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Looking Forward At US Energy Policy In 2019

Category: Energy & Environment,Finance

In this Aug. 6, 2017, file photo, demonstrators against the Keystone XL pipeline march in Lincoln, Neb. Opponents of the proposed oil pipeline from (AP Photo/Nati Harnik)ASSOCIATED PRESS

As we gather with our families today and give thanks for the blessings of the past year, it is a good time to take stock of where energy policy and global oil markets are headed in 2019.

With Democrats winning a majority in the House and the return of divided government, it’s unlikely that both chambers of Congress and the White House will agree on broad, far-reaching energy legislation during the 116th Congress.

The new House majority will busy itself with conducting oversight of the Trump administration, which will slow but not stop the administration’s agenda on trade, the economy and energy production.

Congress has essentially taken itself out of the energy policy game – it’s been several years since lawmakers passed substantial changes to the bulk of federal statutes governing the energy sector. Incremental change is doable, but overall the chances for major policy shifts are low.

Oversight of the oil and natural gas sector has long been the domain of state-run agencies. The rise of federal oversight over methane emissions and wastewater disposal was a new phenomenon brought about by the previous administration. State officials have largely welcomed the return of regulatory autonomy, particularly oil- and gas-producing states like Texas, North Dakota, New Mexico, Pennsylvania, Alaska.

The Trump administration’s “energy dominance” policy has steadily unraveled the regulatory agenda of the previous administration into the fossil fuels industry – reversing course on Clean Power Plan, methane emissions, and pulling out of the Paris climate agreement over economic concerns.

However, more can be accomplished at the federal level to ensure that the United States remains the world’s largest oil and gas producer and a powerhouse in energy markets for the foreseeable future, reaping the huge economic and geopolitical benefits that come with this status.

The Interior Department can look for ways to maximize federal onshore gas and oil leasing. Lengthy permit turnaround times remain an intractable issue that must be solved if the Trump administration is going to make good on its promise to boost interest in federal lands and offshore areas. It is not enough to simply make more land and offshore acreage available – we also have to remove barriers to investment.

There is big money to be had by the federal treasury here – revenue that could be used for public programs and to pay down the debt. Just look at the near $970 million haul in New Mexico’s most recent lease sale.

Narrowing the scope of National Environmental Policy Act (NEPA) reviews to the most unique aspects of a drilling project is one way to accomplish this. Wait times for federal permits are considerably longer than the permitting time for drilling on private lands, including NEPA reviews that must be conducted at anywhere from three to five different points throughout a project. Streamlining the environmental review process, particularly given the nature of “multi-well pad drilling” for shale oil and gas, would be a significant step forward. It also can – and should – be done without reducing the protection of the environment.

Tort reform is another area where the regulatory process can be improved. Too often environmental activist and indigenous groups have used the NEPA process to challenge vital infrastructure projects in federal court. Trump’s efforts to fast-track the Keystone XL pipeline, for instance, have been set back by lawsuits, adding roughly $100 million-$200 million in cost to the 1,184-mile pipeline, according to TransCanada. While most of these projects will eventually be built, the use of the courts to delay them for as long as possible is designed to inflict economic pain on companies. That strategy not only discourages investment but also increases energy costs for consumers and forces producers to find other routes – primarily rail and trucking – to less efficiently move their product to market.

Over time, Trump’s appointment of conservative judges should help alleviate some of these legal obstacles to economic growth but for now, the administration’s hands are tied to a certain extent without further regulatory reform.

The White House has said it will work with Congress to streamline federal siting and environmental reviews, which will require all of its legislative skills now that Democrats control the House. While infrastructure spending may offer a rare opportunity for agreement between the two parties, Democrats are unlikely to go along willingly with efforts to revisit the nation’s bedrock environmental laws.

Trump’s $1.5 trillion infrastructure plan is also still largely without a funding structure. Under the plan, roughly $200 billion would come from the federal treasury, while the rest the White House envisions coming from state and local sources, and public-private partnerships. Democrats may not be opposed to new spending, but there’s something of a crisis brewing among Republicans who traditionally oppose unfunded spending.

Critical energy infrastructure is needed now more than ever as the United States emerges as an oil and natural gas exporting giant. Virtually every new incremental barrel of oil and much of the natural gas produced must be exported, which means we need more pipelines, export terminals, pumping stations, gas processing and treatment facilities, liquefaction plants and port expansions. Much of this spending could come from the private sector if the federal government can remove barriers to investment.

