U.S. CHAMBER OF COMMERCE

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Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth Construction of the Dakota Access Pipeline near in New Salem, North Dakota.Construction of the Dakota Access Pipeline near in New Salem, North Dakota.Photo credit: Tony Webster. Licensed under a Creative Commons Attribution-ShareAlike 2.0 Generic license.

A month ago, I wrote:

President Barack Obama just took the rule of law, crumpled it up, and tossed along a riverbank in North Dakota.

He continues to treat the rule of law like wastepaper by putting up another (likely temporary) blockade in front of the Dakota Access Pipeline.

On Sunday, the Army Corps of Engineers refused to issue an easement to allow pipeline construction under the Missouri River, declaring it will “explore alternate routes for the pipeline crossing.”

In June, the Corps approved the easement but didn't finalize it. 

What changed was the pipeline became a symbolic issue for anti-energy, “Keep it in the ground” protesters, like Bill McKibben. Since this summer, thousands have encamped on federal land in North Dakota and have been ordered to leave by December 5. According to local law enforcement, these protesters are “armed, hostile” and not peaceful, and they inspired attacks on other pipelines in four states.

In September, a federal judge saw that proper procedures were followed in allowing approving the project and refused to stop it. But the Obama administration immediately pressed the pause button. Two months later, President Barack Obama telegraphed what the Corps just did by saying the pipeline should be re-routed—even though a federal judge noted that the pipeline’s path was modified 140 times and would run adjacent to a natural gas pipeline that’s been in the ground for over 30 years.

What's interesting is the Corps never admits that it shouldn’t have approved the pipeline in the first place. It states:

[T]his decsision does not alter the Army's position that the Corps' prior reviews and action have comported with legal requirements.

In other words, the review process was followed correctly--just like a federal judge confirmed months ago. Nevertheless, the Corps (i.e. the White House) arbitrarily changed its mind.

Business and Labor Unhappy

Energy Transfer Partners, the company building the DAPL, called the move, “a purely political action,” adding:

This is nothing new from this Administration, since over the last four months the Administration has demonstrated by its action and inaction that it intended to delay a decision in this matter until President Obama is out of office.

Both business groups and labor blasted the decision.

Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st  Century Energy, said:

The Obama administration sent a clear message: if your special interest-funded protest is loud enough and has enough celebrities tweeting their support, then the rule of law and the facts no longer matter.

Terry O’Sullivan, General President of the Laborers’ International Union of North America, called the decision, “short-sighted, gutless, and irresponsible.”

Blocking the final portion of construction of #DAPL after it is 93% complete & fully reviewed is a short-sighted & irresponsible decision

— LIUNA (@LIUNA) December 5, 2016

Administration Attacks the Rule of Law

This action certainly was a thumb in the eye to the rule of law. To borrow from Professor Richard Epstein, the rule of law is a set of “known, consistent, and certain rules” that are applied in a neutral manner by the government. It's one way our society functions.

There's an implicit agreement: Government establishes a process for getting permission to build a major infrastructure project like a pipeline. If businesses follow those rules it should be assured of a definitive, rational decision. Both business and government function as partners.

Energy Transfer Partners spent years talking to local residents and Native American tribes. They worked with governments at all levels to demonstrate that the pipeline would be safe. They negotiated with private land owners to build the pipeline on their land. They made changes to the pipeline to protect the environment and culturally-sensitive lands.

The company followed the rules, only to have the Obama administration pull the rug out from under them to placate anti-energy activists like McKibben who thinks a modern, 21st Century economy can function without access to abundant energy.

Changing the rules in the middle of the game is fundamentally unfair, the AFL-CIO explained in November: 

Once these processes have been completed, it is fundamentally unfair to hold union members’ livelihoods and their families’ financial security hostage to endless delay. 

Uncertainty Has Consequences

Such decisions have ripple effects--mostly unseen. Other companies are watching.

They know that what’s happening with the Dakota Access Pipeline can just as easily be done to a natural gas pipeline or an electric power line --even if it links to a wind or solar farm. Any type of energy infrastructure investment is at risk from ad-hoc agency decisions that reject the rule of law.

Such uncertainty has consequences. Fewer needed energy projects will be attempted because the regulatory and permitting risk is too high.

As a result, it will be harder to move energy from where it’s produced to where it’s consumed. That means higher costs for families and factories. It also means higher transportation costs for energy producers, less investment in production, and fewer jobs created in the sector.

Hopefully this could be a fragile, temporary win for the anti-energy crowd. A Trump spokesman said the incoming administration supports the Dakota Access Pipeline and will review the Corps’ decision once it takes office next January.

Trump spox @JasonMillerinDC on DAPL: “That is something that we support construction of” says will review Army Corps decision after Jan 20

— Zeke Miller (@ZekeJMiller) December 5, 2016


Nevertheless, it’s a bold reminder that how we permit infrastructure projects needs serious reform. The first place to start is having a White House that stops playing politics with our infrastructure needs while respecting the rule of law and the fairness and certainty it provides.

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Does America need an "All of the Above" energy strategy? Find out here. This Chamber Explainer will get you up to speed.

 

Thomas J. Donohue Oil pump jack in North Dakota.An oil pump jack just outside of Watford City, North Dakota. Photographer: Matthew Staver/Bloomberg.

In the final months of the Obama administration, we’re seeing a flurry of regulatory activity as the president seeks to push his agenda until the last possible moment. Among those regulations is a new offshore leasing plan from the Department of the Interior that would tightly restrict offshore oil and gas development, keeping as much as 90% of the U.S. Outer Continental Shelf off limits for exploration. Doing so would place an extreme, anti-growth environmental agenda ahead of the best interests of the American economy and energy security.

