Not long ago, builders of fossil fuel pipelines in the U.S. followed a standard pattern: The operator made a business case for the project, lining up committed shippers, customers, and investors. Regulators obliged by granting a certificate of public need, which includes the power to acquire easements from property owners even if they object.
But building a pipeline these days has become increasingly more challenging and expensive, as aggrieved property owners and climate activists have joined to rally political opposition to energy infrastructure projects as never before, and have scored a series of major legal victories.
A federal judge in Washington last week ordered Energy Transfer LP to shut down the Dakota Access Pipeline, which carries crude oil from North Dakota shale fields, while the U.S. Army Corps of Engineers conducts a formal environmental impact analysis that it previously passed on. The shutdown, if upheld, could lead to the permanent closure of the $3.8 billion project if it cannot resolve risks of oil spills.
Dominion Energy Inc. also announced last week it was divesting ownership of all gas pipeline and storage assets, and would cancel its Atlantic Coast Pipeline, a project that would deliver natural gas from Marcellus Shale gas fields to Virginia and the Carolinas. Chief Executive Officer Thomas Farrell explained the exit, saying that building gas infrastructure is “increasingly litigious, uncertain, and costly.”
Williams Cos. Inc. this year canceled the Constitution Pipeline that would have delivered Pennsylvania gas into New York state after New York denied water permits, forcing Williams to settle with Pennsylvania landowners whose property it had already taken and cleared.
And New Jersey last week suspended permits for New Jersey Natural Gas’ Southern Reliability Link after a drilling accident damaged a Monmouth County home.
And then there is the Mariner East system, a state-regulated project to transport gas liquids like propane and ethane across Pennsylvania, through densely populated parts of Chester and Delaware Counties, to an export terminal in Marcus Hook, south of Philadelphia. The project, which Energy Transfer LP took over with its 2012 acquisition of Sunoco Inc., has repeatedly been fined for environmental violations, been forced to suspend construction while it changed construction methods, and remains the target of legal actions even as it approaches completion, now set for early 2021.
Environmental advocates believe that after years of litigation and activism, the pendulum is swinging in their favor.
“The public discourse around pipelines, around climate change, is starting to break through the din, break through to the justices,” said Maya K. van Rossum, the head of the Delaware Riverkeeper Network. “And that is the reason why we’re seeing some better decisions, some stronger decisions.”
Industry advocates fear the backlash will impede vital projects that keep energy supplies reliable and costs low, and will impair energy development in Pennsylvania, which became the nation’s second-largest gas producer in the last decade after the adoption of hydraulic fracturing extraction methods.
“I don’t think people appreciate that if we don’t build out the infrastructure, we will not have the resources that we need to heat and cool our homes, to power our businesses, to make the products that we all need on a day-to-day basis,” said Gene Barr, president of the Pennsylvania Chamber of Business and Industry. “It’s very shortsighted.”
Adversaries in Pennsylvania and New Jersey are currently maneuvering for legal position before the U.S. Supreme Court, which is considering whether to hear a case involving the Penn East Pipeline, announced six years ago to transport natural gas 116 miles from Northeast Pennsylvania to New Jersey. PennEast is owned by five energy companies, including its operator, UGI Energy Services, a subsidiary of UGI Corp. of Valley Forge.
New Jersey has blocked PennEast’s access to 42 properties in which the state claims an interest. In 40 of the properties, the state’s interest are easements it granted requiring the land be preserved for recreational, conservation, or agricultural use.
PennEast prevailed in lower court in its effort to acquire rights of way, arguing that the pipeline would preserve the land as open space. But the Third Circuit Court of Appeals in Philadelphia last year sided with New Jersey, saying that a state’s sovereign immunity protects it from lawsuits by private parties, even when entities like PennEast have obtained federal eminent domain authority.
PennEast has asked the Supreme Court to take up the case. It says the Third Circuit decision undermines the Natural Gas Act of 1942, which gave the federal government the power to approve interstate pipelines, expressly to overcome obstacles erected by states, and to delegate eminent domain authority to private entities. PennEast said the appeals court panel got “an exceptionally important question exceptionally wrong.”
