Depoliticizing Middle East Oil Dependence through Increased Production of U.S. Shale

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While America was transfixed with the sordid spectacle of the Brett Kavanaugh confirmation hearings, the news that really can have international impact was playing out in Istanbul, Turkey.  On Thursday its ramifications began being felt in this country.  Thanks to our shale industry, however, President Trump will have many more options going forward than otherwise.

Jamal Khashoggi was a Saudi Arabian journalist who has been highly critical of the ruling House of Saud.  A columnist for the Washington Post, Khashoggi was a permanent resident of the United States.  He also has been a thorn in the side of the de facto Saudi ruler, Crown Prince Mohammed bin Salman.  Readers of this blog will know that I’ve written about “MbS” before.  He is part reformer (opening up new avenues for Saudi women), part irresponsibly aggressive international leader (kidnapping the Lebanese President; getting involved in a reckless war in Yemen), and part thin-skinned autocrat (ordering many of his own royal family held at a Saudi hotel on corruption charges).

Over the last several months, Khashoggi received death threats and other intimidations.  Nevertheless, Khashoggi entered the Saudi consulate in Istanbul to obtain necessary papers for his upcoming wedding.  He hasn’t been seen since.

Turkey, which is a major Middle Eastern adversary of Saudi Arabia, claims he was murdered inside the consulate, his body later dismembered so it could be smuggled out to uncertain location.  The Saudis deny this but can’t produce him.  American intelligence intercepts seem to point the finger directly at MbS for a plot to at least detain Khashoggi, or worse.

Congress now is up in arms.  Twenty-two senators from both parties signed a letter demanding President Trump sanction Saudi Arabia, including cutting off arms shipments.  Trump is resisting the arms embargo, but it looks more likely that he will have to do something substantial.  It was, after all, an American green card holder who was detained and possibly executed in brutal fashion.

What can the President do?  Saudi Arabia is crucial to Trump’s strategy of developing a new axis of power in the Middle East featuring Saudi Arabia, Israel, and Egypt.  It is regarded as a counterweight to the ambitions of Turkey and Iran, both of which are led by Islamic governments (as is Saudi Arabia) yet neither of which is friendly toward the West.

Since the 1973 Yom Kippur War, Saudi Arabia literally has held the United States over a barrel (pun intended).  Their oil weapon intimidated American presidents for 40 years; quite simply, the United States needed their product.  However, during that time, Saudi oil money – in large part coming from America – also funded Islamic schools called madrassas that indoctrinated Saudi (and in Pakistan, Taliban) youth into their radical, misogynistic form of Wahhabism Islam, sponsored terrorist camps around the world, and produced 15 of the 19 hijackers on September 11, 2001.  Somehow, the Saudis always got a pass.

Now, however, the world might be different, and that difference is due in significant part to our frackers.  As out of “PC” favor as it may be, it is the shale industry that has given the President, or any president, freedom of movement in this situation.  Given the gravity of the situation, Trump will probably have to make serious moves, but he must be very careful in what he does given the complexity and volatility of the Middle East.  A military option would only be a last resort.  An economic one is far more likely but its chances for success in bringing about reform are heavily dependent on the degree of Saudi pain that it might inflict.  This is where the shale industry becomes an important factor.In response to any economic sanctions, any threat by the Saudis to use its oil weapon would have far less sting today than it did during the oil embargos of the early 1970s.  Such a move certainly would increase the price of oil and gas, but it would also give the American shale industry a huge opening to increase production, expand international market share, and actually make some money (which many of the companies really don’t do).  Environmental activists can act self-righteous all they want, but it is the frackers who provide the breathing space for the American government to use economic weapons instead of military ones – and for the economic weapons to have real effect.

Provided many scientific questions get answered (which is not a foregone conclusion), both America’s and the world’s long term future may be with “renewables.”  In the short term, however, those of us with younger children need to say a “thank you” to George Mitchell and the other pioneers of the shale industry.  Thanks to them, our sons and daughters have substantially less chance being sent overseas to fight another Middle Eastern war we don’t want among people we don’t understand.

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.

Flaster Greenberg Continues to Grow Business, Corporate, Estates & Tax Teams, Deepens Real Estate Department and Adds National Aviation Practice

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Flaster Greenberg PC is pleased to announce three new attorney additions. Daniel B. Markind has joined the firm as a shareholder effective August 31, 2018, bringing with him a nationally known Aviation Practice and over 35 years of experience as a real estate and corporate transaction attorney. Tax attorney Eric Loi and trusts and estates attorney Courtney Dolaway Zeuner also joined the Flaster Greenberg team last week.

