Pipeline Task Forces May Slow Energy Development | White & Case LLP International Law Firm, Global Law Practice

Pipeline Task Forces May Slow Energy Development

Despite their good intentions, quasi-governmental task forces that are set up to review proposed pipeline projects often add complexity that can hobble the approval process at a time when demand for natural gas is surging.

 

NIMBY meets natural gas

Energy companies are used to dealing with opposition from stakeholders with a "not in my backyard" (NIMBY) mentality as they seek to build infrastructure such as high-voltage transmission lines and natural gas pipelines. But the opposition seems better organized today, particularly in the natural gas sector where NIMBY groups have opposed fracking. Some groups oppose the expansion of natural gas pipelines as a strategy to minimize fracking's reach.

Although greater stakeholder participation can be a vehicle for collaboration, task forces can increase bureaucracy

An increasing number of municipalities are forming quasi-governmental task forces to review pipeline proposals. They are meant to give a broader array of stakeholders a voice in the development process, which can help developers win public support for energy projects, reduce delays and litigation, and complete projects more efficiently.

Although greater stakeholder participation can be a vehicle for collaboration, task forces can increase bureaucracy, adding to the time it takes to get pipelines built or, in some regions, making it difficult to get them built at all. Indeed, task forces may often provide an effective platform for NIMBY opposition. A small NIMBY minority can have a disproportionate influence in this context and may often be able to highjack a task force's proceedings, particularly when approval requires universal agreement. This can be particularly problematic because the profitability of pipeline projects usually hinges on the ability to gain approval and build quickly.

 

Striking the right balance

Pennsylvania's Pipeline Infrastructure Task Force (PITF) illustrates some of the challenges that task forces can present. PITF was created to recommend policies, guidelines and tools to assist in planning, permitting and construction of pipeline development. The task force's stated goal is to "engage a diverse array of stakeholders"that includes no fewer than 12 constituencies, including environmental groups and Native American tribes. In fact, anyone was eligible to apply for task force membership.

This task force is charged with providing a final report detailing its findings by February 2016, but many observers are concerned that the multiplicity of task force participants will lead to paralysis.

There's plenty of precedent for paralysis in the sector, even in cases that do not involve task forces. The Keystone XL Pipeline Project has battled litigation on multiple fronts while trying to build out an oil pipeline. The Algonquin Incremental Market natural gas project has also encountered strenuous resistance. The Algonquin project would include pipeline construction in four Northeastern states where natural gas needs are acute due to the lack of pipelines. In March, the Federal Energy Regulatory Commission approved the project. But in June, right before construction of a crucial pipeline spur in Dedham, Mass was set to begin, the town of Dedham sued FERC to stop it.

Michigan's approach seems to strike a fair balance between pipeline development and concern for the natural environment

It will be interesting to see how PITF compares to the industry task force in Michigan. There, a Petroleum Pipeline Task Force with representatives from multiple government agencies oversees oil transportation with seemingly fewer obstacles. Task force members represent agencies that oversee environmental quality, natural resources and the Great Lakes. Although the product differs, Michigan's approach to pipeline development seems to strike a fair balance between pipeline development and concern for the natural environment.

While Michigan's task force oversees pipelines, task forces like PITF typically only make recommendations, not regulations. And even when everyone on a task force agrees, litigation by a single stakeholder group can hold up construction and increase the cost of a build, regardless of what a task force decides. But perhaps Pennsylvania's plan to construct up to 25,000 miles of gathering lines and 4,000 to 5,000 miles of midstream and transmission pipelines over the next decade, with its accompanying job creation and other economic benefits, will help prevent development delays and discourage court action.

 

What this means for midstream players

If task forces substantially slow pipeline development, midstream companies will have few options to increase their ability to meet demand. Startup companies could offer compressed natural gas storage facilities and transport. Or companies with existing projects with approved rights of way can build out existing pipelines. But these are short-term solutions. Pipeline development is still the only long-term solution. If there are long delays that accompany debate over development, the advantage is likely to fall to strong companies with the resources to wait out the uncertainty and explore alternative market options.

 

This article was originally published in Oil & Gas Monitor.