The Federal Energy Regulatory Commission, the agency that reviews and approves pipelines, said that the Third Circuit’s decision will have “profoundly adverse impacts on the development of the nation’s interstate natural gas transportation system, and will significantly undermine how the natural gas transportation industry has operated for decades.” More than a dozen gas industry, labor and business organizations filed amicus briefs in support of PennEast’s petition.
The Supreme Court appears to be taking some interest in the case, and invited New Jersey and the solicitor general of the United States to file arguments about whether it should review. Gurbir S. Grewal, New Jersey’s attorney general, said that PennEast “greatly overstates the consequences” of the case, saying the decision precludes only private parties from filing condemnation suits against states. The decision does not provide states with a veto over interstate pipeline projects, he said.
The court will announce later this year if it will grant a formal review of the case.
Even if the Supreme Court rules in PennEast’s favor, the project’s opponents believe numerous other legal and political obstacles await, each of which will cost time and money for the pipeline operator to resolve before various regulatory bodies — part of a sophisticated legal strategy of this and other opposition campaigns to wage many simultaneous legal battles.
“The agencies are really, you know, taking a much harder look at these projects, at the need for these projects, at the environmental impact,” said Tom Gilbert, the campaign coordinator of Rethink Energy NJ, a group formed to oppose fossil fuel pipelines and to promote renewable energy. “So I think there’s a whole set of factors there that are working against this project ever happening.”
The political landscape has changed dramatically in New Jersey since PennEast was announced in 2014, and was supported by former Gov. Chris Christie, a Republican. PennEast’s owners include companies affiliated with two gas distribution companies, South Jersey Gas and New Jersey Natural Gas.
Gov. Phil Murphy, a Democrat elected in 2017, has taken a hostile position toward the project, challenging PennEast in court, and applauding the state Department of Environmental Protection’s denial of permits last year in an Oct. 11 tweet. “We are committed to transitioning New Jersey to 100% clean energy by 2050,” Murphy said.
Pipeline opponents have also challenged the federal approval of PennEast’s certificate of public need, saying there is no shortage of pipeline capacity to New Jersey, and that PennEast’s owners are duplicating existing infrastructure.
“Why are we allowing new infrastructure if there’s no new demand as defined by unmet capacity?” said Jennifer Danis, a senior fellow at the Sabin Center for Climate Change Law, which has represented PennEast’s opponents. “So if you’re just kind of moving the air from one side of the balloon to the other there’s a lot of environmental damage and also a lot of economic damage.”
But the industry says that infrastructure is in short supply. They point to the increasing need for natural gas in New England and New York state, where nuclear power plants were forced to retire, increasing demand for gas-powered generation to maintain reliable electricity supplies when intermittent renewable sources cannot deliver.
“We have a very, very close view of how perilously close we are to not having sufficient capacity for natural gas,” said Anthony Cox, chairman of the PennEast Pipeline Company Board of Managers. “The potential exists for there to be a real calamitous event. And it would only take one to change the minds of a lot of people as to whether or not infrastructure is needed.”
In response to New Jersey, PennEast in January announced changes: It now plans to build the pipeline in two segments, and 68-mile Phase 1 would terminate near Easton, Pa. That means the first part of the project would be contained within Pennsylvania, where PennEast has obtained necessary permits. Opponents are challenging the amendment before federal regulators and with the Delaware River Basin Commission, which says it has jurisdiction over the project.
Much of the ongoing debate hinges around the future of renewable power sources, such as offshore wind energy or solar power. The builders of pipelines say that until renewable energy is in place, natural gas is the most affordable option — and cleaner than other fossil fuels.
“We certainly recognize that there’s a move to move toward a decarbonized future with respect to energy, and we’re committed to being part of that,” said Cox. But the industry maintains that a growing population needs electrical power, and it needs to be affordable.
“This is not something that we can continue to put our heads in the ground and hope for the magic bullet, that we are going to snap our fingers and all of a sudden renewables are going to take care of our needs,” he said. “That’s an evolution that is going to take a lot of years, and a lot of money.”