Cutting of Red-Tape Begins

Energy Matters

Within hours of President Trump being sworn in, he will take action to change the energy and environmental oversight of the federal government. He is being urged to suspend guidelines with which federal agencies weigh climate change when approving pipelines, deciding what areas to open for drilling, or taking other major actions. He is looking at changing the new executive order that requires agencies to consider the social cost of carbon in decision-making. President Trump is also looking at rescinding the executive order that put the State Department in charge of permitting border-crossing oil pipelines. In addition, he is preparing to sign executive actions in other areas, such as cracking down on immigration and he mentioned building a wall on the U.S.-Mexican border. President Trump’s advisers have identified more than 200 potential executive orders for him to consider signing on healthcare, climate policy, immigration, energy, and numerous other issues.

Congress is also poised to start cutting bureaucratic red tape and regulations.

The list includes measures that would change the way rules are promulgated, as well as rolling back regulations and changes to judicial review. Their list, which they began enacting last week, includes:

  • “Regulations from the Executive in Need of Scrutiny Act,” H.R. 26, would require congressional approval of measures with an estimated annual economic impact of more than $100 million. House Republicans passed the bill again this month.
  • “Regulatory Accountability Act,” H.R. 5, would require federal agencies to identify the objective of a proposed rule and choose the lowest-cost alternative. It would repeal the Chevron and Auer legal doctrines, which encourage the courts to defer to agencies’ interpretations of laws. It would also prevent billion-dollar rules from taking effect until courts can resolve litigation brought against those agency actions, among other reforms. Among other ramifications, that could affect U.S. EPA’s ability to set air quality standards under the Clean Air Act. The bill passed the House this month.
  • “SEC Regulatory Accountability Act,” H.R. 78, would amend the Securities Exchange Act of 1934 to increase the use of cost-benefit analyses in the rulemaking process, primarily in the financial sector. The measure would require the SEC to take a number of additional steps before issuing new regulations. The measure passed the House this month.

Specific regulations or executive actions targeted for repeal or change will depend on the actions taken by the Administration, which could eliminate the need for Congressional involvement in some areas.

But, the current list includes:

  • Repealing the Clean Power Plan has long been a top priority for congressional Republicans;
  • The Paris climate agreement is a global response to the risks of climate change. It was signed by nearly 200 countries and went into effect last November;
  • Oil and natural gas standards released, by EPA under the Clean Air Act, that directly limit emissions of methane, a potent greenhouse gas. The rules cover new and heavily modified equipment and operations in the oil and gas industry;
  • Arctic and Atlantic drilling – the president banned drilling in parts of the Atlantic and most of the Arctic;
  • The Dakota Access pipeline, which many Republicans would like to see the advance;
  • Vehicle standards, with which EPA set tighter fuel economy rules for cars and light trucks for 2022-2024;
  • Ending clean energy tax incentives;
  • Energy efficiency standards, which have been increased under the Obama Administration, but are under attack under legislation introduced by Rep. Michael Burgess (R-Texas);
  • The Endangered Species Act, which has added protections for sage grouse, gray wolves, and salmon. The new Senate Environment and Public Works Chairman John Barrasso (R-Wyo.) want to overhaul it adding to the list of key Republicans eyeing the landmark law for reforms.

The 20th of January is day one of “sweeping out the old guard.”


TRANSITION NEWS

AmericanFlag

Interior Pick Walks Fine Line on Climate, Highlights Conservation Rep. Ryan Zinke, President-elect Donald Trump’s nominee to be the next secretary of Interior, used his confirmation hearing Tuesday to repeatedly highlight his record on conservation, while walking a fine line on the hot-button issue of climate change. Montana’s sole congressman sought to compare himself to President Teddy Roosevelt and his strong conservation agenda, while saying he’ll ensure that fossil fuel production on federal land still have a place. Zinke sought to contrast his positions against those of the GOP on key questions, specifically the transfer of federal land to state or private control. “I want to be clear on this point: I am absolutely against transfer or sale of public land. I can’t be any more clear,” he said. He committed repeatedly to working with senators on the issues they care about, including ending the moratorium on coal mining leases on federal land, supporting the repeal of the Bureau of Land Management’s methane venting and flaring rule, and asking Trump to undo national monument designations made by President Obama that do not have local support, although he was not confident that Trump could do that himself. “Legally, it’s untested,” he said, adding that he’d prefer to work with states on national monument questions when possible. Under questioning from Sen. Bernie Sanders (I-Vt.), Zinke insisted that he believes man-made climate change is “not a hoax,” notably breaking with Trump. Read more on The Hill

