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Released April 12, 2019 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--On Wednesday, in the heart of Texas' energy corridor, President Donald Trump signed a pair of executive orders that could affect energy projects in the U.S. One order directs the U.S. Environmental Protection Agency to review its existing guidance on Section 401 of the Clean Water Act (CWA) and affects permissions needed for international pipelines. The other executive order calls for the transportation of liquefied natural gas (LNG) by rail, making access to natural gas easier for areas that lack sufficient pipeline infrastructure.
Under Section 401 of the Clean Water Act, companies must obtain certifications from a state before building infrastructure, even if the project has been approved by the U.S. Federal Energy Regulatory Commission (FERC), which grants permission to construct pipelines and other energy projects. Section 401 has been divisive along party lines, with Republicans accusing Democrat-controlled states of using this power to block FERC-approved infrastructure projects.
Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Industry, said, "Whether due to the Clean Water Act or not, water issues remain a decisive factor in whether pipelines are granted permission to proceed. We've seen this a lot in the eastern states, in particular New York. There's a reason President Trump signed the order in Texas. In other locations, the reception wouldn't have been good. The order is primarily taking aim at projects in the Northeast."
In fact, New York's Democrat Governor Andrew Cuomo has already spoken out against the order, saying it is a "gross overreach of federal authority that undermines New York's ability to protect our water quality and our environment," according to Reuters.
Industry groups were more enthusiastic about the order. Independent Petroleum Association of American Executive Vice President Lee Fuller said, "This [existing] guidance, overdue for updating, has allowed for implementation of the CWA in a manner inconsistent with the statute and to inhibit projects that are clearly in interstate commerce."
Among the largest projects rejected in New York under Section 401 is Williams Companies' (NYSE:WMB) Constitution Pipeline, which would run 125 miles from the Marcellus Shale in Pennsylvania to around New York City. The pipeline would have carried 650 million cubic feet per day of natural gas. Issues surrounding New York's decision to deny a permit to the pipeline on the basis of water quality concerns eventually made it the U.S. Supreme Court. In April 2018, the Supreme Court chose to leave standing the decision of the Second Circuit Court of Appeals, which upheld the New York State Department of Environmental Conservation's authority to deny water quality certification (WQC) to the FERC-approved project. Williams had filed the original application for a WQC in 2013 and twice withdrew and refiled applications in 2014 and 2015. The pipeline was to have crossed 251 water bodies in the state. For more information, see Industrial Info's project report on the New York section of the project.
Among other projects in the Northeast that have faced water quality permit problems is the PennEast Pipeline in New Jersey, which has twice rejected water quality permit applications. The pipeline was to have transported up to 1 billion cubic feet per day of natural gas from Pennsylvania to New Jersey. The kickoff slippage of the project now stands at more than 30 months. For more information, see Industrial Info's project reports on the Pennsylvania and New Jersey sections of the project.
Pipelines are not the only type of project to be blocked by Section 401. In 2017, Washington Governor Jay Inslee (D) used the provision to block a permit for the Millennium Bulk Terminal, which was designed to ship coal from the U.S. to markets in Asia. While the project remains active in Industrial Info's Global Market Intelligence (GMI) Database, it has been designated as having a low probability of proceeding as planned. The project was to be built at the site of a closed aluminum smelter in two stages. The first stage involved constructing the infrastructure to transport coal from trains to ships on the Columbia River to export 25 million tons per year. The second stage would expand export capacity to 44 million tons per year. For more information, see Industrial Info's project reports on Stage 1 and Stage 2.
Davis said, "To be honest, I'm not sure how effective the part of the order affecting the Clean Water Act is going to be. The federal government is essentially taking away states' rights, and the states will challenge this in the courts."
Davis said another part of the order affecting permission to construct international pipelines also probably wouldn't have much immediate effect. While previously international pipelines (those spanning the U.S. borders with Mexico and Canada) had initially to be approved by the U.S. Secretary of State then the President, the order now bypasses the Secretary of State, placing permission directly with the President. The order would have affected a handful of natural gas pipelines running to Mexico and another project that has had its own issues with water quality certifications, the Keystone XL crude oil pipeline, which runs from Canada into the U.S. Last year, Nebraska rejected developer TransCanada Corporation's (NYSE:TRP) (Calgary, Alberta) proposed route for the pipeline, submitting an amended route that involved less impact to the state's bodies of water. For more information, see Industrial Info's project report on the Nebraska section of the pipeline.
Another executive order signed by President Trump on Wednesday ordered the Department of Transportation to write a new rule permitting the shipment of LNG by rail. The move clearly takes aim in getting natural gas to the Northeast, which has a lack of pipeline infrastructure. According to Bloomberg, in January New England imported six cargos of LNG by ship at an average price $8.88 per million British thermal units, while Appalachian natural gas was trading at $3.25. While the move has been welcomed by some, it has been criticized by others.
