The backlash against the Dakota Access Pipeline has only intensified in the recent days as the litigation moves towards conclusion. An appeals court on Sunday ruled in favor of Energy Transfer, causing increased protests where 27 people were arrested for trespassing at construction sites. The last piece of the puzzle for ETP is a go ahead from the Army Corps of Engineers, however with intensifying protests and political pressure it is unclear when this will happen. Extensive delays or cancellation of DAPL, which is at least 60% complete, would be a sea change in the outlook for hydrocarbon infrastructure, especially where midstream infrastructure is sorely awaited as in the Marcellus and Utica.
It is no arbitrary transition from the consequences of DAPL, an oil pipeline facing trouble in North Dakota, to the Marcellus and Utica, which are awaiting natural gas infrastructure. In fact, it has been suggested by the president of an environmental opposition group that, after success with Keystone XL and the conclusion of the battle over DAPL, Northeast natural gas infrastructure will be the next target; citing Atlantic Coast Pipeline and Mountain Valley Pipeline specifically.
Previously, we have discussed some of our methodology surrounding analysis of takeaway projects out of the Northeast, but how can we quantify the qualitative public sentiment surrounding projects? The first way we can gain insight into public sentiment is looking at the attention specific projects have received during the federal regulatory process, which tends to be more transparent than state regulatory processes. The below graphic shows the number of public comments some selected projects received throughout their FERC process.
Constitution Pipeline which was a major point of contention last year provides a benchmark for opposition activity, some of which most likely contributed to the project’s indefinite delay. Of course, looking at the above shows PennEast has dwarfed highs previously hit by Constitution, while projects like Atlantic Sunrise and Nexus are on par with Constitution’s previous levels.
Beyond FERC comments we can also trace the path of these projects through the US economic landscape. The map below shows the major greenfield projects overlaid with household median income data by county, according to 2014 census data. The color gradient of each county represents that individual county’s household income as a percent of US average median income.
This map does not take into account population and cost of living adjustments, which are important factors to be considered, but it still shows areas where projects interact with more affluent communities. Money not only brings additional political influence, but also provides people with the time and means to pursue causes, in this case environmental and anti-hydrocarbon causes.
All of these midstream risks are coming at a crucial time for the US natural gas industry. Incremental demand has begun to materialize: Cheniere’s Sabine Pass has begun operations on its second train bringing its liquefaction capacity up to 1.2 Bcf/d, power burn has hit record levels, and exports to Mexico have risen to more than 3 Bcf/d. With demand expected to grow and the Northeast set to remain constrained due to project delays, how will the market find a balance? What areas will grow production to meet demand and what prices at Henry Hub prices are needed to incentivize that production? See our upcoming Upstream Outlook and Northeast Gas Quarterly for these answers and more. Also, we look forward to seeing you at our 2nd annual What Lies Ahead Conference in early 2017.