U.S. Senators Propose Additional Sanctions on Russia’s Nord Stream 2 Natural Gas Pipeline

A bipartisan group of U.S. senators recently proposed expanding sanctions on Russia’s Nord Stream 2 natural gas pipeline in an effort to halt the project’s construction. If completed, the pipeline will transport natural gas from Russia to Germany to supply Western Europe. The bill, Protecting Europe’s Energy Security Clarification Act, comes after Congress last year implemented sanctions on the companies supporting the pipeline.

U.S. policymakers are concerned the pipeline increases Europe’s energy reliance on Russia, ultimately weakening the region’s energy security. Given Russia’s history as an unpredictable and volatile regime, this development poses a significant threat to the national security of our nation and its allies in Europe. The sponsors of the legislation have argued:

“There is bipartisan and bicameral consensus that Russia’s Nord Stream 2 pipeline poses a critical threat to America’s national security and must not be completed,” Sen. Cruz said.

“We must now continue that effort and ensure that Russia does not surreptitiously extend its malign influence throughout Europe. Nord Stream 2 threatens Ukraine, Europe’s energy independence and gives Russia an opening to exploit our allies. Congress must once again take decisive action and stand in this pipeline’s path,” Sen. Shaheen said.

“The Nord Stream 2 pipeline is a Russian trap. It makes Europe and our allies more dependent on Russia and more prone to Russian influence. We’re committed to blocking all Russian efforts to complete this dangerous pipeline,” Sen. Barrasso said. “Our bipartisan bill expands targeted sanctions on those involved in assisting with the construction of this pipeline. These sanctions will prevent Russia from bolstering its geopolitical weapon.”

“Halting construction of Nord Steam II demands our continued vigilance,” Sen. Cotton said. “These expanded sanctions will help complete our mission to stop Moscow from using the pipeline to drive a wedge between Eastern European nations and the rest of Europe.”

“Preventing Russia from using its energy resources as a geopolitical weapon is in America’s national security interests,” Sen. Johnson said. “This legislation’s expansion of targeted sanctions will send a strong message to Putin that Russia’s continued aggression has consequences.”

With record natural gas and oil production in recent years, the United States has the ability to safely provide a reliable and affordable source of energy for our allies across the globe – including those in Europe. Thanks to continued domestic energy infrastructure investment – from pipelines to export terminals – the U.S. is continuing to strengthen the global energy market with a stable, dependable source of energy.

States Taking Steps to Ensure Consumer Access to Natural Gas

Louisiana is the latest state to block municipal natural gas bans, according to a recent article in Bloomberg Law. Democratic Governor John Bel Edwards last week signed legislation barring local governments in the state from banning natural gas utility services.

While no municipalities in Louisiana have proposed bans at this point, the legislation is a key step in ensuring reliable consumer access to affordable, domestically-produced natural gas. Several other states, including Oklahoma, Tennessee, and Arizona, approved similar measures earlier this year.

The wave of new legislation comes in response to a rise in municipal natural gas bans, originating in California and Washington State. Berkeley, CA last year became the first city to ban natural gas hookups in new buildings, as several other cities including Seattle, San Jose, Sacramento, and Los Angeles either considered or continue to consider similar policies.  

But rather than recognizing the significant environmental and economic benefits of natural gas, proponents for natural gas bans advocate for such policies almost entirely out of an ideological opposition to the use of fossil fuels. However, natural gas has helped lower carbon emissions from the power sector, and provides one of the most affordable methods of heating homes, cooking, and drying clothes. But even some activists, like Rev. Jesse Jackson, have come around to the importance of natural gas: Jackson is supporting the construction of a new natural gas pipeline to serve an impoverished community outside of Chicago.

It is clear natural gas is a key part of the solution for a reliable yet sustainable energy future – not the problem.

Court Finds Regulators Were Correct in Approving Line 5 Contingency Plan

The 6th U.S. Circuit Court of Appeals last week found the Pipeline and Hazardous Materials Safety Administration (PHMSA) acted appropriately when they approved Enbridge’s plan to address potential spills from its Line 5 oil pipeline in Michigan, reversing a lower court’s decision calling for the federal agency to conduct further analysis before approving the response plan. Line 5 transports crude oil and natural gas liquids from Wisconsin to Ontario, crossing through the Straits of Mackinac in northern Michigan.

As part of an ongoing effort to halt the upgrades and continued operation of the pipeline, environmental activist groups had challenged PHMSA’s approval of Line 5’s contingency plan in the rare event of a spill. They claimed PHMSA should have assessed whether the response plan also complied with the Clean Water Act, Endangered Species Act, and National Environmental Policy Act.

