Pennsylvania natural gas industry stalled by lack of support from neighboring state

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New York State politics is preventing Pennsylvania natural gas producers from gaining economic and competitive ground in the market, a situation that’s unlikely to improve in the near-term without serious changes, says Associated Petroleum Industries of Pennsylvania (API-PA) Executive Director Stephanie Catarino Wissman.

Liquid natural gas (LNG) projects haven’t been able to move forward because New York State’s Department of Environmental Conservation has repeatedly denied pipeline companies’ applications for water quality certificates, even though they’ve already got the green light from the Federal Energy Regulatory Commission (FERC), Wissman recently told Pennsylvania Business Report.

“FERC has the ultimate authority over these projects, and states should not be able to unilaterally block them after FERC has approved, said Wissman, who as head of the API-PA leads a division of the American Petroleum Institute (API) that represents all segments of the nation’s oil and natural gas industry. The division has more than 625 members, including large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms.

New York Gov. Andrew Cuomo (D) is the main opponent standing in the way of growth for Pennsylvania’s LNG industry across state lines. Re-elected during the recent midterms to a third term by an almost 30-point margin, Gov. Cuomo’s party also takes over the state legislature for the first time since 2010, meaning his decisions will remain the status quo for the foreseeable future.

Mike Butler, executive director of the Consumer Energy Alliance (CEA) Mid-Atlantic, explained in an Aug. 7 blog that the New York State Department of Environmental Conservation (NYDEC) earlier that month denied a renewal of an air quality permit needed to operate the Competitive Power Ventures Power Plant in Wawayanda, N.Y. The permit previously received state approval for construction, but Gov. Cuomo decided to politicize “the basic tenets of transparent and fair government,” Butler wrote, by “siding with irrational demands of extreme anti-energy groups.”

“Cuomo’s administration already approved the construction of the power plant but continues to actively deny ways of supplying it with natural gas — now by not renewing its air permit — all to appease Manhattan elites,” wrote Butler. “All the while nearly 3 million New Yorkers live in poverty and can’t afford to pay their energy bills — and others barely get by living paycheck to paycheck.”

Calling the governor’s action a “purely symbolic political decision,” Butler said New York consumers are the ultimate losers because they already pay 44 percent more for electricity than the national average.

“And household budgets were crushed last winter during epic cold spells due to man-made constraints of natural gas pipelines — bottlenecks that Cuomo refuses to approve,” said CEA’s Butler, adding that Gov. Cuomo “needs to stop playing games with our energy infrastructure and quit waging war against his own constituent’s wallets.”

Wissman of API-PA agreed.

“Actions by Governor Cuomo to block pipeline projects through his state only prevents consumers in New York and New England from getting the lowest cost, low-emission resource to generate electricity, heat their homes and cook their food,” Wissman said.

“Increased pipeline capacity would not only supply cheaper energy to New England, but it could also increase the value of gas produced in Pennsylvania,” from $1 billion to $3 billion annually, she added, calling it “a huge boon to the state’s economy.”

But producers in northern Pennsylvania can’t reach New England’s lucrative markets, despite shale drillers in the Commonwealth producing 5.1 trillion cubic feet (Tcf) of natural gas last year, according to the state Department of Environmental Protection (DEP), which called it another record year behind the 4.6 Tcf Pennsylvania drillers produced in 2015.

The DEP ranks Pennsylvania as the nation’s second-largest gas-producing state behind Texas.
“If not for states like Pennsylvania producing record amounts of natural gas, New Yorkers would not enjoy such low-cost energy,” said Karen Moreau, executive director of API-NY.

New York is the nation’s fourth-largest consumer of natural gas, said Moreau, who noted it’s “the fuel of choice for over 4.4 million New York homes, 398,000 businesses and 6,000 industrial consumers.”

Those numbers would be even greater, she said, “if Governor Cuomo had not blocked the Constitution.”

A spokesperson for the governor’s office was not immediately available to comment.

Cuomo’s decision also reaches far beyond states like Pennsylvania and New York, according to an expert.

The worldwide LNG trade grew by a record 10 percent in 2017, outpacing the growth of gas exported by pipelines, according to The Real Fuel of the Future: Natural Gas, a September report written by Mark P. Mills, senior fellow at the Manhattan Institute and a faculty fellow at Northwestern University’s McCormick School of Engineering and Applied Sciences, where he co-directs the Northwestern Initiative for Manufacturing Science and Innovation.

Roughly 80 percent of that new LNG supply came from the United States and Australia in nearly equal shares, according to the report, which noted that 2017 also marked the first time LNG was shipped from the Arctic, specifically from Russia’s new Yamal LNG facility.

“Yamal made news in January of this year, when a cargo was rerouted to Boston to help alleviate a gas shortage created by a late-winter cold snap (a shortage that would have been supplied by American gas if New York State had not opposed a planned pipeline),” Mills wrote in the report.
Wissman told Pennsylvania Business Report that a solution exists: the Republican-sponsored Water Quality Certification Improvement Act of 2018, S. 3303/H.R. 6889, which the American Petroleum Institute supports, she said.

The proposed GOP measure, introduced on July 31 by U.S. Sen. John Barrasso (R-WY) in the U.S. Senate and on Sept. 25 by U.S. Rep. David McKinley (R-WV) in the U.S. House of Representatives, would amend the Federal Water Pollution Control Act and change water certification policies, among other provisions, according to text of the identical bills in the congressional record.

Specifically, the legislation “would clarify existing provisions in the Clean Water Act about the appropriate scope of review for water quality certification, including requiring states to publish their standards for water quality certification requests and clarifying that permitting states can only consider discharges that would result from the federally permitted or licensed activity itself per their delegated authority,” Wissman explained last week.

“Safety of surrounding communities and the environment is of paramount importance” to API members, she said, “and state-issued water quality certificates are an integral part of ensuring projects will operate safely and effectively, which is why the process for issuing these permits needs to be clear to all parties.”

S. 3303, which has the support of original cosponsors U.S. Sens. Shelley Moore Capito (R-WV) and Steve Daines (R-MT), among others, is under consideration by the U.S. Senate Environment and Public Works Committee. H.R. 6889, which has four Republican original cosponsors, is being reviewed by the U.S. House Transportation and Infrastructure Committee.