EPA and FERC chiefs brief independent producers on administration achievements, policies

HOUSTON - Late last week, on Day 2 of its annual meeting and 90th anniversary, the Independent Petroleum Association of America (IPAA) heard from the respective heads of the EPA and FERC on how Trump administration policies are benefitting both the nation and the upstream oil and gas industry. Speaking at a hotel in Washington, D.C., their assessments received a favorable response from a key administration constituency.

EPA’s accomplishments, ongoing work. Providing an environmental regulations overview in the first session of the morning was EPA Administrator Andrew Wheeler, who has now been in that post for close to nine months, although he served as “acting administrator” for an additional seven months from July 2018 to  February 2019. He also had been deputy EPA administrator before that for three months, beginning in April 2018.

Wheeler provided attendees a review of administration achievements and current policies, including items that pertain directly to independent producers. For instance, “At EPA, we established an assistance portal, which is a one-stop shop intended to help small and medium producers (cope with regulations),” noted the administrator. “Stakeholder engagement remains a priority focus for us.”

One area that Wheeler said has not gotten enough attention is the great strides that have been made in U.S. air quality, particularly given the ongoing, raucous dialogue about climate change.  “From 1970 to 2018, air pollution has declined, and the air is now 74% cleaner than it was in 1970,” pointed out Wheeler. “And we’ve done this while U.S. GDP has grown 278% (in the same timeframe). You certainly won’t hear that from the media.”

Taking this theme a step further, the administrator added, “We produce our natural gas in a more environmentally conscious fashion than our international competitors. And while all this was going on, we became the world’s largest oil and gas producer. The truth is that the U.S. leads the world in energy production and environmental protection.”

One of Wheeler’s major complaints is that individual states are taking the power of federal regulations a step, or many steps, further than what was intended, all in the name of stopping the use of one or more fossil fuels. “Section 401 of the Clean Water Act gives states some control over projects on their lands,” explained the administrator, “but some states use it to kill projects altogether (and for other political purposes). We should allow the free market to determine which fuels are used in the country, not the EPA. The Obama administration tried to use the EPA to do this.”

Wheeler said that it’s really too early to judge the effectiveness of EPA’s recent actions during his tenure, saying that it will take time to see the full results. “From Day 1, I sat our political staff down and said, ‘I will not judge how successful our actions and rules (revisions) have been, until at least two years go by.’ I am making sure that we follow the law, but one of my biggest complaints about the Obama administration was that they went way beyond the law (in pushing their agenda).”

One of Wheeler’s passions is his never-ending effort to get the news out to the public about the accomplishments being made at EPA, which the media, he claimed, are not reporting. “I’m trying to (educate the public) every day about the 74% improvement in U.S. air (quality). Similarly, today, 92% of our U.S. (public) water systems meet EPA standards.”

The view from FERC. Following Wheeler in briefing producers was Federal Energy Regulatory Commission (FERC) Chairman Neil Chatterjee. He reacquainted producers with the wide-ranging role that FERC plays, which includes interstate commerce-related items, including regulating transmission and wholesale sale of electricity and natural gas, regulating transportation of oil by pipeline, and reviewing proposals to build interstate natural gas pipelines, gas storage projects, and LNG terminals. In addition, FERC licenses private, municipal and state hydropower projects.

Chatterjee went on to laud producers on their reliability and the role they play in the U.S. energy infrastructure. “The role that you guys play in ensuring our energy supply is (critically important),” said the chairman. “The fact that we’ve had the chance to be a net exporter for the first time in 60 years is remarkable.”

However, added Chatterjee, there was a point where he had been worried that the U.S. would not fully play a role in the global LNG market. “It had been almost two years since we had approved an LNG project, before we approved the first of (of a string of) seven projects. And I was concerned that the U.S. was going to miss this opportunity.” Fortunately, he noted, the U.S. is now becoming a major force in worldwide LNG trading, and there are good reasons for it. “I’ve talked to many colleagues in (various) European governments,” explained Chatterjee, “who like to deal with us, because they appreciate our regulatory certainty. And they also want a counterweight to Russian gas.”

The chairman voiced a concern, whereby he believes that the general public has no idea of the tremendous workload shouldered by FERC, particularly new project permit applications. “FERC is responsible for overseeing previous projects, as well as new applications,” said Chatterjee. “These applications can be 40,000 to 50,000 pages in length. We have a number of additional projects in the queue.”

Accordingly, continued Chatterjee, “We’ve created a new LNG Division in our Office of Energy Projects. We’re also opening a new Houston office. We’re hopeful that we can find some folks there that would serve, who might otherwise not come to Washington (due to the high cost of living and the contentious nature of the city). I want to make sure that the commission is not only prepared to work on LNG and pipeline projects, but also hydro projects. We’re working with some senators and House members, to get outside the regular pay scale that is capped, to give us the ability to attract top talent. I’m concerned about keeping the talented staff that we have now.”

Chatterjee said that one of his goals in shepherding FERC is to provide industry companies with some degree of certainty, as they try to conduct their business. “You all (the industry) are not just making two-, three- and four-year decisions, you’re making decisions on 10-, 20- and even 30-year projects. For you to have confidence in your decision-making, you need to know that there is stability and durability in the regulatory landscape.”

The administrator expressed dismay at the acrimony and frequent litigation that occurs in today’s U.S. pipeline approval process. “(As regards pipeline projects), unfortunately, what used to be routine has become a very contentious process,” said Chatterjee.

He ended his remarks on a hopeful note about U.S. LNG in the global marketplace. “There is considerable excitement around the world about U.S. LNG.” One European regulator told him that “they were concerned about over-reliance on Russian gas, and he said that they would be willing to pay a slightly higher price, ‘because freedom has a price.’”