But last week’s determination from the 6th Circuit found Enbridge had satisfied the six statutorily defined criteria, rejecting the challengers’ argument that PHMSA had to consider additional environmental criteria that were outside of the law.

Such extraneous legal challenges have become all too common in the anti-energy activism playbook, as activists have extended efforts from protesting at work sites to propagating legal and regulatory challenges – continuing to seek new tactics to halt further development of fossil fuel infrastructure. Enbridge has taken steps to further bolster pipeline safety standards by proposing the construction of a protective tunnel around the pipeline where it crosses the Straits – a project that has become a political target for environmental activists, despite the clear environmental benefits. Both Michigan’s Democratic Governor Gretchen Whitmer and Attorney General Dana Nessel have called for the critical infrastructure to be shut down.

A number of state and federal regulators already perform a rigorous review and permitting process before ultimately granting the necessary approvals. Rather than creating more red tape and time-consuming, bureaucratic hurdles for infrastructure investment, regulators and policymakers must ensure a straightforward permitting and approval process with reasonable timelines and regulatory consistency.

Illinois Commerce Commission Rejects Activist Calls for DAPL Optimization Delay

The Illinois Commerce Commission (ICC) this week rejected calls from environmental activists urging the regulatory agency to delay a determination on the proposed optimization of the Dakota Access crude oil pipeline. The optimization project has received the necessary approvals from regulators in North Dakota, South Dakota, and Iowa, and awaits a final decision from the ICC. The pipeline has been safely transporting crude oil from the Bakken oilfields in North Dakota to the Patoka Oil Terminal in southern Illinois for nearly three years.

Activists allege the increased capacity is not necessary given the coronavirus’ impact, reducing demand for oil. However, as GAIN spokesman Craig Stevens explains in a statement released this morning, the pandemic-induced downtown in oil demand is only temporary, and we must be prepared for when it eventually bounces back:

“GAIN commends the Illinois Commerce Commission for continuing to review and consider the merits of the Dakota Access Pipeline optimization project. Activists have continued to exploit the uncertainty surrounding the coronavirus to further an anti-fossil fuel agenda that fails to consider the long-term energy and economic ramifications. But it is paramount that regulators and policymakers keep in mind the pandemic-induced oil downturn is only a temporary hurdle, and the nation must be prepared for increased demand when this passes.

“Increasing the capacity of Dakota Access strategically positions the United States to maintain both energy security and energy dominance in a post-coronavirus world. In addition to ensuring affordable access to domestic oil, DAPL optimization is a shovel-ready project that will provide new economic benefits to the communities along its route, including thousands of high-skilled jobs and new streams of tax revenue. GAIN trusts that the ICC will ultimately make the right decision to secure our nation’s energy future and approve the optimization of a critical component of our nation’s energy infrastructure network.”

Optimizing the Dakota Access Pipeline is the safest, most efficient, and most environmentally-conscious method of bolstering American energy security and increasing consumer access to our nation’s energy resources. Through the construction of three new pump stations and modifications to existing facilities, optimization will nearly double the pipeline’s capacity from 570,000 bpd to 1.1 million bpd – a strong development for our nation’s energy infrastructure network. No new mainline construction will be required.

Instead of acknowledging the significant benefits of this project, environmental activists have continued to oppose it, largely based on an ideological opposition to the use of fossil fuels. However, activists fail to recognize that traditional energy sources like natural gas and oil continue to provide for the mainstay of American energy needs. While an “all of the above” energy strategy that includes renewables like wind and solar are important, it would be a disservice to American consumers to limit energy infrastructure development, ignoring the reality that natural gas and oil remain critical components of our energy makeup.  

Line 3 Replacement Faces Further Delays

After pressure from environmental activists during the recent comment period, the Minnesota Pollution Control Agency (MPCA) this week announced it will hold a public hearing this summer on Enbridge Inc’s plan to replace its Line 3 oil pipeline, adding a potential three-month delay and pushing the bulk of construction to next year. The hearing will focus on how the pipeline will safely cross streams and wetlands on the route.

The hearing comes after the agency issued a draft water quality certificate for the project earlier this year. The Minnesota Public Utilities Commission (PUC), the primary regulator of oil pipelines in the state, also issued approval in February.

Despite a rigorous permitting and approval process, activists continue to challenge the project, advocating for additional regulatory hurdles and more red tape to delay construction – which ultimately impacts American energy consumers. Replacing the pipeline, which was constructed in the 1960s and is only able to run at half capacity, should be a win-win. The replacement bolsters American energy security while also strengthening pipeline safety and efficiency.

