WolfeNotes.com

Perverse Incentives to Climate Policy, High Capital Cost Death Spiral, Stranded Assets

I was just reading all the public comments on the Energy Master Plan Update that Christie BPU totally ignored in the Update, and came across an interesting point about how the fundamental economics of gas pipelines work at cross purposes with and undermine both sane economics and climate and energy policy.

(the huge climate footprint of gas is beyond the scope of this economic oriented note).

I call the dynamic an economic death spiral.

NJ dealt with exactly the same economic and environmental dynamics during the debate on garbage incinerators.

In a nutshell, to finance the high capital costs and risks of garbage incinerators and assure that they would operate cost effectively, a fixed large daily volumes of garbage had to be guaranteed to be delivered to the plant by “put or pay” contracts and DEP regulations known as “waste flow”.

These daily waste delivery guarantees resulted in perverse incentives that directly undermined more environmentally sound efforts to reduce and recycle waste. We called it the need to feed the beast.

Then the fatal blow was struck: after the project financing and contracts were executed, the US Supreme Court struck down “waste flow” laws, so cheaper disposal alternatives from nearby Pennsylvania landfills emerged.

At the same time, lower cost recycling increased.

The effect of cheaper alternatives created what was called “leakage”, where waste that was planned to go the incinerator found cheaper alternatives.

This diversion of waste flow increased the effective cost per ton at the incinerator, which provide additional economic incentive to divert even more waste to alternative disposal and recycling alternatives, resulting in uneconomic incinerators and stranded assets the public was forced to pay for.

The death spiral.

Turns out that gas pipelines have exactly the same death spiral economics – as EDF warned the BPU:

Do pipeline opponents really think corporations or governments are going to give them a heads up?

Opponents focus on local governments while ignoring State permits

[Update below – reply from CAPP]

For months now, I have been writing about and talking to PennEast pipeline opponents, urging them to get to work NOW, BEFORE PennEast submits permit applications to the NJ DEP.

The reasons for that are twofold:

First, by acting right now, opponents can get out in front and define the overall expectations, the applicable regulatory requirements, a set of technical issues, methodologies, and requirements they think the pipeline must address.

This is especially critical in these pipeline reviews, because environmentalists must force DEP to conduct a more thorough review and enforce water quality standards in land use programs, something that DEP has not done in the past.

Getting active now also generates technical documents and information that is very useful and that can drive informed public criticism and fuel the public campaigns to target pressure on DEP. Keep those OPRA’s going!

There are no secret regulatory kill pills – don’t think Pilgrim’s lawyers don’t know all the angles and that you’ll surprise them at the 12th hour. No way.

Secondly, the public portion of the permit process is a total sham.

By the time a draft permit is “public noticed” and distributed for public review and comment, the deal is done.

The public comment and public hearing process on a draft permit is a sham – a dog and pony show.

Once DEP issues a draft permit, they are pretty much locked in – only minor changes can be made at the margins – if only to save DEP’s face. Like any bureaucracy, they are loath to admit error and listen to the public. There are also legal issues involved regarding how far DEP can go with respect to making changes in response to public comment before having to withdraw the draft permit and start all over.

Besides, at that point, you are stuck with a final permit and pipeline – not a denial.

The Pre-Appplcation Process is Key

In fact, the overall framework, the outcome expectations (YES, MAYBE, or NO), and the applicable regulatory requirements and technical issues are all decided during the pre-application phase!!

DEP holds private meetings with a permit applicant called “pre-application meetings”. The public is excluded from these critical meetings.

DEP has tipped their hand about all that pre-application meeting stuff in the FERC review process, where meetings between DEP and PE on DEP permit issues are revealed.

I thought I made this pre-application abuse clear during the Pinelands pipeline debate.  

In a post mortem praising activist, I wrote:

VI)  Improving the decision making process 

There were several problems revealed during this debate – here are some of the key flaws that must be fixed:

1) the pre-application and review process suggests agency capture – far more transparency and public participation are required for major projects;

2) the Commission relied far too heavily on information submitted by the applicant and lacked independent science and technical review

[NJ Natural Gas also abused the Pinelands pre-application process.]

