DAPL Ruling Threatens Future of North Dakota’s Oil Industry

Judge Boasberg of the U.S. District Court for the District of Columbia recently ruled that the Dakota Access Pipeline must shut down pending further environmental review. The decision to shutter the pipeline after three years of safe operations will have far-reaching negative consequences. Inforum recently reported: 

“North Dakota’s Industrial Commission was grappling to formulate a game plan for the state’s oil industry Tuesday, July 7, after a federal judge halted operations of the Dakota Access Pipeline earlier this week, a sudden blow to oil companies already limping through the pandemic.”

North Dakota Governor Doug Burgum was quick to criticize the decision, citing the economic harm of setting legal precedents that discourage investment.

“’This is the kind of risk that would just chase capital out,’ Burgum said, warning of the effects that the decision may have on North Dakota’s oil output and arguing the hit to North Dakota oil production will ‘hand a gift to all of our competitors’ in overseas oil-producing countries.”

An article published in the Midland Reporter Telegram elaborated on just how harmful the decision could prove to be.

“Dakota Access, which started up in 2017, was fundamental to advancing North Dakota’s oil production…Shutting the pipeline will mean oil can’t leave the state economically at a time when a pandemic-related glut gives buyers plenty of oil to choose from…The alternative of using rail would double the cost of transportation.”

Industry affiliates denounced the decision for similar reasons, noting that resulting economic damage would not be confined to the Bakken.

“Phillips 66, which owns a stake in the pipeline, said Monday it was disappointed in the court ruling. ‘The negative impacts resulting from this court’s decision to markets, customers, and jobs up and down the energy value chain will inflict more damage on an already struggling economy and jeopardize our national security,’ Dennis Nuss, a spokesman, said in an emailed statement.”

It is still too early to determine just how North Dakota’s oil industry will respond to the ruling, but its harmfulness cannot be overstated.

“One thing’s clear: The closure will be devastating for the Bakken, which once jostled to become the nation’s most prolific crude-producing field.”

ICYMI: Dakota Access Ordered to Temporarily Shut Down, Atlantic Coast Canceled, NWP 12 Reinstated

Yesterday, U.S. District Court for the District of Columbia Judge James Boasberg ordered the Dakota Access Pipeline (DAPL) be emptied and shuttered until the U.S. Army Corps of Engineers completes an Environmental Impact Statement (EIS) of the already operational crude oil pipeline. This comes after Judge Boasberg in March ordered the Army Corps to conduct additional environmental review, despite a previous “Finding of No Significant Impact” (FONSI). The pipeline has safely transported more than half a million barrels of crude oil per day from the Bakken oilfields of North Dakota to the Patoka Oil Terminal in southern Illinois.

As we have stated exhaustively, the Army Corps met or exceeded all guidelines when conducting its review of DAPL and performing the Environmental Assessment. North Dakota also conducted a 13-month review before they allowed construction to move forward.

Shutting down DAPL has significant economic, environmental, and energy security ramifications for both the state of North Dakota and the United States. Judge Boasberg even admitted the significant and disruptive impact of his ruling, noting: “[The Court] readily acknowledges that, even with the currently low demand for oil, shutting down the pipeline will cause significant disruption to DAPL, the North Dakota oil industry, and potentially other states.”

GAIN spokesman Craig Stevens issued this statement yesterday:

“Today’s order to shut down Dakota Access jeopardizes our national and energy security and raises significant concerns for the future of American energy infrastructure investment. Since coming into service three years ago, DAPL has safely transported more than a half a million barrels of crude oil per day from the Bakken oil fields of North Dakota to the Patoka Oil Terminal in southern Illinois.

“Despite its safe operation and having received the necessary permits and approval from both state and federal regulators, Judge Boasberg has decided to side with environmental activists to shut in our nation’s critical natural resources. A robust energy infrastructure network is the lynchpin to our nation’s energy and economic success, and DAPL is a key component of that growing network.

