US can play key role in responsible infrastructure development in Latin America

As the government shutdown continues, all eyes have been on Washington as ongoing budget negotiations between President Donald Trump and Democratic congressional leadership have proven futile. As GAIN spokesman Craig Stevens writes in his recently published op-ed in Morning Consult:

Given all this attention [to the border], it has been difficult to miss the poor living conditions facing the Central American population. Take Honduras, for example, where two-thirds of the population lives in poverty. Many migrants moving toward the U.S. border started their journey in Honduras, looking to leave behind the violence and inadequate living conditions.

Although the region’s challenges are multi-faceted, progress starts with small steps, and the US can play a major role in improving living conditions in countries like Honduras by facilitating responsible energy infrastructure development. As Stevens contends, Latin America has lacked adequate resources and the infrastructure required to provide reliable electricity and fuel to meet its consumer needs. He writes:

Energy-rich countries such as the United States can play an important role in this, too. For example, the U.S. Trade and Development Agency’s Gas Infrastructure Exports Initiative can help to facilitate responsible energy development in Latin American countries.

While the US under the current administration has been hesitant to increase assistance to the region, China has seized the opportunity and has begun developing relationships with several Latin American governments through its investment in the region, nearly $150 billion since 2015. As GAIN strategic advisor James “Spider” Marks writes in his recently published op-ed in Real Clear World, “China’s deep commitment to Latin America is a direct challenge to the United States.”

Marks underlines several concerning elements of China’s growing involvement in our backyard – much of which has a negative impact on the people throughout the region. He writes:

A number of countries in the region are already benefiting from China’s Belt and Road Initiative, a long-term plan for increased trade and economic growth with significant foreign policy and geopolitical implications. Although most of the states participating in the program span Asia, Africa, and the Middle East, the number of Latin American participants is expected to grow as China continues to express its willingness to invest in the region. 

However, these countries have already started to pay the price for their growing dependence on China. From Venezuelan oil deals to Ecuadorian mining issues, infrastructure development has been conducted irresponsibly, with significant repercussions falling on local populations. As reported by the Washington Post, “many Latin Americans have criticized China for its extensive promotion of Chinese firms, labor, and machinery within state-to-state investment contracts, and its lack of local governance standards, including inadequate environment and labor protections.” Are we surprised? Of course not. 

As both Stevens and Marks conclude, as an energy-rich country, the US is well-positioned to foster responsible energy infrastructure development in countries throughout Latin America, such as Honduras. Through private-public partnerships, in tandem with strong industry standards and regulations, these goals can become a reality.

Energy industry going above and beyond when it comes to cybersecurity

The US Government Accountability Office (GAO) recently released a report with claims that there are a series of “weaknesses” in how the Transportation Security Administration (TSA) manages its pipeline security efforts. While it’s worthwhile to continually evaluate the resilience of our nation’s energy networks, what this report doesn’t acknowledge are the lengths that the energy industry is already going to in exceeding regulatory best practices around cybersecurity. It’s important to keep in mind that guidelines outlined by the TSA are a baseline framework, and many operators continue to exceed these standards. In fact, the global oil industry was expected to increase spending on cyber defenses by $1.9 billion in 2018.

Safety is the top priority for the natural gas industry. Although the GAO report is a helpful assessment, any changes to the current status quo should not be made in an overly hasty manner. There are inherent risks involved in every industry, but the TSA and energy developers are working closely together, taking robust steps to anticipate any potential threats and develop safeguards accordingly. From decades of extensive experience, the TSA and pipeline operators have developed layers of resilient support and strong security programs to mitigate risk.

In addition to comprehensive training exercises to simulate active assaults on the grid, dozens of natural gas and oil companies share cyber threat intelligence with each other and the federal government. Therefore, there is little chance that a severe service disruption could occur to the natural gas transmission network. And in the exceedingly rare event of a disruption, impacts would be localized and brief, and it is extremely unlikely that a single point of disruption could result in an uncontrollable cascading outage.

