Released June 11, 2021 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--This week's decision by TC Energy Corporation (NYSE:TRP) (Calgary, Alberta) to terminate the partially built Keystone XL crude oil pipeline was the most recent example of death by litigation for oil & gas pipeline projects, but it is unlikely to be the last. The addition of another high-profile victory over monied interests emboldened environmental activists.
The Wall Street Journal quoted Bill McKibben, the founder of the climate activist group 350.org, as saying, "When this fight began, people thought Big Oil couldn't be beat. But when enough people rise up, we're stronger even than the richest fossil-fuel companies."
Kendall Mackey, a campaign manager with that group, was quoted by The New York Times as saying, "The termination of this zombie pipeline sets precedent for President (Joe) Biden and polluters to stop Line 3, Dakota Access and all fossil fuel projects. This victory puts polluters and their financiers on notice: Terminate your fossil fuel projects now -- or a relentless mass movement will stop them for you."
Other recent pipeline cancellations include the Atlantic Coast Pipeline Project, the Constitution Pipeline Project, the Liberty Pipeline Project and Canada's Eagle Spirit Energy Holdings Pipeline project. All had total investment values (TIV) in the billions of dollars. For more on the termination of the Keystone XL pipeline, see June 9, 2021, article - Keystone XL Pipeline Terminated.
Keystone XL's prospects dimmed the first day Biden took office, as he signed an executive order rescinding the federal permit for the long-delayed project, into which TC Energy had plowed an estimated $9 billion. The new president pledged to make fighting climate change a key element of his administration. He rejoined the Paris Agreement of 2015 and pledged to use the "whole of government" approach to lower U.S. CO2 emissions through various means and using various agencies. For more on that, see January 28, 2021, article - Big Oil, Big Business Slam Biden's Pause on New Oil & Gas Leases on Federal Lands and Waters.
The owners of the Atlantic Coast project gave up last year, after several years of litigation over permits. Delaying a project drives up its costs, and can change a company's cost-benefit analysis.
Other proposed pipeline projects may be imperiled. In a reversal of longtime practice, the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) is considering whether a proposed pipeline project's carbon dioxide (CO2) emissions should be factored into the agency's permitting decisions. For more on that, see April 1, 2021, article - Chatterjee's Revenge: FERC Pipeline Review to Include GHG Assessment.
It's not just the change in administrations that has turned the tables on proposed pipelines. The rise of so-called Environment, Social and Governance (ESG) investing is casting a large shadow over all types of proposed hydrocarbon projects - coal mining, coal-fired power plants, oil and gas exploration & production, and even gas-fired power plants. The power of investor capital to affect corporate decision-making has been evident in the Oil & Gas Industry, where companies have been pressured to abandon costly development projects in favor of returning excess cash flow to investors.
A loosely defined investment category known as "environmentally responsible" funds has quintupled over the last decade, to an estimated $100 trillion of assets under management (AUM), according to Principles for Responsible Development (PRI), a United Nations group. Investors in that category tend to take a dim view of hydrocarbon investments. Investor sentiment, always fickle, seems to be taking a harder edge, with a growing number of banks and financial institutions swearing off future investments in hydrocarbons, mostly related to coal but some coming out against proposed pipelines and gas-powered power generation projects.
Click on the image at right to view a graphic on the growth of environmentally responsible funds over the last decade.
Recent events demonstrated how the tide could be turning in favor of hydrocarbon skeptics and opponents:
"We believe a number of other proposed but long-delayed pipeline projects will likely be cancelled. Litigation has delayed and driven up the costs to build those projects, and the new administration appears to be dubious about the merits of a significant amount of hydrocarbon projects. How far this will go--and whether the industry can succeed in litigating adverse decisions in the federal courts that became more conservative and pro-business under the previous president--remains to be seen."
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.
The Wall Street Journal quoted Bill McKibben, the founder of the climate activist group 350.org, as saying, "When this fight began, people thought Big Oil couldn't be beat. But when enough people rise up, we're stronger even than the richest fossil-fuel companies."
Kendall Mackey, a campaign manager with that group, was quoted by The New York Times as saying, "The termination of this zombie pipeline sets precedent for President (Joe) Biden and polluters to stop Line 3, Dakota Access and all fossil fuel projects. This victory puts polluters and their financiers on notice: Terminate your fossil fuel projects now -- or a relentless mass movement will stop them for you."
Other recent pipeline cancellations include the Atlantic Coast Pipeline Project, the Constitution Pipeline Project, the Liberty Pipeline Project and Canada's Eagle Spirit Energy Holdings Pipeline project. All had total investment values (TIV) in the billions of dollars. For more on the termination of the Keystone XL pipeline, see June 9, 2021, article - Keystone XL Pipeline Terminated.
Keystone XL's prospects dimmed the first day Biden took office, as he signed an executive order rescinding the federal permit for the long-delayed project, into which TC Energy had plowed an estimated $9 billion. The new president pledged to make fighting climate change a key element of his administration. He rejoined the Paris Agreement of 2015 and pledged to use the "whole of government" approach to lower U.S. CO2 emissions through various means and using various agencies. For more on that, see January 28, 2021, article - Big Oil, Big Business Slam Biden's Pause on New Oil & Gas Leases on Federal Lands and Waters.
The owners of the Atlantic Coast project gave up last year, after several years of litigation over permits. Delaying a project drives up its costs, and can change a company's cost-benefit analysis.
Other proposed pipeline projects may be imperiled. In a reversal of longtime practice, the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) is considering whether a proposed pipeline project's carbon dioxide (CO2) emissions should be factored into the agency's permitting decisions. For more on that, see April 1, 2021, article - Chatterjee's Revenge: FERC Pipeline Review to Include GHG Assessment.
It's not just the change in administrations that has turned the tables on proposed pipelines. The rise of so-called Environment, Social and Governance (ESG) investing is casting a large shadow over all types of proposed hydrocarbon projects - coal mining, coal-fired power plants, oil and gas exploration & production, and even gas-fired power plants. The power of investor capital to affect corporate decision-making has been evident in the Oil & Gas Industry, where companies have been pressured to abandon costly development projects in favor of returning excess cash flow to investors.
A loosely defined investment category known as "environmentally responsible" funds has quintupled over the last decade, to an estimated $100 trillion of assets under management (AUM), according to Principles for Responsible Development (PRI), a United Nations group. Investors in that category tend to take a dim view of hydrocarbon investments. Investor sentiment, always fickle, seems to be taking a harder edge, with a growing number of banks and financial institutions swearing off future investments in hydrocarbons, mostly related to coal but some coming out against proposed pipelines and gas-powered power generation projects.
Recent events demonstrated how the tide could be turning in favor of hydrocarbon skeptics and opponents:
- Three climate activists were elected to the board of directors of the ExxonMobil Corporation (NYSE:XOM) (Irving, Texas) over the opposition of its chairman and chief executive.
- A Dutch court ordered Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) to rapidly decarbonize its business.
- Activist groups in late May were able to persuade other investors to demand more CO2 emissions cuts from Chevron (NYSE:CVX) (San Ramon, California).
"We believe a number of other proposed but long-delayed pipeline projects will likely be cancelled. Litigation has delayed and driven up the costs to build those projects, and the new administration appears to be dubious about the merits of a significant amount of hydrocarbon projects. How far this will go--and whether the industry can succeed in litigating adverse decisions in the federal courts that became more conservative and pro-business under the previous president--remains to be seen."
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.