Pruitt Vows to Defer to Ethics Officials on Recusal from Environmental Lawsuits Scott Pruitt may claim the reins of the Environmental Protection Agency in days, but the Oklahoma attorney general won’t commit to recusing himself from environmental lawsuits in which he continues to participate. Instead, Pruitt told the Senate Environment and Public Works (EPW) Committee he will defer to EPA ethics officials for their advice on recusal. That EPA ethics position is currently unclear, meaning Pruitt, President-elect Donald Trump’s pick for EPA administrator, could direct the EPA to agree with state and industry challenges against sweeping EPA regulation. During Pruitt’s day-long nomination hearing Jan. 18, Sen. Ed Markey (D-Mass.) pushed Pruitt to unilaterally withdrawal from those suits, but Pruitt repeatedly vowed to defer to the ethics officials. Pruitt is involved in several active lawsuits against the EPA, including challenges to the Clean Water Rule, Clean Power Plan, ozone air quality standards, mercury standards and methane limits for the oil and natural gas industry. Markey said Pruitt’s deferral Pruitt pledged to follow the advice of the counsel. The nominee also said he would recuse himself for one year from all EPA matters involving entities under which he recently served, which include the Southern Baptist Theological Seminary, Windows Ministry Incorporated and the controversial Rule of Law Defense Fund. That one-year pledge was included in Pruitt’s disclosure to the Office of Government Ethics. The Office of Government Ethics cleared Pruitt but admitted Jan. 17 the ethics request does not include political affiliations. Read more on Bloomberg

Speeches Can Offer Clues About a President’s Green Policy As the New York businessman is sworn in as the nation’s 45th president today, he’s promising a short, albeit traditional, inaugural address, penned in his own hand, that will focus on the challenges facing the nation. For nearly 2 ½ centuries, inaugural addresses have often soared with grand, eloquent visions for America and bold calls for all citizens to come together to face the challenges of the time. A careful reading of speeches delivered by the most recent chief executives over nearly 50 years shows they hinted at how they might approach issues like the environment, conservation, energy and climate change. It suggests too that Trump will likely offer similar guideposts. President Nixon in 1969 called for Americans to “press forward urgently” with several domestic goals, among them “protecting our environment” at the dawn of the modern environmental movement and less than two years later, Nixon would sign legislation creating U.S. EPA. And in 1977, President Carter did not even mention energy in his speech, although the nation’s energy crisis would become a defining issue of his presidency and he would create the Energy Department. Reagan did not directly address energy or environmental policy in either of his inaugural speeches in 1981 and 1985, but in both he sought to rally Americans behind a more limited government and deep cuts in federal spending and taxes. President Clinton cited the need for environmental protections in both of his inaugural addresses previewing how he would go on to use his power under the Antiquities Act to designate more national monuments than any other president up until that time. President George W. Bush did not weigh in on energy or environmental policies during his inaugural addresses. Democrat Barack Obama touched on themes friendly to the environmental community in both his first and second inaugural addresses. No president spoke more about climate change in his inaugural address than Barack Obama, who has a lengthy green legacy that includes signing the Paris Agreement; establishing a federal framework for reducing emissions, known as the Clean Power Plan; and supporting a range of expanded federal efforts for renewable energy and energy efficiency programs. Trump, has been reviewing past inaugurals as he drafts his speech. Read more on E&E


 

ENERGY TRANSPORTATION NEWS

New Hazardous Liquid Pipeline Reporting, Inspection, and Assessment Requirements Released The Pipeline and Hazardous Materials Safety Administration released newly expanded reporting, inspection and assessment requirements for hazardous liquid pipelines in the final version of a wide-ranging rule Jan. 13. The rule’s main benefits will come from avoiding hazardous pipeline accidents that can be prevented through early detection, the agency said. Parts of the rule are based on recommendations from the National Transportation Safety Board’s report on a 2010 pipeline rupture in Marshall, Mich. and a 2012 Government Accountability Office report on federally unregulated gathering pipelines. “A lot of [the rule] is technical, engineering material, and actually that’s a good thing,” said the Association of Oil Pipe Lines. Operators have been concerned that previous pipeline repair criteria required them to spend more time on less-urgent issues, creating blind spots in potentially high-priority areas. “PHMSA has adjusted the language now; they’re allowing for engineering assessments of the pipe and giving multiple approaches. And the rule allows operators to be proactive with their safety inspections. We’re gratified that PHMSA heeded the comments of stakeholders and made adjustments to the rule that allows operators to tailor their safety programs to best fit the specific pipelines,” he said. Read more on Bloomberg

