Aesop’s Fable of The Ant and the Grasshopper

In a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest.

“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?”

“I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”

“Why bother about winter?” said the Grasshopper; “We have got plenty of food at present.” But the Ant went on its way and continued its toil.

When the winter came the Grasshopper had no food and found itself dying of hunger – while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew: It is best to prepare for days of need.

Children are told this story and given the moral truth that warm summer days (good times) don’t last and wise people “make hay while the sun shines.” In the longer version of the story, the starving grasshopper begs for food from the ants and is turned away.

Climate Grasshoppers

Today we are seeing climate alarmists in the role of grasshoppers. They presume future warming is certain and want to stop anyone from storing energy reserves. A post yesterday (NIMBY Wars) reported on west coast grasshoppers in Oregon and British Columbia acting against fossil fuel transport and storage. Today is a report on New England’s energy outlook facing the return of normal winters.

Dean Foreman wrote A Deeper Dive into New England’s Self-Imposed Pipeline Capacity Problem in Energy Tomorrow.  Excerpts below with my bolds.

U.S. infrastructure promises to be a top priority for the Trump administration in 2018. In his State of American Energy keynote address, API President and CEO Jack Gerard highlighted how resistance to infrastructure development has left New Englanders with some of the highest electricity costs in the nation, particularly so through extreme winters.

In December and early January, New England’s wholesale electricity prices averaged nearly three times those of equally-frigid Chicago. Over the past four years, New England’s wholesale electricity prices averaged 24 percent higher than those in Chicago and were nearly three times more volatile.

 

While price volatility provides signals that are important to the efficiency of wholesale energy markets, the disproportionate rise of the region’s winter prices stems from New York’s beggar-thy-neighbor policies, which blocked planned, much needed and federally approved new pipeline capacity. Politics and policies that accentuate high and volatile natural gas and electricity prices, not only in New York but also in New England, harm consumers and undermine regional investment, jobs and competitiveness. It is high time that New York and New England take a collective and collaborative approach to solve the problems with permitting and incentives that utilities have to contract longer-term for natural gas.

In the first week of January, contrasting headlines proclaimed natural gas got bomb-cycloned in the new year with daily New York (Transco Zone 6) prices spiking as high as $140 per million BTU (MMBtu). Yet the U.S. Energy Information Administration (EIA) reduced its 2018 price forecast to $2.88/MMBtu at Henry Hub, Louisiana. The low Henry Hub price represents a major natural gas production region and liquid trading hub. By contrast, the high New York City price reflects a major natural gas production region that could have ample low-cost natural gas, except that it is stymied by a lack of effective political and regulatory mechanisms to enable responsible resource and infrastructure development.

The rise in natural gas prices has reverberated through electricity markets. For example, the chart below compares wholesale electricity prices for December through early January between Boston and equally-frigid Chicago. Chicago is amply supplied by natural gas pipelines that flow from the U.S. Gulf Coast, Appalachia, and Rockies regions plus Canada. Based on data from Bloomberg, wholesale electricity prices between Dec. 1 and Jan. 8 averaged $31.31/MWh and had a standard deviation of more than $35/MWh. By comparison, Boston’s prices averaged $85.36/MWh with a standard deviation of $67.64/MWh over the same period. New England utilities thus paid more than twice as much for electricity and experienced about twice the price volatility.

The region’s relatively high and volatile energy prices are rooted in the inadequacy of natural gas infrastructure to meet peak seasonal demand and, to a lesser extent, the long-standing shift in market incentives toward utilities’ reliance mainly on spot markets and very short-term contracts for gas. Specifically, natural gas-fired generators set the region’s electricity price about 75 percent of the time. Gas-fired power generation in the Northeast census region rose by 53 percent between 2007 and 2017, according to the EIA short-term energy outlook. Natural gas-fired generation contributed 38.6 percent of the region’s electricity in 2017, compared with 24.3 percent in 2007, and gained market share due to its abundance, low cost and efficient and clean-burning environmental properties.

However, natural gas pipeline constraints have hampered utilization at peak times. For example, ISO New England recently highlighted that four gigawatts of natural gas-fired generation capacity – 24% of the region’s gas-fired net winter capacity – was at risk of not being able to get fuel when needed. Much of the constraint is due to New York state’s blocking the Constitution and Northern Access Pipeline projects, among others.

