Ed Hild, Principal in our Federal Government Relations Group, Kimberly Arouh, Shareholder and San Diego Office Leader, and Matt Pitzarella, Director of our Energy, Environmental, and Natural Resources Group discuss the key areas of Trump’s infrastructure plan that may impact the energy industry.
What are the opportunities and challenges? What are the next steps for the energy industry to consider?
Listen here or read the transcript below.
Matt: Hi. Thanks for joining us. My name’s Matt Pitzarella. I’m the Director of Buchanan’s Energy, Environmental, and Natural Resources Section. I’m joined today with my colleagues: Ed Hill, the Principal on our Federal Government Relations Group in our Washington D.C. Office. Before joining Buchanan, Ed spent 20 years working on the Hill, most recently as Chief of Staff for the Senate Energy Chairman, and, Kimberly Arouh, a Shareholder and Office Leader in our San Diego Office, who has a lifetime of litigation experience, including quite a bit in the Energy space. I’m looking forward to this discussion today. We’re going to take a deeper dive into President Trump’s Infrastructure Proposal, as it relates to our nation’s energy industry.
The President earlier this year released his infrastructure plan and there’s been a lot of discussion around it: what’s feasible, what’s not, if there’s opportunities and challenges, and what are some of the next steps that the folks in the energy industry should be thinking about.
I’ve spent almost the last twenty years of my career in various aspects of the energy industry. I’m not sure a day has passed without hearing some concerns about permitting. What exactly is President Trump proposing to be done with infrastructure permitting in his Proposal?
Ed can we start with you?
Ed: Absolutely. So, the President is streamlining the federal law and specifically he’s proposing to make a single agency the lead and also reducing the permitting process to two years, and also, he proposes to delegate more review and permitting responsibilities to the States. So, those are the two pieces in a nutshell on the permitting aspect of the proposal.
Matt: So on the permitting side, energy companies or those engaged in infrastructure, would, in effect, have a one-stop shop with a – sounds like a two-year cap with greater delegation to the States. Is that correct?
Ed: Yes. And really, it takes away some of the duplicative review that different agencies all engage in under some of the current environmental laws, and it creates more certainty for the companies, something that as they’re planning out over 5-10-15 years – if they have that certainty, it makes it a lot easier for them to proceed forward with a major project.
Matt: So, Ed, you mentioned the certainty as it relates to obtaining permits in the energy space. Has that been a challenge for energy companies in recent decades in the U.S.?
Ed: Absolutely. It has taken sometimes multiple years – 4, 5, 6 years – to obtain a single permit to drill, for instance, and not to mention, the litigation aspect that seems to invariably come with many of these permits that are issued.
Matt: Kimberly, has that been something that you’ve seen over the years representing various energy companies in terms of on the litigation side as it relates to permitting and projects?
Kim: Definitely. Energy infrastructure projects located in California face a host of challenges in getting approved, especially under the California Environmental Quality Act, known as CEQA (see-kwa). It’s the State equivalent of NEPA (National Environmental Policy Act). While there are categorical exemptions for some energy infrastructure projects in the CEQA statute, for example, early activities related to thermal power plants, small hydro-electric projects, and small co-gen projects at existing facilities, there are a host of other energy infrastructure projects that require compliance with CEQA, and the CEQA requirements, when you’re applying to public agency projects, including activities directly undertaken by a governmental agency, activities financed in whole or in part by a governmental agency, and private activities which require approval from a governmental agency, and CEQA like NEPA has requirements for environmental review of those projects and the CEQA requirements are different than, and at times, much stricter than Federal environmental requirements.
Matt: Yeah, I know that’s obviously also been something that energy companies not just in traditional parts of the U.S. where we’ve seen a lot of in particular, say, oil and gas activity, but in the Northeastern United States with so much more expansion with this energy renaissance that we’ve seen, there’s certainly been a great deal of uncertainty, and that’s been something that we’ve heard loud and clear from energy companies.
The industry is enormous. There’s upstream, midstream, downstream and then there are – I think a lot of people fail to realize that there are probably tens of thousands of service companies that support this big portion of our economy. What are some of the things that companies should be looking for when it relates to energy infrastructure? In particular, what kind of support do they need from Congress?
Ed: Again, I think the companies want certainty. They want to know what the rules of the road are. And, if Congress is going to be clear in what those rules of the road are, and not constantly change things midstream, so to speak, that would be very helpful to companies. For instance, a pipeline company is part of this permitting reform. Pipeline companies want to make sure that FERC, the Federal Energy Regulatory Commission, is the lead agency for the permitting and not one of the other agencies within the government.
Matt: So I would imagine that in addition to – regardless of where one falls in terms of being within the energy space – whether this is – you know we’ve heard the President use the term “moving beyond energy independence” and talking about “energy dominance,” so I would imagine that even whether it is the exporting of oil and gas or the big transition that’s taken place in how we generate electricity in the United States, whether it be from natural gas or renewable sources, I would have to believe that certainty would help streamline that transformation in how we generate our power in the U.S. Is that your take Kimberly?
Kim: That is correct. You know, on the power generation side for renewables, it is equally important to have the certainty. And under California law, for example, I mean there’s some categorical exemptions for the State environmental statute – CEQA – that where some early activities related to small hydro-electric projects and co-generation projects at existing facilities are carved out, but to the extent there are broader carve-outs that have the federal statute that would provide even greater certainty and those projects could move forward faster.