“Flaster Greenberg is excited to begin Q4 by welcoming three new attorneys,” said Alan Zuckerman, Managing Shareholder of Flaster Greenberg. “Dan Markind has built an impressive aviation practice and is a nationally recognized real estate and corporate attorney. All three of our new hires will make a fantastic addition to our growing law firm.”

Daniel Markind’s real estate and corporate practice has focused on representing some of the largest companies in the United States in sophisticated purchase, sale, financing, leasing, zoning and land use, workout and development matters. He also has helped form numerous start-up and smaller entities and has assisted in their growth. Over the past decade, Markind has developed a sub-specialty in energy law, including solar and wind energy, and oil and gas development and leasing. He speaks widely on Marcellus Shale and other mineral extraction issues and represents numerous companies and individuals involved in different capacities related to natural gas and oil leasing, production, transmission and waste disposal.

Markind also brings with him a national aviation law practice, adding Flaster Greenberg to a short list of nearly a dozen full-service firms that handle aviation law in the United States. He represents airports in litigation against the Transportation Security Administration, in business matters for the purpose of growing the business at their airports, and with regard to the energy assets at their airports. In addition, he represents companies that seek to assist airlines in establishing their business model, that seek to make airports safer and that seek to transact business at airports.

Former General Counsel of the Philadelphia International Airport, Markind currently serves as outside general counsel and outside specialty counsel to numerous airports. He is recognized as one of the nation’s foremost authorities on the relationship of aviation law to mineral extraction law.

A graduate of the University of Pennsylvania Wharton School of Business and University of Pennsylvania Law School, Markind is rated AV preeminent by Martindale-Hubbell® and has been named to the prestigious “Best Lawyers in the America” list for his work in real estate law. He is licensed to practice law in Pennsylvania, New Jersey and New York.

Eric Loi joins us as a member of the firm’s Business & CorporateEmployee Benefits and Executive Compensation and Taxation Departments. Focusing his practice in tax and areas related to employee benefits and executive compensation, he advises corporate, non-profit, and governmental employers on issues relating to the design, administration, and compliance of qualified and non-qualified retirement plans and health and welfare plans.

Most recently, Loi worked an as associate at Norris McLaughlin & Marcus, P.A. Prior to entering private practice, he worked for a large national accounting firm where he advised large multi-national companies and U.S. companies of all sizes and industries on compensation and employee benefit matters, as well as other general federal tax matters. Licensed to practice law in New Jersey, New York and the District of Columbia, Loi received his J.D. from the University of Buffalo Law School and his LL.M. in Tax from Georgetown University Law Center.

Courtney Dolaway Zeuner joins us as a member of the firm’s Trusts & EstatesTaxation and Business & Corporate Departments. She focuses her practice on estate planning, estate administration, business succession, and general corporate matters and represents individuals and business owners in their estate plans and corporate planning. Prior to joining the firm, she worked as senior associate at Baratta, Russell & Baratta, P.C.

Dolaway Zeuner is licensed to practice law in Pennsylvania and New Jersey, along with the United States District Courts for the District of New Jersey and the Eastern & Middle District of PA. She received her J.D. and LL.M. with a focus on estate planning from Villanova University Charles Widger Law School.

Marcellus Shale Update – 7.3.2018

As we approach Independence Day, the disconnect between what is reported in the press and what the world situation actually is remains very curious.

Today, speaking on MSNBC’s Morning Joe, host Joe Scarborough and Council of Foreign Relations President Richard Haass bemoaned the fact that President Donald Trump is eviscerating the post-World War II order and not replacing it with anything.  Haass said we voluntarily are giving up our international position of primacy.  One wonders if Mr. Haass has spent much time looking at Nord Stream 2, the gas pipeline from Russia to Germany through the Baltic Sea, bypassing Ukraine, Russia and the Baltic States.

The effect of this pipeline will be to give Russia greater control over Europe’s energy supply.  It will enrich Putin, remove any control or payment that these other countries would have received, and make German Chancellor Angela Merkel even more subservient to Russia.  Ukraine for example, may lose 2% of its GDP as a result of the loss of trans-shipment payments.

Trump, who according to Morning Joe and much of the Western press is a Russian stooge, adamantly opposes the pipeline.  The Trump Administration is going so far as to have Secretary of State Mike Pompeo announce that the United States has made it clear that Russia should not be allowed to get more opportunities to exert political influence not only in Germany, but also in Europe in general, if Nord Stream 2 is implemented.  The current Administration has threatened to sanction any company involved in the project.

