Daniel B. Markind, Esq.
Weir and Partners, LLP
The pipeline industry has received a hard lesson about how not to play into the hands of its most vicious enemies who saw opportunity and grasped it.
Venezuelan President Nicolas Maduro, a modern day Dante, seems intent on inflicting on his people ever deeper stages of hell. The next will be a likely sovereign debt default. Since the sham plebiscite chose a new Constitutional Assembly, Venezuela’s currency has tanked, increasing the pain felt by ordinary citizens. A sovereign default will make it much more difficult for Venezuela to sell its oil, the one asset it has left.
As I’ve written numerous times, it all comes down to the junior officer corps of the Venezuelan military. They are the ones who haven’t stashed huge amounts of cash abroad yet must order their troops to fire on starving Venezuelans. Will they continue to do so? Will they agree to change from firing mostly tear gas at the citizens to live ammunition? If so why?
Under these circumstances, the shale revolution gives us the benefit of time. Oil prices are not gyrating wildly. Thanks to shale, we have the option of sitting back, doing nothing, letting Maduro self-destruct, and quietly working with the junior officers. It may not work, but it’s a much better position to be in than one in which our entire economy, and that of the world, were facing a crisis similar to the 1973 or 1979 oil shocks.
Back in Pennsylvania, last week saw a significant development whose repercussions may be felt for years. For the gas industry, it is entirely a self-inflicted wound.
The development was the agreement reached between Sunoco Logistics and the Clean Air Council, et al, that permitted Sunoco to resume most drilling of its Mariner East 2 Pipeline. The terms of the deal seem logical, but the result of the process is a repudiation of Sunoco Logistics and a diminishing of the industry’s political position. Unless the industry revises its strategy of dealing with the public in Pennsylvania, it is in for further trouble.
The terms of the agreement include that Sunoco Logistics must (i) improve plans for drilling at 60 sites where horizontal drilling is being used, (ii) notify all residents within 450 feet of the horizontal drilling at least ten days before any work takes place, (iii) offer to test drinking water at wells along the pipeline’s path before, during and after drilling, and (iv) immediately notify a well owner if the company or the Department of Environmental Protection determines that a problem could impact the water supply.
None of these provisions seems terribly oppressive. In light of this, many Pennsylvania residents and commentators are asking why the Clean Air Council, the Delaware Riverkeeper Network and the Mountain Watershed Association took the lead on enforcing this and not the DEP? In addition, most of the requirements are similar, if more stringent, to the requirements Sunoco Logistics was supposed to be following in the first place. Why did it get to this point?
Perhaps the most appalling part of this settlement is that it gives tremendous credence and credibility to organizations like the Delaware Riverkeeper Network, which until this time has taken absolutist positions against nearly all drilling anywhere. The Riverkeeper has been among the most vocal groups seeking to enforce a ban on fracking in the Delaware River Watershed and recently they expanded their outreach to fight all pipeline projects. In July they filed a petition to try to stop the building of a tiny 14-mile pipeline in Berks County near Reading that would feed the proposed Birdsboro Power project.
Cleverly, the Riverkeeper adjusted its absolutist stance on Mariner East 2 and participated in the settlement. The industry should take note. The Riverkeeper now has increased credibility as it fights its next battles. Additionally, State Senator Andy Dinniman of Chester County, one of the industry fiercest critics, now looks like a hero. It was his office that checked with landowners along the pipeline route and determined not only that Sunoco Logistics was not contacting them before commencing drilling, as was required, it hadn’t even tried to ascertain whom they had to contact.
Looking at the reports that have come out, it is difficult to escape the conclusion Sunoco Logistics tried to game the system. They knew the rules and they had the resources to follow them. It doesn’t appear they tried too hard. In the end, they have to do more than they would have had they simply followed the rules.
In their wake, Sunoco Logistics neutered the DEP, made a hero of the Riverkeeper and of one of the industry’s leading critics in the Legislature, obligated themselves to pay more than they otherwise would have had to and sullied the name of Sunoco, which has been around since 1886 and was founded by one of the leading Philadelphia families, the Pew Family.
Almost a decade into the shale era, many in the industry still fail to appreciate the overall context in which they exist in Pennsylvania. Perhaps this helps. We in Pennsylvania are not like people in Texas or Oklahoma where the energy industry is dominant. In fact, in the most populous part of Pennsylvania the majority of people hardly know the industry exists.
Pennsylvania has had painful experience over the last 150 years with industries like coal, timber and tanning that came to our state, raped our land and moved on. Because of that, the Pennsylvania Legislature enacted the Environmental Rights Amendment to the State Constitution in 1971.
Unlike other states in the Northeast, however, Pennsylvanians have invited in the industry and wish that it stay. They’ve essentially said “If you work with us, you can transform the State and the region, make billions of dollars for yourselves and help the environment and national security. But please don’t play us for fools. Follow the rules, respect our people and take care of our environment. If you do that we can do magnificent things together. If you try to take advantage of us, however, we’ll recoil. The choice is yours.”
Editor’s Note: Dan’s article may seem like bitter medicine, but medicine it is. His views, though not entirely my own, contain much truth. I was shocked when the Delaware Riverkeeper and other William Penn Foundation and Heinz toadies signed onto the DEP pipeline agreement.
I’m not sure the agreement is a reasonable one or that DEP did not take the lead in forcing the deal, but there’s no question Sunoco handled this poorly from multiple perspectives. It clearly didn’t supervise its contractors or do its own homework adequately. It handed its most vicious enemies a public relations victory. It showed those thoroughly unreasonable enemies how to do real damage by being just a tiny bit more rational. It played into their hands by issuing the same sort of pablum for public statements that big corporations always employ and hoping that’d be enough. It’s not and it never is.
Pipeline companies need to fight back and fight hard and pretending problems don’t exist and putting oneself in a position where those hard-core enemies out to destroy your company along with the rest of the industry suddenly look semi-reasonable is the complete antithesis of this. The pipeline industry has a fabulous environmental and safety record but it can’t muddle through this stuff, not with vicious enemies such as those who exist in our area of the country, funded as they are by huge pots of trust-funder cash. Sunoco needs a PR transplant, better supervisors, a lot more candor and a lot more fight.