Op-ed – “Gas prices reach new 2018 low, but some states won’t reap the benefits”

The Daily Caller recently published an opinion piece by GAIN spokesman Craig Stevens highlighting record-low gas prices for 2018. Stevens suggests that the cost of fuel is one of the “most recognizable and reliable economic indicators” here in the US, affecting millions of Americans each day. The op-ed emphasizes the benefits of affordable gas, noting that the average US family spends about five percent of its annual income on fuel, about $2,400 for last year. With cheaper gas prices, the money that families save can instead go towards a variety of other household commodities.

Stevens contends that the “downward trend in retail fuel prices is a boon for consumers, and it owes largely the surge in energy development happening across the nation.” He points out that while the national average of gas prices is impressively low, states like California face gas prices more than 40 percent above the national average. Stevens argues:

As conventional wisdom holds, retail prices follow crude. But there’s more to the story. Crude oil makes up about half the price consumers face at the pump, and research indicates that a $1 change in the price of crude oil moves the retail value by approximately 2.4 cents. From there, many factors come into play, including local demand, state taxes, marketing and distribution.

One of the heftiest costs producers face — which, in turn, gets passed on to consumers — is that of moving energy products. Once pumped from the ground, developers ship oil and natural gas to refineries, which process it into market-grade fuels. These products are then transported to regional hubs, and finally on to the point of sale.

Studies show that as much as 20 percent of consumers’ costs owe to the expense of moving fuels from stage to stage. 

Not surprisingly, states with the highest fuel costs tend to be those that lack midstream infrastructure to safely and effectively transport fuels.

The United States’ remarkable shale development has restructured the flow of energy from outside-in to inside-out, and pipeline deployment has struggled to keep pace.

In addition to a lack of infrastructure, several states have vehemently opposed new pipeline construction to alleviate these bottlenecks, such as New York Governor Cuomo’s “blockade” on infrastructure. Other states, like Pennsylvania, California, and Washington have implemented high fuel taxes. And by no coincidence, these states have some of the highest gas prices across the country.

Moving forward, the US must take advantage of the boom in energy production. In order for all Americans to share in these low fuel prices and benefit accordingly, we must expand our critical energy infrastructure network. Denying infrastructure growth is preventing progress – from New York to California. As Stevens concludes “To extend this progress nationwide, and to solidify the country’s march toward energy security, policymakers should prioritize the United States’ infrastructure capabilities.”

US oil exports hit key milestone

Earlier this week, Bloomberg reported the US has become a net oil exporter for the first time in 75 years. This status serves as both a practical and symbolic milestone, indicating the US’ dominant role in the global energy market. The article highlights the factors leading up to this newfound “energy independence,” writing:

The shift to net exports is the dramatic result of an unprecedented boom in American oil production, with thousands of wells pumping from the Permian region of Texas and New Mexico to the Bakken in North Dakota to the Marcellus in Pennsylvania.

On paper, the shift to net oil exports means that the U.S. is today energy independent, achieving a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush. Yet, it’s a paper tiger achievement: In reality, the U.S. remains exposed to global energy prices, still affected by the old geopolitics of the Middle East.

Although the US is exporting record amounts of oil to our allies around the globe, there is still much work to be done when it comes to growing our energy infrastructure and achieving more efficient transportation methods. As reported by E&E News, the oil industry has flared a record amount of natural gas in Texas’ Permian Basin this year, and is expected to flare even more gas in 2019. Flaring is the process of burning excess gas at drilling sites that could not be transported for consumer use due to a lack of infrastructure in the region. In addition to being a potential environmental concern, flaring disposes of valuable gas that could be utilized by consumers around the country, such as those in New England who are preparing for another frigid winter.

Fortunately, there are a number of projects underway in the Permian to help alleviate the pipeline bottleneck, and will better position the US to maximize oil production, export capabilities, and efficient transport of product. Bloomberg writes:

U.S. crude exports are poised to rise even further, with new pipelines from the Permian in the works and at least nine terminals planned that will be capable of loading supertankers. The only facility currently able to load the largest ships, the Louisiana Offshore Oil Port, is on pace to load more oil in December than it has in any other month.

GAIN recognizes the US’ status as a net exporter of oil as an important milestone in our history and moving forward. A strong American energy industry not only plays a critical role in fueling our growing economy, but also stabilizes the global market with the US as a key player.

