Pipeline Economics and Regulation

Since 2011, Ian Goodman and Brigid Rowan of TGG have co-authored expert reports and testimony on North America's most controversial pipeline projects, including:
TGG offers the following services related to oil and gas pipelines:
  • Preparation of expert reports (as well as comments and briefing papers) and expert testimony related to the economic impacts (costs and benefits) of oil and gas pipelines including:
    • employment impacts related to pipeline construction and operation
    • tax and other financial benefits related to pipeline construction and operation
    • economic costs of environmental impacts related to pipeline construction and operation, including costing of worst-case spill scenarios
    • evaluation of the adequacy of pipeline companies’ financial assurances (e.g. insurance coverage and other financial instruments) in the event of a worst-case spill scenario
    • distribution of economic costs and benefits between communities/governments and pipeline proponents (energy producers/pipeline companies/refineries).

TGG frequently provides technical reports for clients on the subjects of energy and regulatory economics. Ian Goodman and Brigid Rowan of TGG have authored or co-authored over 60 publications relating the energy industry.

  • Preparation of expert reports (as well as comments and briefing papers) and expert testimony related to crude oil market analyses (examining the economics of crude oil supply and demand in relevant markets) to evaluate the need for various pipeline projects.
     
  • Direct testimony (i.e. appearance to provide direct oral testimony) before national/state/provincial regulatory bodies and other judicial bodies.

TGG released nine expert reports on the economic development and environmental impacts of crude oil and natural gas transportation (including seven reports on pipelines and two on crude by rail). Our reports have examined the economic costs (with a focus on worst-case spills) and benefits (with a focus on employment and tax revenues) for communities (including states, provinces, and regions).

TGG reports have also analyzed the distribution of costs and benefits between communities/governments and pipeline proponents (energy producers/pipeline companies/refineries). TGG has also produced crude market analyses (examining the economics of crude oil supply and demand in relevant markets) to evaluate the need for various pipelines.
 
At a US national level, TGG has released two expert reports on Keystone XL. In 2011, TGG evaluated the US employment impacts of this pipeline in “Pipe Dreams? Jobs Gained, Jobs Lost by the Construction of Keystone XL, an influential widely publicized study co-authored with Cornell University. Then in 2013, TGG evaluated the adequacy of the US State Department’s Market Analysis for Keystone XL.
 
At a state/provincial/regional level, TGG has produced five reports on the economic and environmental impacts of pipelines.

TGG’s seven expert reports on crude oil and natural gas pipelines include:

  • Expert Report on the PennEast Pipeline Project Economic Impact Analysis for New Jersey and Pennsylvania, commissioned by the New Jersey Conservation Foundation. This November 2015 report evaluates the economic impact study (PennEast Pipeline Project Economic Impact Analysis) prepared for the PennEast Pipeline Company. The PennEast Analysis claims that the pipeline project to transport Marcellus shale natural gas from Pennsylvania to New Jersey would have considerable economic benefits in both states. TGG demonstrates that the PennEast Analysis significantly overstates the total jobs from designing and building the pipeline by approximately two thirds or more.
     
  • Changes to the Economic Costs and Benefits of the Keystone XL Pipeline for South Dakota, written expert testimony filed in April and June 2015 at the South Dakota Public Utilities Commission on behalf of the Rosebud Sioux Tribe. Based on the conclusions of pipeline safety expert, Richard Kuprewicz (that (a) “[t]he proposed routing in South Dakota places the proposed pipeline at undue risk of rupture with massive release of oil;” and (b) the worst-case spill scenario of 60,000 barrels (assuming a 15-minute valve shutoff time)), TGG estimates a range of Worst-Case Scenario Costs starting at US$1 billion and escalating to $2 billion or more for a very high consequence event. Given the Keystone XL’s very small employment and property tax benefits, TGG concludes that, under a range of worst-case scenarios, the costs of the Project will greatly exceed the benefits for South Dakota.
     
  • Economic Costs and Benefits of the Trans Mountain Expansion Project (TMX) for BC and Metro Vancouver in collaboration with Simon Fraser University, Centre for Public Policy Research. The report, first released in November 2014, shows that the economic development benefits of TMX are very small and have been significantly overstated by Kinder Morgan, whereas the worst-case costs of a catastrophic spill are very large and have been vastly understated.
     
  • Economics of Transporting and Processing Tar Sands Crudes in Quebec in collaboration with Équiterre and Greenpeace Canada. The January 2014 report demonstrates that the economic development benefits of moving and refining tar sands crudes would be insignificant for Quebec, while the costs and risks are very high.
     
  • The Relative Economic Costs and Benefits of Enbridge's Line 9B Reversal and Line 9 Capacity Expansion Project, expert report filed in August 2013 at Canada's National Energy Board on behalf of a coalition of environmental groups. In light of pipeline safety expert, Richard Kuprewicz’s high-risk assessment for rupture on the Project, TGG concludes that:
    •  The implementation of this Project would involve a substantial risk of major economic damage and disruption - and potential loss of life. This is especially true in Toronto and Montreal, where the pipeline runs parallel to or crosses key urban infrastructure and could threaten the drinking water supply.
    • Due to Line 9B’s extraordinary proximity to people, water and economic activity, the rupture costs of the Project (under a wide variety of pipeline accident/spill possibilities) range from significant to catastrophic. Given the high risk of rupture, the expected Project cost also ranges from significant to catastrophic.
    • Based on an evaluation of economic costs and benefits, the potential economic costs could exceed (and, under a wide range of accident/spill conditions, greatly exceed) the potential economic benefits.
       
  • Report evaluating the adequacy of the Keystone XL (KXL) Draft Supplemental Environmental Impact Statement (DSEIS) Market Analysis, filed as an attachment to Comments on KXL DSEIS submitted by Sierra Club, NRDC and 14 other groups in April 2013. TGG concludes unequivocally that the DSEIS Market Analysis substantially underestimates the impact that a rejection of KXL would have on tar sands production and expansion through 2030 across a number of scenarios. Based on TGG’s evaluation of the (then) current market conditions (including emerging crude markets, factors driving tar sands expansion, availability and cost of crude oil transportation, and tar sands breakeven costs), the TGG Report concludes that the Market Analysis is deeply flawed and not a sound basis for decision-making. TGG determined that KXL, and specifically its impact on tar sands logistics costs and crude prices, would have a significant impact on tar sands expansion under a very broad range of conditions and assumptions.
     
  • Pipe Dreams? Jobs Gained, Jobs Lost by the Construction of Keystone XL, co-authored with Cornell University, September 2011 and updated in January 2012. TGG provided the economic analysis to demonstrate that TransCanada had greatly exaggerated the employment impacts of the Keystone XL (KXL) Project. TGG estimated the Project would create no more than 2,500-4,650 temporary direct construction jobs for two years and at the most a handful of permanent jobs (ranging from a low of 20 to a high of 127). TGG’s conclusions in Pipe Dreams were used to demonstrate to the US media and to the Obama Administration that KXL would not be a major job creator for the US, nor would it have any substantial impact on US unemployment.