A backfiring tactic

Dec. 18, 2017
Environmentalists opposed to pipeline construction should proceed cautiously with a central piece of their strategy. The tactic might backfire.

Environmentalists opposed to pipeline construction should proceed cautiously with a central piece of their strategy. The tactic might backfire.

Pipelines are priority targets of that noisy segment of environmentalism trying to preclude the production and use of hydrocarbon energy. Oil and gas lacking access to markets can’t be produced. Oil and gas producible at rates exceeding transport capacity lose value relative to destination supplies from competing sources. When environmentalists can’t strangle production, therefore, they settle for choking it.

Expanded oversight

The tactic potentially hazardous to this obstructionism is expansion of greenhouse-gas oversight in pipeline permitting decisions to activities beyond pipelines themselves. From just the construction and operation of a pipeline, emissions of carbon dioxide and other greenhouse gases are small. Adding emissions associated with production, refining, and consumption makes a pipeline much more consequential. Even then, the calculated effects on global average temperature of any single pipeline are speculative and minuscule. The environmentalist response is to aggregate and oppose them all.

The tactic claimed a large prize in October, when TransCanada ended plans for the Energy East system of converted and newbuild pipeline that would have carried crude oil from Alberta to Canada’s East Coast. TransCanada made its decision after the National Energy Board said it would account, in its environmental review for TransCanada’s permit, for greenhouse gases upstream and downstream of the pipeline.

Advocacy groups have been pressing for similar approaches in the US related to permitting not just of oil pipelines but of gas lines as well. That discouraging gas projects represents a perverse way to remediate climate change seems to matter little. To energy radicals, hydrocarbons are hydrocarbons, pipelines are pipelines, and distinctions beyond those just confuse politics.

As authors of a recent Oil & Gas Journal article point out, however, the US Federal Energy Regulatory Commission and Department of Energy must account for more than greenhouse gas emissions when reviewing gas exports or imports under their jurisdictions and, for FERC, proposals for gas pipelines (OGJ, Dec. 4, 2017, p. 71). Statutes and court rulings oblige them to consider advantages, such as lowered energy cost, along with disadvantages, including environmental degradation. Unlike Canada’s NEB with the Energy East crude line, FERC and the DOE have resisted the expanded approach for US gas projects, noting the difficulty of relating particular climate effects to indirect emissions associated with a specific pipeline.

Until recently, courts mostly agreed. But that might be changing, warn authors of the OGJ article, Joel Zipp of Orrick, Herrington & Sutcliffe LLP of Washington, DC, and Gavin Roberts of Weber State University in Ogden, Utah. In a case involving the Southeast Market Pipelines Project, a federal appeals court ruled in August that FERC environmental analyses must consider downstream effects of a project proposal when the effects are “reasonably foreseeable.” It said downstream effects of gas delivered by interstate pipelines meet that standard.

“This decision raises the question of whether FERC, DOE, or other courts will now adopt or encourage a more quantitative approach to analyzing both the downstream and upstream impacts of potential projects,” the authors observed. “On this point, the court also asked FERC to determine whether its position on the social cost of carbon…continues to apply, opening the questions of whether the courts also will begin to require the agencies to look at upstream effects and what quantitative analyses might look like.”

Costs and benefits

Against that possibility, the authors examine two comprehensive economic studies estimating annual costs and benefits, market and otherwise, associated with increased gas production from shale plays. “Both papers find that the benefits outweigh the costs on an annualized basis, even under worst-case scenarios,” Zipp and Roberts conclude from their detailed review.

Environmental problems thus don’t automatically cancel benefits associated with growing abundance of affordable energy, even when identified by scrutiny tuned to amplify them. Hydrocarbon haters won’t welcome this message. But energy consumers will profit from whatever damage it inflicts on the antipipeline campaign.