Line 3 is a critical component of our nation’s energy infrastructure network. Rather than unnecessarily introducing further uncertainty and challenges, regulators and policymakers have a duty to foster a straightforward infrastructure permitting process that ensures regulatory consistency.

U.S. Can Take Steps to Best-Position Energy Industry

The Rio Grande Guardian recently published an op-ed by GAIN strategic advisor James ‘Spider’ Marks emphasizing the importance of a strong domestic oil industry, and steps the government can take to best position the industry for the future. Marks opens:

The expansion of the U.S. energy industry bolstered America’s GDP and strengthened its national security.

Now, the coronavirus pandemic threatens to reverse decades of gains despite an OPEC+ production cut agreement to end the Saudi Arabia-Russia oil price war. Petroleum storage is rapidly filling at great cost to producers who are desperate to avoid halting operations.

While a number of options have been discussed for how to best support the oil industry in light of these unprecedented challenges, there is not a silver bullet. The Saudi Arabia-Russia oil war certainly exacerbated a crisis for political gain – but it merely accelerated an imminent glut. Marks argues:

That damage is now irreversible, and government must move quickly to help the U.S. energy industry survive. Unfortunately, policymakers continue to chase the wrong solutions. Some have advocated tariffs on energy adversaries, which will hurt American importers more than foreign producers. Others have proposed mandated production cuts, which are divisive at best and self-sabotaging at worse. These proposals are flawed in the same way as the original trade agreement: their efficacy relies on government-interference in private industry and cooperation with international competitors. To avoid the worst, it is imperative that lawmakers shift their focus from distracting foreign policy stopgaps to smart domestic action.

Several targeted domestic policies have already helped to mitigate the crisis. The U.S. Government has started taking deliveries to the Strategic Petroleum Reserve, which has bought the industry time to find alternative storage solutions. Meanwhile, the EPA has suspended enforcement of certain environmental regulations to prevent undue disruptions to production, and some states are considering allowing pipeline companies to store, rather than transport oil. Although these measures are not sufficient on their own, all three empower the private sector to respond to the crisis without interfering in the free market.

Marks further emphasizes the importance of the free market in the domestic energy industry’s prior success, noting: “Heterogeneity allowed producers to prosper, and their success contributed to stronger energy security, a healthier economy, and greater resilience to foreign price manipulation.”

He closes by pointing out that the U.S. has a duty to support producers without depriving them of the independence that facilitated their growth, concluding: “The correct response to foreign cartelization is not capitulating to adversaries’ wishes for production cuts, but instead taking advantage of a unique policy window to drive a strong domestic response rooted in free market principles that emphasizes public-private partnerships.”

New EPA Rule Will Help Streamline Energy Infrastructure Development

A rigorous permitting and approval process for energy infrastructure is the lynchpin of successful American energy development. Local, state, and federal regulators carefully review proposed projects and issue permits only after ensuring such projects will not impact the surrounding environment or pose other risks.

But a longstanding issue in the United States has been the concerning length of time it often takes for critical energy infrastructure projects to receive the approval necessary to begin construction. Even after all environmental and safety standards have been met or exceeded by developers, the permitting process is often mired with delays and challenges from activists and state administrations seeking to halt the use of fossil fuels. Some states have resorted to using their authority under the Clean Water Act Section 401 to block energy infrastructure projects for reasons unrelated to water quality. Such challenges can delay the permitting process for years – with American consumers paying the price.

Fortunately, the U.S. Environmental Protection Agency (EPA) yesterday issued a final rule that will further streamline the construction of critical energy infrastructure projects. The rule increases the transparency and efficiency of the Clean Water Act Section 401 certification process in order to facilitate the timely review of projects while continuing to ensure that Americans have clean water for both drinking and recreation.

The final rule follows an executive order signed by President Trump last April seeking to accelerate and promote the construction of natural gas and oil pipelines and other key infrastructure.

Craig Stevens, spokesman for the GAIN Coalition, expressed support for the new rule:

“GAIN applauds the EPA for this final rule and for its ongoing efforts to promote energy infrastructure development while continuing to protect our nation’s land, air quality, and waterways. It is essential that the federal government ensure a straightforward permitting and approval process that provides developers with regulatory consistency and clear guidelines. Unfortunately, a number of states have blocked the construction of much-needed energy infrastructure projects using their authority under Section 401 – despite meeting the necessary requirements. These objections, however, have often been based in an ideological opposition to the use of fossil fuels rather than legitimate concerns regarding the state’s waterways. This newly enacted rule sends a strong message that environmental stewardship and responsible infrastructure investment are not mutually exclusive.”

