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Oil and gas allies to Trump: Slow down

Oil and gas allies to Trump: Slow down

While the industry has generally cheered the administration’s approach, there are growing worries that its efforts could backfire.

President Donald Trump’s aggressive drive to roll back environmental regulations is moving too fast even for some in the oil and gas industry.

Publicly, petroleum companies and their trade groups are cheering Trump’s efforts to undo former President Barack Obama’s environmental regulations, including restrictions on fracking-related pollution, pipeline permits and offshore drilling. But quietly, people in the industry are growing worried that deregulation could backfire on them, according to interviews with a dozen executives, lobbyists, lawyers and analysts.

Among their fears: Laxer rules could set the stage for an environmental disaster like 2010’s BP oil spill in the Gulf, which blackened the industry’s reputation and spurred a regulatory clampdown.

“Every industry wants regulations that make sense, but you don’t need to roll things back so far that it opens an opportunity for outsiders to criticize, or something bad happens,” said Brian Youngberg, an energy analyst at the investment firm Edward Jones.

A person at one oil and gas company expressed similar worries. “It’s not helpful if regulations are streamlined so as to allow something to happen — say, a methane explosion or a spill — and we’d be painted with it as an entire industry,” said the person, who requested anonymity to speak freely.

In addition, some large companies that have already spent money to comply with Obama-era regulations fear being undercut by unscrupulous competitors if the Trump administration reverses those rules. And an industry that prizes regulatory certainty is uneasy with Trump’s efforts to renegotiate lucrative trade deals like NAFTA and reorganize the agencies responsible for overseeing offshore drilling.

Another source of industry unease is Trump’s slowness to fill key positions across the government, which has delayed decisions on regulatory matters such as pipeline safety standards.

One example where oil and gas lobbyists and industry sources said the administration may be expending too much effort is its quest to dismantle an Obama-era Interior Department rule tightening methane emission standards for oil and gas wells and pipelines on public lands.

Congress failed to repeal the rule earlier this year after three GOP senators joined Democrats in voting to keep it in place. Now Interior Secretary Ryan Zinke says he will try to rewrite it, a process that would take years — leaving the industry unsure of what will requirements it will someday have to meet.

Two of the industry’s biggest trade associations, the American Petroleum Institute and the Western Energy Alliance, publicly cheered Zinke’s decision to change the regulation. “It is definitely our focus to rewrite or rescind those rules,” said WEA President Kathleen Sgamma, whose group has met with Interior officials and is involved in a lawsuit seeking to overturn the methane rule.

But behind the scenes, people at ExxonMobil, BP and other large oil and gas companies consider the rule a relatively minor issue, lobbying and industry sources said.

Those companies have the technology and engineering in place to meet the standards, which would require them to capture planet-warming methane pollution before it escapes to the atmosphere, and they have expected to pay down their compliance costs by selling the methane, people in the industry said. Companies operating in Colorado have already had to comply with a state rule that closely matched the federal standards.

The Obama administration estimated that the industry would spend up to $279 million per year to comply with the rule, while the overall net benefit would reach up to $1.2 billion over a decade.

To be sure, the industry has unequivocally supported some of Trump’s rollbacks. Oil and gas developers have universally praised the administration’s plans to open up more federal waters in Alaska for drilling, along with its support for allowing more exports of liquefied natural gas.

But Trump’s sluggish pace in staffing up his administration has some worried whether he will be able to follow through.

“There’s definitely people concerned about it,” said Tyler Nelson, a former aide to Rep. Pete Olson (R-Texas) who is now a vice president at lobbying firm Cornerstone Government Affairs. “If you don’t have enough people in place across the executive branch, it’s hard to implement and get things done right.”

A White House spokesperson did not reply to questions.

The administration just this month was able to restore a quorum at the Federal Energy Regulatory Commission, the agency in charge of approving natural gas pipelines, whose inability to conduct any major business since February had delayed$13 billion worth of projects.

The White House still hasn’t nominated a permanent administrator for the Pipeline and Hazardous Materials Safety Administration, the agency responsible for inspecting and setting safety standards for pipelines, nor has it tapped anyone to lead key agencies at Interior that oversee energy production on federal lands or offshore.

