 Jay Fidel here on ThinkTec, and it's a given Wednesday afternoon at 3 o'clock clock, and we are joined by Max Peas here. He's a researcher for E-prink, and he's normally in Washington, but today he's in Laurel and City, New York City, and Queens as a matter of fact. Welcome to the show, Max. Thank you, Jay. It's great to be here. Great to talk to you again. Yeah, well there's a lot of things going on, and we styled this. These are interesting times for energy, and I suppose we should talk first about it, about natural gas, because that's the American thing these days, isn't it? It's taking the country by storm, if not the world by storm. Certainly, natural gas is something that's on an uptick in terms of production here in the United States, in the continental United States. There's so much gas we can't use it ourselves, so we're trying to find as many export markets as possible. That includes Mexico, potentially Canada, and also the expansion of liquefied natural gas exports out of the US Gulf Coast and the Atlantic Coast here in the United States. So you're seeing huge projects develop. Some have already been commissioned in Texas, and also Atlanta and Maryland. Challenges are that are taking place because of the trade wars, especially with China and India, is finding customers, new customers for all of these natural gas exports. But thankfully that means there's abundant supplies here in New York, along the East Coast, as we're enduring this early freeze. We've got plenty of heat, so come on in. Yeah, I wanted to ask you about that. So in New York right now, there's a frost happening. It's only really November, and it's colder and expected to be colder still by reason of the, I guess, the cold coming down from the Arctic, which is part of climate change. And in New York right now, it's cold. And the question I put to you, Max, is, well, if it's cold, then people need more heat. And if people need more heat, they need more fuel. So what does it look like for the Northeast when it gets really cold this winter? Thankfully for in existing installations, there's no dearth of natural gas supplies, no dearth of heating oil supplies. As we were discussing before we got on the air, what's interesting is that the New York state is going the way of California. You have a considerable amount of environmentalists, NIMBYs that are becoming increasingly vocal and having the ear of key authorities within the state of New York. And again, referencing our discussion before we got on the air, what that has led to is they've prevented the expansion of new natural gas supplies into coming into Long Island, the lower part of the state of New York, and also new natural gas supplies into the county just north of New York City. And given all that, that's prevented the local operators, the Consolidated Edison and National Grid are the two local operators that deliver natural gas into residences and commercial establishments. They have said, if we can't get new pipelines into the region, we can't provide new hookups to new developments, any new residences, any new businesses, either in Long Island or in New York City, so why can't they get the pipelines in? Who's standing in the way? A variety of people. The wholesale gas coming into Long Island, the company that's building that is Williams, and they are under the jurisdiction of the Federal Energy Regulatory Commission in Washington. And that's a lot of work that's going on in the state of New York. They've been under the jurisdiction of the Federal Energy Regulatory Commission in Washington. There have been certain, they've provisioned it, they've received appropriate permits from FERC, the Commission in Washington, but the environmentalists have caught the ear of the governor of New York State, Andrew Cuomo. So he's put out orders saying that these pipelines will not get built. That in turn has caused the operators to approach any new business, any new business, say a pizza parlor or a barbecue joint, they will not provide natural gas for their commercial operations. So as ridiculous... You were telling me a story about one particular pizza restaurant. Can you tell us that story, what happened to them? Sure, absolutely. It's a barbecue joint. So it's right on the beach, right? On the beach in the Rockway section of Queens, one of the boroughs of New York City, they received all the permits for the construction of their restaurant. They put in gas ovens. They were ready to open up at the beginning of summer, but National Grid, the operator said, we're not going to deliver heat. I'm sorry, we're not going to deliver natural gas. We can't because the governor is providing us from giving us available supplies, giving us adequate supplies. So through give and take, all sorts of pronouncements, for three months this establishment wasn't open. So finally, the operators of the barbecue place put in electric ovens, downsized their menu and increased their prices so that they could be open still in time for the summer season. But of course, they have no natural gas, so they can't heat the premises for the winter. So we have a day like today. Anyway, the governor, all this made headlines, the governor heard about it, and he insisted that National Grid, the operator, provide hookups to this barbecue joint in the beach section of Rockway, which they did. And so thankfully, you and I, Jane, on your next trip to New York, we can go out to this barbecue joint and stay warm through a winter day, a cold winter day like we're having here in early November. I'll hold you to that, Max. Please. Okay, so the thing with natural gas, at least in the East Coast, on the mainland, is that there's talk about a tax. How does that work? How is that affecting, you know, the development of the resource and the supply? Well, we at Appering also are concerned about LNG exports, and so the key source for natural gas close to New York State is what's known as the Marcellus Utica formation on the western side of Pennsylvania, eastern side of Ohio, and most of West Virginia. That's about 400 miles from where I am right now. So there's ample supplies there, but because you can't get a pipeline across the state of Pennsylvania, a new pipeline across the state of Pennsylvania into this particular region. You have plenty of gas going into