Pacific Dreams & Nightmares

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By a vote of 17-11, the Oregon State Senate last week just passed a five-year moratorium on fracking in that State. The Senate bill cut in half a 10-year moratorium passed in March by the Oregon House of Representatives, but the House is expected to quickly agree to the Senate version. Then the bill will be passed along to Governor Kate Brown, who is likely to sign it.

The fracking moratorium comes on the heels of the Oregon Department of Environmental Quality’s rejection of Section 401 Clean Water Certifications for the Jordan Cove Pipeline, which would have transported gas and oil to a terminus on Coos Bay in economically depressed Southwestern Oregon. Currently there are no fracking operations in Oregon. The proposed moratorium and the DEQ decision, however, put Oregon clearly in the camp of states that stake out an environmentalist position, with future consequences to be seen.

North of Oregon, across the Canadian border, the province of British Columbia lost a ruling issued by the Provincial Court of Appeals where the Court said that the BC government could not stop the Mountain West Pipeline from Edmonton, Alberta to Burnaby, BC, north of Vancouver. Long time readers of this blog will remember that last year two Canadian provinces, Alberta and British Columbia, almost had a trade war over BC’s attempts to stop the pipeline.

What BC did accomplish was forcing out the pipeline developer, Kinder Morgan, and requiring the Canadian Federal Government to take over the project. That Canadian Federal involvement was the main reason the BC Court of Appeals rejected BC’s latest attempt to stop Trans Mountain. The Court ruled that the Province did not have the power to stop what now is a Federal enterprise.

Given the Section 401 Certification situation in Oregon, which we have seen repeated elsewhere in the United States, such as New York’s recent rejection of the Northeast Supply Enhancement Pipeline, it bears asking the question of whether this will be the model that we will have to follow in this country to get interstate pipelines built at all? Will the US Government actually have to build the pipelines itself and fight out Federal-State constitutional issues every time we need to build a pipeline somewhere?

All along the North American West Coast, states and provinces are moving against what they perceive as “dirty” energy.  But as they move against oil and natural gas (although don’t ask BC about coal, which the Province still hypocritically produces and exports in massive quantities), the West Coast needs viable energy sources to replace them. That part of the equation remains lacking.

What the West has now is large quantities of wishful thinking and good intentions, but no sensible, practical or economically viable energy policy. This is true especially in the short term, as Westerners assume that, eventually, so-called green energy will be sufficiently widespread to actually fill projected needs.

Left Coast residents should take heed. Laws that appear good in the abstract can be devastating when put into actual practice. Good intentions are never sufficient to make up for lost services that are essential to human life and economic well-being.

If Oregon goes ahead with its fracking moratorium and bans Jordan Cove, it will need to ensure that it has energy sources ten years in the future. Does it have a plan for this? If so, the Oregon public has a right to know what it is. If that plan calls for large amounts of “renewables”, the public should ask itself how that power gets stored and transmitted. Will Oregon need massive new investment in huge batteries to store solar energy that cannot be produced at night or power lines to move wind power from the wilderness (where it is typically generated) to populated areas where it is most needed?  If that’s the case, what type of power lines will Oregon need?  Are they the same type that just was shown to have caused California’s deadly and destructive wild fires last year?  If large batteries are needed, does this battery storage technology even exist to handle all that would be needed if there were no fossil fuels?  Technologically, can any of this actually be done – at least in 2019 – 2029?  If not, what official in Kate Brown’s Administration gets to tell the good citizens of Portland, Eugene and Medford that there will be no heat during the winter?

Questions? Let me 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.

NESE Rejected

At 8:30 p.m. yesterday, the State of New York Department of Environmental Conservation rejected Williams Corporation’s proposal for the Northeast Supply Enhancement (NESE) natural gas pipeline. Citing potential water contamination from the project, which mostly would run into New York Bay, the DEC refused to issue the required Section 401 Clean Streams Certification.

The decision was made “without prejudice,” meaning Williams can resubmit its application. The company said it planned to do so.

In reaction to the DEC decision, the two power companies that serve New York City and Long Island, National Grid and Consolidated Edison, are expected to follow through on their moratoria against any new gas hookups in practically the entire New York City metropolitan area within New York State. Among other things, that means that a planned new arena for the New York Islanders ice hockey team to be located in Elmont, New York likely is dead.

A more interesting question will be how this move affects New York City’s bond rating as a whole. Without available new natural gas service, will the rating agencies feel as confident about Downstate New York’s future growth potential?

All of this, and many other questions, remain to be answered.

Questions? Let me 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.

