December 2014, Vol. 69, No. 12
Washington Watch
GOP Control Of Senate In 2015 Improves Legislative Outlook For Pipelines
The ascent of Republicans to majority status in the U.S. Senate in 2015 means the pipeline industry will be able to play more effective defense against Obama administration regulations it opposes and more effective offense behind energy legislation it supports.
House Republicans passed a number of narrow, pipeline-friendly bills in 2013 and 2014 which went nowhere in the Democratic-controlled Senate. That was true of H.R. 1900, a pipeline permitting bill, which would have forced federal agencies to abide by timeframes when considering permit applications. That bill passed the House by a vote of 252-165 in late 2013. It was never considered by the Senate in part because the bill was mistakenly referred to the Senate Commerce, Science and Transportation Committee, instead of the Senate Energy and Natural Resources Committee. Martin Edwards, the vice president of legislative affairs, at INGAA, says Sen. Mary Landrieu (D-LA), chairman of Senate Energy, was trying to straighten that out at the end of the 2014 session. But she may have been preoccupied by her own re-election battle, which will now be decided by a runoff election. The bill was supported by a number of House Democrats, and having passed the House in late 2013 Landrieu should have had time early in 2014 to get the jurisdictional question sorted out. But she did not.
Sen. Lisa Murkowski (R-AK), who becomes chairman of Senate Energy in 2015, would likely move quickly on the pipeline permitting bill if the House, as expected, passed it again at the start of the new year. That bill is just one of 30 separate pieces of legislation that the House Republicans packaged into one bill called H.R. 2 in September 2014. The bill passed with only Republican support. Besides H.R. 1900, H.R. 2 included pro-energy provisions having to do with liquid natural gas exports, the Keystone XL pipeline, state authority to regulate fracking, offshore oil and gas leasing and other provisions.
One of the bills not included in H.R. 2 was a bill (H.R. 6) to expedite Department of Energy approval of applications to export LNG to countries without free trade agreements (FTA) with the U.S. Rep. Cory Gardner (R-CO), who won a seat in the Senate in the 2014 election, was sponsor of that bill. It was approved last June in the House by a vote of 266-150 and had considerable Democratic support. It went nowhere in the Senate. That will probably change in 2015, especially if Gardner is assigned to the Senate Energy Committee, which would surprise no one.
The LNG and permitting bills, plus another dictating Obama administration approval of the Keystone XL pipeline, will be among the leading energy bills Republicans will push through the House and Senate in 2015. Senate passage of at least the permitting and LNG bills is quite possible, now that the GOP commands at least 53 votes. If Democrats mounted a filibuster, the Republicans would need 60 votes. They are certainly obtainable from other Democrats. Over-riding an Obama veto, if it came, would be considerably more difficult, though again not impossible.
With regard to possible Republican moves to block regulations, the Obama administration’s Clean Power rule is a likely target. Murkowski has been vocal about the potential impact of the Environmental Protection Agency (EPA) rule requiring states to reduce greenhouse gas emissions from electric utilities. This is expected to result in the closing of coal-fired utilities, putting a burden on interstate gas pipelines to increase supplies to the new gas-fired plants which will replace aging coal operations. There is concern in a number of quarters, including FERC Commissioner Phillip Moeller, that adequate pipeline capacity is not currently available. That increases the priority on building new pipelines from shale deposits in places such as Marcellus and Utica or, in the alternative, passing legislation which moderates the EPA’s final rule.
EIA Report Says Minimal Gas Price Increases From Additional Exports
An October report from the Energy Information Administration (EIA) strengthened the hands of natural gas producers who want the DOE to expedite approval of applications to export LNG to non-FTA countries. Non-FTA applications, to countries such as the Ukraine, require a more detailed analysis than do applications for exports to FTA countries such as Mexico. The DOE has moved slowly on those non-FTA applications. The agency angered the LNG industry in August by discontinuing “conditional” export approvals prior to the Federal Energy Regulatory Commission (FERC) completing an environmental impact statement on any gas company permit application for a domestic LNG gasification facility. Responding to that change in policy, Center for Liquefied Natural Gas (CLNG) President Bill Cooper said: “CLNG continues to believe that DOE should adopt procedural changes to eliminate delays in the agency’s review process and reduce ongoing regulatory uncertainty. We have serious reservations about the direction of DOE’s procedural landscape.”
U.S. manufacturers, led by Dow Chemical, have been the loudest opponents of non-FTA exports, repeatedly voicing concerns about their impact on domestic prices. Natural gas is a key feedstock for chemical production, for example.
Erica Bowman, vice president for research and policy development, America’s Natural Gas Alliance, says, “Under any but the most implausible scenarios, prices remain stable at levels below $6.00 a million British thermal units through 2030.”
The EIA report says: “On average, from 2015 to 2040, natural gas bills paid by end-use consumers in the residential, commercial, and industrial sectors combined increase 1% to 8% over a comparable baseline case, depending on the export scenario and case, while increases in electricity bills paid by end-use customers range from 0% to 3%. These estimates reflect the combined impact of higher prices and small reductions in natural gas and electricity use.”
PHMSA Underlines Current Requirements On Reversal of Pipeline Flows
The Pipeline and Hazardous Materials Safety Administration (PHMSA) published an advisory bulletin on pipeline flow reversals in September. It does not contain anything the agency hasn’t said before in past advisory bulletins. But Rick Kuprewicz, president, Accufacts Inc., a pipeline advisory company, notes the bulletin “raises the bar” for companies by cautioning against lackadaisical attention to details. The agency particularly emphasized the importance of effective hydrostatic testing and checking of valves. Kuprewicz is a member of PHMSA hazardous liquids advisory committee.
Two serious accidents in the past few years apparently convinced PHMSA to issue the bulletin: the ExxonMobil Pegasus accident which resulted in a proposed $2.6 million civil penalty; and the Tesoro High Plains Pipeline rupture discovered on Sept. 29, 2013, which occurred six months after the Pegasus leak. Pipeline flow reversals are becoming more common as operators look for ways to get shale gas from Marcellus and Utica formations to the Gulf of Mexico. The Pegasus proposed fine has not been finalized. The pipeline, originally composed of three segments, has flowed south from Illinois to Texas since 2006. Prior to that, the three segments operated separately and flowed north.
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