Independent Risk Assessment Underscores Pennsylvania Pipeline Safety

In southeast Pennsylvania, construction of the Mariner East 2 pipeline is nearing completion. The project, which will be capable of carrying up to 275,000 barrels per day of natural gas liquids for both domestic and international use, underwent a rigorous regulatory review process – after which local, state, and federal officials approved the pipeline for construction and operation. And any lingering concerns over the project’s safety should be put to rest by the publication of an independent study of ME2 which was recently completed at the request of local residents.

An independent risk assessment report was commissioned by Delaware County officials earlier this year. Houston-based G-2 Integrated Services, a consulting firm with extensive expertise in the pipeline and energy industries, examined the possibility of an accidental release of the Mariner East 2 or the Adelphia pipelines in Delaware County, concluding that such an incident was highly unlikely to occur. According to a Daily Times report on the study:

In their analysis, G-2 “concluded that the individual fatality risk levels estimated for both the Mariner East 2 pipeline and the Adelphia pipeline fall within a range of other common risk sources such as traffic accident, house fire, or fall from stairs.”

In fact, the report stated that a person is 20 times more like to die from a traffic accident or fall from stairs and 35 times more likely to die from a house fire than from an incident involving the Mariner East 2 pipeline 24 hours a day, seven days a week.

Based on this 79-page report, local residents should rest easy knowing that the operation of pipelines in their communities is safe, efficient, and highly unlikely to result in any type of adverse incident. GAIN looks forward to the successful completion of the Mariner East 2 pipeline.

Rover & Mariner East 2 Pipelines carefully reviewed and permitted by regulators

Many Americans may not realize it, but the oil and gas industry is one of the most closely regulated industries in the country. For example, pipelines undergo an extensive review process before receiving approval from a number of local, state, and federal regulators. They must meet rigorous standards outlined by regulatory bodies, conduct a public comment period, and address concerns and questions regarding the proposed project.

Despite these thorough procedures and careful approval process, critics have been quick to point fingers and claim corners were cut anytime an issue arises. Recently, Reuters published an article questioning the standards and procedures regarding the construction of two key pipelines in the Midwest: the Rover and Mariner East 2 Pipelines. The article alleges the construction schedules of these projects were “ambitious,” suggesting crews rushed through the process to get the pipeline into service. However, as quoted in the article, Energy Transfer, the developer of the two lines, stated the schedules were “appropriate for the size, scope, and the number of contractors hired.”

Take the Rover Pipeline, for example. It is now fully operational, having recently received approval from the Federal Energy Regulatory Commission (FERC). The project went above and beyond when it comes to environmental and safety efforts. During Rover’s construction, more than 20,000 construction specialists in the construction industry such as electricians, welding technicians and various other specialized tradesman, worked across Ohio, West Virginia, Pennsylvania and Michigan to ensure the safety of the community and the integrity of the project remained intact. As a result of diligent planning, Rover was able to avoid many tracts under this conservation easement, with approximately 80% of the pipeline paralleling existing infrastructure.

Energy developers and regulators make extensive efforts to get feedback from community members during the process, too. In FERC’s Final Environmental Impact Statement on Rover, the agency stated a Notice of Intent to Prepare an Environmental Impact Statement was distributed to 15,600 interested parties, including federal, state, and local government representatives and agencies; elected officials; environmental and public interest groups; Native American tribes; affected property owners; other interested parties; and local libraries and newspapers. Additionally, seven public comment meetings were held during spring of 2016 regarding the project, and more than 2,000 comments were received and addressed accordingly from landowners, public officials, non-governmental organizations, and government agencies regarding the project.

Energy Transfer, the developer of Rover, has reiterated their commitment to the safe and efficient operation of the pipeline. Industry experts have even argued that many energy companies are now avoiding projects that require federal permits all together in an effort to avoid drawn-out legal challenges, regulatory hurdles, and aggressive opposition from environmental activists. In order to bolster the industry and fuel the American economy, our policymakers must prioritize expanding our critical energy infrastructure and welcome investment in the energy industry.