Shale Gas News Podcast – Pipelines, Fracking & More

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I had a great time on the Shale Gas News Podcast over the weekend discussing New York Governor Andrew Cuomo’s dilemma regarding approval of the NESE pipeline, the decision by Oregon to deny a Section 401 Clean Streams Certification for the Jordan Cove Pipeline, the banning by Washington Governor Jay Inslee of fracking in his state, and the battle near Death Valley over lithium mining, which is needed to make renewable energy sources viable.

Check it out here in case you missed it. (My interview appears at 18:55).

Questions? Let me 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.

 

 

NESE: Governor Cuomo Will Decide – And NYC Will Face The Consequences

Huge metal gas pipeline transporting gas

While little noticed outside of the energy industry, New York Governor Andrew Cuomo is about to make one of the seminal decisions of his tenure. Before May 16, 2019, Governor Cuomo must decide whether to allow the New York State Department of Environmental Conservation (DEC) to issue a Section 401 Clean Streams Certification to the Northeast Supply Enhancement Project, which is proposed to bring natural gas from the Marcellus Shale gas fields of Northeastern Pennsylvania to New York City.

NESE, as the Project is known, would utilize portions of the existing 10,000 mile long Transco Pipeline, that currently connects natural gas fields in South Texas with New York City, to add about 10 miles of new pipe in Lancaster County, Pennsylvania, about 3 miles of new pipe in Middlesex County, New Jersey, and about 23 miles of offshore pipe mainly in New York Bay, plus a new compressor station in Somerset County, New Jersey. The additional pipe would allow the existing pipeline to convey increased gas volume originating in the Marcellus region to New York City.

The decision now before Governor Cuomo has profound implications for people as varied as all New York City residents (but especially lower income residents), real estate developers, business owners, and even Vladimir Putin.

NESE received final approval from the Federal Energy Regulatory Commission on January 25, 2019. Cuomo could try to kill the project by refusing to allow his DEC to grant the Section 401 Certification based on the fact that about 23 miles of the pipe will be underwater starting in New Jersey’s Raritan Bay and extending into the lower New York Bay in New York State. The Governor has done this before, of course, with the Constitution Pipeline and other Upstate projects.

Because of his prior maneuvering, Cuomo has no good option. Given his history of withholding the Section 401 Certification for the Constitution Pipeline, the Governor’s environmental supporters expect nothing less here. Indeed, the amount of water the NESE pipe will cross dwarfs anything seen before in the Section 401 controversy (except, ironically, a portion of the existing Transco Pipeline that is already installed offshore in the same general region in Raritan Bay and lower New York Bay).

On the other hand, refusing to grant the 401 Certification means risking power shortages in New York City. Already Consolidated Edison, which services portions of New York City and recently issued a moratorium on new gas hookups in Westchester County, New York, because of concern for future demand, is promising the same for Manhattan should projects like NESE be stopped. Likewise, National Grid, which services other parts of the City, is also threatening a moratorium if NESE is not built. However, of the two utilities, only the latter would actually be the pipeline’s customer.

No new supply means a marked contraction of economic activity in the City and its immediate suburbs in New York State. Along with that economic decline would come higher energy prices, which disproportionately affect the economically disadvantaged, and an increased reliance on imported gas. Little would make Vladimir Putin happier than to have his foot placed squarely on New York City’s economic lifeline.

Until now, Downstate New Yorkers have suffered little from the effects of their environmental activism. They got to feel righteous while the Upstate residents in Binghamton and Elmira paid the price from the moratorium on fracking. Now that economic price will be extracted in the biggest city in the country as well. How will the New York City business community deal with looming power shortages? What will the advocates for the economically disadvantaged say when their gas bills soar? What will the real estate community tell Governor Cuomo if they cannot offer gas service to new customers?

A major influence in Governor Cuomo’s initial decisions first to declare a moratorium on fracking in New York State and then to stop all pipelines through the Section 401 process was his former brother-in-law, environmental activist Robert F. Kennedy Jr.

However, Kennedy’s star has faded recently as he has been one of the leaders of the anti-vaccine movement that resulted in the resurgence of diseases like measles. More have come to question his judgment from that fiasco than arguably was the case a decade ago, when he was the chief attorney and board chair for the environmental activist organization, Hudson Riverkeeper. Will that loss of prestige be enough for Cuomo to approve NESE? If he does, how can he continue to block the Constitution Pipeline as well? If he does not approve NESE, what will happen if there are price spikes and brownouts in New York City, as quite likely will occur? What impact will it have on the 2020 Presidential race if during the next winter Russian gas tankers need to bail out New York City?

Whatever Governor Cuomo decides, this time it will be his Downstate base that feels the result.

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.

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.

Pipelines, Courts and Reports

Storage Tanks and pipelines in the refinery.

Pipeline issues continue to dominate the natural gas news.  Last week, the pipeline industry got some good news, some bad news, and some news potentially so devastating it could threaten the entire industry.

