If you are a pipeline developer, landmark court victories just aren’t what they used to be.
Dominion Energy and Duke Energy announced on Sunday that they are canceling their proposed Atlantic Coast Pipeline just 20 days after they won a 7-2 decision in the U.S. Supreme Court authorizing them to build the pipeline underneath the Appalachian Trail. Apparently, the economics of the project were so terrible and the opposition to the to the project was so tenacious that even a landmark Supreme Court decision couldn’t save the $8 billion project.
The two companies are walking away from what the Wall Street Journal reports is, to date, a $3.4 billion investment. The pipeline, which would have traveled 600 miles through West Virginia, Virginia and North Carolina, met with fierce opposition from residents of all three states. Opponents were concerned with the seizure of their land by the companies through the use of eminent domain, local environmental impacts, climate impacts associated with gas emissions, and the financial burden that would be borne by utility customers.
Never giving up was also the strategy of the Continental Army
RESIDENTS OF THE THREE STATES FOUGHT THE PROJECT IN EVERY VENUE THEY COULD — the courts, the Federal Energy Regulatory Commission, state administrative offices and in the public arena. They lost quite a few battles, but it turns out they were able to hold out longer than Dominion and Duke. With the decision coming so close to the Fourth of July, it’s worth noting that losing a lot of battles while never giving up was also the strategy of the Continental Army.
It hasn’t just been agonizing court victories for the pipeline companies. They have also suffered from the agony of court defeat. Keystone XL is now in limbo due to a court decision holding that an Army Corps of Engineers nationwide permit regarding water crossings violated the Endangered Species Act. And on Monday, another court ruled that oil will have to stop flowing through the Dakota Access Pipeline at least until the Corps conducts an extensive environmental impact statement on the project.
FIGHTS OVER OIL AND GAS PIPELINES AND OTHER PROJECTS ARE TAKING PLACE ALL OVER the country. Some of those fights, such as the Keystone XL oil pipeline, are famous. Others, involving gas pipelines such as Permian Highway in Texas; Mountain Valley in West Virginia and Virginia; and Pacific Connector in Oregon, are well-known in the states that would be directly affected but have not gained national prominence.
Virtually every oil and gas pipeline is now controversial
Pipeline companies operate in an environment that is very different from the one they enjoyed a decade ago. Virtually every oil and gas pipeline is now controversial. Property owners don’t want their land taken against their will by pipeline companies. Residents don’t want bodies of water to be polluted. Consumers don’t want to be forced to pay for multi-billion-dollar gas infrastructure through their utility bills when the gas is not needed. Americans don’t want their land taken and damaged by oil pipelines just to enable large corporations to export oil that is drilled here in this country.
MOREOVER, IT HAS BECOME OBVIOUS THAT THE OIL AND GAS INDUSTRY IS IN DECLINE. Even a price increase to about $40 per barrel hasn’t prevented American carnage for the industry. Domestic production has dropped to 10.5 million barrels per day from about 13 million in late March. The Wall Street Journal reports that this is the biggest 11-month decline since 1983. In recent months, Shell, BP, Hess, Occidental and Chevron have all taken write-downs. Despite the industry’s obvious weaknesses, the majority of the Texas Railroad Commission has chosen to stand idly by, refusing to plan for a future in which the industry will be much smaller. Their political hero appears to be Nero, who fiddled while Rome burned.
Exxon, the largest U.S. oil company, now has a market capitalization that’s less than the market capitalization of Tesla. While Tesla itself may or may not turn out to be a long-term winner, it is clear that over the next few years, oil-based motor vehicles will continue to lose market share to electric vehicles. In the electricity sector, gas will continue to lose market share to renewables and energy efficiency. This shift might happen on a large scale very quickly or a little less quickly. But it’s already happening, even under a presidential administration that has done everything it can to promote oil and gas. And the pace of change will certainly accelerate.
The lesson of the Atlantic Coast Pipeline battle is that opponents of oil and gas projects can win if they get into the fight early, operate in every venue they can, and fight as hard as they can. This is a lesson that the people of Texas understand and that Texas policymakers need to learn. When opponents of pipelines and other oil and gas projects are organized, the oil and gas crowd is in serious trouble.
Larry Shapiro is associate director for program development for the Rockefeller Family Fund and co‑founder of the Funder Collaborative on Oil and Gas. He is also president of IEEFA’s Board. This commentary originally appeared in The Houston Chronicle on July 7, 2020.