“While we are disappointed with the judge’s decision, the GAIN Coalition is hopeful that common sense will prevail and this decision will be stayed or overturned. We remain confident the Corps’ additional review will affirm its previous findings on DAPL.”

On Sunday, Dominion Energy announced they were no longer moving forward with the Atlantic Coast Pipeline, a new pipeline that would’ve carried gas from West Virginia to consumers in Virginia and North Carolina. Dominion noted, “While the need for new infrastructure in our region remains, there is too much legal uncertainty to continue moving forward with this project.” The project had faced years of legal challenges and regulatory scrutiny fueled by anti-energy activists.

Now, activists and project opponents are celebrating the loss of 17,000 construction jobs, $2.7 billion in economic activity, and nearly $30 million in annual property tax revenue that would have gone to local governments along the route.

Rulings like Judge Boasberg’s shuttering DAPL are exactly why companies like Dominion are walking away from projects like Atlantic Coast. Infrastructure projects like DAPL and Atlantic Coast require regulatory certainty. If developers meet all safety standards, receive the necessary permits from both state and federal regulators, and move forward with construction, they should be confident that their investments will be able to operate as intended. However, that is unfortunately not what we are seeing. U.S. policymakers and regulators have a duty to ensure a straightforward permitting and approval process that promotes regulatory certainty for energy infrastructure investments.

Dominion CEO Thomas Farrell told Wall Street analysts, “”Until these issues are resolved, the ability to satisfy the country’s energy needs will be significantly challenged… This trend, deeply concerning for our country’s economic growth and energy security, is a new reality [that] threatens the pace in which we intended to grow these assets.”

Finally, a ruling from the U.S. Supreme Court yesterday did bring some good news to the industry: SCOTUS agreed to reinstate Nationwide Permit 12 (NWP 12), a streamlined permitting program for new pipeline projects across the country. The permit is used by the U.S. Army Corps of Engineers to authorize dredge-and-fill activities for infrastructure around water crossings. More than 70 pipeline projects were held up in the NWP 12 suspension since Judge Brian Morris’ April ruling. While this week’s decision allows the Corps to utilize NWP 12 for new infrastructure projects, the ruling excludes the Keystone XL Pipeline while an appeal plays out in the Ninth Circuit.

GAIN spokesman Craig Stevens released the following statement welcoming the decision:

“GAIN commends the Supreme Court for today’s ruling to reinstate Nationwide Permit 12. We’ve seen judicial activism attempt to rewrite the intent of federal regulations and usurp the legal authority of the Army Corps of Engineers, so we are pleased to see some common sense coming from the Supreme Court today. As lower courts run amuck, the Supreme Court’s leadership is critical to ensuring regulatory certainty to companies and financiers who invest billions of dollars in large scale infrastructure projects.

“Energy infrastructure projects already undergo a rigorous and notably lengthy permitting and review process with both state and federal regulators before ultimately receiving the necessary approvals. Nationwide permits like NWP 12 are critical to cutting red tape and allowing infrastructure development to efficiently move forward while also maintaining the integrity of the tried-and-true permitting process conducted by the career professionals at the Army Corps. While the Keystone XL Pipeline was not included in today’s decision, we are confident the court will ultimately affirm the permit’s status upon further consideration and allow project construction to proceed.”

Natural Gas Infrastructure in the Permian Must Move Forward

While COVID-19 has certainly presented unprecedented challenges to our nation’s energy industry, it is clear that once this pandemic passes, the industry must be prepared for demand to rebound. As the Houston Chronicle reported last month, a drilling revival may soon be underway in Texas as more than one hundred drilling permits were filed with the Texas Railroad Commission from June 3 to 9 – nearly half of which were filed for projects in West Texas’ Permian Basin.

As drilling and production begins to rise, it is important that the proper infrastructure is in place to transport product to consumer markets, specifically, natural gas that is produced as a byproduct of oil drilling. For many years, the region has lacked the infrastructure necessary to transport record natural gas production from the Permian to consumers and export terminals along the coast.

