Washington Watch: U.S. Regime Changes That Could Impact Pipeliners

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I’m writing this column in mid-January, before the presidential inauguration of Donald Trump and while his cabinet nominees are amid Senate confirmations. By the time you read this, Trump will be president, and many, if not all, of the cabinet nominees will be confirmed. A number of these nominees could play a significant role in developing policy and rules that will impact the oil and gas pipeline industry. As such, it’s time for a little political “hot stove” talk about the new president’s energy team.

Here, I’ll identify a few important, energy-related government positions, highlight the Trump administration’s anticipated lineup, review the starting players’ statistics and make a few projections about the upcoming season. Major League Baseball Hall of Fame manager Casey Stengel once told his baseball team: “All right everyone, line up alphabetically according to your height.” Taking our cue from “The Old Perfessor,” let’s start our analysis with the cabinet positions, listed in alphabetical order.

SECRETARY OF ENERGY

“The mission of the Energy Department is to ensure America’s security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions.” The Secretary is responsible, among other things, for the country’s nuclear weapons program, nuclear reactor production for the Navy, energy conservation, energy research and domestic energy production.

Nominee: Rick Perry (66) is the son of a West Texas cotton farmer, a graduate of Texas A&M and a former Air Force officer. He served as Texas governor from 2000-2015 and twice ran unsuccessfully in the Republican presidential primaries, including in 2016. Perry would replace Ernest Moniz (72), who helped negotiate the nuclear agreement with Iran.

Projection: When running for President, Perry suggested that the DOE be abolished. Whether Congress abolishes the department, which was established in 1977 during the Carter administration, remains to be seen. But look for him to support fossil fuels more and renewable energy less than his predecessor.

SECRETARY OF INTERIOR

“The Department of the Interior protects and manages the Nation’s natural resources and cultural heritage; provides scientific and other information about those resources; and honors its trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated island communities.” The Secretary oversees several agencies, including the Bureau of Land Management (BLM), which has responsibility for more than 10 percent of the land in the United States and one-third of the country’s minerals. As a general matter, the department’s policies have a significant impact on the western United States, where much of the federal land and resources are located.

Nominee: Ryan Zinke (56) was born and bred in Montana. The son of a plumber, he attended the University of Oregon on a football scholarship as an offensive lineman. Afterward he became a Navy SEAL, served in the Montana State Senate and most recently was elected the sole representative of Montana in the U.S. House, serving on the Natural Resources and Armed Services committees. Zinke campaigned for North American energy independence. He would replace Sally Jewell (60). The current BLM Director is Neal Kornze, whose replacement has not yet been nominated.

Projection: Under Jewell and Kornze, BLM issued controversial regulations impacting oil and gas production on federal and Indian lands. The regulations, which were part of the Obama administration’s climate change agenda, include 1.) the Fracking Rule, which imposed limitation of hydraulic fracturing and impacted more than 10 percent of the country’s natural gas production and 5 percent of its oil production and 2.) proposals to reduce waste, such as a prohibition of venting, limitation on the rate of routine flaring during the development of oil wells. Zinke and the new BLM Director are expected to promote access to oil and gas resources on federal lands.

SECRETARY OF STATE

“The [State] Department’s mission is to shape and sustain a peaceful, prosperous, just and democratic world and foster conditions for stability and progress for the benefit of the American people and people everywhere.” Additionally, the State Department is involved in the process of granting a Presidential Permit to authorize the construction and operation of pipelines that cross the border between the United States and Canada or Mexico.

Nominee: Rex Tillerson (64), grew up in Texas and received an engineering degree from the University of Texas. After graduation, he went to work for Exxon and is now the CEO of Exxon Mobil Corp. He never worked in government, but has negotiated deals with foreign governments, including Russia. Tillerson would replace John Kerry (73).

Projection: On Nov. 6, 2015, Kerry “determined that the national interest of the United States would be best served by denying TransCanada a presidential permit for the Keystone XL pipeline.” In contrast, Tillerson will likely approve the new Presidential Permit application by Keystone XL.

SECRETARY OF TRANSPORTATION

The Secretary of Transportation oversees 10 administrations, including the Pipeline Hazardous Materials Safety Administration (PHMSA). “PHMSA’s mission is to protect people and the environment by advancing the safe transportation of energy and other hazardous materials that are essential to our daily lives. The PHMSA administrator is chiefly responsible for the development and enforcement of regulations for the safe operation of the nation’s 2.6 million miles of the gas and liquid pipeline transportation system.

Nominee: Elaine Chou (63) was born in Taiwan, where her parents fled after the Communists took over mainland China in 1949. As a child, her family moved to the United States. Chou earned a bachelor’s in Economics from Mount Holyoke College and an MBA from Harvard University. Married to Senate Majority Leader Mitch McConnell, she was previously Secretary of Labor under President George W. Bush and Deputy Secretary of Transportation under President George H.W. Bush. Chou would replace Anthony Foxx (45). A replacement for current PHMSA Administrator Marie Therese Dominguez has not yet been nominated.

