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- Title
HOW POLITICAL RISK ASSOCIATED WITH CLIMATE CHANGE IS IMPACTING PIPELINE CONSTRUCTION AGREEMENTS.
- Authors
Gaille, S. Scott
- Abstract
Synopsis: For those who believe that fossil fuels are an imminent danger to the planet, the merits of natural gas and oil pipelines are outweighed by their contributions to carbon emissions. In their view, new pipelines should be opposed because they perpetuate the Nation2s relianIe on fossil fuelsV 5his means that the already complex process of designing, permitting, and constructing pipelines must now also navigate the forces of climate change politics. The first half of this artiIle desIri_es how the eleItorate;s evolving views on carbon emissions increasingly threaten pipeline construction. While Americans remain evenly divided about the risk of global warming, about two-thirds of Democrats regard climate change as a serious threat. This bloc of fervent voters is wielding considerable influence in the Democratic PartyGmaking carbon emissions an ever-higher priority for its elected officials. Climate voters also have turned to ballot initiatives. Energy companies may have breathed a sigh of relief when 57% of Colorado voters defeated a 2018 proposition that would have banned pipeline construction across much of the state, but the outcome may be different in future elections. While pipeline owners cannot control the electorate, they can fast-track projects to minimize the amount of time investments are exposed to such political risks. Fast-tracking usually requires construction contractors to enter into agreements (and even commence building) prior to obtaining full information about critical elements of design, engineering, permitting, and right-of-way. As such, fast-tracking is not conducive to traditional, lump sum contractsGwherein the parties, early on, agree on a fixed price for building the entire pipelineGbecause no one can accurately estimate what that price will be. Instead, pipeline owners and their IontraItors enter into aFreements that reim_urse the IontraItors2 aItual Iosts plus an agreed upon profit. The second half of this article explores the principal contracting challenges that exist within such cost reimbursable arrangements and how they can be mitigated with specialized terms and conditions.
- Subjects
NATURAL gas transportation; NATURAL gas pipeline laws; CLIMATE change &; politics; GOVERNMENT policy on climate change; GLOBAL warming &; politics; ENERGY industry laws; LAW
- Publication
Energy Law Journal, 2019, Vol 40, Issue 1, p111
- ISSN
0270-9163
- Publication type
Article