FUTURE-PROOFING ENERGY TRANSPORT LAW.

• Author: Klass, Alexandra B.

ABSTRACT

The U.S. energy system is critical to every aspect of the nation's economy and daily life. That energy system, in turn, is completely dependent on U.S. energy transport infrastructure--the oil pipelines, natural gas pipelines, electric transmission lines, and import and export facilities that transport and distribute the energy resources that power the country. This Article explores how the law can influence the billions of dollars in private sector energy transport investments necessary to meet current energy needs as well as respond to the significant technological, market, and policy developments in the energy sector. In doing so, it develops criteria policymakers should consider in creating laws and regulations to govern energy transport infrastructure that focus on federalism principles, flexibility in the location and amount of energy resources, and clean energy goals. It then applies these criteria to two of the nation's most pressing energy transport debates: (1) whether to transfer more siting authority for interstate electric transmission lines from the states to a federal or regional authority and (2) whether to transport new sources of North American oil primarily by an upgraded rail system or by expanded pipeline infrastructure.

INTRODUCTION

The U.S. energy system is critical to every aspect of the nation's economy and daily life. That energy system, in turn, is completely dependent on U.S. energy transport infrastructure--the oil pipelines, natural gas pipelines, electric transmission lines, and import and export facilities that allow for the transportation and distribution of the energy resources that power the country. This Article explores how the law can best influence the billions of dollars in private sector energy transport investments necessary to meet current energy needs, address the rapid technological and market shifts in the energy sector, and implement present and future clean energy goals. In other words, it considers how policymakers can attempt to "future-proof" (1) energy transport laws to deliver the growing array of present and future fossil fuel and renewable energy resources to markets and consumers in a sustainable manner.

In a time of major technological and economic change in the energy sector, it is difficult to decide what to build. Should electric utilities and other market actors pour billions of dollars into expanding the long-distance electric transmission grid to transport wind energy in the Midwest to population centers on the coasts if new industrial scale batteries or new wind turbine technology will ultimately make such long-distance infrastructure unnecessary? (2) Should the oil industry build new major interstate oil pipelines if expansion of existing interstate rail infrastructure can fill a short term need to transport increased oil production while avoiding the path-dependency that comes with new pipeline infrastructure devoted to transporting fossil fuels for another generation? (3) Should the private sector expand the natural gas pipelines network to allow electric utilities to more easily replace coal-fired electricity with cleaner-burning and now cheap natural gas? Or should it focus more heavily on investing in the infrastructure necessary to move directly to a greater reliance on utility-scale wind, solar, and hydropower energy and expand locally distributed energy in the form of increased rooftop solar coupled with battery storage?

Legal structures that help or hinder the development of energy transport infrastructure influence the answers to these questions. This is particularly true because this infrastructure spans multiple local, state, and federal jurisdictions and is regulated by a combination of local, state, and federal actors. (4) Moreover, it is almost exclusively the private sector that builds and owns the billions of dollars in infrastructure necessary to transport fuels and electric energy resources across the country from import and domestic production sites to nationwide markets and exports. (5) This stands in stark contrast to the U.S. road transportation infrastructure, which is planned, developed, and built almost exclusively by government actors. (6) Because energy transport infrastructure will last for many decades, decisions made now regarding what to build will profoundly influence the capital-intensive private investments in a wide range of fossil fuel and renewable energy resources long into the future. (7) In other words, "infrastructure is destiny." (8)

A holistic evaluation of current and developing energy transport systems and the laws that govern them is critical to a clean energy future. This is because energy transport infrastructure requires significant utilization of land-based and other physical resources to build millions of miles of pipelines and electric transmission lines, thousands or millions of charging or fueling stations, and the like. This infrastructure can become completely obsolete at best and a public health or environmental risk at worst if changing markets and technology leave it behind. (9) But it becomes very difficult to abandon such major investments in favor of new sources of energy even if technology and market development would otherwise support such a transition. (10) This raises the question of what types of laws can most effectively require or encourage the build-out of energy transport infrastructure that can meet the needs of the present but also incorporate the changing technologies, markets, and clean energy policies of the future. Policymakers, industry, and the public must make major efforts to future-proof energy transport laws to provide sufficient flexibility to accommodate changing energy development technologies and resources while attempting to achieve clean energy goals in a process that adequately weighs both national energy needs and local costs of energy infrastructure.

An assessment of existing energy transport laws also raises important federalism questions because federal law governs some forms of energy transport infrastructure--like interstate natural gas pipelines--and state law governs other forms of energy transport infrastructure--like interstate oil pipelines and interstate electric transmission lines. (11) Such distinctions profoundly impact private investment decisions not only in energy transport infrastructure, but also in the energy resources themselves, which are profitable only if they can be cost-effectively delivered to processing and distribution sites and markets.

These concerns about sunk costs, path dependency, federalism, future-proofing, and a clean energy future are coming to a head as the nation faces growing concerns regarding climate change at the same time as it has an unprecedented abundance of newly available sources of domestic oil, natural gas, wind, and solar energy. After decades of concern about growing U.S. oil imports and the high cost of natural gas, developments in hydraulic fracturing and directional drilling technologies have made massive new domestic sources of oil and gas available in Texas, Oklahoma, Pennsylvania, Ohio, and North Dakota. (12) This has resulted in a significant decline in oil imports that will continue for decades, and will result in the U.S. transitioning from a net importer of natural gas in 2013 to a net exporter as early as 2018. (13) This shift has also resulted in a precipitous drop in natural gas prices, allowing gas to displace coal as a major source of electric energy, as well as a significant drop in oil prices, which has a major effect on the vehicle and transportation sector. (14) With regard to renewable energy, the U.S. Energy Information Administration ("EIA" (15) predicts that electricity generation from renewable sources such as wind and solar energy will increase dramatically. (16) Indeed, the U.S. Department of Energy ("DOE") estimates that wind power alone could supply 20% of U.S. electricity needs by 2020 and 35% by 2050, and such percentages already exist in certain regions of the country. (17)

These new energy resources can either put the United States on a path to a greater dependence on fossil fuels, which are now available domestically at low prices, or can help the nation transition to a clean energy economy, with new sources of wind and solar energy on a scale very few would have anticipated less than a decade ago. Which path predominates depends in large part on what energy transport infrastructure the private sector invests in to deliver the growing array of fossil fuels and renewable energy resources to processing facilities and consumers. And legal frameworks governing energy transport siting have a major influence on these investment decisions. This is particularly true because this new abundance of domestic energy resources comes at a time when there is increasing public resistance by landowners, environmental advocates, and others to the expansion of new energy transport infrastructure like the Keystone XL and Dakota Access oil pipelines as well as new natural gas pipelines and interstate electric transmission lines. (18) In the face of major public opposition to new energy transport infrastructure, the role of the law in facilitating or blocking the ability to obtain siting permits and exercise eminent domain authority to build such transport infrastructure cannot be overstated.

Part I evaluates the rapidly changing nature of the U.S. energy economy as well as the development, current status, and key challenges of the U.S. energy transportation network of oil pipelines, natural gas pipelines, electric transmission lines, and related energy import and export facilities. It describes these multi-billion dollar physical networks, their current shortcomings, and their future promises and challenges. These promises and challenges include the development of new utility-scale battery technology to store electric energy, the shift from building natural gas...