Cuomo’s Natural Gas Blockade
The U.S. shale boom has lowered energy prices and created hundreds of thousands of jobs across the country. But those living in upstate New York and New England have been left in the cold by New York Gov. Andrew Cuomo, whose shale gas blockade could instigate an energy crisis in the Northeast.
Progressives once hailed natural gas as a “transition fuel” to renewables like solar and wind, but now they are waging a campaign to “keep it in the ground.” New York is ground zero. First, Mr. Cuomo banned hydraulic fracturing (i.e., fracking), and now he’s blocking natural gas pumped in other states from reaching Northeast markets.
The Empire State’s southern tier overlays the rich Marcellus and Utica Shale formations, among the most productive drilling regions in the country. Shale fracking has been an economic boon for Appalachia—and could have lifted upstate New York. Since 2010 natural gas production has surged 520% in West Virginia, 920% in Pennsylvania and 1880% in Ohio. (See chart nearby).
Mr. Cuomo’s predecessor David Paterson imposed a moratorium on fracking in 2010. After winning re-election in 2014, Mr. Cuomo started laying the ground for a White House bid and made the ban permanent. Between 2010 and 2015, New York’s natural gas production plunged by half—which has translated into fewer jobs as well as less royalties for landowners and revenue for local governments.
Last year the Governor compounded the economic damage by blocking the 120-mile Constitution pipeline transporting natural gas from Pennsylvania to upstate New York and New England. Although the Federal Energy Regulatory Commission (FERC) approved the pipeline in 2014, Mr. Cuomo’s Department of Environmental Conservation conducted a separate review and denied a water-quality permit putatively because the developers hadn’t provided sufficient information.
Constitution’s developers challenged the denial in federal court. While the Clean Water Act lets states perform their own environmental reviews, New York appears to have abused its discretion. Last week the Second Circuit Court of Appeals deferred to state regulators while leaving a door open for the pipeline companies to challenge the timeliness of the state review in the D.C. Circuit Court of Appeals.
While Constitution isn’t dead, environmentalists say the appellate-court decision will give New York and other states more latitude to block pipelines, which is no idle threat. Two major pipelines in the Northeast under development will need state approvals, and developers pulled two others in the past two years amid regulatory obstacles in New England.
All of this is ominous since the region desperately needs more natural gas to make up for lost power from the impending shutdown of nuclear and coal plants. New England’s Independent System Operator projects that 14% of the region’s electric generation capacity will be retired within three years and says more pipelines are needed for grid stability.
Mr. Cuomo is also forcing the premature retirement of the Indian Point nuclear plant, which provides a quarter of New York City and Westchester County’s electricity. He hasn’t offered a back-up plan, but natural gas will have to play a role. Renewables (excluding hydropower) make up only 5% of New York’s electric generation, and we doubt the local liberal gentry will abide wind farms off Long Island.
Energy costs in the Northeast are already the highest in the nation outside of Alaska and Hawaii in part due to the shortage of natural gas. Northeast residents pay 29% more for natural gas and 44% more for electricity than the U.S. average, according to a recent study by the U.S. Chamber of Commerce. Industrial users in the Northeast pay twice as much for natural gas and 62% more for electricity.
Electricity and natural gas constitute many manufacturers’ biggest costs, which in part explains why so many are fleeing the Northeast. Since 2010 manufacturing economic output has increased by 1.5% in the Great Lakes region while shrinking 0.7% in New England and 2.4% in New York.
Inclement weather can cause energy costs to skyrocket. During the 2014 polar vortex, natural gas prices in New York City spiked to $120 per million Btu—about 25 times the Henry Hub spot price at the time. Natural-gas power plants in New York are required to burn oil during supply shortages. Due to pipeline constraints and the Jones Act—which requires that cargo transported between U.S. ports be carried by ships built in the U.S.—Boston imports liquefied natural gas during the winter from Trinidad. This is expensive and emits boatloads of carbon.
Speaking of which, about a quarter of households in New York, 45% in Vermont and 65% in Maine still burn heating oil—which is a third more expensive than natural gas and produces about 30% more carbon emissions per million Btu. Yet many can’t switch due to insufficient natural gas and pipeline infrastructure.
Mr. Cuomo’s natural gas blockade is harming residents and businesses throughout the Northeast while raising carbon emissions that he claims are imperiling the planet. The likely Democratic presidential aspirant may hope to ride this record to the White House, but millions of Americans are already paying a high price for his policies
Appeared in the August 24, 2017, print edition.