From the Strait of Hormuz to the Port of Philadelphia – It’s All One World

World Map Isolated on White Background. Vector Illustration

Two attacks on oil tankers in the Strait of Hormuz have set the energy world, and the world at large, on edge. It also shows the folly of the unilateral energy disarmament being practiced on the West Coast and in New England, in the United States.

The Strait is the narrow channel between Iran and the Arab Gulf state of Oman through which 30% of the world’s exported oil flows. As happened during the 1980’s Iran-Iraq war, attacks on oil tankers are used as a political weapon to disrupt the world economy.

The first attack came on the Japanese-owned Kokuka Courageous. It was followed by an attack on the Norwegian-owned Front Altair. Both attacks happened near the Iranian naval base at Jask, both ships sent distress signals, and both crews had to be evacuated.  Iran responded with conflicting accounts. It first said that it had rescued all of the crew of the Kokuka when it had not. Then it claimed that they, the Iranians, are responsible for security in the Strait.

The Trump Administration blamed the Iranians – who denied responsibility – and confusion reigned about whether torpedoes, mines or “flying objects” were responsible for the destruction. In response, the price of oil rose sharply and the Norwegian insurance company DNK, which insured the Front Altair, raised its threat assessment while saying Iran likely is to blame.

Reports since have been measured, with most nations believing Iran is responsible while others urging caution. While this shakes out, however, one name looms large and should be remembered by all – Qasem Soleimani – the Commander of the Iranian Revolutionary Guard Corps..

Soleimani, often considered the mastermind of Iranian military expansionism, has been the key figure in exporting Iranian power overseas. He is behind the drive to surround Israel with a “Ring of Fire” and to challenge Saudi Arabia for control over the Arabian Peninsula.

With Iran’s economy reeling from the Trump Administration’s sanctions, it likely was only a matter of time before Iran sent Soleimani into action. Last week, Iranian backed Houthi Rebels in Yemen fired a missile at the Saudi airport in Abha, wounding 26 and constituting a direct challenge to international aviation. Hamas operatives continued to lob fire balloons and rockets into Israel, bringing that area to the precipice of another military conflagration. Now the ship attacks.

If Iran is responsible, it is because the Mullahs are scared. Demonstrations broke out last year in many Iranian cities, showing the depth of antipathy toward theocratic rule. Unlike Venezuela, where the country’s wealth is being squandered by an incompetent kleptocracy, much of Iran’s natural treasure is being diverted from the people to finance military conflicts about which the average Iranian cares little.

Still, it would be foolish to imagine the regime is in immediate danger. The more likely scenario is a drawn out war of attrition with the potential of violent conflict erupting and spreading throughout the entire Middle East at any time. Under this world situation, the price and availability of energy becomes a weapon and will be even more volatile.

Meanwhile, in the Marcellus region back home, the Delaware River Basin Commission last week approved an LNG export terminal in Gibbstown, New Jersey, across the river from Philadelphia.  In addition, the Philadelphia City Council approved an LNG terminal on abandoned property in South Philadelphia. Neither the DRBC nor the Philadelphia City Council has been friendly toward the gas industry, but both seem to realize the importance of these actions both to the region and to the world at large.

From a geopolitical standpoint, the “keep it in the ground” movement makes this country less secure. Whether it makes the world more secure depends on what the alternatives are.  Until that is clearly shown, we run the risk of making our country more dependent on foreign energy sources at a time of extreme international volatility.  Before we do so, we all should understand the stakes. The issues are decidedly more complex and geopolitical than the locally oriented “keep it in the ground” movement would have us believe.

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

shale gas news podcast

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.

 

 

Trump v. Cuomo – The Battle of the Pipelines

natural gas pipelines 2.jpg

President Trump joined the pipeline battle last week by issuing two Executive Orders aiming at limiting the power of state officials to determine federal policy. One Order calls on the Environmental Protection Agency to streamline its process for awarding oil and gas permits and to expand the ability of the nation’s railroads to transport liquid natural gas. The other Order limits to the President personally the right to “issue, deny or amend” permits for infrastructure projects that cross international boundaries of the United States. Not surprisingly, the environmental community is appalled, and certain governors have blasted the Executive Orders as being a usurpation of state power by the federal government.