Good news came for Mariner East 2.  First, the Pennsylvania Supreme Court rejected a challenge from the Clean Air Council and some landowners in Delaware and Chester Counties to the utilization by the pipeline builder, Sunoco Logistic, of eminent domain along its 350 mile route.  Later in the week, an Administrative Law Judge for the Pennsylvania State Public Utilities Commission rejected a request from seven citizens in Delaware and Chester Counties to shut down finishing of Mariner East 2 and to stop existing operations on Mariner East 1.

Sunoco Logistics repeated again that it would get Mariner East 2 in service by the end of the year, but not in the form originally intended.  In certain areas, Mariner East 2 only will be 20 inches in diameter, with older pipe being attached to newer pipe.  Sunoco Logistics never has fully explained why this is happening.  Is it because of an operational problem?  A cost cutting move?  A supply issue?  A timing issue?  Especially with the use of older pipe that was never part of the original plans and the use of smaller diameter pipe than was originally proposed, concern with safety should be paramount.  At the very least, the public is entitled to a full explanation from the pipeline company.

Make no mistake, Mariner East 2 is a very important project.  It secures the supply of gas to Marcus Hook, where it either can be exported to help free Western Europe from reliance on Vladimir Putin or it can be moved domestically to ensure our national supply.  It’s for this very reason that the PUC should demand answers.  For years, Mariner East was proposed as a certain type of project.  In the end, Sunoco Logistics is delivering another one, with a slightly different route, less capacity, and older pipe in certain places.  If the PUC doesn’t know why this is, it needs to find out and publicize its findings.

While Sunoco Logistics received its good news on Mariner East 2, Penn East Pipeline, which will go from Northeastern Pennsylvania to Central New Jersey, also got positive court results.  On Friday, US District Court Judge Brian Martinotti ruled that PennEast Pipeline Co. LLC, the owner of the pipeline, can use eminent domain to take properties in New Jersey – although initially, PennEast may only be seeking survey access to those properties as it still needs to address local environmental concerns for which the New Jersey Department of Environmental Protection has still not given State blessing.  The pipeline will go through Hunterdon and Mercer Counties in New Jersey, allowing connection to pipelines that serve New Jersey and potentially the New York City Metropolitan Area.  The New Jersey Attorney General’s Office had no comment.  Since the election of Democrat Phil Murphy in 2017, New Jersey has done an about-face and is not friendly to natural gas development.  As with other opponents, however, Governor Murphy has no real plan to live without it.

There was bad news also.  On Friday a pipeline owned by Mark West exploded in Washington County in Western Pennsylvania, injuring four people, one critically.  It is believed that workers were cleaning the pipeline when vapors caught fire and ignited other combustible material.  No matter how you slice it, pipelines are serious business, and safety should always be, but sometimes is not, given the full attention that it deserves.

More bad news for the pipeline industry came further south.  A panel of judges for the Fourth Circuit vacated certain permits issued by the United States Forest Service to the Atlantic Coast Pipeline that would have allowed the pipeline to be built through the George Washington and Monongahela national forests. Atlantic Coast would run 600 miles from West Virginia through Virginia and into Eastern North Carolina.  Twenty one of those miles would be through national forests.  The Forest Service repeatedly told Dominion Energy, Duke Energy and the Southern Company, co-owners of the pipeline, that the pipeline might violate environmental standards.  In 2017, however, the Forest Service issued permits allowing for the pipeline’s building through these forests.  The Fourth Circuit Panel vacated the permits, stating in effect that the Forest Service isn’t doing its job properly.  The pipeline owners intend to fight the decision, saying the judges are undermining the judgment of seasoned professionals.

Finally, the really devastating news came from California, where the California Public Utilities Commission charged utility Pacific Electric & Gas with falsifying safety and maintenance records.  PE&G in effect admitted the accusation.  Now the utility is facing massive criticism in light of the recent wildfires that were the most destructive in California history.  While there is no evidence tying natural gas pipelines to the wildfires, PE&G’s system is antiquated and poorly maintained.  It also doesn’t have enough inspectors to fulfill its reporting obligations.

Should any evidence arise that ties the pipelines to the fires, and then to PE&G’s malfeasance, the entire industry could be at risk.  Once again, it is up to the industry, and its trade groups like the Marcellus Shale Coalition, to start supporting the industry and not just reflexively opposing all government regulation and involvement.  Like all of our nation’s infrastructure, the pipeline system is antiquated and wearing out.  It needs to be rebuilt, using new materials and state of the art construction techniques, and it needs companies willing to do so.  It also needs government both willing to let them do so and to hold them to the highest standards.  Let’s all focus on that.

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.