The South Jersey Gas pipeline project began pre-application meetings around April 2012 and had been before the Pinelands Commission staff for 15 MONTHS before any public criticism was mounted in June/July 2013.

This is exactly the abuse I’ve been trying very hard to avoid with the PennEast pipeline.

So, my head exploded just exploded when I read this, from the Pilgrim pipeline coalition:

Did the CAPP folks really think Pilgrim corporate people or DEC were going to give them a heads up?

Tell them: hey guys, we’re going to submit our permits, so you can begin your public campaign attacking them now!

I realize that these regulatory issues are complex – but ENGO’s have professional staff, don’t they?

They surely have learned nothing and continue to make big mistakes.

It is getting very hard to take.

[Update – CAPP webmaster Joe Testa just sent me this email because he was unable to comment on the post. I share it and my reply for readers. Joe wrote:

I am sorry that your head has unnecessarily exploded when you read about CAPP’s response to the Pilgrim Pipeline filing in New York.

In brief: duh, no, the CAPP folks were not expecting a heads up from Pilgrim or DEC before starting a public campaign attacking them.  In case you hadn’t been watching …CAPP activists have been actually been working on a public campaign and been busy engaging local public officials to join in the long battle against the pipeline.  The 59 towns along the pipeline route (and nearby) did not spontaneously, independently decide over the past year or so that the pipeline would be a bad thing … they were pushed and prodded by CAPP actiivsts, who have privately worked with local officials and engaged in public demonstrations of opposition.

This bit about the ‘tell us 3 months later’ is just the last chapter of the saga.  For you to imply that CAPP has been waiting in Sleepy Hollow, waiting for the good folks at DEC & Pilgrim to wake us out of hibernation, is just flat-out wrong.

Joe Testa
CAPP Webmaster

Gee, I wonder why CAPP’s own post complained – in the headline – about learning of the permit submission 3 months after it occurred. That kind of proves my point, no? i.e. that they are not involved in the NY DEC pre-application process.

My reply:

That’s great Joe – but you’ve confirmed my criticism.

I’ve been very critical of the activists’ focus on local bullshit while they ignore they only state regulatory power that can kill the pipeline.

[Update: 11/23/15 – my smart readers informed me that the Bergen Record article I criticize below was generated by a recent League of Municipalities conference panel.

Here is the League’s analysis of the regulatory issues the panel discussed.

The League made one serious error by claiming that DEP environmental review of gas pipelines is preempted by FERC.

As I’ve written numerous times now – backed up by case law and statute and EPA guidance –  the DEP is NOT preempted by the Natural Gas Act with respect to the exercise of State delegated Clean Water Act Section 401 and 404 powers or Coastal Zone Management Act powers.

By the same token, I have muddied the waters with respect to the preemption issue on oil pipelines. I suggested that preemption of local land use powers would result from BPU petition under the MLUL. That petition process applies only to gas pipelines as public utlities, it does NOT apply to oil pipelines.

However, it is likely that oil pipelines have eminent domain powers and preempt local land use review powers under other statutes and Court decisions, as discussed in the Leagues’s analysis.

Regardless, I find it remarkable that the League of Municipalities is better informed and BETTER FOCUSED than NJ environmental groups BY CALLING ON DEP TO CONDUCT STRICT ENVIRONMENTAL REVIEWS. ~~~ end update]

When environmental groups began their campaign against the Keystone XL pipeline, they did not expect the Mayor and Town Council of Fort Peck Montana to pass a local buffer ordinance to protect the Missouri River from the pipeline and thereby kill it.

[In case it is not obvious and clear – which it is not to a reader who just sent me an email – I am RIDICULING the notion of expecting a town in Montana to use a buffer ordinance to kill KXL. That does NOT mean I oppose a Town in Montana and the people living there from doing events and activism opposing the KXL. But I would urge them to focus their political energies on President Obama.]

Similarly, although the KXL required approval by the US State Department, pipeline opponents didn’t primarily focus on lobbying the Secretary of State or hold protests and get arrested at the State Department.

