Daniel B. Markind, Esq.
Weir and Partners, LLP
Sunoco Logistics is upping the game in building pipeline infrastructure as Pennsylvania DEP applies common sense in dealing with pipelines and earthquakes.
Just two weeks after receiving its permits from the Pennsylvania Department of Environmental Protection for the construction of the Mariner East 2 Pipeline across Pennsylvania to Marcus Hook, Sunoco Logistics confirmed that it will be building two, and not just one, pipelines within the right of way. Construction already has begun on a 20-inch pipe, but Sunoco Logistics CEO Michael Hennigan confirms that a 16-inch pipe also will be built adjacent to the 20-inch pipe. Mr. Hennigan noted that the DEP approval convinced producers to commit to the project, confirming again the importance of the pipeline infrastructure in the production and distribution of energy.
As this was happening, Pennsylvania Governor Tom Wolf’s new tax proposals, including once again layering a mineral extraction tax onto the local impact fee, were being panned by the Republican-dominated State legislature. While the first two years of the Wolf administration produced little but antipathy between the Governor and the gas producers, this would seem to be the most advantageous time for the industry to reach a compromise tax proposal with the Governor.
There is still a solid chance that Governor Wolf will be reelected in 2018, especially if there is the normal midterm electoral wave for the party out of Presidential power. Should that wave happen, and should the immense Republican legislative majority in the Pennsylvania legislature lessen or dissipate altogether, any future tax negotiations will be tougher for the industry. Sometimes it is smarter to lock in a workable system when your political power is great rather than try to tough it out.
Meanwhile, the Pennsylvania DEP confirmed last week that for the first time, earthquakes were reported in the Commonwealth that were caused by hydraulic fracturing. The quakes occurred last year, on April 25, 2016 in Lawrence County, about 50 miles northwest of Pittsburgh. They were too small to be felt on the surface (from 1.8 to 2.3 on the Richter Scale) and were captured only on seismometers.
Still, Hillcorp Energy Company stated that it immediately ceased operations at the well pad after being notified about the quakes. The DEP now has given Hillcorp recommendations going forward, including a “stop light” procedure to ensure no future seismic activity occurs (or to cease action immediately if it does).
While one can argue about the length of time it took for the DEP to draw its conclusions, the specifics of the investigation and the “stop light” procedure, or even about the basic conclusions themselves, the fact that the DEP was on the job, and that the “stop light” procedure does not appear excessive on its face, actually is a good thing for the industry and the Commonwealth. Nothing aids the industry more than a sense of public trust – that there is a watchdog out there which is alert and will take action when needed. So long as the state environmental agency is perceived as doing a fair job the public will have confidence. Especially in states without a long energy producing tradition, confidence is the industry’s best friend.
Nationally, one month into his term reports are circulating that President Trump may delay his purported $1 trillion infrastructure plan until 2018. This would be a foolish mistake, both politically for him and economically for the country. America desperately needs the upgrade, and stories such as the Oroville Dam have galvanized the public about the issue. One need only drive on your local roads or visit your local airport to get a first-hard look at the decrepit nature of our infrastructure. The energy grid and distribution systems likely would be part of that upgrade.
Regarding the Oroville Dam, it appears the structure will hold, but for how long? California’s torrential rains have alleviated its drought, even to the extent of ending the drought entirely in much of the Golden State. However, looking at it from a long term perspective the problem is still dire. The fact is that California’s prime water sources operate at a deficit, meaning the population uses more water than Mother Nature normally will replenish. Unless California finds a way to produce more fresh water, even without a drought the State eventually will run out.
One option is desalination, which draws in seawater from the ocean and removes the salt content. Unfortunately this marvelous technology, which is proven and operational in many parts of the world, has potential environmental concerns. Interestingly, these concerns are similar to those in shale gas and oil production.
The first concern is the water intake, which risks the possibility of destroying large amounts of tiny marine life that will pass through the mesh. There is new technology that allows the intake to occur below the sea bed, significantly lessening this risk. Surprisingly it involves a process similar to horizontal drilling.
The larger environmental issue involves something near and dear to shale ears, the disposal of the salty brine that is a byproduct of the desalination process. The remaining salt needs to be disposed of once the freshwater has been obtained, but there are no completely clean ways of doing so. Any type of disposal involves potentially adverse environmental consequences.
There is, of course, one environmentally pure answer to California’s water problem. That would be for millions of people to move from the arid South to areas with greater natural water supply. Don’t hold your breath. Far more likely is that people will continue to flood into Southern California, drawn by the weather and the lifestyle.
They, like their counterparts in the environmentally artificial Island of Manhattan, will continue to lecture the rest of us self-righteously on environmental issues. Perhaps in time they will come to excuse the lack of credence given them by people who live in areas more environmentally authentic, and they will give more thought to the environmental tradeoffs being made in order to preserve the lifestyles they enjoy.