Texas for, into the US Gulf Coast, at very cheap prices. So the Japanese and other constituencies in the Pacific are happy to receive our low priced, liquefied natural gas exports. So it's that sort of thing. You know, I just, to sort of continue the story, I, you know, it's not just here in the state of New York. There are interesting stories like this also happening in California, and I don't know if you've heard about this, but given all the environmental requirements the state of California has put on its constituents, one of them is to diminish the use of natural gas, to cut off new natural gas hookups. So you're having the notorious cases in Berkeley, but what's really interesting is that you have Chinese restaurants established in the San Gabriel Valley of Los Angeles. They have gone to Sacramento protesting the fact that they will not have natural gas in their particular restaurants. So just imagine trying to run a walk using electric power in place of natural gas. You can't cycle it as quickly as you do. You can't. So it just, it's not just New York state. We also have this happening in California. And I brought these examples up for you just, you know, so being in Hawaii, you can laugh at the rest of us. Well, common denominator is restaurants. So far yet. Go ahead. Okay. And the story gets better here. So, you know, just, just when you thought, well, okay, only the strange things, only strange things are going to happen on the coast in the coastal parts of the continental United States. We at AppRink where we're talking to some of the pipeline operators and we said, well, but, you know, given all of these things that are happening on the coast, certainly you in Texas must be okay. Everything must be okay for you. They said, you know, well, we have problems also. And they use the expression where the far right meets the far left. That's what's happening in Texas. So you have ranchers that want to protect grazing rights. And you have environmentalists that want to stand in the way of every new pipeline construction. The two least likely alliances are suddenly joining forces and preventing, I wouldn't say preventing, but they're impeding. They're providing resistance to new natural gas developments exactly where you have this, one of the places where you have this bounty of new natural gas production. So it's, so laugh some more. Well, how is it, how is it playing out? I mean, they must be, they must be contending their positions before government and government in the courts. How are they looking it out? I don't know the details of Texas. I know in California the constituents, the Chinese restaurant constituents went all the way up to Sacramento and said, yeah, the state capital and protested. In New York state you have, you're going to have hearings on Thursday in Albany, the state's capital. So it's an ongoing process. I mean, interestingly, even the blue collar newspaper in the city of New York, the Daily News, has come out and said, listen people, you really shouldn't stand in the way of these pipelines. This is to your benefit, it's not a detriment. So those are the kinds of situations that are in play. Well, if you stop the pipelines, how do you affect the price to the consumer? Does that mean people have to pay more for fuel and heating and whatnot? Absolutely, right. So this, for lack of a better term, it sticks it to the residences and the commercial businesses. At some point, the various local operators, Consolidated Edison, National Grid, are going to have to charge more for energy prices, because once you create that kind of shortage, you have to rationalize the remaining supply. So either Consolidated Edison or National Grid providing using gas for the generation of electrical energy? I would think so. I'm not wholly certain. I know in the case of Consolidated Edison, they have plants that are fired by natural gas. I would think also the same situation for National Grid. In part, this expanded pipeline from New Jersey across the bay into Long Island. That would be also gas for a major natural gas plant in Nassau County, which is right adjacent to the city of New York, right adjacent to Queens. So I mean, if that's the case, people can get plenty of electrical energy. But is the electrical energy more expensive than if you took it directly by gas? It becomes expensive. It's also problematic in terms of if you don't have a premise of residence or a commercial premise set up to use electricity to generate heat, then you're in a difficult situation. Not only would the price of existing energy become more expensive, but you also have to install appropriate components to utilize the available energy. Say, if it's electricity, then I can't think of the appropriate term, but just premises have to be reconfigured for using electricity. So back to our barbecue joint in Rockaway. So they had to install electric ovens in order to just stay in business. If they were going to go into winter without any natural gas hunk up, then yes, they would also have to install some kind of electric heaters to take if they weren't going to get natural gas into the premises. A footnote to that is that we have Hawaii gas and we have plenty of walks out here in Hawaii. So we have gas being available for those walks. A lot of people have gas in their homes. So when the Chinese restaurant shut down in Southern California, we're all coming flying out to Hawaii for the Chinese food. There you go. That's it. So in terms of, you know, I take it that the issue is that there are people out there for environmental reasons or possibly business reasons who oppose the pipelines. And that's kind of a new emerging development. You know, when we talked about this before, natural gas seemed to have, you know, all the momentum you would want and that people were generally in favor of it because it was a cheaper alternative. But now it sounds like we're in chapter two here and chapter two involves organizations, individuals, even businesses and certainly governments who respond to them who stand in the way of delivering natural gas around the country. So is this a national phenomenon right now? It seems to be picking up some pace. I named three states. Something like this is also taking place in New Jersey. It's mostly driven by environmentalist