To compensate for New York’s un-neighborly policies, ISO New England performed triage for the past five years with its Winter Reliability Program, which has been paying as much as $32 million per year for reserves of oil and liquified natural gas (LNG) as back-up fuels. Beginning this year, ISO New England will change to a Pay for Performance plan that alters how a generation resource’s capacity payments are calculated. These costly plans might not be needed if economic rationality and the overall region’s welfare were top of the New York state of mind.

New York and New England must take a collective and collaborative approach to solve the problems with permitting and incentives that utilities have to contract longer-term for natural gas. Given policy alternatives that provide positive incentives and enable investment and infrastructure development, lower prices, and lessen price volatility, it should be a dominant strategy for the region to pursue outcomes that are less risky, better facilitate market operations and ultimately provide a win for the region’s consumers and economy.

The Bigger Picture: Energy and Human Development

At Forbes, Jude Clemente adds this perspective: More Oil And Natural Gas Invalidates ‘Keep It In The Ground’ Movement

There is a destructive “keep it in the ground” movement arising from environmental groups to block oil and natural gas development and the pipelines required to transport them. The center of this is New York and the New England states, where numerous policymakers seek to artificially constrain energy supply. Yet, despite producing none themselves, their reliance on gas electricity has surged. ISO New England now gets about 50% of its power from gas, versus 10-15% a decade ago. New York sits in the same boat: gas now generates ~45% of the state’s electricity, doubling its market share since 2005.

It’s no wonder then that blocking energy development and pipelines has established home power rates in New England and New York that are at least 50% higher than the national average. Industrial rates are more than double, and encourages companies to leave the area. This is unfortunate and illogical since U.S. natural gas prices have been at historic lows.

Policies intended to reduce oil and gas consumption are dubious: even if they work in the short-term, over time they just lower oil and gas prices and encourage more usage. I’ve already clearly explained it. Oil and gas are so obviously ingrained in the U.S. and global economies, supplying over 60% of all energy. In the real world, this means that more economic growth ultimately means more oil and gas demand. That’s why year after year demand continues to grow. There is no significant substitute for oil whatsoever. And know that natural gas power plants don’t get retired with more wind and solar power, but get built even more because gas is flexible backup required.

This is also why more oil and gas pipelines are so crucial, not just the most economical way to transport energy but also the safest. The Trump administration calls for a bill that gets at least $1.5 trillion for the new infrastructure investment that our country so desperately needs. It’s safe to assume that much of that would include provisions for oil and gas infrastructure. But it’s increasingly obvious that the approval process for pipelines needs expedited, now taking an average of four years for permits to be issued.

Summary

Climatists are fixated on future warming and blaming fossil fuels, the very energy which society needs to face cold or stormy weather. It is not only New York state at fault, but also obstructionists in states like Massachusetts and Connecticut. Climate change is not the problem, it’s climate policies that threaten our collective security.

Lots of cheerleaders celebrated when in 2015, the City of Portland Oregon passed a city ordinance against fossil fuel infrastructure. Resilience.org published today praising Portland as the “First U.S. City to Ban Fossil Fuel Expansion Offers Roadmap for Others”. A year ago the event was proclaimed: Portland Makes History with New Protections from Fossil Fuels Dec. 14, 2016. It was a successful blow by protesters motivated by NIMBY (Not In My Back Yard). Excerpts below with my bolds.

But there’s more to the story. In July 2017 came this story from the Oregonian:

Oregon’s Land Use Board of Appeals (LUBA) on Wednesday rejected Portland’s limits on the expansion of fossil fuel infrastructure in the city, saying the ordinance violated the commerce clause of the U.S. Constitution.

The Portland Business Alliance joined fuel suppliers to appeal to the state Land Use Board of Appeals. They cited a number of grounds for the appeal, but Wednesday’s decision was based on a violation of the commerce clause, which gives the federal government the right to regulate trade between states and other nations.

The city is considering an appeal to the State Court of Appeals.

“This decision is disappointing and goes against the interests of our community,” according to a statement issued by Mayor Ted Wheeler. “It is incumbent upon us to protect our residents from the enormous risks posed by fossil fuels. The City is reviewing the ruling and exploring our options, including an appeal. Additionally, we will continue to work with environmental, energy, and resiliency experts to ensure Portland remains a leader on these issues.”

Then in January 2018 comes a ruling from the Appeals court: Portland Ban On Fossil Fuel Terminals Is Constitutional

The Oregon Court of Appeals ruled Thursday that the Portland City Council did not violate the U.S. Constitution with a 2015 resolution that banned new fossil fuel terminals.