Away from Protests, Crude Quietly Runs Through Great Lakes Even as Native American tribes and environmentalists ostensibly won their battles against two pipelines — Dakota Access and Keystone XL — in the past few years, companies have been quietly shuttling enormous volumes of oil through the Great Lakes region, potentially imperiling the world’s largest freshwater ecosystem. Though President Obama rejected Keystone XL in 2015, Enbridge Inc. lines with three times KXL’s capacity already run from Alberta into Wisconsin. “The Enbridge Mainline system is the largest in the country,” said a lawyer who has represented environmental groups in court battles. “A lot of oil goes through there. Much more than people understand.” Enbridge’s current capacity equals 20 percent of total U.S. oil imports. And the corporation is already planning another pipe that would span 1,000 miles and carry 370,000 barrels per day from Alberta to Superior. The line would balloon total capacity to 3 million barrels of oil per day into Wisconsin alone. “Enbridge has taken a different approach [to building pipes], which is sort of piecing together a whole network based on incremental pipeline expansions and really avoiding the scrutiny some of these other big pipelines are getting,” said an attorney with the Sierra Club Environmental Law Program. Over the past 10 years, Enbridge has suffered around 70 spills annually. Read more on E&E

New North Dakota Governor Expects Controversial Pipeline to be Built North Dakota Gov. Doug Burgum (R) said in an interview with Reuters that he believes the Dakota Access pipeline will eventually be built. The pipeline’s approval will be a foregone conclusion after Inauguration Day, Burgum said. “I expect the world’s going to change dramatically on that day relative to finding resolution on this issue,” Burgum said. “I would expect that [pipeline builder Energy Transfer Partners] will get its easement, and it will go through.” Burgum also urged protesters to clean up their camp before the spring flood, which has the potential to create an ecological disaster. A centrist Republican with no prior political experience, Burgum was elected last month in a landslide during the peak of tensions surrounding the pipeline. He campaigned on a platform of streamlining government and improving relations across the state. Read more on Reuters

Vandals Rip Oilfield Pipeline from Ground Near Hythe Canadian police believe activists ripped a section of an oil pipeline out of the ground near Hythe, a village in northern Alberta. The activists likely used a piece of heavy construction equipment to dig up part of the pipeline, according to the Beaverlodge Royal Canadian Mounted Police. The pipeline was still under construction, and nothing was spilled. But the damage to the pipeline amounts to between 500,000 and 700,000 Canadian dollars ($383,000 to $536,000), said Grande Prairie RCMP Constable Michelle Mosher. This was hardly the first instance of environmental activism in the region. In the 1980s and the 1990s, northern Alberta witnessed hundreds of acts of vandalism against the natural gas industry. Read more on Edmonton Journal

Native American Tribe Attempts to Stop Railway from Hauling Crude Oil Across Reservation A tribe seeking to stop BNSF Railway Co. from hauling Bakken crude oil across its reservation is not entitled to an injunction, but may ask the Department of Interior to cancel the railroad’s right of way, a federal judge found Jan. 13 Swinomish Indian Tribal Community v. BNSF Railway Co. The case was the first to litigate whether a tribe can exclude a railroad for violating an easement agreement. The District Judge ruled that while he is preempted under federal law from enjoining BNSF from hauling crude across the reservation near Anacortes, Wash., the tribe can ask the Bureau of Indian Affairs to terminate the railroad’s right of way. The tracks of BNSF cross the Swinomish reservation on an inlet off Puget Sound on their way to nearby Tesoro and Shell refineries that supply a major share of petroleum products to Washington and Oregon. “There is no genuine issue of fact regarding the existence of a breach in this case,” he wrote in his order. “BNSF’s predecessor promised to keep the Tribe apprised of the cargo it was carrying and to limit the number of trains (and the number of cars in those trains) ‘unless otherwise agreed in writing. BNSF has breached both of those promises” made in the easement agreement. In his order on cross motions for summary judgment, the Seattle judge found that the tribe is not preempted from pursuing its breach of contract claim in his court for damages from BNSF’s violations of the agreement. It also can seek to compel production of cargo lists and adjusted rental payments. The Judge rejected BNSF’s argument that the tribe’s right to exclude the railroad under its treaty and the Indian Right of Way Act (IRWA) of 1948 was abrogated by the ICCTA. His order included an exhaustive review of both statutes and found “no evidence to support a finding that Congress intended to implicitly repeal the IRWA” when lawmakers later passed the ICCTA. Read more on Bloomberg

Old Systems Under Great Lakes Worry States The Great Lakes are home to the Straits of Mackinac, which have dangerous currents unlike any other spot in the lakes and are home to an underwater pipe pumping 540,000 barrels of oil per day. In 1953, a Canadian pipeline company decided that spot would be better than a longer route down the length of Wisconsin. The pipeline was supposed to move about 300,000 barrels each day. But in 2013, the capacity was increased to 540,000 barrels after the pipeline owner increased pressure on the steel tubes. The Great Lakes are home to 20 percent of the world’s fresh surface water. The state of Michigan has ordered an environmental and economic risk study, which is funded by the oil pipeline giant Enbridge Energy Co. Inc. but not overseen by it. While the study is ongoing and is expected to be completed later this year, Enbridge says it is a victim of fearmongering. It says the pipelines undergo regular inspections and that they are as good as new. “We know from the many levels of inspections and diagnostics that the line is in very good condition and can continue to safely operate indefinitely so obsolescence is not a factor,” company officials wrote in 2015.” Read more on E&E