The 12 largest oil and gas companies and trade associations cut their lobbying by an average of 30 percent in the second quarter compared with the first three months of the year, according to an analysis of their lobbying disclosure forms. A large part of the reduction was because there was no work to do on pipeline projects, according to Nelson and other lobbyists.

Oi and gas allies fear that laxer rules could set the stage for an environmental disaster like 2010’s BP oil spill in the Gulf, which blackened the industry’s reputation and spurred a regulatory clampdown.

Meanwhile, the administration is pursuing several regulatory revisions that were never on the industry’s wish list. Those could result in severe setbacks for the industry, several lobbyists and congressional aides said.

The most potentially damaging policy push is the administration’s attempt to rip open the North American Free Trade Agreement for a redo. The U.S., Mexican and Canadian energy markets have become strongly enmeshed over the past decade, and the talks that just began to reopen NAFTA could unleash a Pandora’s box of issues that could threaten business relations, industry sources said.

Valero and other refiners are shipping ever-increasing volumes of U.S.-made gasoline and natural gas to Mexico. Valero itself just signed a deal to bring tankers of gasoline into the Mexican port of Veracruz. Fellow U.S. refining company Andeavor — formerly Tesoro — is now building gas stations in Mexico as well, reversing years of that country’s dependence on the state-owned oil company Pemex.

The last thing Andeavor, Valero and other refiners want to see happen is Trump ratcheting up trade tensions with tough talk that could sour the relationship, people in the industry said.

“In most respects, companies that engage in cross-border trade are most concerned with ensuring that this [NAFTA renegotiation] process does no harm,” said Josh Zive, senior principal at lobbying firm Bracewell.

Another action that has some in the industry scratching their heads is Interior’s review of whether to combine its Bureau of Ocean Energy Management, which leases space on the federal Outer Continental Shelf to energy companies, with its Bureau of Safety and Environmental Enforcement, which regulates the companies’ activities.

BOEM and BSEE were created during the Obama era under then-Interior Secretary Ken Salazar. Interior spent millions of dollars and countless staff hours to carve the two agencies out of the notorious Minerals Management Service after a series of scandals in the Bush administration and the 2010 Deepwater Horizon explosion created the impression that regulators were too close to the oil industry.

Efforts to reunite the two bureaus would probably be as costly as it was to split them, all the while distracting agency staff from processing lease sales, lobbyists said. And no one seems to know why Interior called for the review in the first place.

“We did not ask for it,” said National Ocean Industries Association spokeswoman Nicolette Nye, echoing others in the industry. “We were surprised when it was first mentioned by DOI. That was the first we heard of it.”

Zinke told POLITICO in June he was considering the merger as part of a larger reorganization of Interior agencies. He is also taking another look at regulations the Obama administration put in place after Deepwater Horizon, including a BSEE well control rule that required oil companies to have up-to-date spill-prevention technology in place.

Zinke had planned to release details of any reorganization by the end of summer, but a BOEM spokesman said last week that he had no further information on when those details may be made public. BSEE plans to convene a forum Sept. 7 in Houston to gather input on whether to rewrite its offshore drilling rules.

If the two agencies merge, the Trump administration and companies operating offshore oil rigs will most likely be on the political hook after the next offshore drilling accident, industry officials said.

“When there’s — God forbid — the inevitable accident in the Gulf of Mexico, why would you want to be known as the administration that made that move?” said one lawyer representing oil and gas companies.

In the end, these sorts of rollbacks could backfire, said Jason Bordoff, former senior director for energy and climate change in Obama’s National Security Council and now the founding director of Columbia University’s Center on Global Energy Policy.

“An approach that is, basically, ‘What are the regulations put in place by the previous administration, here’s the list, let’s go down the list and repeal them,’ doesn’t build public confidence in the industry,” Bordoff said.

President Donald Trump’s slowness to fill key positions across the government has delayed decisions on regulatory matters such as pipeline safety standards. | Andrew Harnik/AP

 Source: Politico

LINK:  http://www.politico.com/story/2017/08/25/oil-and-gas-allies-want-trump-to-slow-down-242008

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