Modern business?

Aug 13, 2010

Natural resources use is big business, and the distribution of resources like natural gas is really big business. By now, a lot of you have learned about El Paso Corporation’s plans for the $3 billion Ruby Pipeline running from southwest Wyoming across northern Utah and Nevada and into Oregon, roughly 700 miles of 42-inch pipeline, which will distribute natural gas to the West. On the surface, this sounds like an honorable project, the distribution of clean burning natural gas. It’s the environmental thing to do. Right? That’s what many ranchers thought from the start and they worked with the company to create easements across public and private lands. Ranchers were going along and getting along for the sake of American infrastructure.

Of course, projects of this nature have construction budgets, but anymore, they also have large legal budgets, which are simply a cost of doing business. Companies of this nature know they are going to have legal challenges as a course of business. El Paso Corp. was in the midst of one of those battles with Western Watersheds Project (WWP), a group headed by Jon Marvel, and the Oregon Natural Desert Association (ONDA). Instead of litigating with WWP and ONDA, El Paso mitigated an expensive legal battle by throwing money at them, essentially buying them off.

The Western Legacy Alliance reported the deal like this: "Ruby Pipeline, owned by El Paso, is a multibillion dollar natural gas pipeline being constructed from SW Wyoming across Utah and Nevada to Oregon. Ruby pipeline must get a permit from the Federal Energy Regulatory Commission to build the pipeline, which they did. The Western Watersheds Project then files an appeal to stop the permit which would stop construction of the pipeline and put millions of dollars and jobs in jeopardy. WWP then goes to El Paso and cuts a deal: in short WWP agrees to drop its litigation and let the pipeline go through, only if El Paso will pay WWP and ONDA $22 million to eliminate the federal lands livestock industry."

Public land ranchers know that there is a host of environmental groups gunning for them. These groups want to influence Congress in an effort to change federal law that supports grazing on public ground. The idea that El Paso Corp.’s contribution to these groups will be used to damage public land ranching has incensed many stockmen in the West. Many of those same stockmen allowed the company access to their lands in good faith.

This episode amounts to nothing more than extortion by these two environmental groups and I’m sure that El Paso Corp. just thought that they were doing wise business. Apparently, El Paso has been negotiating this extortion since last February. Ranchers affected by the pipeline just learned about it in mid-July.

Dean Rhodes, member of the Public Lands Council (PLC), state legislator from Nevada, and rancher in the affected area said that if he knew that WWP and John Marvel were going to get a payoff from El Paso, he would have never agreed to work with them on an easement across his private property.

When ranchers heard of the arrangement with WWP and ONDA, they went ballistic. Outcry could be heard across the West. The 12-member PLC board of directors were burning up the phone lines trying to figure out what they could do to protect ranchers. In short order, El Paso Corp. came forward and offered $15 million to PLC in an effort to make them go away.

Now this creates a bit of a dilemma for PLC. Do you take the money, which would be doled out over 10 years and has many strings attached? Or do you stand fast and frame WWP and ONDA as the vermin they are by refusing to capitulate? I’ve been told that the PLC board of directors is going to ask a few more questions and have the entire board vote whether or not to accept the payoff in September.

PLC however, along with National Cattlemen’s Beef Association, kicked out a news release last week saying it’s pretty much a done deal, except for a few details. The donation has been referred to as an endowment. There will be a payment of $7.5 million up front and $750,000 every year for 10 years. I’m not sure if the deal with WWP can be undone, and I suppose the folks at PLC figure they’ve lost this battle, so they may as well take the money. They sure can use it.

Perhaps the only thing this entire event has accomplished is to have set a precedent for dealing with these rogue environmental groups. You pay one off, you’re going to have to pay them all. And at this point, I would expect that resource users will be very cautious about entering into some of these infrastructure deals. — PETE CROW