Trump’s plan is to set a time limit of 21 months for lead agencies to complete environmental reviews, and a hard deadline of three months after that for agencies to make decisions on federal permits. Setting firm time frames – something industry and Republican lawmakers have long pushed for – would reduce the number of redundant hoops that affect the ability of project projects to be built in a timely and cost-effective manner.

Additionally, the plan talks about requiring lead agencies on NEPA reviews to develop a single document rather than each agency conducting separate reviews, something that is currently encouraged in existing White House guidance but not mandated. The plan would also seek to narrow the scope of NEPA reviews by excluding consideration of alternatives that are not “legally, technically, or economically feasible.” It also seeks to tighten parameters to make it more difficult for nuisance litigation to artificially drag out the review process – and in some cases obtain legal rulings by lower courts that can cause costly delays that only benefit the lawyers.

Overhauling the environmental review process would be a major boost to the U.S. oil and gas sector and the economy, but it’s also a heavy lift in the era of “keep it in the ground,” especially as House Democrats talk of reviving the House Select Committee on Energy Independence and Global Warming and giving it legislative authority for the first time.

Failure to improve the process for siting pipelines and other critical infrastructure will artificially constrain the U.S. oil and gas sector and reduce output starting as early as 2020. It would also hamper progress on cutting carbon emissions by impeding the transition to cleaner-burning natural gas for electricity generation.

The White House should also remain focused on expanding markets abroad for U.S. energy. Secretary of Energy Rick Perry’s recent visit to Central and Eastern Europe highlighted the importance of diversifying Europe’s supply of natural gas to reduce dependence on Russia. Asia is also an important market for U.S. producers, especially China, which is locked in an ongoing trade fight with President Trump. It’s important to remember that energy exports offer the best way for the United States to reduce its trade deficit with China.

We should also promote the newly updated BUILD Act, which reforms how the United States finances public-private investments overseas. The law could help U.S. energy producers by offering attractive financing terms for projects overseas – specifically foreign import terminals and other infrastructure needed to receive U.S. LNG – that could help American companies ship more energy overseas at competitive costs.

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In this Aug. 6, 2017, file photo, demonstrators against the Keystone XL pipeline march in Lincoln, Neb. Opponents of the proposed oil pipeline from (AP Photo/Nati Harnik)ASSOCIATED PRESS

As we gather with our families today and give thanks for the blessings of the past year, it is a good time to take stock of where energy policy and global oil markets are headed in 2019.

With Democrats winning a majority in the House and the return of divided government, it’s unlikely that both chambers of Congress and the White House will agree on broad, far-reaching energy legislation during the 116th Congress.

The new House majority will busy itself with conducting oversight of the Trump administration, which will slow but not stop the administration’s agenda on trade, the economy and energy production.

Congress has essentially taken itself out of the energy policy game – it’s been several years since lawmakers passed substantial changes to the bulk of federal statutes governing the energy sector. Incremental change is doable, but overall the chances for major policy shifts are low.

Oversight of the oil and natural gas sector has long been the domain of state-run agencies. The rise of federal oversight over methane emissions and wastewater disposal was a new phenomenon brought about by the previous administration. State officials have largely welcomed the return of regulatory autonomy, particularly oil- and gas-producing states like Texas, North Dakota, New Mexico, Pennsylvania, Alaska.

The Trump administration’s “energy dominance” policy has steadily unraveled the regulatory agenda of the previous administration into the fossil fuels industry – reversing course on Clean Power Plan, methane emissions, and pulling out of the Paris climate agreement over economic concerns.

However, more can be accomplished at the federal level to ensure that the United States remains the world’s largest oil and gas producer and a powerhouse in energy markets for the foreseeable future, reaping the huge economic and geopolitical benefits that come with this status.

The Interior Department can look for ways to maximize federal onshore gas and oil leasing. Lengthy permit turnaround times remain an intractable issue that must be solved if the Trump administration is going to make good on its promise to boost interest in federal lands and offshore areas. It is not enough to simply make more land and offshore acreage available – we also have to remove barriers to investment.

There is big money to be had by the federal treasury here – revenue that could be used for public programs and to pay down the debt. Just look at the near $970 million haul in New Mexico’s most recent lease sale.

