The Natural Gas Industry
The American natural gas industry relies on a sophisticated network of pipelines that transports natural gas throughout the United States. According to data from the U.S. Energy Information Administration, the continental United States contains a pipeline network that stretches nearly three million miles. These pipelines have become essential for connecting natural gas production wells with storage and refining facilities. Moreover, these pipelines are also used to transport natural gas directly to consumers across a majority of the major American metropolitan regions. In 2018 alone, the nation’s highly integrated network of pipelines transported about 28 trillion cubic feet of natural gas to nearly 75 million Americans (EIA, 2019). As the natural gas industry has continued to expand in recent years, producers have had to rely on a continuous expansion of the pipeline network to reach new consumers. However, the regulatory process needed to extend natural gas pipelines is often challenging, especially with today’s shifting economics and increasing pressure from states to combat climate change.
Pressing legal challenges have started to have an adverse impact on the natural gas industry. Currently, there are over 9,000 miles of oil and natural gas pipelines across the country that are being newly built or expanded (Tabuchi & Plumer, 2020). Data suggests that another 12,500 miles of fossil fuel pipelines are currently within the planning phase of development. With the combination of pipelines that are currently under construction, coupled with the additional pipeline infrastructure that is being planned, the United States has enough new pipeline infrastructure on the way to nearly circle the planet. Although, to the disappointment of many consumers and natural gas producers in Appalachia, the Atlantic Coast Pipeline will no longer be among those in the planning phase.
In recent years, West Virginia, Pennsylvania, and parts of Ohio and New York have been able to produce abundant levels of natural gas from the Marcellus Shale basin. However, in order to safely and effectively transport natural gas to other parts of the country from the Marcellus Shale basin, a series of pipeline extensions and upgrades are needed. Oil and gas producers have been vigorously fighting a series of lengthy legal battles in an effort to move forward with plans to extend new natural gas pipelines out of the Marcellus Shale basin. One such pipeline was the so-called Atlantic Coast Pipeline, which was proposed to extend 604 miles of pipeline from the Marcellus Shale basin, through West Virginia, Virginia, and North Carolina. The installation of this pipeline would have enabled gas companies to transport 1.5 billion cubic feet of natural gas per day.
The Atlantic Coast Pipeline
The Atlantic Coast Pipeline was being developed jointly by Dominion Energy and Duke Energy. In 2018, after years of previous planning and public outreach to local communities, the U.S. Forest Service presented a permit to Dominion Energy and Duke Energy that would allow the companies to install the pipeline hundreds of feet below the surface of the George Washington National Forest. However, following this ruling, a plethora of environmental organizations filed lawsuits that claimed how the Trump administration’s U.S. Forest Service did not have the authority to issue the permit to Dominion Energy and Duke Energy. With proceedings led by the Southern Environmental Law Center, an argument was made that the U.S. Forest Service did not have the authority since the pipeline would run under the Appalachian Trail, which is a well-known section of the National Park. Therefore, the Southern Environmental Law Center argued that the rules that governed the National Park System should apply for the development of the Atlantic Coast Pipeline.
After a lengthy deliberation, the United States Court of Appeals for the Fourth Circuit in Richmond, Virginia sided with the Southern Environmental Law Center in December 2018. Following this ruling, the permit issued by the U.S. Forest Service was revoked. After this major blow to the project, Dominion Energy and Duke Energy appealed the federal court decision before the Supreme Court. Beginning in February of 2019, the Supreme Court started to hear testimony on the case. As is the case in many other law-related debates, the focus of the court arguments was centered around the interpretation of a series of words within federal regulations. Given that the eight billion dollar pipeline project had already broken ground, it was imperative for the fossil fuel advocates to win this case in order to prevent a serious loss of funding. Moreover, since there are numerous other national scenic trails similar to the Appalachian Trail, a ruling in favor of the environmentalists would have potentially upended a number of other pipeline projects around the country.
The implications of the Atlantic Coast Pipeline case were huge. Since the Appalachian Trail stretches nearly 2,192 miles from Georgia to Maine, a ruling that stated how pipelines could not cross this trail would have had tremendous repercussions for energy companies. At the time of the case, there were at least ten other proposed pipelines that were being planned to cross the Appalachian Trail (Harlan, 2020). Rerouting or canceling these pipelines would have cost billions of dollars for fossil fuel companies. While the cost to oil and gas companies would be significant, environmentalists say that the cost imposed on the environment could have been even more severe if the pipeline was built. Between January 2010 and November 2018, there were 5,500 accidents, 300 explosions, 800 fires, nearly 600 injuries, and 125 fatalities caused by fossil fuel pipelines (Harlan, 2020).
While the fossil fuel industry has traditionally had a leg up in the fight to build new pipelines, the process has become more challenging in recent years. Concerns related to climate change and a rise in renewable sources of energy have put more pressure on the fossil fuel industry. More value is also being placed on the importance of outdoor recreation and the National Park System, which is creating more scrutiny for fossil fuel producers that aim to construct infrastructure through natural areas. Furthermore, data from the Bureau of Economic Analysis conveys how outdoor recreation added $412 billion to the country’s gross domestic product in 2016, which is representative of more value than was contributed by fossil fuel extraction (Harlan, 2020). Environmental organizations also often highlight how jobs related to outdoor recreation also greatly outnumber all of the jobs in the oil, coal, and natural gas industries.