The EPA’s new rule is a step in the right direction for our nation’s energy infrastructure network. With this new guidance, hopefully long overdue infrastructure development in this country will face a more straightforward and clarified regulatory timeline, which will ultimately provide benefit to all Americans.

Keystone XL & NWP 12 Ruling Paralyzes Infrastructure Permit Process

Law360 recently published a co-authored analysis from GAIN strategic advisor and former Army Corps commander Col. Tom Magness and former Oklahoma Corporation Commission chairman Patrice Douglas regarding the impact of the Keystone XL ruling and its setback for American energy infrastructure development.

In addition to pulling permits for Keystone XL – claiming the U.S. Army Corps of Engineers did not adequately consider the potential effects of the project on endangered species in water bodies the pipeline would cross – the ruling also indefinitely suspended the Corps’ ability to authorize any dredge or fill activities under Nationwide Permit 12 (NWP 12). NWP 12 is used to streamline permitting for projects like pipelines, transmission lines and cables that traverse federally regulated waterways. Magness and Douglas write:

The Corps joined with other federal officials in emphasizing the widespread ramifications of the ruling, arguing in a recent filing that the “Court’s remedies have nationwide effect, are extremely disruptive, and are contrary to the public interest.” On May 11, Judge Morris upheld his ruling, but narrowed its purview to allow the Corps to authorize “non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.” The Corps filed notice two days later seeking to appeal the order.

While narrowing the scope of the ruling was a step in the right direction, the effect of the ruling halts fossil fuel projects under NWP 12 alleging “the threat of such destruction from oil and gas pipelines proves substantial.” From a decade-long permitting process being nullified to a district judge making nationwide energy policy, this ruling presents multiple layers of concern that will surely have infrastructure developers thinking twice.

The Army Corps of Engineers is a nonpartisan organization of career professionals who focus on the facts and scientific findings, not politics. As the authors write:

Keystone XL was permitted only after nearly a decade of thorough planning and vetting that included careful consideration to ensure each of the many permitting criteria were met. In order to proceed with this project, Army Corps professionals worked with applicants to ensure minimal cumulative adverse impacts to the aquatic environment — a key requirement of NWP 12.

Despite the decade of rigorous review, Judge Morris’ ruling introduces a new level of uncertainty in an already uncertain environment, for an industry that has been ravaged by the coronavirus pandemic and an ill-timed global oil price war.

Rather than second-guessing the dedicated professionals that have been tasked with studying and permitting our nation’s infrastructure, it is critical that we extend our full trust to these regulators. Regulatory consistency is essential.

Magness and Douglas emphasize that such a ruling will surely thwart investment and hinder development for decades to come, and consumers will ultimately pay the price. This anti-energy playbook has become all too common – from courtroom challenges to vigilante protests. The piece also points out that similar challenges have arisen with the Dakota Access Pipeline, noting:

Despite nearly three years of safe operation, the court ordered the Army Corps to conduct further environmental review. Activists now call for the pipeline to be shut down until the additional review is completed, which will likely take several years.

As the authors conclude, now is not the time to gamble with our nation’s energy infrastructure:

Now more than ever before, policymakers, regulators and even our judges have a duty to provide consistent and transparent processes that ensure infrastructure development has a meaningful path forward.

Taxpayers and Policymakers Must Continue to Be Disciplined Arbiters of American Energy

Morning Consult recently published an op-ed from GAIN spokesman Craig Stevens regarding the latest challenges facing the energy industry in light of the coronavirus pandemic. A number of potential options have been discussed to help mitigate such challenges – including industry “bail outs.” However, Stevens argues that the free market is the best arbiter for serving American consumers:

Government manipulation of the market, be it through production cuts and quotas or bailouts and subsidies, often does not have the intended results. Unexpected side effects often outweigh any anticipated benefits. Therefore, the free market – particularly when it comes to energy – is the ultimate arbiter to best serve consumers in domestic and international markets.

According to a recent Morning Consult poll, more than half of Americans support bailing out the “clean energy” industry. But before others join in clamoring to pour money into renewable companies and give the government a green light to assess and predict the companies of the future, it is important to remember:

The last large-scale cash injection for energy companies from the government came under the Obama administration as “green loan guarantees” that focused on dozens of companies believed to be on the cutting edge of renewable energy technologies. Perhaps the most infamous recipient was Solyndra, which quickly defaulted on a $535 million government loan after going bust.

