The People of America's Oil and Natural Gas Indusry

Understanding Infrastructure

Mark Green

Mark Green
Posted June 19, 2015

The issue was energy infrastructure – where the United States is and where things are headed. At the U.S. Energy Information Administration’s (EIA) annual conference this week, one discussion honed in on the challenges to infrastructure approval and construction – as well as government’s best role in developing projects that are key to U.S. energy transport and overall energy security. The latter produced some friction between speakers not often seen at conferences like EIA’s. More below.

ageThe U.S. Energy Department’s Melanie Kenderdine talked about some of the details in the department’s recently issued Quadrennial Energy Review (QER), which focused on ways to modernize the nation’s infrastructure. For example, this QER graphic shows the age of U.S. natural gas transmission and gathering pipelines by decade.

Kenderdine stressed the need to increase the resilience, reliability, safety and asset security of transmission, storage and distribution infrastructure. The report’s key findings include:

  • Mitigating energy disruptions is fundamental to infrastructure resilience.
  • Energy infrastructure is vulnerable to many natural phenomena.
  • Dependencies and interdependencies of the electricity and natural gas systems are growing.
  • Aging infrastructure prompts safety and environmental concerns.


Another speaker, RBN Energy’s Rusty Braziel, underscored the need for infrastructure to meet the transport needs of rising domestic production of oil, natural gas and natural gas liquids. One of Braziel’s charts:

liquids

Yes, we need energy infrastructure – improvements and new projects. A third speaker, ClearView Energy’s Christine Tezak, talked about challenges getting projects through the approvals process:

“We have environmental policies so prominent that they’re beginning to almost conflict and step on each other. Renewable projects are starting to have Endangered Species Act concerns. Electrification of the transport industry is being questioned for whether or not it’s actually beneficial for emissions. Changes were under way even before the Obama EPA really started moving forward on its environmental agenda.”

 More Tezak:

“This is a complicated investment environment, because on one side you have policy influences that underscore a need to move away from fossil-based energy. But it’s becoming so prolific and it is so available, and why wouldn’t we be using the infrastructure we have to leverage it? It is difficult to encourage investors to contemplate investing in the needs that (DOE) has identified if you’ve marked the industry for death.”

Tezak said National Environmental Policy Act (NEPA) review of proposed projects used to simply analyze the project’s potential impact on the environment. NEPA’s application has been expanded to not only measure a pipeline, for example, but also what goes through it, she said. Opponents of infrastructure, fossil fuels or both see governmental review not as a way to improve a project’s plans and execution but as a means to block development altogether. Tezak:

“… the issue with the environmental community is that these reviews are never going to be sufficient or adequate, if what those constituencies really want is for the decision to be ‘no.’ If safe or responsible or diligent development isn’t enough, no review will ever suffice. … NEPA is supposed to be a disclosure exercise. Let’s talk about the impacts, let’s get them on the table, let’s ensure that we’re making the right decision, the smartest decision –relative to the needs of the community that the energy serves. There is a concern about the scope of these projects, these reviews, and whether or not they are going so far afield in contemplating so many issues that they’re no longer really useful to the policymakers who rely on them. … How much study is needed? How much study are infrastructure developers going to have to pay for, and how long is it going to take for FERC to review it to make sure it’s good enough to get a project approved?”

As for friction on the speakers’ platform, Kenderdine and Tezak had an exchange on the role of government in reviewing and permitting infrastructure projects, the vast majority of which are privately financed. DOE has taken some criticism for the methodical pace of approvals for proposed liquefied natural gas (LNG) export facilities, and during the session’s Q&A segment, Kenderdine said the process isn’t simple:

“Policies do need to catch up. That’s one thing that the QER is about – that we have data-driven, analytically based policies … In some of our recommendations there’s only so much you can do in the 2030 timeframe with infrastructure. But we also are very concerned about modernization and acknowledge that modernization and transformation – and building resilience – at the same time is a complicated, complicated endeavor. ..”

Kenderdine noted that at one point in the recent past, many thought the U.S. would have to import LNG:

“The industry is the one that made the investment in LNG import facilities, and those facilities have by and large been mothballed or will be repurposed for LNG exports. So it’s not just policymakers that need to be looking at these and adjusting policies. The industry has made some bad calls in the past as well, and I don’t think there was a federal policy that was responsible for the acceleration of LNG imports (facilities). It’s a complicated environment out there for both investors and policymakers. We are seeking to provide some guidance in that regard through things like the QER and are investing in a range of technologies to support our all-of-the-above policy and in many respects we are investing in lower-end costs.”

Let the marketplace decide, Tezak countered. Set up processes to review projects in an efficient and timely way, and let the market work things out. Tezak:

“The issue really comes down to letting the market pick the winners. There were infinitely more import facilities proposed than ever got permitted, let alone built. If you look at the long list of LNG export facilities, it probably is going to wind up being the same thing. What investors generally prefer is they’d like to see projects get through and get the approvals, whether it’s all of the LNG export facilities or pipeline infrastructure. … What investors, I think, are looking for is a little more stability in the permitting environment and a sense of what timelines are. I think we’re getting there. I think there’s general acceptance that it takes longer to get things permitted and done, and that’s part of the new reality.”

Certainly, industry is well-positioned to understand the country’s infrastructure needs and is poise to make those projects happen. But the approvals process must foster clear objectives – as opposed to slow or open-ended reviews fraught with uncertainty, which is a real hindrance to private investment.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.