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July 15 — More than 700 miles of new pipelines in Texas are being built to ship more of the state's natural gas to Mexico, raising concerns from U.S. environmentalists who want to see low-carbon renewable energy grow instead.
Exports of gas to Mexico are expected to grow dramatically by the end of the decade. While the U.S. has a long history of pipeline exports to Mexico, the explosion of new pipeline construction is raising environmental concerns about wild landscapes, an expected expansion of hydraulic fracturing, and greater use of natural gas instead of other sources of energy such as solar and wind.
But Texas, with bountiful supplies as a result of the shale boom, sees opportunity for exports south of the border.
“Having an opportunity like the Mexican market does help Texas producers and the industry, especially in a time when prices are lower here and demand is lower,” said Brian Kalinec, an independent geophysicist in Houston. “You are basically filling in demand if an opportunity exists and I think that any Texas producer close to the border would consider these possibilities.”
Exports from Texas to Mexico are expected to increase from an average of 2.1 billion cubic feet a day to 3.4 billion cubic feet a day by the end of 2020, the Texas Railroad Commission said in a report last year.
The increase in pipeline projects is driven by Mexico’s desire to replace fuel oil for power production as well as the country’s demand for a low-cost fuel for industrial use.
While there are shale plays in Mexico, it will be some time before the infrastructure is built up to where the country can significantly increase domestic production, Jose Valera, a partner at Mayer Brown, told Bloomberg BNA. In the meantime Mexico is focusing on connecting itself to the U.S. supply.
Environmentalists say their main concern with increased pipelines from Texas to Mexico is that they will result in increased natural gas production.
“We are really concerned about the increase of hydraulic fracturing,” Nathan Matthews, staff attorney for the Sierra Club, told Bloomberg BNA.
The environmental impact of hydraulic fracturing is a greater concern to environmentalists than the pipelines themselves, Matthews said. With pipelines, the risks are from sediment runoff into water from pipeline easements and methane emissions from compression stations.
The Sierra Club and other environmental advocacy groups would like to see new power generation coming from renewable sources of energy, such as wind and solar. More pipeline construction means it will be less likely that additional renewables will be included, Matthews said.
But environmentalists also raise objections to the routing of some of the pipelines, particularly the Comanche Trail pipeline and the Trans-Pecos pipeline, in West Texas.
The Trans-Pecos is a 143-mile pipeline, owned by Trans-Pecos Pipeline LLC, a subsidiary of Energy Transfer Partners, L.P., that will transport natural gas from a hub on the pipeline grid in West Texas into Manuel Ojinaga, Chihuahua, Mexico. It is expected to be in service by March 2017.
U.S. environmentalists point out that the pipelines will pass through undeveloped areas in the Big Bend region of Texas. The desert, mountainous area is so remote that it is known as one of the best places in the country for stargazing.
The proposed routes will cross private land and do not go through the region's Big Bend National Park and Davis Mountain State Park.
“We’re not necessarily against the pipeline itself, but rather the proposed route,” Coyne Gibson, a volunteer with the Big Bend Conservation Alliance, told Bloomberg BNA. “Much of that land is greenfield land, which means there’s not existing pipeline infrastructure there.”
Unlike farms and fields, desert land will look different once the pipeline is installed, according to Gibson. Grass and vegetation won’t just grow back. Local environmentalists also worry that the project will attract more industrial development to a region that is still wild.
Environmental groups also object to the way pipelines in Texas are regulated.
The U.S. Federal Energy Regulatory Commission regulates interstate pipelines and international crossings. These projects go through an environmental assessment process before a permit is issued. If FERC feels that there are significant environmental issues at stake, it will conduct an in-depth environmental impact study.
In the case of the Trans-Pecos project, FERC is concerned only with a 1,093-foot portion of the pipeline over the border, the Presidio Crossing Project. The rest of the pipeline is designated as intrastate and under the jurisdiction of the Texas Railroad Commission, the agency that regulates oil and gas operations and the more than 400,000 miles of gas pipelines in the state.
Classified as gas utilities, the intrastate pipelines are subject to the state gas utilities code and to both state and federal pipelines safety rules, which are enforced by the Railroad Commission, James Mann, an attorney with Duggins, Wren, Mann & Romero LLP who represents major intrastate natural gas pipeline companies in Texas, told Bloomberg BNA.