Since the rollout of these loans, taxpayers are picking up the pieces of the program at a cost of $2.2 billion with little progress made by companies that received these loans. This goes to show that when the government gets in the business of picking winners and losers, it seems to miss more than hit.

Second, taxpayers must be diligent in assessing the value or benefit they receive from the deployment of tax revenues by the federal government. Should the 56 percent get their way and a bailout of the clean energy industry be deployed it would likely do little to better the large picture and, instead, may simply speak to the “warm glow effect,” or emotional satisfaction consumers and voters receive from supporting policies they deem to “do good.”

However, as Stevens points out, renewables are still cutting their teeth in energy generation. According to the Energy Information Administration (EIA), wind and solar are responsible for less than 10 percent of American electricity generation, while natural gas alone accounts for more than a third of our nation’s electricity capacity. Further, natural gas has been key to lowering carbon emissions – and is an accessible, affordable, and reliable source of domestic energy.

When considering different solutions for the challenges facing the American economy and energy sector, it is key to focus on the facts:

All said, this should be a reminder that what looks good on paper and what actually works in practice are two very different things. Fortunately, the United States benefits from a long history of investing in energy infrastructure, leading the research and development of new energy innovations, and a wide breadth of natural resources that have brought us energy security. Bailouts and energy market interventions are best reserved for paper, not practice.

Tribes Call for DAPL to be shut down, despite significant disruptive consequences

The Standing Rock Sioux and several other tribes this week filed a brief with the U.S. District Court for the District of Columbia calling for the Dakota Access Pipeline (DAPL) to be shut down while the project undergoes additional environmental review, which could take a year or more.

This comes after a federal judge ruled in March that the U.S. Army Corps of Engineers must conduct an Environmental Impact Statement (EIS) on DAPL, despite its safe operations for nearly three years – safely transporting crude oil from the Bakken region in North Dakota to a the Patoka Oil Terminal in southern Illinois. Further, the Corps had already conducted an Environmental Assessment (EA) on the project before issuing approval, which determined a “Finding of No Significant Impact” (FONSI).

Federal regulators, the state of North Dakota, industry groups, and more than a dozen attorneys general have expressed support with the court that DAPL be able to continue operations while the additional review is conducted. Shutting down DAPL would have severe economic, environmental, and energy security consequences. The ruling could set a dangerous precedent for the future of American energy infrastructure development.

As the North Dakota Petroleum Council wrote in a recent amicus brief:

In sum, shutting down DAPL after three years of operation and under the current market conditions would undermine the substantial commitments North Dakota’s oil producers have made over the past three years. It would further harm the North Dakota oil and gas industry in a time when it is already down due to the coronavirus pandemic. It would also delay any recovery from the pandemic. The loss of oil production would harm not only the companies who produce the oil, but also royalty owners and the state and local governments who rely on royalties and taxes from the production, both during the pandemic and long afterward. It would also harm the service industries and employees who supported the lost production. Ultimately, a shutdown of DAPL in the currently distressed environment likely would cause companies to fail who otherwise might have survived, and jobs to be lost that otherwise might have been saved.

The Corps believes it is “highly likely” that they will be able to substantiate its past permitting decisions after conducting the EIS. As the Corps wrote in their recent brief:

There has already been a great deal of environmental and technical review that informed the Corps’ substantive decisions. Given the amount of analysis that has occurred thus far and the specific easement conditions imposed, it is highly likely that the Corps will ultimately be able to substantiate its existing property management decision after correcting the procedural error identified by the Court.

Without this property interest, the portion of the Pipeline under Lake Oahe would constitute an encroachment on federal land prompting the Corps to undertake an administrative process to determine whether corrective measures, such as removal, are required. Disruptions from removal could include, among other things, creating the “extreme waste” of dismantling and rebuilding the Pipeline. Removal or even temporary decommissioning could create additional construction-related impacts and result in oil being transported by truck or rail—transportation methods that entail both greater risk of spills and greater air pollution than pipeline transport.

The Corps respectfully submits that the Court should not vacate the Corps’ easement decision authorizing Dakota Access to construct a portion of the Dakota Access Pipeline 100 feet under the bed of Lake Oahe. The Corps’ errors were not “serious” in context, and the disruptive consequences of vacatur would be significant.

While opponents have pointed out the oil industry has struggled in light of the coronavirus, additional impairments such as shutting down DAPL will only further impact our nation’s energy producers and hinder development. In order to maintain American energy dominance, it is critical that Dakota Access be able to continue operations, and that policymakers and regulators ensure a streamlined permitting and approval process that provides regulatory certainty for investors.