They targeted President Obama and held protests at the White House.

When Shell Oil announced plans to drill for oil in the arctic, environmentalists did not expect towns in Alaska to pass local ordinances to block the drilling.

While environmental groups did engage obscure permit requirements – such as  EPA air permits and USFWS drilling restrictions, the public campaign, protests, and the media all focused on President Obama.

Closer to home, when NY anti-fracking activists challenged fracking, they targeted Governor Cuomo.

They won. Cuomo issued a moratorium

For the same reason, off shore LNG opponents focused on Governors Cuomo and Christie’s regulatory power to veto the project.

They won. Cuomo vetoed the project (even Gov. Christie vetoed the prior proposed project, before he was running for President).

So why on earth are NJ oil and gas pipeline opponents and the press ignoring these huge wins and totally ignoring the correct target who has the political and regulatory power to kill the various pipelines?

[If the reader that just sent me that email needs a translation: this means mounting a public campaign targeting Governor’s Cuomo and Christie to use their Clean Water Act powers to deny State DEC and DEP permits, OK?]

In sharp contrast, their NY State colleagues get it right.

Why are they instead focusing all their resources, campaigning and organizing efforts on local Resolutions, local ordinances, symbolic political stunts like Legislative Resolutions, opinion polls, jobs impact studies, and FERC reviews under NEPA?

Today’s Bergen Record story is another perfect example of that total failure:

• Mahwah planners meeting to examine whether township can regulate oil pipelines

I found this particularly galling:

It’s a question about the possible extent of municipal power that appears untested in New Jersey — and one that activists say is crucial to protecting watersheds that supply millions of state residents.

The extent of my injuries if I jump head first off my roof onto the pavement is an untested question too.

[NJ is not Pennsylvania – we have no Constitutional Right to a healthy environment. The PA Supreme Court decision overruling Act 13 preemption in favor of home rule regulation fracking won’t work here. The NJ MLUL expressly provides for “utility” preemption of local power via petition and BPU routinely grants preemption petitions. Linear utility projects are exempt from the Highlands Act, but not DEP regulation.]

The legal responsibility to protect the water supply for people of NJ rests with the NJ DEP, pursuant to state and federal laws. Local governments have very little responsibility or legal power in this regard.

And just who are these “activists” who say this is a crucial issue? Whoever they are, they don’t know what they are talking about.

The reporter – in perhaps the biggest buried lead ever – tangentially refers to some of the real issues at play, but fails to focus on “the decider” or even mention the most crucial tool to kill the pipeline.

After emphasizing local controls, way down towards the end of the story, we finally read this:

However, under state law, an interstate oil pipeline — unlike a natural gas pipeline — would be subject to full environmental review including wetland permits, Highlands approval and Flood Area Hazard Control rules.

On top of burying the lead and real story, the reporter got it only one quarter right overall, and made a crucial error with respect to gas pipelines.

Yes, oil pipelines are subject to environmental review and State permits.

[NY has an environmental impact statement review law called SEQRA – NJ does NOT. So it is not accurate for the story to state that the pipeline “would be subject to full environmental review”. That distinction is as important as oil v. gas and interstate v. intrastate and State v. local tactics.]

But the story left out the most important State regulatory power under the Clean Water Act and the fact that the NJ reservoirs and waters of the Highlands Preservation Area are all “Category One” (C1) waters protected by federal Clean Water Act based NJ State Surface Water Quality Standards (SWQS) from “any measurable or calculable change in existing water quality” (physical, chemical and biological characteristics). Enforcement of those SWQS could kill the pipeline. As I’ve written, Flood Hazard rules can not.

and there are no regulatory teeth in EPA Sole Source aquifer designation.]

The story got it flat out wrong with respect to natural gas pipelines.

Natural gas pipelines are subject to review by FERC under federal law and local ordinances are preempted.

But the State DEP has power to kill a FERC regulated interstate natural gas pipeline under Section 401 of the Clean Water Act that is not preempted.

I’ve been writing about this for months, so it is absurd that many of the NJ environmental groups opposing pipelines apparently still don’t get it and keep getting it wrong.