Projection: Expect much of Chou’s attention to be focused on the new president’s anticipated trillion-dollar infrastructure initiative. More about the future of PHMSA will likely become known once the new administrator is nominated and confirmed.

ASSISTANT SECRETARY OF THE ARMY (CIVIL WORKS)

The Army Corps of Engineers’ mission and vision is to “[d]eliver vital public and military engineering services; partnering in peace and war to strengthen our Nation’s security, energize the economy and reduce risks from disasters.” The Corps oversees U.S. waterways and plays a significant role in the construction of energy projects. There is a Commanding General of the Corps, but the Assistant Secretary of the Army (Civil Works) oversees the civil functions of Corps and ultimately reports to the Secretary of the Army. The current Assistant Secretary of the Army (Civil Works), Jo-Ellen Darcy, received a BS in Philosophy and Sociology and a MS in Resource Development from Michigan State.

Nominee: To be determined.

Projection: Based on an Environmental Assessment finding of no significant environmental impacts, the Corps on July 25, 2016, issued the Dakota Access Pipeline (DAPL) permission to cross Lake Oahe in North Dakota. Four months later, on Dec. 4, Darcy issued a “memorandum” incongruously 1.) confirming that permission was properly issued, but 2.) determining that issuance of the right of way (under the Mineral Leasing Act) to cross under Lake Oahe requires “more rigorous exploration and evaluation of reasonable siting alternatives, and greater public and tribal participation and comments,” and therefore directing that an Environmental Impact Statement be prepared to address alternatives. The new president supports completion of the $3.8 billion oil pipeline and signed an executive order on Jan. 24 to revive the project.

ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION ADMINISTRATION

EPA’s “mission is to protect human health and the environment.” EPA implements environmental statutes by writing regulations, setting national standards that the various states and tribes enforce through their own regulations, and enforcing compliance with the regulations. Chief among EPA’s priorities, and certainly the most visible over the last several years, has been addressing climate change, most notably by issuing the Clean Power Plan, which discourages fossil fuel electric generation and encourages renewable energy.

Nominee: Scott Pruitt (48) grew up in Kentucky, where he was a standout baseball player. After college, he received a law degree from the University of Tulsa; was elected to the state Senate, became General Managing Partner of the Oklahoma RedHawks, triple-A baseball club and most recently the Oklahoma Attorney General. Along with more than half of the country’s state attorneys general, he sued EPA over the Clean Power Plan. Pruitt would replace Gina McCarthy (63), a life-time civil servant who has led the charge on President Obama’s global warming and climate change initiatives.

Projection: Trump has promised that during his administration EPA would return to its central mission of ensuring clean air and water, as opposed to a current, more expansive agenda that promotes renewable energy and battles climate change. Pruitt, who has stated that the climate change debate is not yet settled, would seem a good fit for Trump’s agenda and will likely be a lightning rod during the confirmation process and beyond. Pruitt will not support the rules and regulations of the Clean Power Plan, but that doesn’t mean that he will eviscerate the regulations. The energy industry has been moving away from coal-fired generation and toward more natural gas and renewable generation. The Clean Power Plan just accelerated the transition. All Pruitt needs to do is extend the “glide path” for compliance and let the market place sort things out.

CHAIRMAN AND COMMISSIONERS AT FEDERAL ENERGY REGULATORY COMMISSION

FERC is an independent agency under the DOE, and its mission is to “[a]ssist consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cost through appropriate regulatory and market means.” Among other things, FERC regulates the construction, operation, and rates of interstate natural gas pipelines, the rates of oil pipelines, and proposals to build liquefied natural gas (LNG) terminals.

Nominee: Cheryl LaFleur was named acting chairman on Jan. 25, but additional commissioners are still to be determined.

Projection: New natural gas pipelines are needed to address changes in key production areas resulting from the shale revolution and to replace aging pipelines. Under the Obama administration, it took on average 429 days for FERC to authorize construction of a new natural gas pipeline. That’s 70 days longer than it took in 2013, according to a Bloomberg report. Expediting infrastructure projects is a priority of the new president, but first he needs to make some appointments.

The commissioners, like cabinet members, are appointed and then confirmed by the Senate. By law, the president designates the FERC chairman, and no more than three of the five commissioners can be from the same political party. Under normal circumstances, the chairman and two commissioners would be Republicans. However, current circumstances are anything but normal. There are lots of rumors. I’m going to take Stengel’s advice and not make any predictions about FERC.

Washington Watch is a bimonthly report on the oil and gas pipeline regulatory landscape. Steve Weiler is partner at Stinson Leonard Street LLP in Washington, D.C. Contact him at steve.weiler@stinson.com.

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