The court reversed a significant portion of an Oregon Land Use Board of Appeals ruling, which found the ban unconstitutional.

Portland’s use of zoning laws to ban the construction and expansion of fossil fuel terminals matters for a couple reasons.

In Oregon, tanks located in North Portland supply about 90 percent of the fossil fuels used statewide.

Nationally, the ordinance also tested a new strategy for left-leaning cities that want to limit fossil fuel use as a way to combat climate change.

“Other cities were looking to the city of Portland and what they had done as a potential model for other ordinances,” said attorney Maura Fahey with the Crag Law Center.

The text of the Oregon Court of Appeal ruling is at Columbia Pacific v. City of Portland

The review concerned the July ruling by Land Use Board of Appeals (LUBA), The arguments revolve around the federal commerce principle that states are not allowed to favor their own merchants by discriminating against out of state suppliers, or favor their consumers over out of state consumers. The court decided that Portland was not guilty of that result, and also considered a precedent from Pike (US Supreme Court case):

“Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.”

LUBA concluded that the amendments impose burdens on interstate commerce that are clearly excessive in relation to the putative local benefits. Columbia Pacific, ___ Or LUBA at ___ (slip op at 92). We disagree and, in contrast, conclude that Columbia Pacific did not meet its burden to demonstrate that the claimed burdens on interstate commerce are clearly excessive in relation to the putative local benefits.

However, the judges left a door open regarding the public detriment due to restricting fossil fuels for consumers.

Before LUBA, Columbia Pacific argued that that finding was essential to the city’s decision not to allow expansion of existing bulk fossil-fuel terminals and that the specific finding that use of fossil fuels may “plateau and decline” with a continued shift to other modes of transportation, more fuel efficient vehicles, electric vehicles, and other carbon reduction strategies was not supported by an adequate factual base as required by Goal 2. Columbia Pacific, ___ Or LUBA at ___ (slip op at 55). LUBA agreed with Columbia Pacific, concluding that Finding 21 was “key support for the prohibition on any expansion of existing terminals to meet * ** local or regional needs” and its conclusion that fossil-fuel use “may plateau and decline” was “not supported by substantial evidence, and hence not supported by an adequate factual base.”

The Appeals court sided with the defendants on this aspect, noting that “the only evidence in the record projecting future fossil-fuel demand cited to us by either party or LUBA are trend-based forecasts indicating that demand will moderately increase over time.”

Will reasonable people come together and set aside irrational fears?  It remains to be seen.  From the Portland Business Journal

The Portland Business Alliance, in a statement to Willamette Week, said it hopes the city sees the ruling as “an opportunity to bring parties back to the table to revisit elements of the ordinance which, as originally adopted, significantly impact fuel access and affordability” throughout the region.

The Western States Petroleum Association, asked via email if it would appeal the new ruling, sent this statement from Oyango Snell, its general counsel:

The Columbia Pacific Building Trades Council and the Western States Petroleum Association and its members are disappointed with the Oregon Court of Appeals’ decision to allow an unconstitutional ban on new fossil fuel infrastructure in Portland. The Fossil Fuel Zoning Ordinance is not only a violation of Oregon and Portland City land use laws, but punishes consumers and businesses in the city and throughout Oregon, who rely on affordable fuel to power their homes, their businesses and the economy.

Here is what they are up against on the other side:

 

NIMBY in Canada:  Alberta and British Columbia go to war over pipeline expansion

In a similar power struggle, BC province, led by leftist Vancouverites has moved to prevent construction of the expanded Kinder-Morgan pipeline to move bitumen from Alberta to west coast seaports serving Asian customers.  Canadian federal authorities have signed off on this, with PM Trudeau telling the greens that if they liked his carbon tax, they have to swallow this because it is a package deal.

Ironically both provinces are governed by left wing NDP politicos, but despite (or perhaps because of that) the rhetoric is going over the top.  National Post reports
Could Alberta bring B.C. to its knees by shutting off the oil?
If they don’t like pipelines, let’s see if B.C. likes having a main supply of gasoline turned off.  This comes after the Alberta premier earlier threatened to stop importation of BC wines.

Next:  Attacks on energy access on the East Coast (New England) Payback Upon Climate Grasshoppers

For more on climate issues in courts of law:

Judiciary Climate Confusion

Critical Climate Intelligence for Jurists (and others)

Climate Law Alaska Update