In fact, as a result of this shortage of pipeline, $750 million worth of natural gas was flared –burned off – in 2018. That is three-quarters of a billion dollars’ worth of fuel that could’ve helped lower energy costs and provided a more environmentally-friendly alternative to other energy sources. Natural gas has been key in lowering global carbon emissions from the electricity generation sector, with the United States leading the charge.

Fortunately, developers are moving forward on new natural gas infrastructure investment, including projects like the Permian Highway, Gulf Coast Express, and Whistler pipelines. These pipelines will provide much-needed capacity to transport natural gas out of the Permian, thereby reducing flaring rates and helping get fuel safely and efficiently to markets.

These projects also bring a welcomed economic boost in the midst of the COVID-induced downturn, providing thousands of family-sustaining jobs, new streams of tax revenue for Texas and municipalities, as well as new economic opportunities for the communities along their routes.  

Nord Stream 2 Poses A Threat To American Interests

Real Clear Energy recently published an opinion column by GAIN strategic advisor and former Major General James “Spider” Marks regarding the threats posed by Nord Stream 2, a Russian-owned natural gas pipeline project that is intended to transport gas to Germany for distribution in Western Europe.

However, as Marks explains, “if completed, the Nord Stream 2 project will serve as a geopolitical weapon to expand Russia’s influence in Western Europe and undermine American national security efforts with key allies.”

In response to this threat to American interests, a bipartisan coalition of U.S. Senators led by Sen. Ted Cruz and Sen. Jeanne Shaheen have introduced the “Protecting Europe’s Energy Security Clarification Act,” legislation with sanctions intended to halt the construction of the Nord Stream 2 project.

This latest bill is an expansion of measures passed in the 2020 National Defense Authorization Act that co-sponsor Senator Jeanne Shaheen described as ensuring “Russia does not surreptitiously extend its malign influence throughout Europe,” and protecting the Ukraine, Europe’s energy independence, and American allies from Russian exploitation.

With Nord Stream 2, Russia tightens their grip on American allies in Europe, as these nations develop a reliance on Russia for their energy needs. But relying on a volatile and potentially unpredictable regime for energy presents new uncertainty and risks.

As such, American policymakers must unlock our domestic energy resources to better support our European allies with reliable energy, all while bolstering our own energy industry and limiting Russia’s global influence. Marks suggests these measures include investment and approval of export terminals along the Gulf of Mexico, as well as allowing offshore leasing and drilling activity.

As Marks concludes:

The United States is in a global leadership position when it comes to energy. To sustain that role, attention must be given to improving domestic energy strength and reiterating to allies that we are capable and eager to support them. Allowing Russia to complete and operationalize the Nord Stream 2 pipeline forfeits strategic advantages critical to the United States and its allies.

States Ask SCOTUS to Lift Ban on NWP 12

Eighteen states last week asked the U.S. Supreme Court to intervene and block a Montana federal judge’s order partially banning the use of Nationwide Permit 12 (NWP 12) – a critical Clean Water Act permit used by the Army Corps to approve dredge-and-fill activities in waterways for infrastructure development. The use of NWP 12 was banned in a May opinion from Judge Brian Morris in regard to the Keystone XL crude oil pipeline.

The brief argues that NWP-12 makes federal approval of energy infrastructure projects “quicker and more cost-effective than other permitting systems,” noting that these projects and the resources they provide are critical to their states’ economies.

E&E News reported:

The states said pipeline developers are choosing between “sinking time and money into the individual permitting process, or they could wait to start construction until the Corps’ position is ultimately vindicated,” the states wrote in a proposed “friend of the court” brief.

“Either option will potentially add years to the timelines of projects that require substantial capital investment.”

They pointed to permitting processing estimates that found individual permits took 788 days and $271,596 to complete, compared with the average NWP 12 applicant who spent 313 days and $28,915.

If all new pipelines are diverted to individual permits, those timelines would slow down further, they warned.

Law360 highlighted the brief as well, noting:

According to the states, electricity is an “essential and foundational” part of modern life, “no less than water itself.” And they said Judge Morris’ order puts a crimp in energy providers ability to meet growing demand by building new pipelines.

