The agreement in principle on what will become the Fiscal Responsibility Act of 2023 has been designed to maintain the financial stability of the U.S. and global economies by extending the debt ceiling through January 2025. As is always the case in evaluating and passing legislation, the devil is in the details. Here, I look at some of the details in relation to climate risk and federal action.
One of the provisions that was on the table would have included slashing climate programs funded in excess of $600 billion through the Inflation Reduction Act, a piece of legislation that was signed into law Aug. 16, 2022. But it doesn’t. The climate action community dodged a bullet as the negotiations between President Biden and Speaker Kevin McCarthy (R-Calif.) proceeded over the weeks leading up to the default deadline. The drastic rescission that the climate community feared would not be in the bill.
The second provision of the debt compromise that is of interest here (Section 324) was actually added to the bill during negations to secure the votes of West Virginia Sens. Joe Manchin (D) and Shelley Moore Capito (R). It will support the completion of the Mountain Valley Pipeline from Virginia to North Carolina with a spur connecting the project to an East Coast port. At first blush it appears its inclusion could be a billion-dollar jab to the jaw of current U.S. climate policy. However, I argue here that climate action may slip this punch, because there is a demand side to every market.
Perhaps the first indication of the power of the demand side of the domestic energy market became evident when then-President Trump declared his intention to end “the war on coal.” The campaign promise was doomed from the start: Large and small businesses across the country had already begun to wean themselves from coal in both their daily operations and their long-term planning.
Plans to implement and sustain the reopening the Navajo Generating Station and its adjacent Kayenta coal mine in Arizona is a case in point. They were a key element in Trump’s three-year effort to rejuvenate the U.S. coal industry. Federal support for this subsidy has been valued at as much as $1 billion, including cost savings from relaxed air-quality requirements, but it was to no avail. By 2019, the generating station was offline and the coal mine that provides its fuel was closed.
Turning now to the Mountain Valley Pipeline, the language in Section 324b of the Federal Response Act of 2023 is clear: “The Congress hereby finds and declares that the timely completion and operation of the Mountain Valley Pipeline is required in the national interest” despite producing an estimated 90 million tons of greenhouse gas emissions per year. The pipeline was proposed by EQT Corp. in 2014 with a target completion date of 2022 or so; permitting began in 2015. Initial cost projections were around $3.5 billion, but they are estimated to be $6 billion today. If and when it is completed, it could deliver up to 2 million dekaterms (1 dekaterm is equal to 1 million btu) to market per year, but will there be demand for all of that gas?
Four corporations have committed themselves to buying about 36 percent of the pipeline’s ultimate capacity. They are utilities or affiliates of utilities, so they might actually need the gas. That leaves 64 percent to be covered by EQT — but EQT does not consume natural gas. It follows that it will need to find other buyers of the gas — if not domestic customers, then perhaps arranging an export operation to India through the coastal spur.
The demand side news is also getting worse for another reason. Con Edison, a New York utility, may be selling its stake in the project at cost (that is, without asset appreciation over nearly a decade) because demand conditions have changed and gas is no longer part of their “longer-term view.” After all, the federal government pulled the plug in 2020 on an earlier pipeline proposal that would have run from North Carolina to Virginia, the Atlantic Coast Pipeline.
To summarize, then, the future of the Mountain Valley Pipeline is uncertain with enormous downside risk even with the support of Congress. This is why the Manchin punch may never land a glove on climate action.
Gary Yohe is the Huffington Foundation professor of Economics and Environmental Studies, Emeritus, at Wesleyan University in Connecticut. He served as convening lead author for multiple chapters and the Synthesis Report for the IPCC from 1990 through 2014 and was vice-chair of the Third US National Climate Assessment.