Weir and Partners, LLP
The politics of energy don’t fit neatly on a scorecard but some things are predictable, including legislation to thwart fractivist pipeline obstruction.
Pipeline construction continues to be the prime mover in summer energy news. On Thursday, the Pennsylvania Department of Environmental Protection gave Sunoco Logistics permission to restart completion of two of the four remaining unfinished areas of Mariner East 2 pipeline. Work has been suspended since May following the development of sinkholes in Chester County. The pipeline is approximately 98% complete and the DEP is reviewing plans for the final two areas.
On Tuesday, legislation was introduced in Congress to limit the authority of states in the granting of Section 401 Permits under the United States Clean Streams Law. As I’ve written numerous times, this is the mechanism through which governors, led by New York’s Andrew Cuomo, have stopped pipeline construction even after the pipeline has been approved by FERC.
The proposed legislation, sponsored by Wyoming Senator John Barrasso, would limit reviews under Section 401 only to water quality impacts that relate directly to the proposed project. The bill would require states to give notice to pipeline developers within 90 days of submission of permit applications whether or not the state needs more information to complete the permitting process.
Federal action in this area was foreseeable. The entire idea of FERC was to provide a national framework for interstate pipeline approval and development. The actions by Governor Cuomo and others have gutted this framework. While the states certainly will argue that 90 days is insufficient to determine if they have all the information they need and while the states will seek to protect their newfound power, federal action will be inevitable. The current iteration may not be the bill that passes, but something will be done.
In an ironic twist, on Thursday the Senate Environment and Public Works Committee heard from CJ Stewart, a Crow Indian Tribal member and a board member of the National Tribal Energy Association. Mr. Stewart accused the governors like Cuomo of forcing the Crow to “languish in poverty” with 70% unemployment, despite having coal, oil and gas reserves on their land. The Committee also heard from Brent Booker, secretary-treasurer of North America’s Building Trade Unions. He argued that permit denials are delaying about $130 million in labor income.
Following the demonstrations at Standing Rock in North Dakota and the history of labor unions being aligned with the Democratic Party, it is interesting to see how the politics of energy do not fall neatly within our historic political scorecard.
North of the border, Canada’s energy regulator gave approval on Thursday for the construction of the largest segment of the Trans Mountain Pipeline. The Canadian National Energy Board approved Segments 1-4, from Edmonton, Alberta to Kamloops, British Columbia.
The Trans Mountain Pipeline expansion would triple capacity on the line to up to 890,000 barrels per day. As evidence of the need for the pipeline, the discount on Canada’s heavy crude hit a five-year high earlier in August as production overwhelms space on the congested Canadian pipeline system.
BC Premier John Horgan has been quiet on the Trans Mountain this summer. It remains to be seen what benefit, if any, eventually flows to him as a result of his stance blocking Trans Mountain and almost triggering a Canadian inter-provincial crisis.
Finally, as this Summer of Endless Rain continues in the Northeast, Duke University researchers concluded that the fracking boom will require large amounts of water to sustain itself, far beyond what previously was anticipated. If true, this gives a tremendous advantage to Marcellus producers, who live in a wet environment, as opposed to those in often parched areas of Texas and the Southwest. It’s another reason why policy makers in this part of the country should come to grips with all of the resources and opportunities we have here, take steps to environmentally guard them while simultaneously using them for all of our benefit.
Daniel B. Markind is the Chair of the Business Group at Weir & Partners LLP. Mr. Markind has represented individuals and companies in the energy industry for over 20 years. Mr. Markind is asked frequently to speak at conferences, in the media and at other venues regarding energy issues and their legal and political implications.
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