This is a major failure on their part and it is becoming intolerable.

Finally, to top it all off, the story closes with reporting this major flaw in pipeline regulation, which is attributed to Inside Climate News:

But the anti-pipeline group’s website cites an Inside Climate News finding that 135 inspectors oversee 2.6 million miles of pipelines, and only one fifth of that length has been inspected in the past eight years.

That really irks me because my organization, PEER, was the group that filed the FOIA and first disclosed those facts and broke that story, see:

FEDERAL SAFETY AGENCY PLAYS PIPELINE RUPTURE ROULETTE

Hundreds of Spills Draw No Inspection; 2 Million Pipeline Miles Remain Uninspected

[Update 11/23/15 – I just tracked down the source of the mistake. It rests with the Bergen Record reporter or editors, because the Inside Climate News story correctly attributed our work as follows:

According to an analysis of inspection records by the nonprofit Public Employees for Environmental Responsibility (PEER), only a fifth of the nation’s 2.6 million miles of pipeline have been inspected by PHMSA or its state partners since 2006. PEER obtained the records through the Freedom of Information Act.  ~~~ end update]

It’s bad enough that the “activists” and the press get the regulatory issues and political targets all wrong, but then they cite our work without attribution.

Wow.

[PS- this has nothing to do with a small D democratic “grassroots activists strategy” versus a top down, Trenton based, elite professional, or insider lobbyist strategy.

Grassroots opposition to pipelines is necessary – but activists need to select the proper target: both political and regulatory.

It also has nothing to do with trying to limit and narrow the focus of activists to just DEP or water issues.

Again, there are multiple good reasons for opposing pipelines.

But regardless of the reason why people oppose a pipeline, they should be focused on the best tactics to KILL THE PIPELINE.

I’ve been doing this stuff for 30 years – probably longer than the lives of many of the well meaning but misguided activist that seem to be driving the news coverage.

pps – What is the true objective of the activists? To win? Or to lose and build on resentment for some larger battle?

To win? Or to canvass, organize, and fundraise?

To win? Or to cut a deal that avoids preserved lands, maximizes co-location and provides a huge pot of mitigation money?

Does the organizing model of these activists seek to build power by a win (i.e. killing the pipeline) or by a loss, i.e. reaping the anger of those who are pissed off after the pipeline is approved?

ppps – I just got a question from a Pinelands pipeline activist – both those are intrastate pipelines that need Pinelands Commission approvals.

Tripping the Terror Surveillance Network?

Or Andy of Mayberry Just Looking Out For Me?

Preface

Behind Winston’s back, the voice from the telescreen was still babbling away about pig iron and the over-fulfillment of the Ninth Three Year Plan. The telescreen received and transmitted simultaneously. Any sound that Winston made, above the level of a very low whisper, would be picked up by it; moreover, so long as he remained within the field of vision which the metal plaque commanded, he could be seen as well as heard. There was of course no way of knowing whether you were being watched at any given moment. How often, or on what systems, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time. But at any rate, they could plug in your wire whenever they wanted to.  You had to live – did live, from habit that became instinct – in the assumption that every sound you made was overheard, and except in darkness, every movement scrutinized.

(1984 – George Orwell, p. 6-7)

Our Story

The story you are about to read is true – no names have been changed to protect the innocent.

It is unlikely that the true events in this story are random and unrelated. And even if they are, my point is made.

It all begins on Wednesday night, when I was reading an essay Learning How Not To Rule the World, and noted a reference to the classic movie The Battle of Algiers. (the website on which I was reading that essay runs a proud banner: “The only news organization in the US to be labeled a threat by the Department of Homeland Security”).

Given that I had never seen the movie, I Googled it and watched and enjoyed it.

One of the next videos in the Google que caught my eye, a CIA history of the Cuban Revolution – so I watched that too and learned about some Cuban history and CIA propaganda.

No big deal – or was it?

Fast forward to this morning (Friday).

I had a 9:30 am meeting at DEP in Trenton and was running late, so, to save time, I took the dog for a walk by driving to the park we usually walk to.