Oil industry driving investment & development in North Dakota

NPR recently published an article on the increasingly important role of the oil industry in North Dakota. NPR boasts that the US produced more crude than any other country this year, in large part due to booming production in North Dakota. The article briefly outlines the history of the industry in the state, specifically focusing on the small town of Watford City. With many small towns around the country hurting, Watford City’s economy is booming, as people from around the country have moved to the area for good-paying jobs in the oil industry.

Watford City mayor Phil Riely credits hydraulic fracturing and horizontal drilling for revitalizing the small town, which had been losing population for years until recently. Riely tells NPR the city was considering closing a school and looking into other budgetary cuts, but the energy industry turned that around. The article writes “Instead of closing a school, a brand new $54 million dollar high school was built on the edge of town. And the oil industry has influenced what’s taught there.” In addition, the town has plans for more housing and businesses, as well as other key infrastructure improvements.

The influence and the benefits of the industry span from the economy to the schools. For example, Watford City High School has a new $20,000 truck-driving simulator, aimed at encouraging students to consider a career in trucking. Largely due to the nearby oil fields, the work is steady and the pay is good. On jobs in North Dakota, and growing opportunities in the state, NPR writes:

North Dakota’s unemployment rate in October was a low two-point-eight percent, nearly a full point below the national figure. So oil companies and others have trouble finding enough drivers.

Agriculture education teacher Scott Wisness says it’s great to have people moving to Watford City from all over the country for jobs.

“But we don’t want to export our students—or at least I don’t—and neither do these companies. They want to keep people here who are going to stay here… Who are going to raise their families here,” says Wisness.

The article points out North Dakota’s oil companies are producing record amounts of oil with half as many drilling rigs. Dakota Access Pipeline is another reason drilling has become more economical in the area. The pipeline has allowed significantly more oil to be transported across the country via pipeline, a safer, more affordable option than rail. GAIN looks forward to the continued investment and development of the energy industry in North Dakota, and around the US.

Op-ed – “Cyberthreats Underscore the Need for Infrastructure Preparedness”

Morning Consult recently featured an opinion piece by GAIN Strategic Advisor Col. Tom Magness (U.S. Army Corps of Engineers, retired) highlighting cyber threats and other potential risks to energy infrastructure development. Magness emphasizes that as US energy production flourishes, infrastructure safety has become a “renewed focus point on the national stage.” He contends that while most of the conversation surrounding potential pipeline issues has centered narrowly around the risk of structural failures, the real threat derives from cyber-attacks launched from hundreds of miles away. Magness discusses the important role of software used to operate and monitor our infrastructure network, as well as the need to protect it. He writes:

Not surprisingly, by nature, the software needed to run them is susceptible to hacking. Earlier this year, a cyberattack on a shared data network forced major natural gas pipeline operators to temporarily shut down online communications. While reports indicate the culprits were likely phishing for consumer information, the incident showed the vulnerability of a more targeted attack. Also this year, Russian hackers attempted to shut down a Saudi petrochemical plant. In a separate case, a Russian group targeted companies in Ukraine.

The effects of a large-scale disruption to the U.S. energy grid could be staggering, both for industry and for consumers. Recognizing that reality, infrastructure operators continue to invest significantly to safeguard networks. Oil producers alone are expected to spend nearly $2 billion by the end of this year globally on cyberdefense. And, as attacks become more sophisticated, it’s likely that spending will continue to grow.

Magness points out that regulators are also taking cyberthreats seriously. From best practice guidelines to grants strengthening infrastructure resiliency, US officials recognize the need to protect our investments. Public-private partnerships are key to successfully promoting and protecting our energy infrastructure, as Magness contends “A recent report by the American Petroleum Institute concludes that voluntary collaboration between industry and government is the best way to improve cybersecurity and implement protective measures.” In closing, Magness writes:

As history teaches, regulators should exercise caution to preserve the right balance between industry’s and government’s roles. Cyberthreats do not equate to vulnerabilities, and pipeline companies have gone to great lengths to minimize risk exposure. Pipeline operators are able to respond quickly to cyberthreats, and prescriptive regulatory measures — which are typically much slower moving — may ultimately reduce companies’ ability to address situations as they arise.

Emerging cyberthreats emphasize the need to modernize and strengthen our energy infrastructure. Investment is not only bringing online new transportation capabilities — which help to secure our country’s energy independence — it is making these systems more resilient. In that regard, regulators should continue to work with industry to create an environment that provides certainty for midstream developers and operators and encourages implementation of new technologies.