Tribe Cites Oil Spill Potential in Wis. Pipeline Fight Taking a cue from the Standing Rock Sioux’s battle against the Dakota Access pipeline, a tribe in Wisconsin is pushing to get a piece of pipeline removed from its reservation. The Bad River Band of the Lake Superior Tribe of Chippewa Indians is calling for the removal of Line 5, a pipeline operated by Enbridge Inc. The tribe has expressed concern over a potential oil spill from the pipeline, which was constructed in the 1950s. This marks a turning point in tribal activism that until now has focused on halting new pipeline construction, including the high-profile protests against Dakota Access in North Dakota and the Keystone XL expansion project to carry oil across the Canadian border. The controversy over Line 5 was set in motion in 2013, when leases expired that allowed Enbridge to operate the pipeline on certain parcels of tribal land. Other leases that permit the pipeline on different parcels of tribal land will not expire until around 2040. Earlier this month, the Bad River Band passed a formal resolution against renewing the leases that expired in 2013. The resolution also called for the decommissioning and removal of the pipeline from all tribal land. In its 64 years of operation, Line 5 has never spilled. But many tribal members worry that it’s only a matter of time. Line 6B, another Michigan pipeline operated by Enbridge, spilled into a tributary of exceeding 1 million gallons, according to an estimate by U.S. EPA. “When we looked at the Kalamazoo line, which was pretty similar in size, it was only a little over 40 years old when it ruptured and caused catastrophic damage to those communities,” Jennings said. “Here we have a line that’s been in the ground for 64 years. We as a council don’t believe that we can put faith in something so old. If it were determined that the land belonged to the entire tribe, Enbridge would need the whole tribe to consent to the pipeline. But if it were determined that the land belonged to individual tribe members, Enbridge would only need a certain percentage of those individuals to consent, she said. In either scenario, it would be highly unusual for state or federal authorities to force the tribe to allow the pipeline under the legal process known as condemnation.” Read more on E&E

FERC Locks Out Protesters, Approves Gas Pipelines The Federal Energy Regulatory Commission approved two contentious East Coast gas pipelines proposed by TransCanada Corp., developer of the stalled Keystone XL oil project. FERC Chairman Norman Bay and Commissioners Cheryl LaFleur and Colette Honorable announced the approval of the $1.8 billion Leach XPress and Rayne XPress pipelines after a meeting that was webcast but otherwise closed for what the commission said were “public safety” concerns. U.S. EPA had faulted FERC’s work on the Leach Xpress, calling its assessment of downstream greenhouse gas emissions “insufficient” and suggesting that the agency look at alternative routes and further environmental protections. Thursday’s meeting, the last before President-elect Donald Trump’s inauguration, ended that dispute as EPA isn’t expected to push for deeper reviews of gas projects. TransCanada said it plans to begin construction on both projects in February after it secures remaining regulatory approvals. In a separate vote, FERC approved a report tied to the Potomac-Appalachian Transmission Highline transmission project, originally slated to run from West Virginia to Frederick, Md. The commission at the meeting also opened investigations into how much two pipeline companies owned by Kinder Morgan— Natural Gas Pipeline Company of America LLC and Wyoming Interstate Co. LLC — are recouping from their customers. The agency wants to ensure rates charged to customers are fair under the Natural Gas Act. Read more on E&E

DOT Rule Probes Value of ‘Real-Time’ Oil Train Data Transportation safety officials are seeking input on the pros and cons of sharing oil and ethanol train data with state intelligence centers, according to an advance notice of proposed rulemaking issued. The document marks the Department of Transportation’s latest attempt to fill information gaps laid bare by hazardous-material train accidents and explosions in recent years. In several incidents, including a deadly 2009 ethanol train derailment and fire, first responders reported initial confusion over the hazardous materials they were dealing with, leaving them in the dark about how to respond. The new rulemaking instead of bringing state emergency response commissions in the loop on oil and ethanol train movements and volumes, would key in “fusion centers.” These low-profile facilities form a conduit between U.S. intelligence agencies and state homeland security offices in their efforts to combat criminals and terrorists, from hackers to active shooters. Their day-to-day operations are largely shielded from public view. A 2012 Senate report warned of such fusion centers “endangering citizens’ civil liberties and Privacy Act protections” while chasing leads “more often than not unrelated to terrorism.” There is at least one locally staffed center in each state and federal territory, and they typically draw in additional support and funding from the departments of Homeland Security and Justice. DOT notes in its rulemaking that “fusion centers are in a unique position to empower front-line law enforcement, public safety, fire service, emergency response, public health, critical infrastructure protection, and private sector security personnel to gather lawfully and share threat-related information.” In the past, railroads have voiced concerns about oil and ethanol train information passing into the hands of too many state or federal officials, suggesting it could fall into the wrong hands and cause a security threat. Read more on E&E


