April 2013, Vol. 240 No. 4


Obama Draft EIS On Keystone XL Leans Toward Project Approval

The Obama administration’s positive draft environmental impact statement on the final, four-state legs of the Keystone XL pipeline appears to set approval by the State Department on an exorable path. The draft EIS cleared away the major roadblock: concerns that greenhouse gas emissions from extraction of tar sands in Alberta would be unacceptable. It also found no problem with a new route TransCanada developed to avoid passing through a vulnerable aquifer in the Sand Hills of Nebraska.

“Completing the Draft Supplemental Environmental Impact Statement for Keystone XL is an important step towards receiving a Presidential Permit for this critical energy infrastructure project,” said Russ Girling, TransCanada’s president and chief executive officer.

“We’re looking for feedback now from the public to help us shape this going forward,” Kerri-Ann Jones, State’s Assistant Secretary for Oceans and International Environmental and Scientific Affairs, told reporters after the draft EIS was released. The agency is conducting the review because the pipeline would cross an international border.
John Stoody, Director, Government & Public Relations, Association of Oil Pipe Lines (AOPL), says the draft EIS “gives the Obama administration every reason it needs to approve the project. The project would not result in any significant adverse effects to the environment and oil sands development will continue with or without Keystone XL.”

But environmentalists hope the State Department will discard upon closer inspection assumptions it made about railroads stepping in to carry oil sands crude to the U.S. if the pipeline is disapproved, according to Anthony Swift, an attorney for the Natural Resources Defense Council, a major environmental group opposing Keystone. The proposed Keystone XL project consists of an 875-mile long pipeline and related facilities to transport up to 830,000 barrels per day (bpd) of crude oil from Alberta, Canada and the Bakken Shale Formation in Montana. The pipeline would cross the U.S. border near Morgan, Montana and continue through Montana, South Dakota, and Nebraska where it would connect to existing pipeline facilities near Steele City, NB for onward delivery to Cushing, OK and the Texas Gulf Coast region. The administration previously approved the pipeline’s southern leg called the Gulf Coast Pipeline Project from Cushing, OK to Nederland, TX. That $2.3-billion project is more than half complete.

The State Department will be examining public comments before issuing a final EIS. It will then make a determination whether the Keystone XL project is in the public interest. The national interest determination by the Department involves consideration of many factors, including energy security; environmental, cultural, and economic impacts; foreign policy; and compliance with relevant federal regulations and issues. That decision is not expected before September.

Pipeline Adequacy Key Issue In EPA Decision On GHG Limits On Electric Utilities
The adequacy of U.S. gas pipeline infrastructure is a major issue in the Environmental Protection Agency’s (EPA) effort to regulate greenhouse gas (GHG) emissions from electric utilities. The EPA has proposed what are called “New Source Performance Standards” which will dictate how much carbon dioxide and other GHGs electric utilities can emit. The proposal would require all new fossil fuel-based electric generation units (EGUs) to limit emissions to no more than 1,000 pounds of carbon dioxide (CO2) per megaWatthour (lb CO2/MWh) as of the date of publication of the proposed NSPS, based on the emissions expected from a natural gas combined cycle (NGCC) unit.

No final rule has been issued by the EPA, which is waiting for a new administrator to take office. Gina McCarthy, the assistant administrator of the EPA’s Office of Air and Radiation, has been nominated by President Obama to replace Lisa Jackson.

A number of utility groups are pressing the Obama administration to drop issuance of a final rule, whose objective, essentially, is to prevent construction of any new coal-burning utilities until carbon capture and sequestration (CCS) technology is commercialized. That won’t be for a few decades, however. Meanwhile, the EPA wants any new plants to use natural gas.

“A standard that effectively precludes the building of new coal-based plants, combined with the difficulties in being able to build new nuclear or large hydro plants, puts the nation at risk of over-reliance on a single fuel source, natural gas,” says Thomas Kuhn, President, Edison Electric Institute.

Groups such as the Utility Air Regulatory Group, which is composed of electric utilities, go even further. “It is evident from this discussion that EPA’s no-new-coal energy policy jeopardizes the reliability of the electricity supply because of infrastructure problems associated with pipelines and storage capacity,” says F. William Brownell, counsel for the Utility Air Regulatory Group. The American Public Power Association and National Rural Electric Cooperatives Association have made similar points.

But environmentalists says there will be plenty of natural gas, and a February 28, 2013 letter from the Environmental Defense Fund underlines that argument. The letter argues that adequate pipeline and storage capacity will be added to the current system to support new gas-powered utilities, and cities an INGAA report published in 2011 as evidence. It goes on to cite various reports, including ones from the INGAA, that forecast additional natural gas demand by the electric utility industry requiring 43 Bcf/d of new natural gas supply, which, coincidentally, adds letter, is what is predicted to be built by consulting firm Navigant. Similarly, the Energy Information Administration’s current tally of pipeline projects lists 73 interstate and intrastate pipeline construction or expansion projects that have been announced, approved, or are under construction with expected online date from 2013 to 2016. These pipeline projects are located in every region of the country and represent about 35 Bcf/d of capacity and over $10 billion of investment. Tomás Carbonell, one of the EDF attorneys signing the letter, declined to explain what prompted the letter when reached by phone.

But utility groups say predictions about new pipelines and adequate supply are just that: predictions. They don’t account for such things as slower shale gas production because of federal and state regulatory hurdles, increased exports of LNG and other things. “As these studies identify, while INGAA believes the physical capabilities are available to meet such needs, numerous obstacles beyond the control of the pipeline builders could delay or derail efforts to meet these projected needs,” says Rae E. Cronmiller, Environmental Counsel, National Rural Electric Cooperative Association.

FERC Price Transparency Proposal Broadly Panned

There appears to be almost no support for the FERC’s proposal to enhance natural gas market transparency. Gas producers, pipelines, industrial users, electric utilities and nearly everyone else who has submitted comments to the Commission are demanding that it end its consideration of whether to require all market participants engaged in sales of wholesale physical natural gas in interstate commerce to report quarterly to the Commission every natural gas transaction that entails physical delivery for the next day or for the next month. The Commission previously issued Order 704 under its Section 23 authority, which requires that natural gas market participants that buy or sell above 2.2 Bcf annually of wholesale natural gas for next day delivery or next month delivery are required to report annually through Form 552 their annual sales and purchase volumes, by product and by transaction type, and whether the specific transaction was reported to natural gas index price publishers. The proposed reporting in the NOI is significantly more detailed than that required on Form 552. Form 552 is currently collecting information about where gas volumes move. The proposed reporting suggested in the NOI would increase the type and amount of data collected, and would include price data.

The INGAA, AGA and a number of other groups filed joint comments arguing the FERC transparency proposal would only cover a sliver of the wholesale gas market, and that any pricing data would be misleading as a result. The trade associations were also concerned that the public dissemination of detailed transaction information would put reporting parties at a competitive disadvantage to the detriment of natural gas consumers. As stated in the joint filing, “the disclosure of commercially sensitive information simply cannot be applied to some market participants and not others without creating the potential for competitive harm.”

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