Regulators play a critical role in modern energy development. But “playing politics” or adding more regulatory hurdles is not the answer to bolstering industry security – the US must instead streamline the permitting process, establish straightforward expectations, and ensure regulatory certainty for developers. In an era when the US is producing record amounts of oil and gas, lawmakers and regulators alike must welcome investment and foster an environment conducive to energy infrastructure development.

Lawmakers Urge Trump to Get Keystone XL “Over the Finish Line”

Members of congress are urging President Trump to take action to move construction of the Keystone XL Pipeline forward after a federal judge overturned the State Department’s approval of the project in a ruling last month.

In a Dec. 14 letter, forty-four lawmakers, including Montana Sen. Steve Daines and Rep. Greg Gianforte said the recent court decision “has brought real and immediate consequences, halting critical preconstruction activities and invalidating the analysis that underlies the approval issued by your administration.”

“This comes despite extensive review by the previous Administration saying the pipeline will have minimal environmental impact and generate significant economic benefits,” the letter states.

“While we believe that it is important to conduct appropriate environmental reviews, we also believe that further review will not contribute to the existing body of science that already supports pipeline construction and instead will have a significant impact in our rural communities.”

Lawmakers go on to note that the $8 billion project will create an estimated 6,600 new jobs and amount to a nearly a $4 billion capital investment in 2019 alone. According to the letter, the November court decision halting pre-construction activities has already resulted in a loss of at least 700 jobs.

“We respectfully urge you to take every practicable step to get this project over the finish line and workers back on the construction sites.”

GAIN Coalition spokesman Craig Stevens echoed the concerns outlined by lawmakers, while also emphasizing the importance of the project. “Continued study of the matter places an unnecessary burden on limited government resources, while intensifying concerns about the regulatory uncertainty provided to vital infrastructure projects,” Stevens said.

“The Keystone XL pipeline represents an important investment in both the U.S. and Canadian economies and should be built without further delay.”

Op-ed: “The American energy strategic advantage”

The Washington Times recently published an opinion piece by GAIN strategic adviser James “Spider” Marks underlining the importance of American energy and its critical role in the global market. Marks contends that the oil and gas industry is vital to our economy and way of life, supporting more than 10 million American jobs and is responsible for heating our homes, fueling our vehicles, and providing reliable electricity. However, Marks argues the benefits of a strong American energy industry extend beyond its borders. The op-ed writes:

American energy exports can provide stability to the international energy market and foster more prosperous relationships between the United States and countries seeking reliable energy, while bolstering American foreign policy objectives in the process. Look what’s happening today in Ukraine. Russia seized Ukrainian ships and crew members. Crimea is already lost to Russian criminality. What’s next? Fundamentally, this is all about European Union access to Russian oil and gas. The United States must be a viable alternative.

The United States has encouraged European countries to limit their reliance on Russian energy, offering more stable American LNG alternatives instead. European leaders appear to be interested and receptive to U.S. energy, and willing to support building new LNG import terminals to accommodate shipments. Germany has already offered support to build in a terminal in the northern part of the country, with others likely to follow suit.

But in order to fully meet our potential when it comes to stabilizing the global energy market and assisting our allies, we must complete pipeline projects that are currently underway and encourage future investment in our critical energy infrastructure. Marks points out that modern pipelines are the “safest, most efficient method of transporting product, from extraction until it reaches consumer markets.” Despite this, projects across the country, from Keystone XL, to Bayou Bridge, to Mountain Valley, continue to face unwarranted scrutiny from opposition, regulatory uncertainty, and a number of legal hurdles. As Marks concludes:

In order to best utilize our fossil fuels, meet our energy needs and provide reliable fuels for our allies around the world, we must prioritize the safe completion of pipeline projects currently underway and welcome future investment. While thorough evaluations and careful analysis are critical steps of the process, permits must be streamlined and regulations clear and consistent. It is time for U.S. officials to put aside partisan politics, focus on the facts and understand the significant need for infrastructure development.

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.