Pipeline projects getting cut back
Companies easing off large-scale plans after years of fights in court
WASHINGTON — A decade ago, when the shale boom was still in its infancy, developers lined up to build long-distance natural gas pipelines to supply distant markets with low-cost energy to replace aging, dirty coal and oilburning power plants.
But after years of legal fights with environmental groups trying to eradicate carbon-emitting fossil fuels, pipeline companies are backing off large-scale pipeline projects. The decision by its developers earlier this month to cancel the 600-mile Atlantic Coast Pipeline project is just the beginning, experts say.
“There’s so much uncertainty on the project timeline and the cost you are unlikely to see another major natural gas pipeline built (that crosses state lines),” said Sam Andrus, executive director of North American gas at the consulting firm IHS Markit. “These environmental groups have made it their explicit goal to delay these projects and raise the costs. And they’re getting better at it as time goes on.”
If more pipelines go the way of the Atlantic Coast project, it would limit markets for natural gas producers in states such as Texas, which produces more gas than any state and has watched its economy thrive under the oil and gas boom brought on by hydraulic fracturing.
A recent study by the American Petroleum Institute predicts that demand from oil and gas producers would support the construction of more than 17,000 miles of pipelines during the next five years.
But between legal fights with environmentalists and Democratic state politicians such as New York Gov. Andrew Cuomo moving to block pipelines from their states to address climate change, it looks unlikely that anywhere close to that amount will be built.
“We need infrastructure to get our production out to areas with the most demand,” said Frank Macchiarola, senior vice president at API. “It’s essential we get these projects up and running.”
Pipeline companies, as well as their trade group the Interstate Natural Gas Association of America, declined to comment.
Immediate protests
The Atlantic Coast Pipeline, proposed by North Carolinabased Duke Energy and Virginiabased Dominion Energy, was announced six years ago in a bid to connect the United States’ largest natural gas basin, the Marcellus Shale in Pennsylvania, with southern states that had long relied on coal for power.
But to construct the pipeline, the companies needed to cross the Appalachian Mountains, largely a federally protected wilderness area that includes parts of a famed hiking route, the Appalachian Trail. Protests began almost immediately, setting off a legal fight, which, along with project delays, drove the cost of the pipeline from $4.5 billion to $8 billion, the developers said earlier this month.
That is likely to have a chilling effect on the lenders and investors that pipeline developers rely on for financing, said Stephen Brown, an energy consultant and former industry lobbyist.
“Pipeline companies have to decide and say, ‘We probably can’t build everything we want and our clients want, and what can we get across the finish line in a reasonable amount of time?’ ” he said. “You’re going to have to pick your targets a little more carefully, and investment capital is going to get scarce.”
While environmental groups might succeed in shutting down a specific project, they do not have the financial resources to wage legal campaigns against all new pipelines, said David Bookbinder, an attorney with the Niskanen Center, a Washington think tank that advocates for the environment.
They might target high-profile projects such as Keystone XL or the Permian Highway pipeline, which Houston-based Kinder Morgan is building through the Texas Hill Country amid growing local opposition. But most pipelines are unlikely to enter the public consciousness.
“It takes a lot of effort to run a campaign like that (against Atlantic Coast Pipeline),” Bookbinder said. “There’s around six lawsuits against the Permian Highway, but there are probably a dozen other pipelines under construction no one is paying attention to.”
But pipeline developers are paying attention and adjusting their plans.
Shorter is quieter
Financial analysts tracking the industry say companies are beginning to shift from building new pipelines toward expanding existing routes. They also are focusing on shorter pipelines that do not cross state lines and are less likely to attract the attention of environmental groups.
For instance, a series of new oil and gas pipelines out of the Permian Basin all head toward the Texas Gulf Coast, instead of markets in California or the Midwest.
“There are still some industryfriendly states,” said Natalia Patterson, an analyst at the energy research firm Wood Mackenzie. “If you want to build a pipeline within Texas, you’re dealing with the Texas Railroad Commission, but if you’re taking it across into Louisiana,
it’s (the Federal Energy Regulatory Commission) and national attention.”
President Donald Trump has made moves to help pipelines and other infrastructure projects along, including his recent decision to overhaul the National Environmental Policy Act, which requires federal agencies to consider the environmental impacts in their decision-making. The act was signed into law by President Richard Nixon in 1970.
But the Trump administration’s efforts to help industry have struggled to withstand legal scrutiny. Earlier this month, a federal judge ruled the U.S. Army Corps of Engineers had failed to conduct an adequate environmental assessment before signing off on the Dakota Access pipeline project in North Dakota and ordered the pipeline shut down — though the Supreme Court later allowed the pipeline to continue operations.
“The administration has not helped itself by rewriting these rules,” said Brown, the energy consultant. “By rewriting them in such a sloppy legal manner, they’re being overturned by the courts left, right and center, and that adds to the legal quagmire.”