OIL AND GAS INDUSTRY NEWS

oil

Oil Prices Creep Lower Ahead of OPEC Data Oil prices edged lower last week, with investors set to digest key numbers from the Organization of the Petroleum Exporting Countries this week that will give further clues on supply and demand. Earlier prices were slightly higher. The primary driver in oil markets remains the deal struck by OPEC members and several other large producers to cut output. So far, the accord has been adhered to, as energy giants like Saudi Arabia and Russia ease back their output. Donald Trump’s presidential inauguration Friday will shift focus to the U.S. The U.S. oil drilling sector got off to a slow start in 2017. Baker Hughes released its regular rig-count data Friday, which showed rigs had fallen by seven in the last week. Also last week, the U.S. Department of Energy said domestic oil production would likely rise to an average of 9.3 million barrels a day by 2018. The changes “largely reflect increase in federal offshore Gulf of Mexico production,” it said. Goldman Sachs predicts that U.S. oil production will increase by 235,000 barrels a day on the year in 2017, taking into account the backlog of oil wells that have or will be brought back to active drilling between the last quarter of 2016 and the first half of 2017. Read more on Wall Street Journal

Energy Jobs Grow by 5% in 2016 U.S. energy and energy-efficiency jobs grew by more than 300,000 last year, up 5 percent, the Energy Department said in a new report. Those jobs accounted for 14 percent of all new jobs created in the U.S. in 2016, the department said in its second annual energy jobs and employment report. The report highlights the number of new jobs added in four different energy job sectors: electric power generation and fuels; transmission, distribution and storage; energy efficiency; and motor vehicles. The 2016 job growth falls 2 percent short of projections made in 2015 by businesses in the four sectors, according to the agency’s first annual report. Of particular note, the report said wind energy jobs in 2016 increased by 32 percent, and the solar energy workforce increased by 25 percent. There are 2.2 million Americans employed in the energy-efficiency sector in the U.S., which added 133,000 new jobs in 2016, according to the report. Nearly 75 percent of employers said they had difficulty hiring qualified workers over the last 12 months, and 26 percent reported it was very difficult, the report said. Read more on Bloomberg

Enviros Shut Out of Industry Leasing Lawsuit Environmentalists will not have the chance to fight against an industry lawsuit that pushes for more frequent lease sales. A federal court in New Mexico rejected a request from a coalition of environmental groups to intervene in the legal battle between oil and gas drillers and the Interior Department. The groups plan to appeal the decision. The suit, brought by the industry group Western Energy Alliance in August, accuses Interior’s Bureau of Land Management of failing to hold lease sales for public lands four times a year, as specified in federal law. Lawyers for the group say the Obama administration frequently bows to environmental pressure and cancels or delays lease sales. The Wilderness Society, the Sierra Club, WildEarth Guardians and several other groups took the government’s side, arguing that the Western Energy Alliance was trying to force the government to prioritize industry interests over the public interest, including environmental protection. But the U.S. District Court for the District of New Mexico denied their request to join the case. Read more on E&E


 

ENERGY REGULATORY NEWS

House Watchdog Floats Moving Interior, EPA out of D.C. The House’s top watchdog wants to push federal agencies including the Interior Department and U.S. EPA out of Washington and into the states. “Maybe the Department of the Interior should come to Utah. Maybe the EPA could be in a different state, maybe the Department of Transportation could be in Los Angeles,” Oversight and Government Reform Chairman Jason Chaffetz (R-Utah) said. Chaffetz this week introduced a resolution that would express a desire by the House that government headquarters shouldn’t be required to be located in the nation’s capital. The proposal could gain traction in the House and within the Trump administration, although moving massive federal agencies would be a major bureaucratic undertaking. Most of the federal workforce isn’t in Washington. About 85 percent of government employees work outside the capital region, according to government data. Read more on E&E


 

ENVIRONMENTAL NEWS

EPA

Justices Take up WOTUS Jurisdiction Dispute The Supreme Court has agreed to take up the dispute over which lower courts have jurisdiction to hear challenges to the Obama administration’s Clean Water Rule. Justices today granted an industry petition asking the court to reconsider the 6th U.S. Circuit Court of Appeals’ decision to hear legal challenges over the rule, which is also known as Waters of the U.S., or WOTUS. More than 30 states and many industry and farm groups have challenged the joint U.S. EPA-Army Corps of Engineers rule redefining what waterways and wetlands receive automatic protection under the Clean Water Act. The 6th Circuit issued a nationwide stay of the rule pending the resolution of the litigation. The National Association of Manufacturers, with the support of 31 states, petitioned the Supreme Court to reconsider the 6th Circuit’s jurisdiction decision. It argued the litigation belongs in local district courts. The decision by the Supreme Court to review the 6th Circuit decision is a big setback for the Obama administration, which has sought to keep the litigation in the appellate court and avoid fights in district courts that might be more sympathetic to challengers of the rule. The fate of the litigation remains murky, though, given that President-elect Donald Trump will likely take steps to eliminate the rule. Read more on E&E

