United States: Energy Policy Update: Trump Administration And Congress Pursue Separate Paths On U.S. Energy Policy, But Share Objectives

Eight months into the Trump administration, the White House and Congress have taken separate paths on U.S. energy policy. The Senate is making another effort to pass bipartisan "tweaks" to aspects of energy policy, while President Trump has announced an "America-First" energy policy to be implemented through executive action. Nonetheless, both Congress and the White House appear to be focused on expediting required authorizations for energy infrastructure projects and facilitating U.S. energy exports, and their separate efforts could eventually be joined to form a unified energy policy.

Senate Bipartisan Energy Legislation

At the end of June, Senator Lisa Murkowski (R-AK), chairman of the Energy and Natural Resources Committee, and Maria Cantwell (D-WA), ranking member of that committee, introduced the "Energy and Natural Resources Act of 2017" (S.

1460). S. 1460 is the successor to the "Energy Policy Modernization Act," the omnibus bipartisan legislation that passed the Senate in 2016 but could not be reconciled with an energy bill passed by the House of Representatives. Like its predecessor Senate bill, S. 1460 would change certain aspects of current U.S. energy policy, including regulatory reforms to accelerate the approval process for energy projects.

LNG Exports

In circumstances, where the U.S. Department of Energy (DOE) must authorize exports of natural gas, including liquefied natural gas (LNG), under Section 3(a) of the Natural Gas Act (NGA), and where authorization also is required from the Federal Energy Regulatory Commission (FERC) or the Maritime Administration to site, construct, expand or operate LNG export facilities, S. 1460 would require DOE to issue its final decision the export application no later than 45 days after the conclusion of the environmental review required by the National Environmental Policy Act of 1968 (NEPA) to authorize the siting, construction, expansion or operation of the LNG export facilities.

The Senate bill also would amend Section 3 of the NGA to require an applicant seeking authorization to export LNG to report to DOE the names of the countries of destination to which the exported LNG is delivered, and further would require DOE to publish on its website the reported destination information.

Reflecting concerns expressed by some Democrats about the effect of increased exports of U.S.-produced LNG on U.S. gas supplies and prices, S. 1460 also requires DOE to submit to Congress a study of the state, regional and national implications of exporting LNG with respect to consumers and the economy, including analyses of the economic impact that exporting

LNG will have in regions that currently import LNG, and job creation in the manufacturing sector.

Hydropower

S. 1460 would require FERC to consult with other federal and state agencies to study improvements to the hydropower licensing process. It would also amend Part I of the Federal Power Act (FPA) to require FERC to coordinate with other federal agencies to develop overall schedules for federal authorizations required for a hydroelectric project and would extend preliminary permit terms and start of construction dates for hydroelectric projects. In addition, the Senate bill includes a Sense of Congress that all federal authorizations required for a hydropower project or facility, including a hydroelectric license issued by FERC, should be issued within three years after the date FERC considers an application to be complete.

The Senate bill also would amend Section 4(e) of the FPA (which requires FERC to give "equal consideration" to developmental and non-developmental values in its licensing decisions) to include in its consideration "minimizing infringement on the useful exercise and employment of property rights held by nonlicensees."

Energy Storage

S. 1460 would require and appropriate funds for DOE to conduct a program of research, development and demonstration of electric grid energy storage, focusing on, among other things, "fundamental and applied research critical to widespread deployment of electricity storage."

The Senate bill also would require FERC to submit to the Senate Energy and Natural Resources Committee a report describing any barriers to the development and proper compensation of pumped storage hydropower projects and other energy storage facilities caused by transmission organization rules or FERC's regulations or policies under the FPA, and including FERC's recommendations for reducing those barriers.

Nuclear

S. 1460 would require the Nuclear Regulatory Commission (NRC) to submit within a year a plan to develop an efficient, risk-informed and technology-neutral framework for licensing advanced nuclear reactors, including options to expedite and streamline the licensing of advanced nuclear reactors. The plan must be submitted to the Committee on Energy and Commerce of the House of Representatives and the Committee on Environmental and Public Works of the Senate.

Executive Branch Actions

American Energy Dominance

On the same day that Sens. Murkowski and Cantwell introduced S. 1460, President Trump spoke at a DOE event announcing a "new American energy policy" that would "seek not only American energy independence . . . but American energy dominance." As part of this energy policy, Trump stated that the U.S. "will export American energy all over the world."

Trump announced "six brand-new initiatives to propel this new era of American energy dominance." However, several of the items he described are not governmental initiatives but, rather, actions taken by agencies under existing statutory authority, while other items are not "brand-new" but, rather, previously announced administration policies.

First, in order to "review and expand our nuclear energy sector," Trump announced "a complete review of U.S. nuclear

energy policy" but did not provide any details concerning this review.

Second, he announced that the Treasury Department will "address barriers to the financing of highly efficient, overseas coal energy plants" that would use coal exported by the U.S. Presumably, the president was referring to the Treasury Department's rescinding the guidance on coal financing it issued in 2013 ending U.S. support for multilateral development bank (MDB) funding of new international coal projects except in narrowly defined circumstances. In mid-July, the Treasury Department issued Guidance stating that the Executive Director for the U.S. at each of the MDBs will apply three objectives in determining the U.S. position on projects and energy policy: promoting universal access to affordable, reliable, sustainable and clean energy; helping countries access and use fossil fuels more cleanly and efficiently; and helping to deploy renewable and other clean energy sources and support development of robust, efficient, competitive and integrated global markets for energy.