Imagine the potential of U.S. energy if our leaders began actively working to advance it, not thwart it.

The U.S. Chamber of Commerce has called on the incoming Trump administration and the new Congress to immediately replace this regulation with a plan to fully utilize our offshore energy resources. These resources are essential to spurring economic growth and promoting energy security. Unfortunately, the proposal to largely ban offshore drilling is only the latest in a long series of misguided policies by the Obama administration—and there may be even more in its final days. Any continuation of those policies will further undermine one of America’s greatest assets: our abundant natural resources.

The U.S. Chamber’s Institute for 21st Century Energy has produced the Energy Accountability Series, a collection of reports detailing the dire consequences of undercutting America’s energy revolution. For example, if fracking was banned, the reports found that it would cost America 14.8 million jobs and $1.6 trillion in annual GDP by 2022. If energy production was banned on federal lands and waters, America would risk losing 380,000 jobs, $70 billion in annual GDP, and $11.3 billion in government royalties.

Energy remains one of the bright spots for America’s economy despite the restrictive policies of the last eight years. Just last month, America became a net exporter of natural gas for the first time in 60 years even though the administration has done all it can to restrict fracking and eliminate it on federal lands. Imagine the potential of U.S. energy if our leaders began actively working to advance it, not thwart it. We could see new technologies, new discoveries, and increased capabilities in our energy sector.

The Chamber is encouraged by the president-elect’s pledge to eliminate the restrictions that have prevented the United States from taking full advantage of its abundant resources. With the right policies, we can create millions of jobs, billions of dollars in economic growth, and billions more in government revenues and royalties. The Chamber and its Energy Institute will continue to fight for a positive, forward-looking energy policy in the final days of the current administration and into the next.

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Does America need an "All of the Above" energy strategy? Find out here. This Chamber Explainer will get you up to speed.

 

Sean Hackbarth The Asia Vision LNG sits docked at Cheniere Energy's Sabine Pass LNG terminal.The Asia Vision LNG sits docked at Cheniere Energy's Sabine Pass LNG terminal. Photo credit: Lindsey Janies/Bloomberg.

Sixty years ago in 1956, Elvis Presley got his first hit with “Heartbreak Hotel, Norma Jean Mortenson became Marilyn Monroe, and President Dwight Eisenhower signed the law that created the Interstate Highway System.

That year was also the last time the United States was a net exporter of natural gas. But thanks to fracking and the shale energy boom, our country reached a new milestone in 2016, The Wall Street Journal reports [subscription required]:

The U.S. has become a net exporter of natural gas, further evidence of the how the domestic oil and gas boom is reshaping the global energy business.

The U.S. has exported an average of 7.4 billion cubic feet a day of gas in November, more than the 7 billion cubic feet a day it has imported, according to S&P Global Platts, an energy trade publisher and data provider. Exports also topped imports for a few days in September, Platts reported. It has been nearly 60 years since the U.S. last shipped out more natural gas than it brought in annually, according to the U.S. Energy Information Administration.

The milestone comes less than a year after restrictions on most crude oil exports were lifted, allowing tankers of crude to be freely shipped overseas for the first time nearly half a century, and together they mark a significant and potentially permanent change in the way U.S. energy flows around the world. Overseas producers now have to deal with the growing clout of the U.S. energy industry, which is aggressively looking to ramp up its global market share to help offset a long period of low prices.

“Gas exports have risen more than 50% since 2010,” the Journal adds. “The Energy Department says the country will be the world’s third-largest producer of liquefied natural gas for export by [2020], trailing Australia and Qatar.”

Most natural gas exports are going to Canada and Mexico, but a promising market is China which is about to receive its second U.S. shale gas shipment.

The Energy Information Administration predicted the U.S. would become a net natural gas exporter by 2017, but there was an inkling that this would happen sooner. Earlier this month, Bloomberg reported, “The U.S. is set to export a record number of cargoes, demonstrating a strong international demand for U.S. shale gas.

bloomberg_chart_us_shale_exports_2016.png Bloomberg chart on U.S. natural gas exports in 2016.Bloomberg chart on U.S. natural gas exports in 2016.


At the same time domestic natural gas is being exported—supporting good-paying jobs--consumers are seeing lower energy prices.

A 2015 Harvard Business School study found that fracking and the shale energy boom it prompted helped consumers save $780 in energy costs, and that savings is expected to rise to $1,070 by 2030.

Also, residential electricity prices are on pace to fall for the first time since 2002.

Continuing this positive trend requires better energy policies. For instance, we need speedy federal regulatory approvals to allow the natural gas exports to non-FTA nations like Japan and China.

Earlier this year, both the House of Representatives and the Senate passed their own energy bills that include LNG export application streamlining. After months of little activity, the conference committee should finish their work and get a final bill to the president for his signature.

Also, regulatory agencies need to streamline how they permit safe energy infrastructure projects like pipelines to prevent them from being bogged down in red tape.

As David Taylor, president of the Pennsylvania Manufacturers’ Association, wrote in a letter to Federal Energy Regulatory Commission supporting the Atlantic Sunrise natural gas pipeline project:

We must be able to transport the gas to refine it, manufacturer other products from it, and then export it to our friends and allies throughout the world. Only with more pipeline infrastructure can our global leadership flourish.

The Permitting Dashboard created through the Fixing America’s Surface Transportation (FAST) Act is designed to promote transparency and accountability and speed up permitting for infrastructure projects like oil and natural gas pipelines.

With good policies in place, we can keep U.S. energy exports on its healthy, job-creating path.

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Does America need an "All of the Above" energy strategy? Find out here. This Chamber Explainer will get you up to speed.