The federal natural gas pipeline permitting process favors either the industry, or landowners and environmental groups, depending on who you listen to, but one thing both sides seem to agree on is that process hasn’t kept up with the changing energy landscape.
FERC Chairman Neil Chatterjee said in opening the Envision Forum in Lexington, KY, Monday that he wanted “candid, frank, passionate discussions” about energy issues facing the United States and its international partners, and he certainly got them as members of a panel skirmished from separate sides of the pipeline permitting issue.
According to Richard Averitt, who said his plans to build a resort on 100 acres in Nelson County, VA, were decimated by Atlantic Coast Pipeline‘s efforts to build on his property, the use of eminent domain leaves landowners like him with virtually no negotiating power.
“I think there’s a very serious question about whether eminent domain should ever be used to produce a for-profit export project. I think that’s inconsistent with our beliefs around property rights, but particularly when you look at how the courts have extended the right to eminent domain to include preliminary injunctions, or ‘quick take,’ that collapses on landowners to be an absolute destruction of your right to due process…
“The idea that eminent domain is only used as a last resort is a false narrative from a landowner’s perspective. It is used in every pipeline case if it’s on the table. Because when you sit down at the negotiating table, one of the two parties can walk away with virtually no negative impact, and the other one loses everything they care about.”
In addition, conditional permits issued by the Federal Energy Regulatory Commission leave landowners powerless, Averitt said. Such permits allow companies to seize land and prepare it for pipeline construction, often destroying farmland even if the project never comes to fruition, he said.
“To enable the taking of private citizen’s land and the destruction of that land at a time when those permits are still in question is unconscionable…that’s not an appropriate due process.”
The current process stands as it does, according to other panelists, because pipelines are vital to the nation’s economy and demand planning years in advance.
“It’s a bit unfair to cast the characterization that those that are developing natural gas and pipelines in this country are somehow nefarious or calculative characters,” said Alex Herrgott, executive director of the Federal Permitting Improvement Steering Council.
Pipeline construction today is similar to construction of the interstate highway system in the 1950s, Herrgott said.
“Although there are serious questions about fair market value and the equitable nature of eminent domain and the rest, but the bottom line is the pipelines are going to get built. The question is ‘how are we going to do it?'”
Courts have been forced to take a growing role in the federal pipeline permitting process, but the legislative branch is where those decisions should be made, said Mike Catanzaro, a former Trump White House energy adviser now working for CGCN Group.
“Even with the administration and what they’re doing, and what the impending election’s going to bring — potentially, fracking bans and all the rest — if Congress doesn’t step up and fix the permitting process, we’re in a lot of trouble…basically, the policy environment is biased in favor of those that don’t want to build things.” If Congress doesn’t “step up and try to reform statutes that have been in the books for nearly four decades and have not been adopted to the new energy landscape that we’re in, we’re going to continue to face these problems.”
New pipelines will be built, Catanzaro said, “it’s just, what level of pain and cost and delay and frustration are we going to have to go through?”
Costs for large pipeline projects can range from $3-15 million a mile, said Boardwalk Pipeline Partners LP CEO Stan Horton.
“It’s getting more and more risky to build these large diameter pipelines, I don’t care whether they’re gas pipelines or crude pipelines or liquids pipelines. I think the infrastructure’s going to continue to be built out — I think we’ll need additional natural gas and the exports of crude are good — but we certainly have some political wind against us right now that we’ve got to overcome,” Horton said.
“There has to be a balance,” Herrgott said. “We can’t have a situation where the debt equity cost of pipelines is 14% where it used to be 6% because of regulatory uncertainty and the fact that it’s too unsettled and the fact that judges are making science-based decisions on pipelines are creating an adversarial world in which pipelines are pitted against the regulators and they’re pitted against the stakeholders.”
Potential natural gas reserves in the United States were an estimated 3,374 Tcf at the end of 2018, a record high, according to a recent report conducted by the Potential Gas Committee (PGC). It was the highest resource evaluation in PGC’s 54-year history, and larger than the group’s 2016 assessment by about 20%.
The current abundance of supply is the underlying reason the United States needs to continue to buildout infrastructure, said Natural Gas Supply Association CEO Dena Wiggins. “History shows us that our producers are getting better and better and better at producing that gas that’s in the ground…going forward, we need this pipeline infrastructure to get the gas to market.”
The Envision Forum was hosted by the University of Kentucky Center for Applied Energy Research and FERC.
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