Read the full op-ed here.

Op-ed – “Pipeline Paralysis: The left’s latest fossil fuel obstruction tactic”

The Hill recently featured an op-ed highlighting current efforts and tactics from environmental activists to thwart pipeline projects across the country. The op-ed was written by Merrill Matthews, a resident scholar with Texas’ Institute for Policy Innovation. Matthews emphasizes the important role of the energy industry in the US’ growing economy. He includes impressive statistics reported by the US Energy Information Administration regarding oil production, writing:

U.S. crude oil production is growing by leaps and bounds, topping out at 11.7 million barrels per day in November — about twice what it was in 2010, according to the U.S. Energy Information Administration (EIA). And the International Energy Agency (IEA) projects the U.S. will account for about 75 percent of the growth in global oil production over the next six years.

Matthews highlights that with this boom in oil production comes a significant pipeline bottleneck, most notably in Texas’ Permian Basin. He notes that producers have had to turn to rail to keep up with transporting the record amount of oil being produced. The op-ed features comments from the White House expressing the importance of energy infrastructure and the need to expand the network, as well as the increasingly aggressive opposition midstream projects continue to face. Efforts to delay or halt new pipeline construction and energy development include anti-fracking laws, ballot initiatives such as the recent attempt in Colorado, and legal challenges such as the recent order from a federal judge to stop construction on Keystone XL.

Judge Brian Morris, of the District Court for the District of Montana, ordered the work-stop and criticized the Trump Administration for “ignoring climate change concerns” and alleged the State Department “didn’t properly account for factors such as low oil prices, the cumulative impacts of greenhouse gases from Keystone and the Alberta Clipper pipeline, and the risk of oil spills.” However, the State Department, as well as state regulators, determined the Keystone XL pipeline would not have a “major climate change impact.” It appears that the judge’s decision may have been fueled by partisan politics rather than actual findings. Matthews concludes by reiterating the importance of expanding our energy infrastructure and emphasizing we must trust the system, writing:

The importance of fossil fuel production to the U.S. economy and to national security cannot be overstated. Having mostly failed at the ballot box, fossil fuel opponents are increasingly turning to pipeline obstruction, either by protests (e.g., the Dakota Access pipeline) or the courts, or both. It’s one more way of imposing their will on voters rather than the other way around.

 

Bottleneck in the Bakken continues

Reuters recently reported Bakken crude oil prices are set to weaken from already low levels in coming months, largely due to the expected frigid weather conditions this winter that will likely disrupt rail loadings and worsen bottlenecks as production continues to increase. The Bakken has reached record levels of production at 1.3 million bpd, “overwhelming pipelines and rail cars.” As Reuters writes:

The region’s pipeline capacity is just 1.25 million bpd, per market intelligence firm Genscape, forcing producers in North Dakota to rely on less efficient rail, which could face difficulties operating in the winter. In addition, nearby Canadian producers also grappling with bottlenecks are pushing more oil into the United States, worsening the constraints.

North Dakota’s crude production typically is not affected enough to lift prices the winter, but rail operations face severe challenges in the frigid weather, said John Zanner, crude analyst at RBN Energy.

“Winter weather makes crude-by-rail operations much more difficult. You have stuff freeze up, especially in North Dakota,” Zanner said.

Reuters highlights that Energy Transfer plans to expand the Dakota Access Pipeline’s capacity to as much as 570,000 bpd from its current 525,000 bpd. Although new projects have been announced to help alleviate the pipeline shortage in the region, it will take some time before these lines are constructed and brought into operation. Just last week, a federal judge halted construction on the Keystone XL crude oil pipeline from Canada.

With record levels of production, the US is at a critical point in which we must prioritize expanding our critical energy infrastructure network in order to efficiently fuel our current and future energy needs.

Energy Infrastructure Key to Moving Latin America Forward

Real Clear World recently published an op-ed authored by GAIN spokesman Craig Stevens highlighting the importance of energy infrastructure and resilience in Latin America. Although Latin America has seen great progress in recent years when it comes to expanding energy access, more than 23 million people still do not have access to reliable energy. Those suffering from energy poverty often have to rely on primitive methods of heating their homes or cooking food.

