Setbacks hamper pipeline industry backed by Trump

Setbacks hamper pipeline industry backed by Trump

BILLINGS, Mont. — After a U.S. energy boom and strong backing from President Donald Trump propelled a major expansion of the nation’s sprawling oil and gas pipeline network, mounting political pressures and legal setbacks have put its future growth in doubt even as the pandemic saps demand for fuel.

Two major oil pipeline projects suffered courtroom blows this week: The U.S. Supreme Court upheld the cancellation of a key permit for the Keystone XL oil sands pipeline from Canada, and a federal judge ordered the Dakota Access Pipeline shut down more than three years after it started moving oil across the U.S. Northern Plains.

The rulings came a day after utilities cancelled an $8 billion natural gas pipeline through West Virginia, Virginia and North Carolina amid mounting delays and bitter opposition from environmentalists.

Industry representatives took consolation from the Supreme Court’s decision that the permit it denied for Keystone XL can once again be used for other projects. That would allow more than 70 pipeline projects that faced potentially billions of dollars of delays to proceed.

But that outcome may be “too little too late” for some companies already making changes to their plans, said Ben Cowan, who represents pipeline companies as an attorney with Locke Lord LLP.

The recent blows against the industry have emboldened environmentalists and Native American activists, who routinely oppose fossil fuel pipelines because of potential spills and their contribution to climate change.

Montana farmer Dena Hoff, a Keystone opponent, witnessed the environmental damage that pipelines can cause in 2015 when a pipeline broke beneath the Yellowstone river adjacent to her farm and spilled 31,000 gallons (117,000 litres) of crude that fouled downstream water supplies serving 6,000 people.

She said the years of protests against Keystone and other lines have made the public listen. “There’s more to this argument than jobs and tax dollars,” Hoff said Thursday.

Industry executives acknowledged pipeline opponents have found some success in the courts, but insist that continued demand for oil and gas means new lines will be needed.

“We will meet them at the courthouse and fight these battles out legally at every opportunity,” said American Petroleum Institute President Mike Sommers. “The activist community doesn’t want to build anything, anywhere.”

Construction crews installed almost 30,000 miles (48,000 kilometres) of new oil pipelines and nearly 10,000 miles (16,000 kilometres) of new interstate gas transmission lines over the past 10 years, according to government data and figures provided by the Interstate Natural Gas Association of America. Most projects attracted far less attention than huge endeavours like the 600-mile (965-kilometre) Atlantic Coast line. That shows companies can successfully balance landowner concerns, environmental impacts and similar issues, said Joan Dreskin, vice-president of the gas association.

The building spree came after breakthroughs in drilling techniques allowed fossil fuel companies to ramp up production and make the U.S. the world’s top oil and gas producer.

That steep rise toppled off a cliff earlier this year, when a price dispute between Russia and Saudi Arabia combined with the onset of the pandemic caused oil prices to crater. Natural gas prices also have fallen in recent years, driven in part by oversupply.

A loss by Trump in November could add to the industry’s troubles. Since his election, the Republican president has issued directives to speed up pipeline permitting and even interceded personally with Keystone XL, issuing a special presidential permit for the 1,200-mile (1,900-kilometre) pipeline that would stretch from Alberta to Nebraska after it was stalled by an earlier court ruling.

Democratic presidential candidate Joe Biden’s campaign has said he would rescind Keystone’s permit. His administration also could make it harder for Dakota Access to resume operations and prolong the court-ordered environmental review of the project, said Aaron Brady, vice-president of energy at IHS Markit.

Dakota Access is by far the largest pipeline out of the Bakken shale formation of North Dakota and Montana. An extended shutdown could force oil companies to use more costly and risky transport methods, such as by rail.

Similar constraints loom over natural gas producers with the defeat of the Atlantic Coast Pipeline and successful attempts to block pipelines in the Northeast. That could rein in future growth of the Marcellus gas fields, which boosted U.S. production to record highs last decade, said Rich Redash, head of global gas planning at S&P Global Platts.

“It’s going to be more challenging to expand, particularly if you’re in an area where the opposition is organized, better funded and supported by state and local elected officials,” Redash said.

The Keystone case was referred back the 9th Circuit Court of Appeals for further consideration. That could leave unresolved for another year or longer the fate of a U.S. Army Corps of Engineers’ permit program that pipeline companies use for quick approval of the hundreds of river and wetlands crossings involved with large pipeline projects.

Environmentalists and local officials already are using the original ruling that cancelled the permit as justification to seek court orders against other projects, such as the Permian Highway pipeline in Texas.

Despite high-profile spills and fatal gas transmission explosions, the industry for years has avoided proposed safety regulations that would require companies to install costly automatic shut-off valves for pipelines. Meanwhile, courtroom fights and protests against pipelines have only gotten more intense.

As that opposition gets more sophisticated, it will mean more delays and higher costs for projects that rely on federal permits, said Jason Bordoff, founding director at Columbia University’s Center on Global Energy Policy.

“Trump’s energy dominance agenda backfired, as his Administration was taken to task for cutting corners in their environmental reviews,” Bordoff said in an email. “With a more careful and thorough environmental review process, other pipeline projects may yet be able to move forward.”

__ Bussewitz reported from New York.

___

Follow Matthew Brown at https://twitter.com/matthewbrownap

Matthew Brown And Cathy Bussewitz, The Associated Press

oil and gas

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