Trump delay stalls $50 billion of energy investment projects

WASHINGTON (Bloomberg) -- By the time Midwesterners fire up their furnaces this fall, the $2-billion Nexus pipeline is supposed to be pumping natural gas to heat homes from frosty Ohio to frostier Ontario. But six months out, the 255-mi (410-km) pipeline exists only on paper. 

Until President Donald Trump fills key vacancies at an energy regulator, Nexus and other sprawling energy projects are in limbo, unable to secure permits to begin construction. For Nexus developers DTE Energy Co. and Spectra Energy Partners LP, each week that passes threatens the project’s ability to meet winter demands.

Nexus is just part of at least $50 billion worth of ventures slowed or stalled while the agency that approves them, the Federal Energy Regulatory Commission, awaits presidential appointments. For the first time in FERC’s 40-year-history, the agency doesn’t have enough commissioners for a quorum to vote on project applications. At least a half-dozen pipelines valued at $12 billion face imminent delays, while projects valued at $38 billion are slogging through an approval process that’s slow in the best of times. An additional $25 billion of proposed developments just beginning the application process also could be slowed if the situation persists late into the year.

Post-inauguration bottleneck

It’s a bottleneck that can be traced to the White House in the hectic days following the inauguration. Trump inherited a commission with three Democrats and two Republican vacancies and decided to shake things up. The president took the chairmanship from Norman Bay, an Obama appointee, and gave it on a temporary basis to Cheryl LaFleur, considered by Republicans to be a friend of the industry.

In February, Bay resigned. That left the commission with just two members, LaFleur and Commissioner Colette Honorable, whose term ends in June -- one shy of the quorum needed to vote on projects. That meant no approvals for new gas pipelines. No decisions on contested utility mergers. No clearance for new liquid natural gas terminals. 

“The lack of a quorum at FERC is an embarrassing debacle for the Trump administration,” said Ethan Bellamy, a Denver-based managing director at investment firm Robert W. Baird & Co. “The leadership vacuum at FERC is holding up shovel-ready, privately funded infrastructure spending. We need those positions filled yesterday.”

Other regulatory agencies that lack enough staff to vote on issues include the Federal Trade Commission, Commodity Futures Trading Commission and the Export-Import Bank.

Stalled projects

Stalled energy projects big and small include the $1-billion, 114-mi PennEast Pipeline, designed to run from Pennsylvania to New Jersey,  TransCanada Corp.’s $850 million WB Express, and Chesapeake Utilities Corp.’s $100 million Eastern Shore expansion project, which expected approval in the first half of the year.

Pipeline delays could hit consumers directly by driving up prices for the fuel. “You could see ongoing spikes in prices, in particular New England,” said Michael Kay, a Bloomberg Intelligence analyst.

DTE Energy is still targeting the end of the year to have the Nexus pipeline up and running, CEO Gerry Anderson said in a conference call last month. That prospect grows dimmer the longer the White House takes to staff FERC.

Nominees are expected in the coming weeks. Likely candidates include Robert Powelson, a member of the Pennsylvania Public Utility Commission; Kevin McIntyre, a Washington-based partner at law firm Jones Day; and Neil Chatterjee, senior energy adviser to Senate Majority Leader Mitch McConnell.  

Formal nomination is only the beginning of what could be a months-long process. The candidates still have to be confirmed by the Senate after approval from the Energy and Natural Resources Committee. The chairman of that committee, Senator Lisa Murkowski, said Thursday she would clear time for confirmation hearings as soon as Trump announces nominees.

It’s a political process that’ll take awhile, said Martin Edwards, head of government affairs at the Interstate Natural Gas Association of America. “How much time is really unknowable,” he said. Confirming the last commissioner to join the panel, Bay in 2014, took six months.

Pipelines pile up

As the wait continues, even more projects will get caught in FERC’s bottleneck at a time when developers are rushing to find outlets for booming shale production.

Two major pipelines are expected to receive their final environmental reviews in June, setting them up for construction permits later this year. EQT Midstream Partners LP and NextEra Energy Inc. are among the companies developing the $3.5-billion Mountain Valley pipeline, which would span the East Coast, delivering 2 Bcf of natural gas a day to Mid-Atlantic and Southeastern states. The $4.5-billion, 550-mi Atlantic Coast pipeline, the product of a partnership that includes Dominion Resources Inc. and Duke Energy Corp., would deliver 1.5 billion cubic feet a day to West Virginia, Virginia and North Carolina. Together, the lines would deliver enough gas to heat 62,000 homes through the winter, according to estimates from Energy Information Administration data.

The timing of approvals can affect developers’ ability to meet environmental conditions. After receiving a permit in February, on the last day FERC had a quorum, Energy Transfer Partners LP raced to clear 3,000 acres of forest before the start of bat-roosting season, a deadline that could have stymied construction of its $4.2 billion Rover pipeline.

The fate of these projects has gained new significance in recent years, as the U.S. is expected to become a net natural gas exporter by 2018, according to the EIA.

Growing backlog

FERC’s lack of a quorum thwarts its work in other ways. Its two remaining members can’t approve new hydropower plants, rule on contested utility mergers, or finalize settlement agreements in market-manipulation cases. A proposed rule on commercial battery storage is on hold, as is a decision on adjusting FERC’s disputed income tax allowance policy for master limited partnership pipelines.

LaFleur has delegated authority to senior staff to take action on lower level issues, such as clearing pipeline tariff rates. Still, the commission is issuing 85% fewer orders than is typical, she said.

“We’re building up quite a backlog,” LaFleur said in an interview. “Infrastructure cases are pending, merger cases are pending and a number of rule-makings and inquiries that were started we can’t bring to completion.”

The Nexus developers have been waiting for a permit for six months. In January, they asked FERC to grant them a permit before Bay’s resignation, arguing in a letter to the agency that the imminent lack of a quorum would “jeopardize the project’s ability to meet demand.”

For now, the wait continues.