July 04–Last July, Allen Fore made a name for Kinder Morgan at the Harrison County Fair in the tiny Ohio town of Cadiz, a rural community atop the burgeoning Marcellus shale fields that span the Appalachian Mountains.
The Houston pipeline company’s vice president of public affairs, attending the annual livestock auction, bid $4,700 on champion ducks, chickens and rabbits to support the schoolchildren who raised them. It was part of the company’s years-long effort to generate support for its $540 million Utopia pipeline by holding dozens of community meetings and otherwise courting favor along a 215-mile path between Cadiz and the Michigan border.
The charm offensive is part of the new reality for the nation’s largest pipeline companies, no longer able to simply push through projects as rising concerns about climate change, pollution and damage to natural resources prompt unprecedented scrutiny and opposition from environmentalists, landowners and political leaders. In the wake of several high-profile controversies that have collectively cost them billions of dollars, Kinder Morgan and other industry giants are amplifying efforts to foster public support and prevent legal challenges that could force costly delays or worse — project abandonment.
“It’s really a different ballgame,” Fore said. “You cannot take anything for granted.”
Kinder Morgan recently learned that the hard way. Despite the support of Prime Minister Justin Trudeau, Kinder Morgan last month gave up on the expansion of its Trans Mountain pipeline, choosing to sell the project to the Canadian government for $3.5 billion rather than continue to fight environmentalists, indigenous nations and British Columbia’s provincial government. It was the latest major project to face political or legal challenges amid a surge in North American oil and gas production driving demand for more pipelines.
That incident demonstrated how much the atmosphere has changed in the course of a decade. Ten years ago, Kinder Morgan was nearing completion of its 1,700-mile Rockies Express pipeline between Colorado and Ohio, a project the Federal Energy Regulatory Commission dubbed the “king of pipelines.” It began operating in 2009 as one of the largest natural gas lines in the country.
“We had the support of every governor along the route,” Fore recalled. “Will there ever be another one like that? I don’t know.”
Much of the recent opposition stems from environmentalists who have targeted the transportation of oil and natural gas as part of a broader effort to curtail production of fossil fuels, blamed for accelerating global warming. That movement, powered by social media and targeted protests, has politicized the building process and heightened concerns of other interests, particularly landowners who have shown increasing willingness to challenge companies’ power of eminent domain to take land for projects.
As a result, industry officials and analysts say, many pipeline operators are meeting with local officials, landowners and residents earlier and more consistently and mapping routes aimed at avoiding political or regulatory pushback.
“We are operating in a world today where pipeline projects are more susceptible to scrutiny than they ever have been,” said Robin Rorick, director of midstream and industry operations at the American Petroleum Institute, a trade group. “The industry is trying to respond in kind.”
Regulatory disputes have heightened the industry’s sense of uncertainty. While pipelines generally come under federal jurisdiction, state, county and municipal officials in recent years have found ways to delay or even kill projects, a development that has forced companies to pay closer attention to local politics.
In 2016, for example, New York Gov. Andrew Cuomo’s administration cited environmental concerns in denying a water permit for the 125-mile Constitution pipeline designed to deliver natural gas from Pennsylvania’s Marcellus shale fields to New York. Both energy executives and environmental activists saw the decision as a harbinger of greater state involvement in pipeline regulation.
Around that time, Kinder Morgan suspended plans to build its $1 billion Palmetto petroleum pipeline between South Carolina and Florida when officials in Georgia temporarily restricted the company’s use eminent domain in the wake of opposition to the project from landowners and environmentalists.
Protests and regulatory back-and-forth can cost companies millions, if not billions, of dollars. Some operators, including Kinder Morgan and Energy Transfer Partners of Dallas, have tweaked disclaimers in securities filings to state more explicitly the risk of delays and cost overruns caused by public opposition
“Reliability in permitting is critical,” Fore said. “If you have a changing regulatory scheme while you’re trying to build the project and you based cost projections on a certain schedule, that can be very problematic.”
In the face of that uncertainty, pipeline companies are taking a barnstorming approach to securing proposed routes for construction. Some have become more proactive in explaining the benefits of their projects, crafting information campaigns meant to counter those designed by environmental groups.
Last October, Virginia’sDominion Energy inadvertently released an internal presentation explaining the “campaign to elect a pipeline” developed for its controversial Atlantic Coast Pipeline, a project to transport natural gas from West Virginia to Virginia and North Carolina. The presentation noted that “historically non-political processes are now political” and stressed the importance of getting ahead of potential opposition.
“Below the radar is no longer an option,” the presentation said.
At the time, the company had amassed a “supporter database” of more than 23,000 people, sent more than 9,000 cards and letters to elected officials and FERC regulators and held 14 “tele-town halls” to speak remotely with landowners and other interested parties.
“Companies are working more with on-the-ground outreach,” said Bob Comer, a Denver attorney who has worked on issues involving the Dakota Access pipeline, which was delayed for months by environmental and local opposition in North Dakota. “They’re trying to message better and more robustly with communities.”
In Ohio, where Kinder Morgan faced challenges regarding eminent domain, it hired more community relations experts familiar with local politics to discuss the project with officials and landowners in each of the counties along the Utopia route. They held numerous town meetings to address concerns and questions.
The company’s public affairs team took a similar approach to its $1.75 billion Gulf Coast Express pipeline between the Permian Basin and the Corpus Christi area, spending two weeks visiting each county along the 500-mile route to meet with officials and answer questions about the project. Construction began in May.
“Maybe 10 or even five years ago, it was sufficient to say we need a pipeline to move product to market,” Fore said. “Now, you need to make sure the folks have an understanding of why the project is important not from our perspective, but from their perspective.”
Many industry experts point to the $8 billion Keystone XL pipeline as the first major example of the broader challenge facing oil and gas transport. The project, first proposed by TransCanada in 2008 to transport oil from Alberta to Nebraska, ignited years of intense protests by environmentalists and landowners. The Obama administration blocked the project in 2015, a decision the Trump administration reversed last year.
The Dakota Access pipeline, operated by Energy Transfer Partners, became the next big project to attract intense opposition from environmentalists and Native American tribes along the route. That project, which began operating last year, faced numerous lawsuits during construction and is still subject to pending legal disputes.
TransCanada and Energy Transfer Partners declined requests for comment.
“Pipelines seem to be taking longer and longer,” said Kevin Birn, vice president of North American crude oil markets for research firm IHS Markit. “There is greater risk, not necessarily with the completion itself, but with the time and capital required to do it.”
Kinder Morgan has sought more creative ways to bolster support for its projects alongside its traditional outreach. Seeking to run the Utopia pipeline through 14 of Ohio’s 88 counties, the company recognized the risk of failing to connect with local residents and community leaders.
On the recommendation of local officials, Fore, the vice president of public affairs, represented the company at the county fair in Bowling Green, Ohio, in August 2016, buying the grand champion lamb and goat. He then visited the Wayne County Fair, the Harrison County Fair, the Richland County Fair and Ashland County Fair, bidding on livestock at each auction.
The pipeline, which transports ethane for plastics production, began operating in January.
“You have to put in that upfront time,” Fore said. “If you don’t, you do so at your own peril.”
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