For example, they said that existing pipelines and refineries can’t handle the amount of oil that’s currently being extracted from the Permian Basin, and quoted the National Energy Technology Laboratory’s estimate that between $470 million and $1.1 billion of additional investment in pipeline infrastructure is needed to meet seasonal demand in part of the country.

Rather than introducing additional regulatory hurdles and more unnecessary red tape, now is the time to promote regulatory certitude and ensure a straightforward permitting and approval process with clear guidelines for infrastructure developers. Energy infrastructure is essential to safely and efficiently transporting the fuels that Americans rely on each and every day. With the economy already facing unprecedented challenges, now is not the time to gamble with infrastructure investment and our nation’s energy security.

Municipal Natural Gas Bans are taking a toll on America’s energy system

Bloomberg Law recently published an op-ed by GAIN strategic advisor and former Maryland Congressman Albert Wynn on municipal natural gas bans and the resulting economic strain. Wynn outlines the many merits of natural gas and encourages policymakers to follow the lead of states that have passed laws barring local governments from prohibiting new natural gas hookups. Wynn writes:

“According to the American Gas Association, households that use natural gas for heating, cooking, and clothes drying save an average of $874 per year compared to homes using electricity for those applications. Further, natural gas furnaces offer the greatest energy savings for customers, as oil furnaces, electric heat pumps, and electric resistance furnaces cost two to four times as much as the most efficient gas furnaces.”

Wynn goes on to note that Louisiana recently became the largest state to block municipal natural gas bans, joining Oklahoma, Tennessee, and Arizona; all approved similar measures earlier this year. Thankfully these states have reaped the rewards of natural gas, as Wynn continues:

“Despite these obvious economic benefits, several municipalities have either considered, introduced, or even implemented bans on new natural gas hookups in new buildings. Berkeley, Calif., last year became the first city to enact such a ban as part of a statewide push to lower carbon emissions and bolster renewables. Seattle, San Jose, Sacramento, and Los Angeles are considering similar bans.”

The city officials supporting these municipal bans might believe they are acting in the best interests of their constituents, but the reality is the opposite. They are depriving those constituents of a more affordable and environmentally friendly energy resource. Families are struggling in these tough economic times and the last thing they need is a higher energy bill.”

Hopefully city officials see the irreplaceable value of maintaining and continuing to allow natural gas hookups in their areas. For our nation want to maintain a bright energy future, we must allow natural gas to do its part in continuing to lower carbon emissions and provide affordable, reliable energy for Americans. Wynn’s full piece can be read here.

Army Corps Asks Supreme Court to Overturn Nationwide Permit 12 Freeze

U.S. Solicitor General Noel Francisco earlier this week asked the U.S. Supreme Court to temporarily block an order from the U.S. District Court for the District of Montana that has barred the Army Corps of Engineers from approving dredge-and-fill activities for pipeline water crossings under Nationwide Permit 12 (NWP 12).

Permitting under NWP 12 was suspended in April as part of litigation regarding construction of the Keystone XL Pipeline. While plaintiffs in the Keystone XL case were only seeking a resolution on that specific pipeline, Judge Brian Morris responded with a nationwide ban on the permit used to authorize work around water crossings, impacting not only KXL but dozens of other oil and gas projects around the nation.

According to E&E News: “a stay of Morris’ order would remain in effect while the 9th U.S. Circuit Court of Appeals considers whether the court’s May 11 amended order properly brought the permitting program to a halt for new pipeline construction… The request follows the 9th Circuit’s decision against taking immediate action to block Morris’ order, which puts the nationwide permit on hold while the Army Corps conducts an interagency Endangered Species Act consultation.”

The suspension of NWP 12 is a significant disruption to development of our nation’s critical energy infrastructure and gambles with both our energy security and national security. Such a widespread ruling will unnecessarily thwart investment and hinder energy investment for decades to come – with consumers ultimately paying the price.