constituencies. No longer do they see natural gas as a bridge fuel. They see any sort of fossil fuel developments. Anything that provides continuous fossil fuel usage as they want to impede and stand in the way and favor renewables. So that seems to be the constituency that that is engaging in anti-natural gas activities. So even every pipeline becomes a fight. Well, that's, you know, I mean, on the one hand, if you, you know, you want to stay away from fossil fuel and you don't treat natural gas as a bridge fuel, but rather as a fossil fuel, then, you know, I can see that gaining traction somehow. And then I wonder what let's assume for just this discussion, Max, but it does gain traction that we have an upcoming generation who, you know, concerned about environmental issues and they don't want to see more pipelines. As a matter of fact, they'd like to shut pipelines down. What happens to our energy system in America if that happens, if that takes place? Oh, boy, you're asking me to predict what's going to happen in the future. Well, I think it's a dire situation because the amount of energy that you can deliver using these existing systems, pipelines, natural gas generation facilities, they work very efficiently. If you want to replace, say, a natural gas-fired unit with a reasonable scale, let's say one gigawatt generating capacity. The scale of a wind installation that you would need is a magnitude of 400 times larger than the site that you would need to site a natural gas plant. By that I mean say, let's assume this hypothetical natural gas plant that I'm describing sits on 200 acres or 100 acres. You would need 400 times that space to be able to site a wind farm to generate the same amount of electrical energy. For a solar generation, you would need 100 times that much of the original natural gas plant. And you don't have any of these kinds of things installed yet. And they're relatively costly and they're not efficient from the point of view of providing base load. Base load is just you want constant electricity available so that if you walk into a room and it's dark, you can turn on the light. Or you have heat generated, things like that. Solar doesn't work during the nighttime. You can't collect energy that way. And people haven't really begun discussing the size requirements, the siding requirements that you need in order to generate an equivalent amount of electricity from a wind farm that you can already generate from a natural gas plant. We have two wind farm sites that are under protest in Hawaii right now. And it's partly NIMBY, maybe other considerations too. But there's a lot of people who are opposed to that, these two wind farm sites. And part of it is that the modern technology on these turbines is they're taller and more heavyweight than in the past. And they're up to nearly 500 feet in height. And that bothers people who live nearby. They don't like to have the huge structure like that shadowing their property and their lives. So what I get is we have protests on all sides of this. Every time you look, there's a protest. And so our national will, if you will, our national desire to have clean energy or more efficient energy as the case may be, is really sort of in contention right now all around the country. People are protesting this, that, and the other thing. How do you see this unfolding? Because right now I think all the protests that are happening, both on the mainland and here, over various kinds of installations, they all, as you say, they all slow things down. Right. How does it get resolved? I, you know, again, it's difficult to say what the futures, how things are going to take place. One possibility is just more frequent discussions, more candid dialogue between the various constituencies that are involved. Recently, just, you brought up climate change before. You know, it's, if we're using a Venn diagram approach here, it's tangential to our discussion here about natural gas. But you have proponents of notions of climate change, and you have a scientific community that disputes the notion of carbon dioxide generated climate change. Isn't the scientific community nearly unanimous on the whole carbon dioxide issue and it's man-made and it's affecting the planet? There was something in the newspaper last week about how 11,000 unchanged scientists all came out, you know, for the proposition that climate change was really real, but it was much worse than they had expected 15 years ago. Okay, I saw that same item. I think there are respective constituencies that dispute those things. There are certain people at Princeton, at MIT, at the University of Colorado that don't embrace a catastrophic notion of climate change brought on by increasing volumes of carbon dioxide in the atmosphere. So the proposition, and they're not as outspoken as those scientists in that community that accepts the notion. So, but the proposition is let's get those two sides or however many other sides, but there might be people who say yes, carbon dioxide is a greenhouse gas, but let's not expect catastrophic climate change. It's not going to be as severe as people say. Some of that weather lately is severe. Some of that weather is catastrophic. Look what happened in the Caribbean. Let's move on. You had some charts. I don't want to lose the benefit of that. Can you tell us about the graphics that you have? Well, there were just bullet points that I gave you. The first one covered the natural gas situation. There you go. That one right there. The other thing that I didn't discuss was the state of New Jersey. The mechanisms that are taking place there. So I described Texas where the far right meets the far left. In the state of New Jersey, if you want to thread place a natural gas pipeline across the state, an interstate pipeline, you apply to the Federal Energy Regulatory Commission in Washington, and then with all the necessary documentation, which I think are the optimal routes. What people are finding out, the people who want to construct the pipelines is that once you've declared the land that you want to traverse, that creates an opportunity for the environment. So in state of New Jersey in particular, what's happening is that an organization funded by the former mayor of the city of New York, Michael Bloomberg, Bloomberg