Ukraine Crisis Fueling Natural Gas Exports Debate

The Ukraine crisis is adding fuel to the natural gas export debate that’s been brewing in Congress. Sen. John Barrasso, R-WY, is proposing that an amendment to lift restrictions on U.S. natural-gas exports be added to the Senate aid package for Ukraine. On March 5, Sen. Mark Udall, D-CO, a senior member of the U.S. Senate Energy and Natural Resources Committee, introduced legislation to increase the ability of energy firms to export liquefied natural gas. Sen. Udall preceded the legislation’s introduction by noting that:

The situation in Ukraine shows the urgent need for Colorado and the nation to export more natural gas. When foreign powers like Russia are able to exploit their monopoly on energy exports to coerce their neighbors, it weakens the international community’s ability to promote stability and avert conflicts.

Currently, under the Natural Gas Act (1938), exports of natural gas are generally limited to countries that have a free-trade deal with the U.S.. Sen. Udall’s recently introduced legislation, known as “The American Job Creation and Strategic Alliances LNG Act” would modify a part of the Natural Gas Act to allow natural gas exports to World Trade Organization member countries. Of course, under this provision, Ukraine and neighboring countries would then be eligible to receive exported natural gas.

However, many energy experts say that the real problem with natural gas exports is not the governmental red-tape involved with actually exporting it, but the dearth of infrastructure to liquefy the natural gas for overseas shipment. There are now six applications for LNG (liquid natural gas) export facilities that have been approved, but only one of them is under construction. This is Cheniere’s $10 billion Sabine Pass terminal in Cameron Parish, Louisiana, which just recently received its required approvals from the U.S. Department of Energy and U.S. Federal Energy Regulatory Commission as well as from any state regulators that are needed. LNG shipments from this facility are scheduled to start in late 2015. As approval processes for LNG export terminals are lengthy, it is unlikely that the other applied-for LNG export terminals would be operational soon. As Energy Secretary Ernest Moniz said earlier this week during a major energy conference in Houston:

After the Cheniere license, the most optimistic view for the next set of LNG shipments to leave the U.S. isn’t until 2017 or 2018, according to Moniz. “So, there’s still quite a ways to go,” he says.

Aside from the natural gas export ban and the lack of infrastructure, the exporting of natural gas also begs the question of what will its price be once it is on the global market? The price of U.S. produced natural gas is much, much lower in the U.S. than natural gas sold elsewhere. An earlier Geopostings blog detailed how the spot price of domestic gas is set and how natural gas prices overseas are typically “oil-linked”, which means the price is coupled to the per-unit energy cost of crude oil. Suffice it to say that it is a real possibility that natural gas prices for domestic consumption will rise, and could rise precipitously. It is also a real possibility that as a market-driven commodity, U.S. produced natural gas will be exported not to Europe, but to the Asian market, where it will command a higher price.

As I said before in my earlier Geopostings blog on natural gas exporting/pricing:

All in all, 2014 is already shaping up as a very interesting year for US natural gas, LNG exports, and US energy policy.

 

Whose Land Is It Anyways?

The development of energy resources is typically dependent upon the availability of infrastructure such as hydrocarbon pipelines and transmission lines. Many of the issues concerning energy development and consequently infrastructure construction focus on the impact of climate change generated by a particular energy resource. The continuing controversy over the permitting of TransCanada’s Keystone XL pipeline is a flashpoint in the debate over the development of Canada’s tar sands and its impact on climate change. Likewise, many wind- power advocates champion this use of renewable energy to significantly reduce carbon dioxide emissions and catastrophic climate change.

The issues regarding energy resources and their impact on climate change are paramount to future energy policies. However, there is another significant concern tied to energy/infrastructure development, and that is the associated landowner-eminent domain problem. The movement of energy, whether it is hydrocarbons or electricity, involves infrastructure that is built in large part, on private property. When energy infrastructure is built by private corporations, these entities need to deal with private landowners so that infrastructure can be constructed on their lands. Ideally this is accomplished by corporations and landowners negotiating a fair price for the use of their lands. However, that is truly an ideal world scenario. The reality is that private corporations have lately pushed legislation through numerous state legislatures and court systems to gain the right of eminent domain for their infrastructure projects. The right of eminent domain has historically been used by governments to seize private property for public use and then to fairly compensate the owner for that ”taken” property. However, eminent domain usage for recent private infrastructure projects becomes one where private corporations can take private lands for their private gain. For example, the Montana 2011 legislature passed legislation via House Bill 198 that gives private corporations the right of eminent domain for projects such as nuclear generation and storage, hydro, certain transmission lines, certain major pipe lines, geothermal exploration, transportation links, pump stations and other facilities associated with the delivery of energy that receive permits through the Montana Major Facility Siting Act (see the Concerned Citizens Montana website for background on HB 198 and Geopostings.com for a review on Montana Senate Bill 180, the bill intended for repealing a part of HB 198 during the Montana 2013 legislative session).

