. They will continue to preach and pursue policies that are lovely in the abstract. In real life, however, those policies make our environment dirtier, our economies weaker, and the respective national securities riskier.

Finally to pipelines. As with people like Merkel and Cuomo, pipeline proponents often are their own worst enemies. Energy Transfer Partners has been consistently non-forthcoming in its information regarding construction of the Mariner East 2 and Rover pipelines, but ETP is not alone. Two weeks ago a MarkWest Energy natural gas processing plant in Chartiers Township, Pennsylvania, suffered an accident that killed one person and injured three others. Some press reports stated there was an explosion, others that it was a flash fire. The owners of the pipeline involved, including Marathon Petroleum, won’t clarify publically what happened.

Coming on the heels of other pipeline explosions recently in places like Lawrence, Massachusetts, it would seem in the industry’s best interest to clear up what occurred. Without transparency, new pipeline projects such as Jordan Cove in Oregon and Atlantic Coast in Virginia and North Carolina will face more opposition and trouble.. If Cuomo and Merkel are pursuing self-defeating policies on behalf of their constituents, the pipeline companies are doing the same on behalf of their industry. Hopefully honesty, clarity and transparency will be in greater supply in 2019. That would benefit us all.

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.

Russia, Ukraine and Marcellus

russian ships blocking access to ukrainian ports

The simmering dispute over waterway rights between Ukraine and Russia broke into armed conflict this week. Its implications are enormous both for the energy world as a whole and especially for us in the Marcellus Shale region. But some background is required to appreciate the connection.

Briefly, when Vladimir Putin seized the Crimea in 2014 he gained control of the Kerch Strait, which cuts off the sea lanes from Southeastern Ukraine between the Azov Sea and the Black Sea. Until 2014, Russia had controlled the eastern shore of the Kerch Strait but Ukraine had controlled the west. The two countries had reached an agreement in 2003 allowing for shared access of the Kerch Strait and the Azov Sea. However, Russia’s military and political moves in Crimea in 2014 changed that.

Eager to connect the Crimea to the Russian mainland, Putin ordered the building of a 12 mile bridge over the Kerch Strait after the annexation, which he formally opened himself this year in May by driving a truck across it. Russia then placed more armed vessels in the waters around the bridge. The Russians claimed they needed better security. In practice, the extra traffic increased delays to ships trying to access and use the Ukrainian ports on the Azov Sea, increasing the costs of doing business there and undermining the utility of these ports in international trade.

Ukraine responded with a military show of force, but this was overwhelmed by Russian naval power. Russia then used the supports of the bridge, which had been built at a strategic distance, to permit its own warships to blockade the Ukrainian ports. Weaker militarily, Ukraine has few cards left to play and access to its Azov Sea ports is now very much under Russian de facto control.

As I noted in July during the controversy over the Nord Stream II pipeline that Germany is building with Russia and which will bypass Ukraine and Poland, Ukraine currently gets over 2% of its GDP from transfer payments for the trans-shipments of Russian gas and oil to Western Europe. Thanks to Angela Merkel, that transport route may become irrelevant. Nord Stream II brings Putin’s dreams of Russia once again dominating Eastern Europe one step closer. However, more than just Ukraine’s loss of access to its ports and its lost revenue from diverted oil and gas trans-shipments, thanks to this new pipeline Russia can cut off energy supplies to Poland, Ukraine and the Baltic States any time it wishes, without worrying that Western Europe will react harshly as their supplies are also cut off. While economically in the short term this direct pipeline access to Russian gas and oil may be better for Germany, Nord Stream II is a geo-political disaster due to its implications for further expansion of Russian power and influence over former Soviet states, if not more globally.

For these reasons, President Trump was right in calling the Germans out on the new pipeline at the NATO summit in July. However, the President has not been forthcoming with an appropriate condemnation of Russia’s actions, leaving our allies confused and leaving UN Secretary Nikki Haley to act as the lone Voice of America while the President – inexplicably but not unexpectedly – dithers on calling Putin out for what is obviously going on.

Meanwhile, with Putin again showing his aggressive nature, the rest of the West is scrambling.  Cyprus, Israel, Greece and Italy agreed this week to build a $7B pipeline for the Eastern Mediterranean from the Leviathan Field in the Mediterranean Sea. Germany, perhaps belatedly realizing the folly of putting all of its energy eggs in Putin’s basket, now is partnering with Dow Chemical also to build a liquefied natural gas import facility in the German city of Strade, near Hamburg.

Who will supply the gas to feed Western Europe should Russia turn out to be unreliable or if Nord Stream II becomes another pawn on Putin’s chess board to regained Soviet dominance? It could and should be us from right here in the Marcellus. By building out our pipeline system in the US, we can supply Strade and other future European gas import terminals, thereby helping thwart Putin’s aggression, and projecting American “soft power” – which is what critics of an aggressive American foreign policy often demand. At the very least, this will help keep American troops out of harm’s way, but it could also serve as a geopolitical foil to Russia’s attempts to use its energy largesse for political, military, and evident expansion purposes.

Will we have the political will to do it?

In order to do so, the natural gas industry in this country must first recognize the strategic reasons why this is important which, in turn, requires understanding the interconnections between domestic energy policy, international trade, and political, military, and diplomatic events in far away places. Few Americans presently understand how Russian moves in the Azov Sea could eventually end up causing young men and women in Pennsylvania, West Virginia, Ohio and elsewhere to be sent overseas in military uniforms. Fewer still comprehend how the pipeline build out and export terminals in this country can help (1) secure our future militarily while simultaneously (2) creating good jobs for people in our region and (3) decreasing greenhouse gas emissions worldwide. None will understand if they are not told.

Tom Wolf just won reelection handily as Governor of Pennsylvania. He is no friend of the natural gas industry. Unlike his counterparts in New York and Maryland, however, he hasn’t moved to try to shut it down. There will be more pressure on him to do so now that the National Climate Assessment has been released.

Wolf, though, lives in the real world. He must perform for Pennsylvanians. Strange as it sounds, the Governor and the industry need each other. The gas industry has to provide him with the explanation as to why working with the it not only is in Wolf’s own best interests politically but is also in the best interests of all Pennsylvanians, and indeed all Americans. Somehow this message has not gotten through as forcefully as it should.

Further, our newly elected representatives from the Marcellus States in their state legislatures and in the United States Congress must understand – and not be hesitant to educate the public about – the international dynamic. Some, like Chrissy Houlahan of my home district in Southeastern Pennsylvania, are military veterans who have dealt with the intricacies of international relations. Others are untested. It will be up to all of them to work to keep American men and women safe. It will be up to all of us involved with the industry to explain how it can be instrumental – indeed, strategically essential – in doing so.

Meanwhile, Vladimir Putin will be watching, waiting, and planning his next chess move.

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.

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.