When I got back home to drop the dog off before getting the train to Trenton, he wouldn’t get out of the car. Curiously, for the last few weeks, I’ve noticed that he likes to stay in the car as his “den”.

So, I let him stay put and drove to the train station. It was in the high 40’s but just in case it warmed up, I found a parking space in the shade and cracked the windows and opened the sunroof so the car wouldn’t get too warm and hopped the 8:39 to Trenton.

I got back home a few hours later and the phone was ringing.

It was the Bordentown Police. Uh oh. What did I do now? Is it that Mount Holly parking ticket I haven’t  paid yet? Did someone complain about the dog crapping in the woods?

The police said they had gotten a call from the NJ Transit Police, who noted my car with the dog in it and wondered where I was. The cop said the police had come to my house this morning to check up on me and see if I was all right, but no one was home. Cop asked if I was OK.

I told him I was fine and thought nothing of it.

After I hung up, I noticed a message on my cell and listened: it was from the State Police – asking me to call them immediately.

Now I began to think something was not right: the NJ Transit police, local police, and State police all involved? They come to my house? Call me twice?

And all they are concerned about is if I’m OK?

I wondered just how they even noted a “problem” with my car in the NJ Transit parking lot at the Bordentown train station.

Do police typically track down, call, and visit the homes of owners of “suspicious” cars?

The dog sleeps in the back of my hatchback and is not visible from the street. There are maybe 75 or more cars in that parking lot.

What was so special or suspicious about my car that NJ Transit police noticed?

My mind raced.

So I called the State Police – the Sergeant who had called me wasn’t in, so I left my name and number. Never heard back from him.

Suddenly it occurred to me what might have happened –

Given the Paris attack and threats on NY, the NJ Transit cops could have been on heightened security. If so,  it could have been three possibilities:

1) I’ve been stopped by Homeland Security and local police when driving – several times – and not for traffic violations, but to ask me detailed questions about what I was doing and where I was going. Those stops virtually confirmed that I am on some kind of domestic watch list or database and likely was screened by digital license plate scan technology.

The NJ Transit police could have scanned my license plate and gotten a “hit” from whatever database I am in.

The origin of all this was way back in 2008, when I was photographing south jersey refineries and chemical plants just off Rt. 130.

Because those facilities are “critical infrastructure” – I triggered some kind of Homeland Security, FBI, Joint Terror Taskforce and regional Fusion Center episode.

As I was taking photos, the police arrived and I was detained at the scene and later brought to Paulsboro police station for questioning (police also took my photograph, but I was not fingerprinted).

A few days later, the FBI, Homeland Security and the Hunterdon County Prosecutor’s Office investigators came to my home to conduct an investigation.

2) In the alternate, my internet viewing of The Battle of Algiers and the Cuban Revolution could have triggered some kind of terrorist surveillance alerts.

Do the internet surveillance cops think only terrorists are interested in history?

3)  Or, it could have been both the prior watch list, license plate scan, AND internet monitoring.

The fact that I even imagine such things to be possible is perhaps the strongest evidence that we are living in a police state.

The world Orwell imagined is here.

And Big Brother has far more powerful tools than the telescreen.

[End Notes:

1. I bought my Riverline ticket with a credit card.

Did NJ Transit Police have access to my credit card records and note that I was riding their system?

2. Did the State Police call me so that they could GPS my location by use of my cell phone?

3. I left my cell phone home –

Did State Police find it suspicious that my cell phone was at home, my car was at the train station, and I had purchased a train ticket? Did they think it odd that someone would travel on a train without their cell phone?

4. NJ Transit trains and stations have video surveillance – Was I tracked by digital facial recognition?

5. I got a email on Thursday from a friend at Yale who wrote that she was too busy preparing for Paris Cop21.

Did the internet spies use key word monitoring for sensitive phrases like “Paris”?

6. Did this 48 hour pattern of behavior trigger some kind of terrorist profile?

This is the rabbit hole we’ve gone down.

This is the kind of thinking one does when one knows that Big Brother has total information awareness.

