Daniel B. Markind, Esq.
Weir and Partners, LLP
Andrew Cuomo has directly challenged FERC and is likely to lose on the legal front but, politically, he is aiming to have his cake and eat it, too. He may.
New York Governor Andrew Cuomo doubled down on his anti-pipeline stance when his Department of Environmental Conservation refused to grant Section 401 Clean Streams Permits for the Northern Access Pipeline, which would have carried natural gas into Western New York. This is the same stance that the New York DEC took regarding the Constitution Pipeline, which I have written about numerous times.
In doing so, Governor Cuomo issues a direct challenge to FERC. No longer will the Federal Agency tasked with passing on the necessity and routing of pipelines have the final say. Now, the Governor of each State, through the backdoor of the Section 401 process, can assert control over this element of interstate commerce.
At first glance, Governor Cuomo’s Northern Access move appears to undercut his basic stance. Taking this anti-pipeline position a second time is a boldface challenge to the federal agency and the concept of federal supremacy. Unless there is a truly compelling environmental reason for the refusal to grant the permits, it seems unlikely that in the end the New York Governor can prevail.
Politically, however, Governor Cuomo may have found a way to have his cake and eat it too. By forcing this action he solidifies his environmental base heading into the 2018 Gubernatorial election. Should the Federal courts overturn the refusal of his DEC to grant the Section 401 Permit, he gains the pipeline infrastructure he needs also. Not a bad political move.
In better news for the pipeline industry, FERC issued its final Environmental Impact Statement for the 120-mile PennEast Project. FERC concluded that the building of the pipeline would have some environmental impacts, but they would be reduced to “less-than-significant levels” by following mitigation steps. This project, which transports gas from Northeastern Pennsylvania to Central New Jersey, already is over 90% subscribed.
Already this year, Reuters reports that private equity funds raised $19.8B for energy ventures, nearly three times as much as last year at this date. Clearly, shale is making a huge comeback. As Reuters points out, this renaissance is happening even as oil and gas prices stall. What is extraordinary is that producers have slashed costs in half in the last two years.
Of course, the shale price is related to world events, and events that impact and are impacted by energy matters happen so quickly it’s almost impossible to keep up. The major headline last week, of course, was the Trump Administration bombing the Syrian Shayrat Airbase after Syrian planes from that base launched a chemical weapons attack in the Town of Khan Sheikhoun. American warships fired 59 Tomahawk cruise missiles at the airbase, causing substantial damage. This military action did not end, or perhaps even make a large dent, in Bashar Assad’s chemical weapons capability. It did, however, let Assad, the Russians and the Iranians know that unlike the past Administration, this one will not sit by idly by when historical international “red lines” are crossed.
The rub, of course, is what happens now. Russian President Vladimir Putin reacted angrily to the American strike, and Russia vetoed the UN Resolution condemning Assad’s chemical weapons attack. Russian warships now patrol in the Mediterranean, and the Russians have pledged to increase the sophistication of Syrian’s air defenses. Syria is within a few hundred miles of Russia, so Russia has much better proximity to project its military force there than America. Therefore, American leverage will have to take a broader scope than just military power.
This is where energy comes in – front and center. If Russia continues to be belligerent in Syria, the West will need a combination of military and economic power to counteract it. Until the pipeline and export infrastructure is in place, Europe will continue to be subject to Russian energy blackmail. This decreases substantially the cost the West can extract for this Russian adventurism. Again, energy policy impacts world events.