Money Matters

Trump’s plans for energy dominance meet resistance

Money Matters
By John Dizard
Mon, 02, 18

This was supposed to be the era of American energy dominance, to use the Trump administration phrase. Environmental activists and their bureaucratic tools would be crushed, deregulation would follow with a stroke of the presidential pen and exports would flow to a grateful and submissive world.

This was supposed to be the era of American energy dominance, to use the Trump administration phrase. Environmental activists and their bureaucratic tools would be crushed, deregulation would follow with a stroke of the presidential pen and exports would flow to a grateful and submissive world.

Dominance requires tens of billions of dollars to be spent on drilling and construction of pipelines, processing plants and liquefied natural gas export terminals, financed by project-hungry infrastructure funds, bondholders and banks. Then, the story goes, the resulting economic boom would lead to Republican re-election victories in presidential and congressional elections.

Environmental campaigners, though, have not been following the energy-triumphalist script. Instead, they have given up on their previous losing tactic of opposing LNG export terminals, and are concentrating on creating delays or cancellations of gas pipelines.

This has been working. Activists have been winning tactical victories against pipeline projects, and seem to have found weaknesses in the federal permitting process that threaten the energy export offensive.

For the past 70 years, interstate gas pipeline companies have been able to use federal law to roll over local and regional opposition to the construction of the national network. Pipeline project sponsors are required to go through a lengthy lawyer and consultant-heavy process at the Federal Energy Regulatory Commission.

However, once the sponsors manage to prove there is a requirement for the pipeline, and that the environmental risks are accurately described and mitigated, most state, local and landowner opposition is fruitless. The pipeline gets a “certificate of public convenience and necessity” under section seven of the Natural Gas Act, which means get out of the way. The pipeliners get the right of eminent domain, or compulsory purchase, over landowners or state and local governments.

If landowners resist voluntary property sales, their property can be condemned for the pipeline construction. The pipeliners must pay for the rights of way and any damages, but prolonged resistance is futile. Electric transmission line sponsors have been envious, until now, of the pipeliners’ regulatory certainty.

Over the years the FERC’s authority has been amended to include procedures for licensing export facilities, including LNG terminals. Those are in section three of the Natural Gas Act, which includes a presumption that gas exports are a good thing. Section three does not, however, give FERC the authority to trump state government or landowner resistance to export-dedicated pipelines. Up to now, the licensing of interstate pipelines leading to LNG terminals and border crossings has been justified by taking account of their domestic customers.

If the sponsors of those pipelines want to be able to wave the magic eminent domain stick, they need to make a case before the FERC that Americans’ “public convenience and necessity” includes gas exports. That may be stretching the current Natural Gas Act beyond recognition.

When the FERC was granted those pipeline permitting superpowers, nobody was thinking about the US as a gas exporter. They were thinking about the domestic public requirements.

That is not the only problem for gaining gas export pipeline permits. Under the Clean Water Act, the state governments were given the authority to implement the federal rules for assuring that developments such as pipelines would not harm the environment. The energy industry had not thought that was a problem. Gas pipelines had a clean image — the public was thinking about oil spills, not carbon emissions.

In recent years, though, states such as New York have used the Clean Water Act to stop interstate pipeline developments by requiring endless re-filings of permit requests. Even the Trump-appointed majority on the FERC has acceded to the states’ authority.

The pipeline people know they have a problem with the gaps and ambiguities in the FERC’s powers. As one of them says: “Really the solution lies in having Congress make clear that the states cannot block a federally approved project. Unfortunately the idea that they are capable of action is laughable.” Just this past week, New Jersey’s attorney-general refused permission for the proposed PennEast pipeline to cross state-controlled land. While PennEast is not explicitly an export-directed project, some of its methane molecules could find their way to the Cove Point LNG port in Maryland.

Now activists intend to use national FERC proceedings to question public interest in gas exports.