The Bayou Bridge Pipeline and the Global Energy Picture
According to a recent report from the International Energy Agency (IEA), the United States is poised to play a major role in supplying oil demand growth around the globe. U.S. oil production growth is projected to meet more than half of global oil demand growth during the next five years. At a time of increasing international uncertainty, the United States’ growing energy production capabilities could not be more opportune. U.S. energy supplies, particularly oil and natural gas, can make a preeminent contribution to global energy security.
At the same time, steady investments in our nation’s energy infrastructure are required to ensure that those resources are able to reach end markets safely and efficiently. Projects of this scale and the companies undertaking them rely on a consistent regulatory review process to maintain timely construction and operation schedules. So when that process is upended, it harms not only U.S. companies but also their customers and consumers around the world.
Recent developments regarding the Bayou Bridge Pipeline provide a case in point.
In late 2017, Bayou Bridge received full approval from federal, state, and local officials — including the U.S. Army Corps of Engineers and the U.S. Fish and Wildlife Service — following a comprehensive review process. The 163-mile pipeline will connect major crude oil hubs in Louisiana at Lake Charles and St. James, providing much-needed resources to Gulf Coast refineries.
The project received all required regulatory approvals and was deemed to result in no long-term environmental impacts. But environmental activists in Louisiana have sued to stop it anyway. They even succeeded in getting a U.S. District Court judge to order a temporary halt to construction in the Atchafalaya Basin. In the latest development in the case, the 5th Circuit Court of Appeals granted an emergency stay on that work stoppage, allowing construction to continue while the case is heard at the appellate level.
As the media coverage of this saga has recently turned to the clash between activists and the U.S. Army Corps of Engineers, the project’s larger regional and national impacts have been overlooked. Particularly ignored is the national importance of large-scale energy infrastructure projects.
The Bayou Bridge Pipeline will provide a crucial oil link between Texas and Louisiana. In Texas, large supplies of oil are produced from huge resources in the Permian Basin. Texas also contains distribution hubs where oil from other sources can be stored for transport to other markets.
The Nederland hub is one of the large storage centers where oil bottlenecks on its way to market. The pipeline will create a safe, efficient way to move that oil to the customers who need it.
The growing need for U.S. oil and gas infrastructure was recognized by many of the speakers recently during CERAWeek discussions. The steady success of technical innovation in the upstream sector, particularly in high-production areas such as the Permian basin region, has left the midstream lagging behind as pipelines such as Bayou Bridge fall behind schedule. The lack of take away capacity to transport energy resources to end markets could require throttling back wellhead output. The result? Reduced domestic energy production.
Meanwhile, the global need for U.S. oil supply is only intensifying, as important producers, such as Venezuela, slide further down the production curve or face continuing political uncertainty, as in Nigeria, Libya, and Iran. And that’s not all: With instability rising, demand for oil is increasing. So without more supply, prices can be expected to rise.
Presently, the U.S. Energy Information Administration (EIA) projects that West Texas crude oil prices will be $4 per barrel lower than Brent crude spot prices for the next two years. Now is not the time to shrink or freeze domestic oil production and distribution networks. With demand and uncertainty on the rise, we should instead be developing domestic resources even further.
Among non-OPEC countries, the United States is generating by far the largest growth in oil and other liquid fuel production, according to EIA data. We have the opportunity to power additional economic expansion with this growth. To ignore it — or, worse, attempt to reduce it — would be to give up a global competitive advantage at the worst possible time.
None of this negates local concerns. But it should give us reason to pursue solutions, rather than trying to shut down new energy infrastructure projects. Communities and states should work together to find mutually acceptable ways to make such projects happen.
The revolution in domestic energy production provides amazing economic and geopolitical opportunities, including U.S. energy self-sufficiency — long a bipartisan goal. Local concerns, however important, must be considered within this broader national context. The United States is on the verge of a new energy paradigm; we have to work together to get there.
Mr. Caruso is President of the United States Association of Energy Economics. He served as administrator of the U.S. Energy Information Administration from 2002 to 2008.