Matthews, the Sierra Club attorney, said the FERC process doesn't give adequate environmental oversight, but at least provides some oversight.
Mann said such a process would take months or years.
“If federal routing procedures that are used for interstate pipelines were used for the intrastates, it would bring the oil and gas industry in Texas to a halt,” he said.
For intrastate pipelines, generally the Railroad Commission has no authority over routing. The pipeline route is determined by the pipeline’s owner or operator. Pipeline routes are negotiated among the pipelines companies, private landowners and the state, Mann said.
There is no pre-construction permit to build an intrastate pipeline, he said. There are pre-construction safety requirements, however, including a pre-construction report on the proposed route that must be filed with the Railroad Commission 30 days prior to construction.
Most intrastate pipeline operators must also file a T-4 operating permit, which gives the Railroad Commission information about a pipeline, such as what it is carrying. There are no hearings for these permits.
Environmental groups and private landowners asked FERC to assume jurisdiction of the entire Trans-Pecos project because they wanted federal regulators to conduct the environmental impact study, including a consideration of routing options.
“The pipeline owners are using loopholes in the regulation to build this pipeline,” Gibson said. “By calling the majority of the pipeline an intrastate project, they didn’t need any approval for it. There was no examination of the route. There are routes for the pipeline that we felt would have had less of an environmental impact.”
FERC declined to assume jurisdiction of the entire project and focused its study on the portion that crossed the international border. FERC approved the project May 5.
The Natural Gas Act gives FERC final jurisdiction over natural gas cross-border facilities, Tamara Young-Allen, a FERC spokeswoman, told Bloomberg BNA. The Defense and State Departments were consulted, and neither agency had objections. Project opponents, including the Sierra Club, have requested a rehearing, which is still pending.
Texas regulators always have left routing decisions up to pipeline companies and land owners, said Mann, the attorney who represents natural gas pipeline companies. Pipelines to Mexico cross private and public lands, including roads and highways.
He said environmental groups that oppose oil and gas production and want to switch entirely to renewables have decided that the best way to try to stop production is to hinder the pipelines that get oil and gas to market.
The new natural gas pipelines are not expected to meet significant environmental regulatory hurdles in Mexico, where the natural gas infrastructure system is still immature, and demand for natural gas easily outpaces supplies.
In Mexico, pipeline route concern is centered around the disruption or displacement of indigenous communities.
“The only significant objections are on indigenous informed consent procedures, which flare up every once in a while, but then die down,” said Dwight Dyer, an independent consultant on energy development in Mexico, citing recent community opposition to the Proyecto Integral Morelos pipeline, which runs close to the Popocatepetl volcano through Tlaxcala, Puebla and Morelos states.
The 2013 laws also have added the requirement for a social impact assessment, which offers a negotiated agreement on mitigating the impacts of new pipelines. More negotiating generally is required in areas with common lands, or ejidos, which are particularly prevalent in northern Mexico.
“What they typically do is invite the company that is doing the investment and make an agreement to build some infrastructure for the community to have an immediate impact,” said Pablo Zarate, an energy consultant with FTI Consulting and former senior energy official.
Currently, Mexico is able to produce 6 billion cubic feet of natural gas a day, Valera said. The U.S. overall exports about 3 billion cubic feet a day of natural gas to Mexico.
Private pipeline companies operating in Mexico are required to comply with environmental regulatory standards developed since 1995, when the government first eased some of the prohibitions on oil and gas investment for the transportation of hydrocarbons.
“The process is basically the same and it is a rigorous process,” said Francisco Salazar, who was president of the Energy Regulatory Commission, which regulates pipelines in Mexico, from 2005 to the end of 2015. “If the pipeline company finds that they are crossing through an area where they find an endangered species, they must have the approval of the environmental ministry.”
Mexican laws overhauling the energy sector, passed in 2013, included the creation of a regulator post to oversee environmental and safety issues for the energy sector, including pipelines. This new regulatory body, the National Agency for Industrial Safety and Environmental Protection, or ASEA, will replace the Environmental Ministry (Semarnat) in approving environmental permits and ensuring that the regulations are upheld.
To contact the editor responsible for this story: Larry Pearl at email@example.com
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