As discussed innumerable times on this blog, the permitting issue in the first Order revolves around something known as a Section 401 State Certification of Water Quality. This is a certification under the Federal Clean Water Act from a state confirming that any interstate pipeline that may result into a “discharge” into “navigable waters” within its boundaries will comply with the Clean Water Act.

Initially after enactment of this legislation, many states did not pay close attention to Section 401. They either did not act on requests for certification for more than a year, in which case the state’s authority to act was deemed waived, or trusted the applicable federal agency. This includes pipeline projects for which FERC, the Federal Energy Regulatory Commission, retains primary jurisdiction.

Enter New York Governor Andrew Cuomo. Cuomo was terrified of the power and influence of the New York State environmental community. Without really raising any specific good faith environmental objections, in 2016 Governor Cuomo ordered his New York Department of Environmental Conservation to deny the issuing of the Section 401 Certification for the Constitution Pipeline. This pipeline is a proposed 165 mile link running from the Marcellus Shale gas fields in Northeastern Pennsylvania to the Southern Tier of New York State. There, the Constitution would connect into another larger pipeline called the Tennessee Pipeline which led into New England.

Without this link, natural gas from the most prolific gas fields in the world now has no way of being transported to New England. Just five hours away from the Marcellus, Boston instead relies on natural gas imported over the ocean from Trinidad and Tobago, and at times from Russia. In effect what Governor Cuomo did was dictate energy policy not just for his own state but for all of New England as well.

Since Cuomo’s action, other governors have emulated his refusal, turning energy policy into a hodge podge of conflicting local policies and chaos. Using Section 401, Massachusetts, Vermont, Michigan and others have blocked the permitting of interstate pipelines coming within their borders, insisting against all evidence that the energy shortfall from denial of pipeline access can be made up with so-called “renewables”. Those on the ground who have to deal with the real world implications of this situation understand its ramifications. Consolidated Edison, the franchise power company in Westchester County New York, already was recently forced to declare a moratorium on new gas hookups as there is no available supply.  The needed gas is just two hours away in Northeast Pennsylvania, but Governor Cuomo won’t let it arrive.

While there are bound to be judicial challenges, President Trump’s Executive Order is the first step in the federal pushback against what actually can be seen as a state usurpation of an inherent federal power. Pipelines cross state boundaries.  Thus, they are classic examples of Interstate Commerce. Constitutionally, that should be a matter of federal and not local concern or jurisdiction.

From a purely legal standpoint, however, the President’s Executive Order may not work. It clearly raises innumerable legal issues about federalism, executive authority, environmental enforcement and numerous other legal concepts – many still untested in the courts. Also, it gives no real explanation for how a mere Order from the Executive Branch can override a federal statute, which clearly refers to the “licensing or permitting agency… from the State.”

Despite all of these uncertainties, however, the Order really had to happen – if for no other reason than to highlight the debate and the substantial energy dilemma that now exists in the Northeast as a result of the absence of rational and cohesive energy laws and policies throughout the nation. Within all of our laws there is an implied element of good faith. Nowhere does the Clean Water Act assume or provide that a state can purposely refuse to issue these types of permits for any reason based on that state’s unilateral policy decision. In reality, without ultimate federal control, the entire system could and likely will collapse. That certainly was never the intent of Congress in enacting Section 401.

While advocates of a “green revolution” intend to fight the President tooth and nail, their objections in the end will defeat their own cause unless they realize that we all are in this together. The Green New Deal talks about eliminating fossil fuels by 2030. However, even if this were scientifically possible (which it really isn’t without massive use of nuclear power that many reject for other reasons), Alexandria Ocasio-Cortez, Ed Markey and their supporters offer no way of constructing the infrastructure needed to move, and especially store, renewable energy given the current system, available technology and the current level of state environmental rejection.

Although it almost doesn’t seem possible, the noise level over national environmental and energy policy will be ramped up following President Trump’s Executive Order. Each side will raise the specter of the apocalypse should the other side prevail. What really matters though, is what kind of system can be restored that retains federal control over interstate energy transmission, respects local concerns about environmental protection, pays due regard to the need to combat climate change, and guards against grandstanding politicians who will use whatever means they can to leverage local platforms as a way to assert control over all of our lives.

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.

 

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.