Daniel B. Markind, Esq.
Weir and Partners, LLP
Will a new Trump Administration offer some clear energy direction to replace the often conflicting signals that came from the Obama Administration? Perhaps.
With one week to go before the Donald Trump Presidency, the Obama Administration’s final energy moves remain curious. Just a few weeks after refusing to finish the Dakota Access Pipeline, the Administration went the other way on Atlantic Sunrise.
Right before the new year, FERC gave the Atlantic Sunrise pipeline long-awaited good news by issuing a favorable Environmental Impact Statement. Based on that, Williams Partners announced that it anticipates full service by mid-2018. The EIS is good news for Williams and for anyone in the Mid-Atlantic whose gas supply will be safeguarded by the connection of the Northeast Pennsylvania Marcellus Shale deposits with a major Northeast pipeline.
Next, outgoing Energy Secretary Ernest Moniz took credit for the explosion of oil and gas production during the last eight years. Writing in his exit memo, Moniz stated “(d)ue to early DOE investments and the advances made by U.S. companies, domestic production of crude oil rose from 5 million barrels per day in 2008 to 9.4 million barrels per day in 2015, the highest production rate since 1972.”
Unlike others connected to the Obama Administration, Moniz never has been known as a shale opponent. However, you would be hard pressed to find many in the industry who will heap too much praise on the DOE during the last eight years, especially with regard to items like the approval of export permits. The energy world is so large and encompasses so many interests that it is impossible to take a principled stand on issues and expect complete consistency.
Still, the constant back and forth of the DOE and the other federal agencies regarding regulations, moratoria, approval of permits and other items has made it difficult for anyone to get a real read on the overall regulatory environment or on the wisdom of investing billions of dollars in new infrastructure projects (witness Dakota Access). Clear energy direction from the new Administration will be a welcome change.
That clear energy direction will come at a time of great promise. In its Annual Energy Outlook for 2017, the U.S. Energy Information Administration predicted that the United States could become “energy independent” by 2026. Indeed by that date we could become a net energy exporter. What a change from eight years ago, before the shale revolution took place. Aside from the domestic economic implications, the foreign policy possibilities are stunning. An America free from worrying about Saudi Arabia, Nigeria, Venezuela and other foreign suppliers would have a much freer hand in the world, to try to shape (or choose not to shape) world events with less downside risk.
And, the early days of 2017 already show how energy politics shapes world events. The energy year began in Central Asia when Turkmenistan suspended gas exports to Iran for unpaid bills going back to 2006. Apparently the Turkmens, who are the ethnic ancestors of the modern-day Turkish people in Asia Minor, jacked up prices to Iran during the bitter winter of 2006, resulting in an arrearage of approximately $2B. Iran, subject to the UN sanctions until 2015, could not pay. Turkmenistan now is taking action.
Both of these states are quite insular and no one really knows why Turkmenistan chose this moment or this action. It leaves Turkmenistan with only one foreign buyer of its gas, China, and Iran’s northern provinces without gas supply. This seems like a lose-lose for everyone involved, and on that basis are conflicts made.
Finally, a hopeful story from the Middle East. On numerous occasions I have written about the curious dealings with the Cypriot, Israeli, Noble Energy venture in the Leviathan Basin. Now the Leviathan may stimulate a settlement of the 40-year old Cypriot conflict.
Since 1975, Cyprus has been divided, with Turkey militarily occupying Northern Cyprus and being the only country to recognize Northern Cyprus as an independent. The Turkish military occupation has complicated Turkish relations internationally and has limited Cyprus’s ability to develop as a nation.
Thanks to the potential for gas money (estimated at approximately $50B), mercurial Turkish President Recep Erdogan now may cut a deal to end the conflict. Turkey is heavily reliant on Russian gas, and last year’s event showed that Turkey and Russia have some common interests but also many divergent ones. Neither party wants to be dependent on the other. The potential of a gas pipeline from the Leviathan to Turkey may be too much for Erdogan to resist.
This week in Geneva leaders of the Greek Cypriots and the Turkish Cypriots presented their proposals for a bi-zonal federation. Following the meeting, the UN Secretary General said peace was very close. The Obama Administration largely has been on the sidelines, but what a wonderful going away present it would be for the Obama Administration – and simultaneously what a great way to exhibit the positive potential for shale gas – than to see Cypriot reconciliation.