Narrowing the scope of National Environmental Policy Act (NEPA) reviews to the most unique aspects of a drilling project is one way to accomplish this. Wait times for federal permits are considerably longer than the permitting time for drilling on private lands, including NEPA reviews that must be conducted at anywhere from three to five different points throughout a project. Streamlining the environmental review process, particularly given the nature of “multi-well pad drilling” for shale oil and gas, would be a significant step forward. It also can – and should – be done without reducing the protection of the environment.

Tort reform is another area where the regulatory process can be improved. Too often environmental activist and indigenous groups have used the NEPA process to challenge vital infrastructure projects in federal court. Trump’s efforts to fast-track the Keystone XL pipeline, for instance, have been set back by lawsuits, adding roughly $100 million-$200 million in cost to the 1,184-mile pipeline, according to TransCanada. While most of these projects will eventually be built, the use of the courts to delay them for as long as possible is designed to inflict economic pain on companies. That strategy not only discourages investment but also increases energy costs for consumers and forces producers to find other routes – primarily rail and trucking – to less efficiently move their product to market.

Over time, Trump’s appointment of conservative judges should help alleviate some of these legal obstacles to economic growth but for now, the administration’s hands are tied to a certain extent without further regulatory reform.

The White House has said it will work with Congress to streamline federal siting and environmental reviews, which will require all of its legislative skills now that Democrats control the House. While infrastructure spending may offer a rare opportunity for agreement between the two parties, Democrats are unlikely to go along willingly with efforts to revisit the nation’s bedrock environmental laws.

Trump’s $1.5 trillion infrastructure plan is also still largely without a funding structure. Under the plan, roughly $200 billion would come from the federal treasury, while the rest the White House envisions coming from state and local sources, and public-private partnerships. Democrats may not be opposed to new spending, but there’s something of a crisis brewing among Republicans who traditionally oppose unfunded spending.

Critical energy infrastructure is needed now more than ever as the United States emerges as an oil and natural gas exporting giant. Virtually every new incremental barrel of oil and much of the natural gas produced must be exported, which means we need more pipelines, export terminals, pumping stations, gas processing and treatment facilities, liquefaction plants and port expansions. Much of this spending could come from the private sector if the federal government can remove barriers to investment.

Trump’s plan is to set a time limit of 21 months for lead agencies to complete environmental reviews, and a hard deadline of three months after that for agencies to make decisions on federal permits. Setting firm time frames – something industry and Republican lawmakers have long pushed for – would reduce the number of redundant hoops that affect the ability of project projects to be built in a timely and cost-effective manner.

Additionally, the plan talks about requiring lead agencies on NEPA reviews to develop a single document rather than each agency conducting separate reviews, something that is currently encouraged in existing White House guidance but not mandated. The plan would also seek to narrow the scope of NEPA reviews by excluding consideration of alternatives that are not “legally, technically, or economically feasible.” It also seeks to tighten parameters to make it more difficult for nuisance litigation to artificially drag out the review process – and in some cases obtain legal rulings by lower courts that can cause costly delays that only benefit the lawyers.

Overhauling the environmental review process would be a major boost to the U.S. oil and gas sector and the economy, but it’s also a heavy lift in the era of “keep it in the ground,” especially as House Democrats talk of reviving the House Select Committee on Energy Independence and Global Warming and giving it legislative authority for the first time.

Failure to improve the process for siting pipelines and other critical infrastructure will artificially constrain the U.S. oil and gas sector and reduce output starting as early as 2020. It would also hamper progress on cutting carbon emissions by impeding the transition to cleaner-burning natural gas for electricity generation.

The White House should also remain focused on expanding markets abroad for U.S. energy. Secretary of Energy Rick Perry’s recent visit to Central and Eastern Europe highlighted the importance of diversifying Europe’s supply of natural gas to reduce dependence on Russia. Asia is also an important market for U.S. producers, especially China, which is locked in an ongoing trade fight with President Trump. It’s important to remember that energy exports offer the best way for the United States to reduce its trade deficit with China.

We should also promote the newly updated BUILD Act, which reforms how the United States finances public-private investments overseas. The law could help U.S. energy producers by offering attractive financing terms for projects overseas – specifically foreign import terminals and other infrastructure needed to receive U.S. LNG – that could help American companies ship more energy overseas at competitive costs.


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