None of this has stopped Merkel, ostensibly the leader of the country blazing the trail toward a “green economy”.  She is determined to get this pipeline built, increase her dependency on Putin’s energy and rely more fully on Russian gas production from environmentally sensitive areas of the Arctic.

All of this sounds upside down, doesn’t it?  Indeed yesterday Estonia’s Minister of Foreign Affairs Sven Mikser said it is in the EU’s best interests to stop the project as it serves Russian geopolitical interest.  Earlier today, the German environmental group Nabu filed a lawsuit with Germany’s highest constitutional court asking to halt the pipeline.

Supporters of the project say that Nord Stream 2 will give Germany access to a cleaner form of energy than it currently uses.  That this might be so shows how dirty Germany’s current power supply is.  Despite refusing to greenlight any power project that is not “renewable” this decade (or perhaps because of this), Germany remains highly dependent on a very dirty form of coal called “lignite”.

Why then, is the Trump Administration, which according to many press reports (a) is in the pocket of Putin, (b) doesn’t care about the environment and (c) is willing to tear apart the old European alliance, so opposed to this pipeline?  Even if its only concerns are geopolitical and economic, the fact that the Administration is opposed to Nord Stream 2 shows that something is missing from the national debate.  A Putin puppet would just go along.  Instead the United States is taking a remarkably hard line.  Nowhere, however, is this nuance reflected in the press.

The topic of energy encompasses so many facets of our modern political debate, from geo-political power to environmentalism to future economic growth, that these stories have to be part of the discussion.  Trump may be secretly aligned with Putin.  None of us really knows.  The fact though that the Trump Administration is fighting so hard against Putin’s interests in this critical field is a story that needs to be told.  Each reader or listener then can draw his/her own conclusions.  It certainly may not show that Trump is an environmentalist, but it argues against the idea that he’s in Putin’s pocket.

Why Scarborough, Haass, the rest of MSNBC, CNN and even Fox News  fail to report on Nord Stream 2 remains mystifying.  It only increases the level of suspicion and derision with which the American press is held.

Questions? Let Dan know.

Marcellus Shale Update – 3.02.2018

Yesterday may have been the most instructive day ever to understand the current international situation involving natural gas.

Russian President Vladimir Putin, in his State of the Nation address, bragged about “invincible” missiles that could carry nuclear warheads.  He showed videos of missiles raining down on Florida.  As he did so much of Europe was battered by two weather storms called “Storm Emma” and the “Beast from the East”.  Today is the coldest spring day in UK recorded history (I guess they consider March 1 spring over there).  Unfortunately they may have no heat.  Britain’s National Grid warned yesterday that it did not have enough natural gas to supply the country.

UK running out of gas, warns National Grid

UK weather: Armed Forces called in as death toll rises to 10 in coldest spring day on record

Britain has a lot of shale gas potential but it has not developed it, running into the same environmental objections that bedevil most of Europe.  We might have been able to help make up the shortfall, but our export capacity remains limited.  Now Britain freezes.   How many people will die in the UK because of their energy policies?

There are other reasons for Britain’s current situation, including the foolish shutting down last year of a natural gas storage facility at Rough, but the result is that Britain may turn in desperation to the same person that New England relies upon in times like these, Vladimir Putin.

Putin has been very busy.  Also yesterday, the Science, Space and Technology Committee of the US House of Representatives released a report detailing how Russia used Facebook, Instagram and Twitter to exacerbate tensions over American energy policy and climate change.  For example, Russians created a group called “Native Americans United” which put out an ad showing a young girl looking out over the prairie with the caption “Love Water Not Oil, Protect Our Mother, Stand with Standing Rock.”  This tension obviously benefitted Vladimir Putin.

In this country, gas prices remain so low that many of the suppliers are hurting badly.  As one of the producers told me yesterday, after fixed costs just about every place production is sold is negative.  In the very short term that’s good for the consumer.  In the long term that’s not.  Were more export terminals operating, the price could rise to a sustainable level, more gas could be sent overseas to break the energy vice grip of countries like Russia and the chances of gaining effective leverage over Russia and other rogue states would increase.

Since the Cold War we’ve had a debate over which is more important, soft power or hard power.  Here’s a tip for the “soft power’ proponents:  Soft Power works best when you have it.  Internationally, our current energy policy seems to be unilateral disarmament.  Again, that raises the possibility that the only way we can project force internationally and protect our allies and our vital interests is through hard power.  In English that means your sons and daughters and mine being sent overseas to fight.

When an “environmentalist” asks why you support hydraulic fracturing, you can answer very simply.  “I love my children.”