Third, the president announced the approval of a new petroleum pipeline to Mexico. This announcement referenced the June 28 authorization issued by the State Department in response to a 2014 application submitted by NuStar Logistics, L.P. to construct pipeline facilities at the U.S.-Mexico border for importing or exporting refined petroleum products (naphtha, liquefied petroleum gas, natural gas liquids, jet fuel, gasoline and diesel) between the U.S. and Mexico.1 The State Department's Bureau of Energy Resources receives and processes applications for Presidential Permits for cross-border liquid pipelines under Executive Order 13337, which was signed by President George W. Bush in 2004.

Fourth, Trump announced that Sempra Energy signed an agreement to begin negotiations to sell natural gas to South Korea. This announcement appears to be related to the proposed Port Arthur Liquefaction Project under development by a subsidiary of Sempra Energy near the City of Port Arthur, Texas, that would liquefy U.S.-produced natural gas for export to foreign markets. Port Arthur LNG, LLC (Port Arthur LNG) has filed an application with FERC under Section 3(a) of the NGA for authorization to construct and operate the liquefaction facility and also has filed an application with DOE for authorization to export LNG from the facility to countries with which the U.S. does not have free trade agreements that require "national treatment" for trade in natural gas (Non-FTA countries).

Fifth, he announced that DOE approved two long-term applications to export natural gas from Lake Charles LNG terminal in Louisiana.2 These approvals were issued in response to applications filed with DOE in August 2016, under Section 3 of the NGA, which give DOE authority to approve exports of U.S.-produced natural gas, including LNG. Since 2012, DOE has authorized 28 applications for large-scale, long-term exports of U.S.-produced LNG to non-FTA countries, totaling some 21.33 billion cubic feet per day of natural gas.

Sixth, Trump announced the creation of a new offshore oil and gas leasing program but did not provide details of that program. It is not clear whether he was referring to anything beyond the "America-First Offshore Energy Strategy" outlined in an Executive Order signed in late April.3 Executive Order 13795 declares that the policy of the U.S. is "to encourage energy exploration and production including on the Outer Continental Shelf, in order to maintain the Nation's positon as a global energy leader and foster energy security and resilience for the benefit of the American people, while ensuring that any

such activity is safe and environmentally responsible." To implement this policy, the Executive Order, among other things, directs the Secretary of the Interior, in consultation with the Secretary of Defense, to give full consideration to revising the schedule of proposed oil and gas lease sales to include annual lease sales to the maximum extent permitted by law in each of the following Outer Continental Shelf Planning Areas: Western Gulf of Mexico, Central Gulf of Mexico, Chukchi Sea, Beaufort Sea, Cook Inlet, Mid-Atlantic and South Atlantic.

Executive Order on Environmental Review and Permitting Process for Infrastructure

In August, President Trump issued an Executive Order finding that "[i]nefficiencies in current infrastructure project decisions, including management of environmental reviews and permit decisions or authorizations have delayed infrastructure investments."4 It concludes that "the Federal Government, as a whole, must change the way it processes environmental reviews and authorization decisions" with respect to infrastructure development. Among other things, Executive Order 13708 requires each major infrastructure project, including "energy production and generation, including from fossil, renewable, nuclear and hydro sources, electricity transmission and pipelines" to have a lead federal agency be responsible for navigating the project through the federal environmental review and authorization process. It also requires all federal authorization decisions for the construction of a major infrastructure project to be completed within 90 days of issuing an environmental Record of Decision by the lead federal agency, provided that the final environmental impact statement (EIS) prepared under NEPA includes an adequate level of detail to inform agency decisions under their specific

statutory authority and requirements.

This Executive Order applies to FERC licensing of hydroelectric projects, certification of natural gas pipelines and authorization of LNG terminals, as well as to NRC licensing of nuclear facilities.

DOE Proposed Rule to Expedite Authorization of "Small-Scale" Natural Gas Exports

In late August, DOE issued a Notice of Proposed Rulemaking (NOPR) to revise its regulations, providing for expedited authorization of natural gas exports not to exceed 0.14 Bcf per day ("small-scale exports"), where such authorization does not require the preparation of an EIS or environmental assessment (EA) under NEPA.

In support of its NOPR, DOE cited the "emerging market" for small-scale natural gas exports to countries primarily in, but not limited to, the Caribbean, Central America and South America. According to DOE, many of these countries do not generate enough natural gas demand to support the economies of scale required to justify large volumes of LNG imports from large-scale LNG terminals via conventional LNG tankers. DOE determined that small-scale natural gas exports are consistent with the public interest under Section 3(a) of the NGA, finding that such exports will not interfere with the domestic need for natural gas, will not have a detectable impact on domestic natural gas prices and will not pose a risk to the security of domestic natural gas supplies.

Under DOE's proposed rule change, in order to qualify for expedited approval, an application under Section 3(a) of the NGA to export natural gas, including LNG, to Non-FTA countries must satisfy two criteria. First the applicant must propose to export natural gas in a volume up to and including 0.14 Bcf/d. Second, DOE's authorization of the export must qualify for a categorical exclusion; that is, it is a class of action identified by DOE for which preparation of an EA or EIS normally is not required under DOE's NEPA regulations. If the export application meets these two criteria, DOE will issue an order granting authorization on an expedited basis, without providing notice of the application or following other procedures typically required for non-FTA export applications under DOE's regulations. DOE did not indicate, however, which categorical exclusions from NEPA published in its regulations would apply to small-scale exports of natural gas, or whether it would have to establish new categorical exclusions for such projects.

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