Railroad advocacy groups are among the proposed rule's supporters. In the past few years, rail operators have seen shipments of coal decline, and the move would help displace some of that loss. The Association of American Railroads has been petitioning to allow LNG shipments since at least 2017, when the association said that there had been only two accidental releases of cryogenic liquids in approved rail cars in the past 16 years. However, environmental and safety groups are not pleased with the proposed, citing spills and explosions caused by shipment of crude oil by rail.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Under Section 401 of the Clean Water Act, companies must obtain certifications from a state before building infrastructure, even if the project has been approved by the U.S. Federal Energy Regulatory Commission (FERC), which grants permission to construct pipelines and other energy projects. Section 401 has been divisive along party lines, with Republicans accusing Democrat-controlled states of using this power to block FERC-approved infrastructure projects.
Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Industry, said, "Whether due to the Clean Water Act or not, water issues remain a decisive factor in whether pipelines are granted permission to proceed. We've seen this a lot in the eastern states, in particular New York. There's a reason President Trump signed the order in Texas. In other locations, the reception wouldn't have been good. The order is primarily taking aim at projects in the Northeast."
In fact, New York's Democrat Governor Andrew Cuomo has already spoken out against the order, saying it is a "gross overreach of federal authority that undermines New York's ability to protect our water quality and our environment," according to Reuters.
Industry groups were more enthusiastic about the order. Independent Petroleum Association of American Executive Vice President Lee Fuller said, "This [existing] guidance, overdue for updating, has allowed for implementation of the CWA in a manner inconsistent with the statute and to inhibit projects that are clearly in interstate commerce."
Among the largest projects rejected in New York under Section 401 is Williams Companies' (NYSE:WMB) Constitution Pipeline, which would run 125 miles from the Marcellus Shale in Pennsylvania to around New York City. The pipeline would have carried 650 million cubic feet per day of natural gas. Issues surrounding New York's decision to deny a permit to the pipeline on the basis of water quality concerns eventually made it the U.S. Supreme Court. In April 2018, the Supreme Court chose to leave standing the decision of the Second Circuit Court of Appeals, which upheld the New York State Department of Environmental Conservation's authority to deny water quality certification (WQC) to the FERC-approved project. Williams had filed the original application for a WQC in 2013 and twice withdrew and refiled applications in 2014 and 2015. The pipeline was to have crossed 251 water bodies in the state. For more information, see Industrial Info's project report on the New York section of the project.
Among other projects in the Northeast that have faced water quality permit problems is the PennEast Pipeline in New Jersey, which has twice rejected water quality permit applications. The pipeline was to have transported up to 1 billion cubic feet per day of natural gas from Pennsylvania to New Jersey. The kickoff slippage of the project now stands at more than 30 months. For more information, see Industrial Info's project reports on the Pennsylvania and New Jersey sections of the project.
Pipelines are not the only type of project to be blocked by Section 401. In 2017, Washington Governor Jay Inslee (D) used the provision to block a permit for the Millennium Bulk Terminal, which was designed to ship coal from the U.S. to markets in Asia. While the project remains active in Industrial Info's Global Market Intelligence (GMI) Database, it has been designated as having a low probability of proceeding as planned. The project was to be built at the site of a closed aluminum smelter in two stages. The first stage involved constructing the infrastructure to transport coal from trains to ships on the Columbia River to export 25 million tons per year. The second stage would expand export capacity to 44 million tons per year. For more information, see Industrial Info's project reports on Stage 1 and Stage 2.
Davis said, "To be honest, I'm not sure how effective the part of the order affecting the Clean Water Act is going to be. The federal government is essentially taking away states' rights, and the states will challenge this in the courts."
Davis said another part of the order affecting permission to construct international pipelines also probably wouldn't have much immediate effect. While previously international pipelines (those spanning the U.S. borders with Mexico and Canada) had initially to be approved by the U.S. Secretary of State then the President, the order now bypasses the Secretary of State, placing permission directly with the President. The order would have affected a handful of natural gas pipelines running to Mexico and another project that has had its own issues with water quality certifications, the Keystone XL crude oil pipeline, which runs from Canada into the U.S. Last year, Nebraska rejected developer TransCanada Corporation's (NYSE:TRP) (Calgary, Alberta) proposed route for the pipeline, submitting an amended route that involved less impact to the state's bodies of water. For more information, see Industrial Info's project report on the Nebraska section of the pipeline.
Another executive order signed by President Trump on Wednesday ordered the Department of Transportation to write a new rule permitting the shipment of LNG by rail. The move clearly takes aim in getting natural gas to the Northeast, which has a lack of pipeline infrastructure. According to Bloomberg, in January New England imported six cargos of LNG by ship at an average price $8.88 per million British thermal units, while Appalachian natural gas was trading at $3.25. While the move has been welcomed by some, it has been criticized by others.
Railroad advocacy groups are among the proposed rule's supporters. In the past few years, rail operators have seen shipments of coal decline, and the move would help displace some of that loss. The Association of American Railroads has been petitioning to allow LNG shipments since at least 2017, when the association said that there had been only two accidental releases of cryogenic liquids in approved rail cars in the past 16 years. However, environmental and safety groups are not pleased with the proposed, citing spills and explosions caused by shipment of crude oil by rail.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