New Energy Finance. We haven't heard that name recently. I know. It was somewhere out there, you know, presidential candidate, something like that. But some organizations funded by him go out and they buy up all the deeds, where some of the deeds along the right-of-way, and they donate them to the state of New Jersey. And right there you have an impediment that prolongs the situation for acquiring eminent domain over this land and building the pipeline. That jeopardize all the different constituencies, the investors, the people who raise capital, the operators, the construction organizations, their laborers. And that's relevant to that last slide that you showed. One thing that comes to mind, Max, is that it seems like so much of this controversy, even according to your graphic, is on a local statewide basis, local basis and local issues that are different from the next state and so forth. And this is a hard question, but is the federal government doing enough to make these rules consistent, to show leadership on clean energy or energy in general? Can the federal government sort of settle all this down one way or the other and move us into more cleaner and more efficient energy over time? Is the government doing enough or is it not doing enough? Well, I think it just varies by which administration is in power. So, I mean, the Obama administration, the phrase that was always thrown around was, all of the above and none of the below. So, all of the above wins solar, renewable energy, none of the below, no fossil fuel. And I have to say the EPA was very aggressive under the leadership of Gina McCarthy, Obama's last EPA administrator, the former subordinates Janet McCabe at the Office of Transportation Air Quality. The people who are in place now in the Trump administration are not taking it as an aggressive position. In fact, they've relaxed the rules. So, from the administrative side, you have a considerable amount of variability, but then you also have an incredible amount of litigating. Yes, the federal government can set nationwide policies, but once you bring it in within the state, then other things begin to happen. And the point that I made about Texas, Texas is a big surprise. Yeah, you would think that the constituencies in Texas would understand the value of natural gas production, its value as it would be distributed across the United States, especially in the cold weather that we're having now. It affects the economy of Texas, and will continue to affect the economy of Texas for years to come. So, you think they have an economic interest there? Oh, absolutely, yes, absolutely. Well, what about California? We only have a minute left, but there was an issue about emissions standards in California. Can you talk about that? I don't know if I can be brief, but I'll try. Moving from natural gas to transportation fuels, gasoline in particular, diesel to some degree also. California was provided with waiver authority because it had severe pollution problems in 1975 when the Clean Air Act was enacted. It used that, the reason it was provided waiver authority is so that it could be more aggressive than the national standard. It couldn't be as aggressive as California wanted. So, California feels that it still has jurisdiction over greenhouse gases. Greenhouse gases are a global problem. You can solve them by California policies. So, that has become a point of contention. The Trump administration wants to remit, I don't know the exact legal term, take away California's waiver authority, especially as it relates to greenhouse gases. That in turn has moved on into issues relating to automobiles. So, the automobiles are in play because the Obama administration put together a new set of emissions standards in 2012, but they left the most aggressive component when the Obama administration would not be in office. That was for 2021 through 2025. Everybody knows those standards are not achievable. You have the technology, but commercially, people aren't going to buy those motor vehicles. So, there was a determination last August, August 2018. There was a congressional hearing in June, and then California decided to cut a deal with three automakers on its own. And now the Justice Department is suing the state of California and these three or four automakers that cut a deal with California on antitrust violations. So, I don't know if I went over my minute, but I tried to put it into that sort of a context, and it's a mess. Yeah, and then it's going to wind up in the Supreme Court, isn't it? There is a chance that it might wind up in the Supreme Court, depending on how it gets litigated and how things can't get settled and how they get appealed. Yeah. Well, the stakes are that if California and the auto dealers win, they'll be able to keep maintaining the high emission standards. If they lose, then they'll be forced to be consistent with the nationally other states, the national standards, and they'll be able to relax their emission standards. It's a strange influence of events, isn't it? It is. I mean, a judge can rule one or three ways. You mentioned two, but the third way is that the judge says, I don't like California standards. I don't like the new Trump administration standards. Just give me back Obama standards. California is basically admitted through its deal with these four automakers, and the automakers themselves know that the last leg of this three-pronged set of legislation that the Obama administration put in place, it's unattainable. It can't happen. It's just going to break things. So if the judge rules that way, who knows? And I don't know when that's going to come out. Well, who knows, Max? Maybe you'll get a call any day now from the judge, and he'll want you to come down and explain this to him. Sure. I'm more than happy to. In advance, let me just say that it's great to talk to you. Likewise. Thank you. I always appreciate our discussions, Max. I don't want to continue not only the first point we talked about to see how that evolves, but also the emission standards litigation and see how that evolves. Thank you so much. Absolutely. And your next trip, that barbecue joint in Rockaway and Queens. I'm ready. Okay. Thanks a lot. Thank you. We'll talk to you soon. Max Peirziura. Peirziura. And we'll talk to you soon. Aloha.