A Win for the Natural Gas Industry
With convincing arguments being made by both sides of the Atlantic Coast Pipeline debate, the Supreme Court was surrounded by a tremendous amount of tension. However, throughout the case, Chief Justice John Roberts voiced concerns about the consequences of ruling in favor of the Southern Environmental Law Center. In an effort not to impose new obstacles to the development of many other pipeline upgrades across the country, the Supreme Court ultimately overturned the ruling made by the Court of Appeals for the Fourth Circuit. In response to the ruling, Dominion Energy and Duke Energy released a statement that said, “Today’s decision is an affirmation for the Atlantic Coast Pipeline and communities across our region that are depending on it for jobs, economic growth and clean energy” (Carpenter, 2020).
As part of the ruling, the Supreme Court compared the situation with the U.S. Forest Service in a similar manner as an easement or right-of-way being issued to a neighbor by a current landowner. Justice Clarence Thomas said, “If a rancher granted a neighbor an easement across his land for a horse trail, no one would think that the rancher had conveyed ownership over that land” (Sullivan & Wamsley, 2020). This was felt as a major victory for the region’s natural gas companies as well as the Dominion Energy and Duke Energy utility companies. Moreover, the fossil fuel producers in the Marcellus Shale region also applauded the court ruling, as the Atlantic Coast Pipeline would help to address the oversupply of natural gas. This oversupply has caused depressed natural gas prices in recent years. Within the Marcellus Shale region, natural gas sells for around $1.30 per million Btu (British thermal units) of fuel. Outside of the region, natural gas is typically priced at $1.75 per million Btu.
Professor James Van Nostrand of the West Virginia University College of Law has spent years studying the impact of supply and demand on the price of natural gas. He says, “There is much more supply than demand within the Marcellus Shale region, so prices are depressed compared to the national price” (Carpenter, 2020). As a result of this situation, natural gas producers have been desperate to link to a new pipeline connecting through Appalachia. In addition to gaining more access to the national market, a new pipeline would alleviate oversupply concerns. While the victory at the Supreme Court was met with resounding appreciation by leaders within the natural gas industry, other looming issues would ultimately stop the pipeline in its tracks.
An Alarming Defeat
At the beginning of July, only a short time after the victory in the Supreme Court, Dominion Energy and Duke Energy announced that they would be canceling their plans to construct the Atlantic Coast Pipeline. Impending legal uncertainty, ongoing project delays, and an alarming increase in the project cost killed the economic viability of the pipeline. Even though Dominion Energy and Duke Energy have already spent a great deal of time and resources on planning this project since early 2014, the ongoing litigation has created too much ambiguity to continue moving forward. The chairman of Dominion Energy, Thomas Farrell, expressed extreme disappointment in the announcement that the project was coming to an end. He conveyed that until increasing levels of legal uncertainty are addressed, the American energy industry as a whole would continue to be severely challenged.
While natural gas producers and energy utilities expressed deep concerns about the future of natural gas development in the region, environmentalists and natural resource professionals applauded the decision to cancel the pipeline. Natural Resources Defense Council attorney, Gillian Giannetti, says that “This is tremendous news for West Virginians, Virginians, and North Carolinians who deserve clean air, safe water and protection from climate change” (Duffy, 2020). U.S. Energy Secretary Dan Brouillette does not share the same view as the Natural Resources Defense Council. In a media statement, Secretary Brouillette blamed the cancelation of the Atlantic Coast Pipeline on obstructionists within the environmental community.
Even though environmentalists believe that the cancelation of the Atlantic Coast Pipeline will lead to the development of more renewable sources of energy in place of natural gas, some energy industry analysts actually believe that this may be a win for the coal industry instead. Despite the fact that using coal to generate electricity has been on a significant decline in many developed nations, some coal companies believe that the cancelation of the Atlantic Coast Pipeline could send them a temporary lifeline that will allow them to continuing operating. If the Atlantic Coast Pipeline would have been constructed, the coal industry was forecasted to lose billions of dollars (Hirs, 2020). Instead of now being able to access clean and affordable supplies of natural gas, many communities within Appalachia will now be forced to rely on coal for the foreseeable future.
Carpenter, S. (2020). “Desperate To Get Natural Gas Out Of Appalachia, Pipeline Builders Face Long Battle Even After Supreme Court Victory.” Forbes.
Duffy, C. (2020). “Energy companies cancel construction of Atlantic Coast Pipeline.” CNN.
EIA. (2019). “Natural Gas Explained.” The U.S. Energy Information Administration.
Hirs, E. (2020). “Coal Wins! Atlantic Coast Pipeline Canceled.” Forbes.
Harlan, W. (2020). “Will the Appalachian Trail Stop an $8 Billion Pipeline?” The New York Times.
Sullivan, B., and Wamsley, L. (2020). “Supreme Court Says Pipeline May Cross Underneath Appalachian Trail.” National Public Radio.
Tabuchi, H., and Plumer, B. (2020). “Is This the End of New Pipelines?” The New York Times.