Pipelines are carefully studied by both state and federal regulators before receiving the necessary permits and approval. But with this ruling, we are second-guessing the career professionals that have been tasked with studying and permitting our nation’s infrastructure – throwing regulatory consistency out the window. It is paramount the Supreme Court step in and overturn the order that will have such major repercussions for our nation’s energy future.

The Supreme Court’s Commonsense Ruling on the Atlantic Coast Pipeline

From court room antics to vigilante protests, anti-fossil fuel activists have made it clear they are willing to do whatever it takes to stop the construction of much-needed energy infrastructure projects. The latest ploy in the anti-energy playbook? Arguing pipelines cannot cross the Appalachian Trail, a 2,200 mile hiking path that spans from Maine to Georgia.

While activists have continued to adapt their strategy in an effort to develop new hurdles to infrastructure development, the Supreme Court yesterday ruled this one was just too far off from fact and commonsense. The Court overturned a lower court’s ruling that would have blocked construction of the $8 billion Atlantic Coast natural gas pipeline – determining the U.S. Forest Service has the authority to grant the pipeline a right of way under the trail in the George Washington National Forest in Virginia.

The Wall Street Journal Editorial Board called it a “victory for common sense” and “a defeat for those who want to shut down U.S. energy production,” noting:

The U.S. Forest Service approved the plan, but climate activists sued. They argued that because the Appalachian Trail is administered by the National Park Service, it counts as Park System lands. If so, then no federal agency would have the authority to permit the pipeline crossing. An appellate court accepted this theory in a ruling that—no kidding—quoted “The Lorax,” a children’s book by Dr. Seuss.

Justice Clarence Thomas made short work of the argument in U.S. Forest Service v. Cowpasture River Preservation Association. “If a rancher granted a neighbor an easement across his land for a horse trail,” he wrote, nobody would think “that the rancher had ceded his own right to use his land in other ways, including by running a water line underneath the trail.” The same principle applies when the Forest Service grants a “right-of-way” under the Trails Act of 1968.

The land is still maintained by the Forest Service, as the government’s advocate explained during oral argument: “If a tree falls on forest lands over the trail, it’s the Forest Service that’s responsible for it. You don’t call the nine Park Service employees at Harpers Ferry and ask them to come out and fix the tree.”

The theory that pipelines can’t pass the Appalachian Trail, Justice Thomas wrote, “would apply equally to all 21 national historic and national scenic trails currently administered by the National Park Service.” Where a trail traverses state or private properties, those might also be considered “lands in the National Park System.” The facts, Justice Thomas concluded, “simply cannot bear the weight” of the Lorax interpretation.

GAIN spokesman Craig Stevens released a statement yesterday in support of the ruling:

“The Supreme Court’s ruling is a key win for the Atlantic Coast Pipeline and energy infrastructure development across the nation. While activist challenges to permitted energy infrastructure attempt to delay construction of critical pipelines and bog down the courts, today’s ruling sends a reassuring message that facts and commonsense will ultimately prevail. Policymakers, regulators, and the legal system have a duty to ensure regulatory certainty for infrastructure developers who meet the necessary permitting and safety standards.  Today’s decision is a significant step in the right direction and we look forward to the completion of Atlantic Coast and its important role in bolstering our nation’s energy security.”

Shale Crescent Region Leading Natural Gas Production

The Center Square recently highlighted the growing importance of the Shale Crescent region in meeting our nation’s natural gas needs. Thanks to significant technological advances in drilling and delivery, Ohio, West Virginia, and Pennsylvania have been able to produce a record amount of natural gas in recent years. In fact, these three states combined produce more natural gas than Texas, and from 2008 to 2018, 85 percent of all natural gas growth in the U.S. came from these three states due to the shale boom in the Marcellus and Utica formations. If the three states were a country, they would be the world’s third-largest natural gas producer behind the U.S. and Russia.