As the op-ed emphasizes, these families often also have to overcome unhealthy living conditions and additional challenges, including “a lack of potable water, improper sewage treatment, and educational and health care shortfalls.” Proper energy infrastructure and improved access to reliable energy can “help bring communities out of poverty, and it can help support economic and political stability.” The overall quality of life could be greatly improved, as Stevens contends:

The possibilities cannot be overstated, as reliable energy can greatly improve many aspects of life. In the home, for example, it promotes modern, sanitary cooking and heating.  In hospitals and medical facilities, electricity enables modern care and life-saving procedures. In schools, electricity allows the power of the internet, and with it new information, to teach the next generation of leaders. 

Additionally, the op-ed goes into detail on specific countries that have significant populations suffering from energy poverty, including Honduras and Haiti:

Take Honduras, for example, where the migrant caravan started. As of 2016, nearly one million residents did not have access to electricity.  The country ranks 96th out of 137 on the Global Competitiveness Index, with electricity and communications infrastructure ranking 105th of the 137 countries studied. Adding electricity capacity to a more reliable national grid would help bolster the economy and create new jobs. Haiti is another example of an underdeveloped country that could greatly benefit from investments in critical energy infrastructure. The country ranks 136th out of 137 for electricity and communications on the Global Competitiveness Index. The promotion of public-private partnerships is crucial in order to create a more resilient electric grid and expand access to all Haitians. 

Stronger energy infrastructure and increased access to reliable energy are key to improving living conditions in developing nations in Latin America. Advancements in infrastructure would not only benefit residents and communities in the region, but also solidify more resilient relationships between energy-rich countries like the US and countries throughout Latin America and the Caribbean.

Read the full op-ed here.

American Petroleum Institute releases new report featuring cybersecurity in the oil & gas industry

GAIN recognizes that in addition to growing our nation’s infrastructure, it is critical that we also prioritize protecting what is already in the ground. The American Petroleum Institute (API), in conjunction with the Oil and Natural Gas Subsector Coordinating Council and the Natural Gas Council, recently released a new report emphasizing the importance of cybersecurity in the oil & gas industry. The report highlights the industry’s “resilience and preparedness to defend itself and energy consumers against malicious cyber threats,” as well as “providing insight for policymakers into the comprehensive cybersecurity programs of the natural gas and oil industry.” The report goes into great detail, describing cybersecurity efforts from the time natural gas is extracted till it reaches the consumer:

Cybersecurity in the natural gas and oil industry applies throughout the value chain, extending from wellheads to pipelines and through to the supply of natural gas to an electric power generation facility or gas utility, or the supply of oil to a refinery and through to the manufacturing of fuels and sales at a gasoline station.

However, a misconception has recently developed that implies natural gas pipelines are more vulnerable to attacks than other energy infrastructure. Although it is true that cyberattacks targeting US energy infrastructure are on the rise, our pipelines have a number of security mechanisms in place to ensure safe, efficient operation. As the report notes, there are a series of industry guidelines that are closely adhered to, as energy companies are continuously evaluating potential risks and adding increased levels of enhanced security. Expanding on this point, the report contends:

Furthermore, the natural gas system is highly resilient because the production, gathering, processing, transmission, distribution and storage are highly flexible and elastic – characterized by multiple fail-safes, redundancies and backups. Pipeline companies have in place layers that protect against cascading failure, which also include mechanical controls that are not capable of being overridden through any cyber compromise of [industrial control systems].

A layered defense approach provides optimal protection in the rapidly evolving cyber threat landscape, as no one layer of defense or technology will ever be completely effective. This approach creates a landscape that is much more challenging for an attacker to fully penetrate – providing necessary time to implement defensive response measures.

Industry works closely with the government agencies responsible for cybersecurity throughout each of these segments – from Coast Guard regulatory oversight in maritime and maritime-facing facilities to TSA regulatory oversight of pipelines, as well as bi-directional sharing with the U.S. intelligence community via DHS/NCCIC, DOE, FBI and others – ensuring collaboration and communication at every point.

Through strong public-private partnerships and ongoing technological advancements, energy companies will be able to continue to protect and maintain pipelines around the country. GAIN appreciates the extensive efforts of the American Petroleum Institute in compiling this comprehensive report on the continued need to protect our nation’s critical energy infrastructure.

Read the full report here.