Obama’s Methane Emissions Requirement May be Short-Lived The oil and gas industry lost a court bid to block an Obama administration requirement to contain methane emissions from production on federal land, but they may soon win in Congress. A federal judge in Casper, Wyoming, said the new rule can take effect Tuesday over the objections of that state, North Dakota, Montana and two industry groups. The outgoing president’s victory may be short-lived. House Majority Leader Kevin McCarthy has said Republican lawmakers will seek to repeal the methane rule, as part of a roll back of Obama administration policies.“ There are undoubtedly certain and significant compliance costs attached to the rule, which are unrecoverable from the federal government,” the U.S. District Judge said in his ruling. But the judge said he’s not convinced those costs were so imminent that a temporary court order blocking the rule was needed to prevent harm. Western Energy Alliance and Independent Petroleum Association of America who brought the case said, “The venting and flaring rule oversteps BLM’s mandate from Congress by usurping Clean Air Act authority that resides only with the Environmental Protection Agency and the states. Read more on Bloomberg

EPA Finalizes Standards as Unhappy Carmakers Look to Trump The Obama administration locked in tighter fuel economy standards for cars, minivans, SUVs and pickup trucks — finalizing the decision 14 months ahead of schedule and a week before the inauguration of Donald Trump. A component of President Obama’s climate change agenda, the greenhouse gas standards would bring average fleetwide fuel economy for new vehicles to 50.8 mpg in 2025. EPA could have chosen to raise or ease standards set in 2012 for model year 2022-2025 vehicles as part of a midterm review, but the agency proposed last November to keep them unchanged. That decision surprised automakers because the final deadline had been April 2018 and the decision was expected to go to the next administration. It decided to maintain the standards to “provide regulatory certainty for the auto industry despite a technical record that suggests the standards could be made more stringent.” A technical report released last summer found automakers could meet or exceed the standards through 2025 with existing or developing technology, although it cautioned that consumer appetite for trucks and SUVs over passenger cars would slightly curb the average fleetwide fuel economy. Because it is not a rulemaking, EPA’s allies said, the decision is not subject to the Congressional Review Act. The Trump administration and the Republican Congress have several options to tweak the rules. Read more on E&E

Barrasso Sets Sights on Endangered Species Act ‘Update’ Newly minted Senate Environment and Public Works Chairman John Barrasso wants to overhaul the Endangered Species Act, adding to the chorus of key Republicans eyeing the landmark law for reforms. The Wyoming Republican identified the ESA as a top legislative priority for the panel this Congress, which formally meets for the first time tomorrow to hold a hearing on President-elect Donald Trump’s nominee to head U.S. EPA, Oklahoma Attorney General Scott Pruitt (R).”I want to find ways to update, improve, strengthen the Endangered Species Act so it actually helps species that are put on the list with a recovery plan and then a way to actually get them off the list,” Barrasso told reporters in a meeting this morning to discuss his expectations for the panel. Other key Republicans have also made clear that the ESA is in their sights, including House Natural Resources Chairman Rob Bishop (R-Utah), who last year suggested the law should be repealed entirely. A major focus, he said, will be “eliminating a lot of the red tape and the bureaucratic burdens that have been impacting our ability to create jobs.” A specific legislative priority will be addressing EPA’s Waters of the U.S. rule, which attempts to delineate which wetlands and waterways get automatic protection under the Clean Water Act. Much of the committee’s early focus will be on processing nominees for agencies under its purview, including the Fish and Wildlife Service and the Nuclear Regulatory Commission, but Barrasso signaled that he plans to push to repeal as many of President Obama’s rules as possible through the Congressional Review Act. “There’s an entire list that the administration has been working on,” along with House and Senate leaders, he said, with the Bureau of Land Management’s venting and flaring rule a top priority of rules for EPW.” Read more on E&E

Court Revives Bush-era ‘Transfers’ Rule in Surprise Win for EPA A federal appeals court reinstated U.S. EPA’s controversial “water transfers” rule, reversing a lower court ruling that struck down the George W. Bush-era regulation. EPA in 2008 formalized its long-standing position that water transferred from one body of water to another via a canal, channel or pumping station did not require a Clean Water Act discharge permit as long as there wasn’t an industrial, municipal or commercial use along the way. Such systems are common in drinking water infrastructure throughout the country. Environmentalists, however, have criticized the policy for years, arguing that it allows pollutants from a body of dirty water to be moved into another with cleaner water. They filed multiple lawsuits and celebrated when a federal judge in New York threw out the rule in March 2014. EPA and others appealed, and the 2nd U.S. Circuit Court of Appeals ruled 2-1 yesterday that while the regulation does not appear to achieve the Clean Water Act’s goal of protecting water quality, the agency’s justification was sound and thus deserved deference from the court. But he said the court was bound by the Supreme Court’s 1984 Chevron USA Inc. v. Natural Resources Defense Council Inc. precedent, which held that courts must defer to an agency’s interpretation if it is reasonable. Read more on E&E