In addition, according to economic development initiative Shale Crescent USA, the region is a commonsense location for petrochemical plants because it is one of the “few global locations where the natural gas is located in the same area as the manufacturing plants and end-use consumers.” The article notes the Shale Crescent region saw growth after Shell’s $6 billion cracker plant began construction in western Pennsylvania. Such investment creates thousands of jobs, new streams of tax revenue, and new economic opportunities for the surrounding communities.

Regarding future natural gas production, the article paints a bright future for the region:

According to a recent U.S. Energy Information Administration (EIA) Natural Gas Liquids Primer update, surging production of natural gas in the Appalachian Basin is expected to quadruple total eastern U.S. production from 2013 levels by 2050, and NGL production is expected to increase by more than 700 percent by 2023.

This boom in production has created a renewed importance on reliable energy infrastructure in the region. Pipeline projects like the Mariner East system, Rover, and Atlantic Coast are key to safely and efficiently transporting natural gas to consumer markets. Modern pipelines are carefully studied by federal and state regulators before receiving the necessary permits, and are the safest and most environmentally-conscious method of delivering the energy that Americans rely on each and every day.

Energy Infrastructure Investment Can Provide Economic Relief in Light of COVID-19

The Detroit News recently published an opinion column by Bette Grande, president and CEO of the Roughrider Policy Center and energy research fellow at The Heartland Institute, regarding the significant economic benefits energy infrastructure investment can provide. These benefits are even more important in light of the economic downturn triggered by the coronavirus pandemic.

But despite the clear economic gains from modern energy infrastructure investment, additional legal and regulatory obstacles have been put into place to delay critical development of projects like Line 3 and Line 5. As Grande writes:

In at least two states, though, governors could get thousands of people back to work right away by removing obstacles to existing energy infrastructure projects. Considering the dire economic forecasts, it would be a shame not to let them move forward.

Back in 2018, regulators in Minnesota approved a plan to replace an aging oil pipeline. Line 3, as it is known, carries crude oil from Alberta to Wisconsin, but because of its condition, operates at only half capacity. Last year, Gov. Tim Walz renewed a state appeal to stop the project. 

A similar delay is playing out in Michigan, where, in 2018, the state approved agreements to create a tunnel under the Straits of Mackinac, the waterway between Lakes Michigan and Huron. The tunnel is designed to house oil and gas pipelines that now sit unprotected on the bottom of the Straits. Gov. Gretchen Whitmer ordered state agencies to halt action on the proposed tunnel last year. A Michigan court reversed her order, but she still faces pressure to block any forward movement on the project.

The challenges facing these projects are not rooted in fact or based on the merits of the proposed upgrades. Rather, they are an unfortunate result of politics at play and an ideological opposition to the use of fossil fuels. While opponents claim to be focused on the environment, Grande explains that with less pipeline capacity, more crude is transported by train – which produces more greenhouse gas emissions and is less safe than pipeline.

Grande highlights the immediate economic benefits of moving forward with pipeline construction on these projects, and turns to other pipelines that have been completed in recent years, their safe operation, and the benefits they brought to their respective states:

Crucially as we head into a major recession, infrastructure projects offer a slew of economic benefits. Minnesota’s Line 3 replacement would create about 6,500 local jobs over a two-year period, pay some $167 million to local workers and generate another $162 million in purchases at local businesses. In Michigan, Enbridge has committed to spending $500 million on the Straits of Mackinac tunnel, including $40 million right away.

There are also up-and-running examples of the potential economic impact, like Louisiana’s Bayou Bridge, a pipeline extension completed last year. That project paid $71 million to local landowners, plus nearly $35 million to Louisiana-based companies for materials used in the pipeline’s construction. It also created 2,500 construction jobs.

The Dakota Access pipeline, which was similarly stalled by protestors before it was finally completed in 2017, has been a boon for the North Dakota economy. The project produced some 12,000 jobs for North Dakotans during construction, and within its first two years of operation, the pipeline generated more than $263 million in state tax revenue.   

In conclusion, the column emphasizes that with the unprecedented challenges facing the American economy, now is not the time to stall perfectly safe infrastructure projects that can support thousands of jobs, usher in new tax revenues, and create new economic opportunities for Americans.