Matt: Kimberly, you mentioned the differences between CEQA and NEPA. What are some of those differences and what should companies be considering as it relates to this proposal?
Kim: Well, the CEQA requirements are stricter when it comes to whether an environmental impact report (or an EIR) which is the State equivalent of an EIS (Environmental Impact Statement) is required. So under CEQA an EIR is required, for example, if substantial evidence supports a fair argument that a project may have a significant impact, even if other substantial evidence indicates that an impact will not be significant. Under NEPA, however, deference is given to the agency’s determination based on its assessment of the context and intensity of potential impacts, when that determination is demonstrated in the NEPA document and supported by the administrative record. If President Trump’s plan loosens the NEPA regulations and the permitting process is streamlined, there will be increased questions as to whether and to what extent remaining state and local laws are in addition to but not in conflict with Federal NEPA requirements.
Another distinction between NEPA and CEQA is currently NEPA regulations require an agency to rigorously explore and objectively evaluate all reasonable alternatives, and in practice the NEPA standard of devoting substantial treatment to each alternative tends to result in a more detailed look at fewer alternatives. President Trump’s Infrastructure Plan proposes that in an environmental review under NEPA, an agency should not be required to consider alternatives that are outside the agency’s authority or outside the capability of an applicant. Even if the NEPA standard is changed, according to President Trump’s proposal, for projects that are subject to CEQA in California an analysis would still be required of a reasonable range of alternatives to the proposed project. A CEQA reasonable range of alternatives includes those that are capable of voiding or substantially lessening any significant effects of the project, even if these alternatives would impede to some degree the attainment of the project objectives, or would be more costly. So if the Federal NEPA standard changes as President Trump’s proposal outlines, while the Federal NEPA standard would be relaxed, energy infrastructure applicants subject to CEQA would still need to comply with the California State requirements of analyzing a reasonable range of alternatives that include those that are capable of voiding or substantially lessening any significant effects of the project, even those alternatives that would impede or to some degree impede the attainment of the project objectives or would be more costly.
Matt: That’s really interesting. I mean, there’s certainly a lot of not just the political aspect, but clearly a lot of legal considerations and I am sure that the folks in the energy industry are continuing to watch this closely as these proposals continue to coalesce in D.C.
Ed, in twenty years on The Hill and most recently as the Chief of Staff for the Senate Energy Chairman, I’m sure that as you’ve mentioned, you’ve heard a lot from companies on the importance of having predictability as it relates to permitting. I would imagine that the industry believes that providing that greater certainty in addition to supporting the nation’s infrastructure would probably have an impact on their ability to create jobs. Is that something that you have heard over your many decades in Washington, D.C.?
Ed: Yes. It’s critical for companies to know the rules of the road and know that those rules aren’t going to abruptly change, as they’re making plans for capital investments and projects and things of that matter.
Matt: Great. What are some of the questions, some of the key questions and aspects that energy companies should be thinking about as D.C. considers this proposal and begins to as the House and Senate begins to form their own infrastructure bills?
Kim: From the energy companies’ perspective, they should be thinking about how to influence the legislation to preserve and broaden categorical exemptions for environmental review of various types of energy projects. And, they should also be thinking about whether and to what extent the new federal legislation and implementing guidelines would conflict with and therefore pre-empt state and local legislation when both federal and state legislation apply.
Matt: Ed, that sort of goes along the lines of some of the things that you had discussed earlier as well. What are some of the things that you think energy companies in particular should be considering at this critical juncture?
Ed: I think one of the first things energy companies need to do is simply engage in the process. They have the opportunity to help shape this permitting reform and by engaging based upon their previous experiences with the permitting process they can help shape the reformed permitting process so it’s more optimal to their companies going forward. So simple engagement and a seat at the table is where it starts.
Matt: Ed, have we seen a lot of engagement from NGOs (non-governmental organizations) as it relates to these proposals?
Ed: They have started to weigh in, for sure, and as the Congress continues to move forward, you will see further engagement by the NGOs and companies on both sides of the issue. Whether it be pro-development or those more NGOs on the environmental side of things, there’ll be a robust debate from both sides of the issue.
Matt: So obviously, it’s still early in this process and there may continue to be changes but hypothetically, Ed, what sort of differences could this mean, for instance, for pipeline companies?
Ed: Well, with the increased certainty, clearly they would be able to bring a project on line much faster and likely companies would also be able to save money in terms of being able to bring the project on line quicker, and all of that goes back to getting the product to market, whether it be to a power generation plant or to an export terminal for LNG (liquefied natural gas) or oil, to send to all over the world.
Matt: There’s a real international race right now for the next wave of energy dominance and it would appear as though that we are in a situation where every month or year really matters a lot as it relates to these sorts of big, large-scale, multi-billion dollar projects.
Ed: Without question. Companies are looking all over the world both here in the United States and elsewhere, and many times, companies have previously undertaken projects not in the United States because it was simpler to do it, because of the lengthy permitting process here, as well as the variable litigation that follows the permitting process.
Matt: Okay. Well I really appreciate this discussion. This is still very early in the process and it seems as though that there’s still quite a bit of opportunity for folks on all sides of this issue to weigh in as Washington, D.C. considers pretty dramatic changes to how we permit and move forward with infrastructure.
On behalf of everyone here at Buchanan, Ed, Kimberly, I want to thank you very much for your time. Hopefully this was a good discussion and the first of several others that we may have.