US President Donald Trump came to power on the back of promises to usher in a new golden age for American industry, by reducing regulation, promoting investment in new infrastructure, and removing barriers to the development of domestic oil, gas and coal resources. It's ironic, then, that a lack of regulators is threatening to stymie progress in developing new gas projects, including pipelines and terminals.
It's been more than three months since the US' five-member Federal Energy Regulatory Commission (Ferc) lost its quorum, rendering it virtually powerless to advance any major gas infrastructure projects. The independent agency regulates the interstate transmission of gas and electricity, and has primary authority for approving and licensing pipelines and LNG projects. While other agencies have input, Ferc makes the final decision on certification -- but needs, by law, a minimum of three serving commissioners to make those decisions. As things stand, according to some calculations, as many as six major gas pipelines valued at $12 billion are facing imminent delays as a result of the logjam at Ferc, while another $38 billion worth of gas, LNG and electricity projects are mired in the dramatically slowed-down approval process.
The reality is raising the level of angst among gas industry officials and lawmakers alike, particularly as until this week there had been no sign that Trump planned to nominate candidates to fill any of the three -- soon to be four -- vacant seats anytime soon. That changed on May 9, when the president announced he planned to nominate Robert Powelson and Neil Chatterjee for Ferc terms ending in 2020 and 2021, respectively, giving the agency a quorum.
That should provide some comfort to the various industry lobby groups that published an op-ed piece earlier this month urging Trump to speed up the nomination of new Ferc members. "If President Trump and congressional leaders are serious about jobs and infrastructure, they must move quickly to nominate and confirm at least one new member, and, ideally, three new members, to fill open seats at Ferc," the heads of the Natural Gas Supply Association, American Gas Association, Independent Petroleum Association of America and Interstate Natural Gas Association of America said in the article.
No less than 39 states have adopted policies aimed at increasing gas consumption, and "many of those proposals require new interstate natural gas infrastructure projects, which only Ferc can authorize," the article noted. "Manufacturers, particularly in the chemical sector, have brought plants and jobs back to the US precisely because of the cost savings and secure supplies that domestic gas production can offer. If the regulatory risk due to Ferc inaction gets too high, they may begin to re-think those decisions."
Trump's long-overdue move will also come as a relief to Ferc Acting Chairman Cheryl LaFleur. While noting that Ferc staff have some delegated authority to move projects through the system, she said recently that the agency is "building up quite a backlog, and it will only get bigger the longer this goes on -- the world isn't sitting still while we don't have a quorum."
Ferc typically issues about 100 orders a month, she noted, but since the agency lost its quorum in early February with the abrupt departure of then-Chairman Norman Bay, its staff -- under delegated authority -- has issued fewer than 60, half of which require further action once Ferc has the minimum number of commissioners in place.
The Wait Goes On
But even though Trump has now nominated new commissioners, industry officials worry that the confirmation process could take months given the slow pace of the administration filling out top Cabinet positions, with hundreds of lower-level agency positions requiring Senate action still vacant. As Harry New, president of pipeline contractor Willbros Oil & Gas, notes, even if the Ferc nominations were sent to Congress today, the vetting process could drag this out for another two to three months or more.
So how did we get here? In late January, with Ferc already down to three, Bay, an appointee of President Barack Obama, abruptly announced that he, too, would exit with only a week's notice. Chairman since April 2015, Bay announced his resignation hours after Trump said he was naming LaFleur acting chairman -- Bay could have stayed on until a replacement was named, but opted to leave with virtually no advance warning.
That left just LaFleur and Colette Honorable, also an Obama appointee. During Bay's final days, Ferc pushed through several large gas pipeline projects but left a host of others in limbo. The outlook worsened on Apr. 28, when Honorable said she would not seek reappointment when her term expires at the end of June, meaning a fourth vacancy is imminent if she chooses not to serve until a replacement is named, as other departing members have done.
It is not only gas transportation projects that could be affected by the paralysis at Ferc, Willbros' New notes. Producers with shipping contracts need pipelines to meet agreed completion schedules to make sure their supply moves from the wellhead to market, he says. This is not how an energy-friendly Republican agenda should unfold, New complains. "It's all 'rah-rah,' but nothing's happening." He also expressed concern that the backlog will create a whole new set of challenges once a quorum is in place and the spigot is turned back on -- a flood of projects rushed to regulatory completion, creating too much work for the sector to handle all at once.
Backed by antifossil fuel activists, some lawmakers have already seized on Ferc's paralysis to further postpone or derail certain infrastructure projects. US Senators Elizabeth Warren and Edward Markey, both Massachusetts Democrats, earlier this month urged LaFleur to reverse Ferc staff's recent approval for Tennessee Gas Pipeline to engage in construction on to its Connecticut Expansion project. And in Michigan, Attorney General Bill Schuette has invoked Ferc's lack of a quorum to cast doubt on whether the Nexus Gas Transmission pipeline will be finished this year as planned.
Mark Davidson is Energy Intelligence's Washington Bureau Chief and Editor of Natural Gas Week. Tom Haywood is Energy Intelligence's Houston Bureau Chief and Editor of Gas Market Reconnaissance.