LaFleur to be Trump’s Choice to Lead FERC Commissioner Cheryl LaFleur is said to be Trump’s pick to be FERC Chairman. LaFleur has previously served as acting chairman and chairman of FERC; she has grid security, regional transmission planning and a “clean and diverse” power supply listed as priorities Before joining FERC, LaFleur was executive VP, acting CEO of National Grid USA. She was appointed to the Commission by President Obama. Read more on Bloomberg


 

GLOBAL ENERGY MARKET NEWS

Number of Liquefied Natural Gas Tankers Passing Through Panama Canal Increased in Final Quarter of 2016 The Panama Canal is benefiting from Asia’s hunger for U.S. shale gas. Fourteen tankers hauling liquefied natural gas passed through its expanded shipping lane on average a month in the final quarter of 2016, up from five in the previous period. U.S. gas exporters are taking advantage of a price premium in Japan and China and boosting shipments from Cheniere Energy Inc.’s terminal in Louisiana, according to the Panama Canal Authority. LNG traffic is an unexpected boon for the Panama Canal expansion project that was first proposed more than a decade ago, before the U.S. shale boom took hold. The more than $5 billion upgrade added a third set of locks that made it possible for large tankers and container ships to use the shortcut between the Atlantic and Pacific Oceans for the first time. LNG has become the third-largest driver of traffic in the wider shipping lane. Since the new locks started operating on June 26, the canal has seen 64 LNG tanker crossings and the authority has received bookings for another 29 through Feb. 24, he said. The new locks are handling a total of about six cargoes a day and the authority plans to increase that number to 11 to 12 transits. Read more on Bloomberg

OPEC Faces Headwinds From Rising Non-OPEC Production OPEC is facing headwinds with rising production from rivals, the International Energy Agency said Thursday, the latest warning that OPEC’s efforts to take barrels out of the market could backfire. The Organization of the Petroleum Exporting Countries—the 13-nation oil cartel that controls over a third of global crude production—promised to throttle back its output by 1.2 million barrels a day, or almost 4%, on Nov. 30. There are 11 countries outside the group—including Russia—that have agreed to join with cuts of 558,000 barrels a day on Dec. 10. But in its closely watched monthly report, the Paris-based IEA, which advises key oil consuming nations, said other producers were stepping into the breach, as investment in their fields is bolstered by higher oil prices. Despite pledges to reduce output by Russia and others, the agency upgraded its estimates for non-OPEC production growth by 175,000 barrels a day for this year, with a rise now estimated at 380,000 barrels a day. That increase will come largely from U.S. output—which the IEA says will grow by 170,000 barrels a day in 2017. OPEC itself is facing internal challenges from higher production from Libya and Nigeria, both of which are exempt from the production cuts. Libyan output, for instance, rose above 700,000 barrels a day early this month—its highest in three years—after a key pipeline reopened in the West of the country. Read more on Wall Street Journal

Crude Rebounds on Confidence in OPEC Cuts Crude futures rose by the end of this week, driven by signs of the market tightening after last year’s agreement by major oil producers to reduce output. Brent crude, the global oil benchmark, rose 1.2% to $54.80 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 1.3% at $52.77 a barrel. An oil glut has depressed prices for more than two years. The enduring price collapse eventually prompted a group of 20 oil producers from within and outside the Organization of the Petroleum Exporting Countries last November to agree on an output cut, a deal which has boosted crude prices by around 18% since. Even though the agreement went into effect only this month, the International Energy Agency said on Thursday that OPEC production has slowed, declining by 320,000 barrels a day to 33.09 million barrels in December, and is likely to fall more steeply this month. The IEA, OPEC and the U.S.’s Energy Information Administration all expect steady demand growth in 2017, along with rising non-OPEC output as producers respond to higher prices. The entities vary on when they see oil stocks contracting, which analysts believe is the key to prices moving much higher. IEA data showed oil storage in industrialized nations of the Organization for Economic Cooperation and Development fell in November. Across markets investors held back from making large moves ahead of President-elect Donald Trump’s inauguration speech on Friday. “Today’s main potential market mover will be the inauguration of Donald Trump where comments on the new President’s economic policy could cause market jitters,” said an oil analyst at Global Risk Management. Read more on Wall Steet Journal


 

