Our Editorial: Invest in energy infrastructure
Last month’s temporary spike in gas prices, caused by an unexpected shutdown of BP’s Indiana refinery, has subsided, but it serves as both a warning and reminder of how vulnerable Michigan and much of the Midwest is to an aging energy infrastructure.
The stress on pipeline, refineries and power plants is compounded by increasingly onerous federal regulations and pressure from aggressive environmentalist agendas.
State and federal lawmakers should encourage investment in the infrastructure, and be careful not to shackle the energy sector with regulations whose costs are not balanced by environmental benefits.
The gasoline price hike was particularly perplexing as it came the same week the price of crude oil hit a six-year low. But oil in its crude form needs to be transported and refined, and the Midwest has very little excess refining capacity.
The Whiting, Indiana, refinery that broke down is the largest refinery in the Midwest, supplying much of Michigan and other Great Lakes states, as well as Canada. When parts of the refinery go down, as happened in August, there are few back-up options.
The plant, which also experienced problems during the winter, is at operational capacity, as are most others throughout the Midwest. Meanwhile, energy demand grows.
In Michigan, Detroit’s Marathon refinery is the only one. In the 1980s, there were five.
Energy companies, faced with the reality that getting new, or even replacement infrastructure approved, is almost impossible, are trying to keep the existing infrastructure patched together.
Enbridge, which operates the 60-year-old pipeline beneath the Straits of Mackinac, says it’s a challenging environment to get anything built, including windmills.
And with other sweeping regulations like the EPA’s sulfur emissions rules and the Clean Power Plan, it’s not hard to understand why the refinery business isn’t growing, despite the country’s steady energy boom.
Rules to cut carbon emissions will be very costly, particularly for new plants coming online. The sulfur rule is projected to impose compliance costs of almost $10 billion on refiners, and cause eventual increases in gas prices.
Meanwhile, the Clean Power Plan will take many of the nation’s coal plants offline, with no realistic plan to replace them.
Its impact on global warming will be less dramatic. Installing the equipment necessary for refiners to meet the goals will actually create more carbon dioxide emissions than replacing an existing coal plant with a natural gas facility would emit.
Even investing in renewables takes energy storage, transportation, and infrastructure that has to first overcome high public resistance hurdles.
Michigan motorists were unhappy when their gas supply was threatened and the cost at the pump skyrocketed. But such disruptions should be expected.
Policymakers who draft rules that shut down refineries and power plants should also be working to encourage investments that assure a secure energy future.