By Dan K. Eberhart
Eberhart is CEO of Canary, an independent oilfield services company in the United States, and a frequent commentator on oil markets and US politics. The opinions expressed in this commentary are his own. He is based in Phoenix.
Environmentalists are claiming victory after a spate of setbacks for oil and natural gas pipeline projects. However, activists must still scale a mountain of realities to offer a credible alternative for meeting America’s energy needs, sustaining economic growth, and tackling climate change.
Recently, Dominion Energy and Duke Energy abandoned the Atlantic Coast Pipeline and the U.S. Supreme Court let stand a lower court’s order halting work on the Keystone XL pipeline. In addition, a U.S. Court of Appeals for the District of Columbia reinstated the Dakota Access pipeline’s permission to operate but its future is as murky as ever. All three projects have been the subjects of endless litigation over permitting issues. In the case of the 600-mile Atlantic Coast Pipeline, the repeated legal challenges by environmental organizations caused the project’s cost to balloon from $5 billion to $8 billion.
While the warriors against oil and gas toast their successes, the impact on the security, affordability, and even the environmental impact of our energy supply is far more complicated.
First, as the past year has shown, energy producers are every bit as tenacious and resilient as their opponents in the green movement. An oversupplied market and a game of chicken between Russia and Saudi Arabia drove oil prices into negative territory for the first time. Then came the global pandemic that kneecapped oil demand.
Some saw these developments as harbingers of the end of the oil and gas industry. But as the global economy returns to life, prices have rebounded — and will continue to do so. Even as renewable energy sources become more competitive, government and industry analysts expect oil and gas will still supply nearly half the energy the world will consume in 2050.
If we accept the fact that we’re going to be using oil and gas for the foreseeable future, we also have to face the reality that pipelines are the best method for transporting those resources from wellhead to market.
Second, the costly impediments environmentalists created have only bolstered the rationale for an overhaul of the 50-year-old National Environmental Policy Act announced earlier this summer by President Donald Trump. As long as people need oil and gas to travel, heat their homes and businesses, and fuel industrial production, companies will supply it while also adhering to an efficient, transparent, and predictable environmental review process. Unfortunately, the current system sabotages honest deliberations about the potential environmental impacts of a project by rewarding public relations campaigns.
Third, scuttling pipeline projects is not as good for the environment as the activists would have us believe. Many pipelines carry abundant and affordable natural gas that has displaced coal as an fuel source for power generation. The result is that the U.S. has led the world in reducing carbon emissions over the decade. A new ICF study concluded that if China, India, and Germany used U.S. liquefied natural gas instead of coal, they could reduce their carbon emissions by more than 50 percent.
In the absence of a historic breakthrough in technology that comes up with a better energy source than natural gas, we have to rely on it to curb carbon emissions and keep the economy running smoothly. The more oil and gas are moved by pipeline, the lower the risk of spills and other environmental hazards associated with trucking or shipping it by rail.
Finally, the activists celebrating continue to overlook the reality that thousands of Americans make their living building and maintaining the nation’s pipelines. They take pride in their skill and the attention to safety and environmental protection that they carry out every day. As the head of the Laborers’ International Union of North America noted, halting the Dakota Access project “ignores the high standards and reputation for quality of the more than 8,000 skilled building tradesmen and women” involved in its construction. The local and state tax revenues generated by the pipeline are helping countless communities with everything from public schools to public safety — funds that will no longer be available to communities already struggling with lost revenue due to the Covid-19 pandemic.
Three high-profile setbacks are hardly the end of America’s energy renaissance or the need for an expanded and more advanced pipeline system. Environmentalists will probably downplay the fact that the Supreme Court’s decision on Keystone XL was accompanied by the reinstatement of a process known as Nationwide Permitting 12 to expedite construction at dozens of other pipeline projects. In essence, the job-creation, energy independence, and adoption of cleaner-burning natural gas will continue.
Environmentalists and energy companies can expect victories as well as defeats in the courts over regulatory requirements. Both sides have the resources and motivation to defend their positions, but betting against American oil and gas as the best supply option to meet the world’s growing energy needs is a mistake.