RENEWABLE ENERGY NEWS

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Renewables Trade Groups, Enviros at Odds Over Perry Environmentalists and clean energy groups disagree over President-elect Donald Trump’s pick to lead the Energy Department ahead of tomorrow’s confirmation hearing before the Senate Energy and Natural Resources Committee. \While the wind industry’s largest lobbying group is voicing support for the nominee, former Texas Gov. Rick Perry (R), the Natural Resources Defense Council turned thumbs down on the Republican for his denial of the existence of climate change. The CEO of the American Wind Energy Association, in a letter to committee leaders credited Perry for creating a “stable, long term competitive energy market, combined with robust infrastructure investment” that allowed wind power to flourish in Texas. Under Perry’s watch, the state increased its wind energy production from 200 megawatts in 2000 to nearly 18,000 MW of installed capacity at the end of 2015, and more than 25,000 workers and $32 billion of private investment in wind farms. Key to that growth, he said, was Perry’s decision to support the expansion of the Texas transmission lines through the Competitive Renewable Energy Zones (CREZ) program, a $6.9 billion upgrade of the Texas power grid completed in 2014. The CREZ program, comprising more than 180 projects, included the construction of roughly 3,600 miles of high-voltage transmission lines to carry wind power from high-production parts of central and West Texas to demand centers in the state’s eastern half. Meanwhile, the new leader of the solar industry’s lobbying arm, the Solar Energy Industries Association, has also signaled “cautious optimism” about Perry’s nomination and the prospect that Congress will not roll back renewable tax credits. Read more on E&E


 

STATE ENERGY NEWS

Oil-patch States Struggle with Deficits Oil-producing states are bracing for another lean year as they wait to see whether the drop in oil prices has stabilized. In Texas, the biggest oil-producing state, the Comptroller predicted a 2.7 percent drop in state funds, from $107 billion in the current two-year budget cycle to about $105 billion in the 2017-2019 biennium. In North Dakota, the Legislature is projecting $3.6 billion in taxes over the next two years, down almost $1 billion from an estimate in December, and more than one-third lower than the state’s prediction at the beginning of the 2015-2017 biennium. In Alaska, which relies more on oil taxes than any other state, Gov. Bill Walker (I) predicted that the state’s revenue will fall to about $3.3 billion. The oil bust not only cut into the direct taxes that the states collect on oil and gas production, it also cut into sales and other taxes that came from drilling activity. In Texas, for instance, sales taxes from the mining and energy sector are at their lowest since 2010. At the same time, the states also may be suffering from other factors besides oil prices, said an economist at Wichita State University who studies government finance. Prices for wheat and other agricultural commodities dropped at the same time as oil prices. Plus, Texas diverted some of its sales taxes and oil and gas taxes to road construction over the last three years, and Oklahoma cut both its oil taxes and income taxes at the height of the boom. Each state is coping with the shortfall in different ways. Legislators in all three states are also discussing whether to tap into their ample reserve funds. Alaska has about $56 billion in its permanent fund, but state leaders have tried to preserve most of it as a trust fund, spending only the interest. Read more on E&E


 

FROM THE CHART ROOM

Feedstock For Plastics, U.S. Ethane On The Rise

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U.S. production of ethane is expected to increase from an average of 1.25 million barrels per day (b/d) in 2016 to 1.7 million b/d in 2018 according to EIA’s latest Short-Term Energy Outlook (STEO). Increased ethane production is expected to be consumed in the petrochemical industry domestically as well as exported to other countries. Ethane is a hydrocarbon with two carbon atoms that may be present in raw natural gas extracted from the ground. In recent years, the amount of ethane contained in raw natural gas has exceeded U.S. demand and exports, so some ethane has been left in the natural gas provided to end users instead of being separated and marketed as a distinct product. Increases in domestic consumption and exports of ethane are expected to support higher ethane prices relative to natural gas prices, which will encourage more ethane recovery from raw natural gas. Ethane is used almost exclusively as a petrochemical feedstock to produce ethylene, a compound used in the creation of many plastics. Expansions at existing ethylene plants contributed to a 170,000 b/d increase in ethane consumption between 2013 and 2016. By mid-2018, construction is expected to be completed at six new ethylene plants and one restarted plant, collectively capable of using 450,000 b/d of ethane feedstock. EIA expects U.S. ethane consumption to increase by 310,000 b/d (26%) between the first quarter of 2013 and the fourth quarter of 2018 as these plants ramp up operations. Read more on EIA


 

Michael Best Strategies

 

Michael Best Strategies’ Energy Team

About Michael Best Strategies

Michael Best Strategies focuses on achieving clients’ objectives through unparalleled strategy development and deployment for implementation, pragmatic guidance on public policy development, and government relations. The Strategies team specializes in a full range of services, including government relations, public policy consulting, grassroots advocacy, public affairs, conference planning, and strategic political relationships. For more information, visit michaelbeststrategies.com.