Or maybe Big Brother was concerned about this “scary” photo printed in the newspaper story on the Salem nuclear permit – I got that tee shirt from American Indian Movement folks – if you can’t see it, it reads: “Homeland Security – Fighting Terrorism Since 1492”

Flood Hazard Rule Would Increase Allowable Sensitive Buffer Disturbance Limits

Tennessee Gas Pipeline (8/14/11)

I’m surprised that given all the controversy over numerous gas and oil pipeline projects in New Jersey, that no on seems to have picked up on the fact that the Christie DEP’s proposed new Flood Hazard Act “stream encroachment” regulations would eliminate the current cap on “riparian zone” disturbance and increase allowable disturbance limits.

That outrageous rollback is not mentioned in the Legislative Veto Resolution either.

Existing Limits On Disturbance of the Buffer of a C1 Water by Pipelines

Specifically, under current stream encroachment permit rules, a pipeline crossing a category one stream with a 300 foot “riparian zone” would be allowed – for a “temporary disturbance only” – a maximum of 12,000 square feet of disturbance of vegetation (see Table C in this post).

That sets a cap on allowable disturbance. (exceedence triggers a 2/1 compensation requirement).

Proposed New Disturbance Limits

In contrast, under the proposed new Flood Hazard Act stream encroachment permit rules, the current 12,000 square foot maximum disturbance is replaced by a new standard, which would allow disturbance of 30 square feet per linear foot of pipeline. (see Table 11.2 in this post)

That proposed standard is a RATE, not a total limit on disturbance. (That appears to eliminate or reduce compensation requirements , obviously dependent on the site specific stream crossing)

Therefore, for example, a pipeline could follow a C1 stream for 3 miles, and be allowed to disturb a whopping 475,200 square feet! That’s 10.9 acres.

(5,280 feet/mile) X (3 miles) = 15, 840 linear feet X (30 square feet/linear foot) =  475,200 square feet

475,200 square feet)/43,560 square feet/acre – 10.91 acres

In addition to that, DEP would allow an additional 6,000 square feet of disturbance for access to the project, per crossing.

I’ve been told that the PennEast pipeline would cross 31 Category One streams (including tributaries) – so that means that for access alone, DEP would allow 186,000 square feet of disturbance (4.27 acres).

On top of all that, DEP proposes NO LIMITS at all for “reconstruction, upgrade, expansion, or maintenance” of an existing pipeline.

Finally, the concept of “temporary disturbance only” is eliminated, thus implying that DEP is allowing permanent disturbance.

Just when DEP should be developing methodologies to strictly enforce current stream buffer disturbance standards to protect NJ’s water quality from pipelines, the Christie DEP is proposing to repeal the Category One “Special Water Resource Protection Area” buffer rules, eliminate the cap on total disturbance under current stream encroachment rules, and increase allowable disturbance.

These rules could have been written by the pipeline lawyers – and very well may have been.

Curiously, the DEP “by invitation only” Stakeholder process webpage seems to omit the invited stakeholders for this rule.

[End note: for folks who like to understand the technical issues, the applicable regulations for a utility crossing are found at NJAC 7:13-11.9 (starting on page 126). Note that there is no requirement to comply with the anti degradation policy, surface water quality standards, or other restrictions on disturbance in the storm water rules SWRPA @ NJAC 7:8-5.5(h). DEP proposed to repeal those strong SWRPA which could authorize denial of a permit.

Also see NJ DEP’s Technical Manual – it provides maps of riparian zones and flood hazard areas and illustrations of how the rules apply to disturbance and stream crossings. It also provides revealing admissions that the stream encroachment rules are less protective than the C1 SWRPA buffer rules:

Note that any feature that meets the definition of a “swale” under the Freshwater Wetlands Protection Act rules at N.J.A.C. 7:7A- 1.4 is not regulated under the Flood Hazard Area Control Act rules and therefore has neither a flood hazard area nor a riparian zone. This is true because a swale, by definition, drains less than 50 acres and has no bed and banks, and therefore meets the requirements for a non-regulated water under N.J.A.C. 7:13-2.2(a)3.

Tennessee Gas Pipeline (11/2/10)