Beyond the Pipeline Wars: Reforming Environmental Assessment of Energy Transport Infrastructure

Abstract

In recent years the role of transport infrastructure in energy markets has become a flashpoint for legal conflict. On one hand, the world is experiencing an unprecedented build-out all kinds of energy transport: oil and gas pipelines, liquefied natural gas projects, power transmission, and port facilities for coal and oil. On the other hand, environmental advocates have increasingly insisted that pipelines and other transport projects should not be built if they would encourage fossil fuel production in markets “upstream” and fossil fuel consumption in markets “downstream” of these projects.

Governments have struggled with how to respond. President Obama famously promised to assess the upstream emissions from the Keystone XL pipeline but the resulting analysis was criticized by all sides as confusing and incomplete. In the meantime, most other energy transport facilities, including other oil and gas pipelines, were being approved without any upstream or downstream analysis over the objection of environmental groups. The federal agencies remain split between infrastructure-approving agencies which are resisting wider reviews and the Environmental Protection Agency, which is demanding them. And the fight has spread to other countries, where the Keystone XL precedent is now frequently cited as a model by opponents of oil and gas pipelines.

This Article makes the counterintuitive case that studying how energy transport projects might affect upstream and downstream markets is not helpful. First, the marginal impact of a single energy transport project in ever-changing global energy markets is so uncertain that it provides no useful information to the agencies that decide on these projects. Second, to approve or reject a pipeline because it could encourage international energy markets is to assert the power and the authority to control energy markets in other countries—an undiplomatic encroachment on the authority of those countries to balance environmental and economic concerns in regulating their own energy markets.

Keywords: pipelines, liquefied natural gas, climate change, greenhouse gases, environmental assessment, energy transport, oil markets

JEL Classification: F18, F64, K32, N50, O13, O44, P48, Q56, Q47, Q48, L71