In a needed first step for educating the Montana legal and legislative communities about the recent changes in eminent domain law, the State Bar of Montana CLE (Continuing Legal Education) Institute will convene a course on Montana Condemnation Rights on February 14, 2014, at Fairmont Hot Springs, Fairmont, Montana. A link to the course brochure is: MT Condemnation Rights.

The MT CLE course is well balanced in that it contains presentations from many sides of the eminent domain issue. More specific information on the CLE course presentations includes:

–          CONDEMNATION 101—What every real estate practitioner should know about condemnation. An overview of condemnation law in Montana, including condemnation authority, time frames, notices, rights of possession, valuation and attorney fees and expenses. [This element of the program is intended as an overview and not a detailed consideration of the latest developments in Montana law.  However, there should be a brief introduction to the US  Supreme Court decision in Kelo v. City of New London (propriety of using the power of eminent domain for economic development purposes) which placed new focus on the intended scope of the power of eminent domain as well as the Montana response.]  (1 hour presentation by Hertha L. Lund, Lund Law PLLC, Bozeman, Montana.)

–          TAKINGS AND TRANSMISSION— This presentation will explore the range of state laws governing eminent domain authority for interstate transmission lines, particularly those designed to bring renewable energy generated in one state to customers in other states.  It will focus in particular on various state approaches to granting private merchant transmission lines eminent domain authority to build transmission lines, and whether such lines are a “public use” for purposes of meeting state statutory eminent domain requirements.  In addressing these issues, this presentation will discuss the Supreme Court’s Kelo v. City of New London decision, the litigation and legislative activity surrounding the Montana Alberta Tie Line (MATL) project, some historical context with regard to state constitutional and statutory grants of eminent domain to private parties in the West, and the role of “just compensation” in eminent domain disputes involving transmission lines. (1.25 hours presentation by Professor Alexandra B. Klass, Professor of Law, the University of Minnesota Law School.)

–          THE EASEMENT:  PROCESS, TACTICS AND SUBSTANCE- How and what to negotiate to fully protect landowners’ property rights when confronted with the possibility of transmission lines burdening their land. A negotiation/drafting checklist will emerge which prove extremely helpful for any practitioner handling future utility easements. (1 hour presentation by Dennis R. Lopach, Attorney, Helena, Mt.)

–          THE MONTANA BATTLE: LITIGATION/LEGISLATION RELATING TO PRIVATE EMINENT DOMAIN FOR TRANSMISSION LINES AND OTHER CONTESTED CONDEMNATION ISSUES. A debate to highlight the opposing views by lawyers intimately involved in the process. Participants include: Hertha L. Lund (Private Landowners) Lund Law, PLLC, Bozeman, MT and John Alke (Utilities) Hughes, Kelner, Sullivan and Alke, Helena, MT. Each lawyer will be given 30 minutes to present their case in chief. (Total debate time: 1.5 hours.)

–          HOT TOPIC ROUNDTABLE-  A facilitated panel discussion including all speakers will address “Hot Topics” which have emerged throughout the day. (Facilitator:  Brian Kahn, Attorney, Helena, MT. Total Roundtable time is 1.25 hours.)

The potential use of eminent domain by a private corporation, Northwestern Energy, to build a high-voltage transmission line through a southwestern Montana community.

The potential use of eminent domain by a private corporation, Northwestern Energy, to build a high-voltage transmission line through a southwestern Montana community.

Coal Could Overtake Oil As Number 1 Global Energy Source By 2017

I watched a coal unit train zip through the Belgrade-Bozeman, Montana, area yesterday. The Montana Rail Link unit train was 125 cars in length and presumably bound for Pacific Northwest seaports. The coal is sourced from the Powder River Basin, an approximately 20,000-acre part of Wyoming that supplies about 40 percent of U.S. coal. An informative guide to the Montana-Pacific Northwest coal train situation is the July 2012 Western Organization of Resource Councils’ publication – RAIL IMPACTS OF POWDER RIVER BASIN COAL TO ASIA BY WAY OF PACIFIC NORTHWEST TERMINALS.

My viewing of the coal train passage coincided time-wise with a press release on the International Energy Agency’s (IEA) Medium-Term Coal Market Report. The IEA contends that by 2017 coal will closely rival oil as the number one global energy source.

“Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st Century,” said IEA Executive Director Maria van der Hoeven. “This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined. Coal’s share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade.”

The growth trend for coal will increase globally except for in the U.S. where cheap natural gas will bring a decline to coal usage. China and India will be the big markets for coal over the next five years, accounting for than 90 percent of the increase in coal demand.

In a Huff Post Green Blog, van der Hoeven notes that although affordable coal has aided emerging economies …” the surge in coal burning is not good news. Despite industry’s effort to promote “clean” coal, the black matter remains the dirtiest of all fossil fuels. The average coal-based power plant emits a tonne of CO2 per MWh generated, about twice the level of a power plant using combined-cycle gas turbines.”

The relentless growth trend for coal currently appears untouched by either climate policy or the economic slowdown. Given the present political situation, it may well be that cheap natural gas continues to be our biggest hope for carbon emission reductions.