A Path for Energy Independence

Over the past several weeks, the new administration and cabinet agencies have been working to reduce the rules and regulations for U.S. companies. The coal, oil and gas industries, in particular, have gained advantages through an executive order, presidential memorandum, legislation and several agency actions. The main reasoning, energy independence, is driving the administration, with help from the Department of Interior and Environmental Protection Agency, to pursue a path toward this goal. 

An overview of what has been passed in the new government includes:

Executive Order:

Presidential Executive Order on Promoting Energy Independence and Economic Growth – primarily orders agencies to review and rescind rules and regulations that present restrictions to the energy industry, including the lift of a ban on federal leasing to coal producers.  

Presidential Memorandum:

Presidential Memorandum Regarding Construction of the Dakota Access Pipeline – allows for the continuation of construction and operation of a major petroleum pipeline from North Dakota.  

Signed Legislation:

H.J.Res.38 - Disapproving the rule submitted by the Department of the Interior known as the Stream Protection Rule – overturned what would have restricted coal mining firms from dumping into nearby, mountaintop waterways; existing federal and state regulations and protections to be adhered.

Proposed Legislation: 

H.J.Res.45 - Disapproving the rule submitted by the United States Fish and Wildlife Service of the Department of the Interior relating to management of non-Federal oil and gas rights. - eliminates regulations governing non-Federal oil and gas activities on National Wildlife Refuge System lands

H.J.Res.46 - Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule of the National Park Service relating to "General Provisions and Non-Federal Oil and Gas Rights". – seeks to eliminate a rule regarding the management of oil and gas rights within National Park Service lands outside of Alaska

Department of Interior Actions:

Secretarial Order 3348 - overturns the 2016 moratorium on all new coal leases on federal land and ends the environmental impacts statement that was set to be completed in 2019.

Secretarial Order 3349 - implements the review of agency actions as outlined under the Promoting Energy Independence and Economic Growth EO and initiates the reexamination of mitigation and climate change policies across the agency to balance conservation strategies with creating jobs and growth for American workers. Included in these review of policies are regulations related to U.S. oil and natural gas development.

Proposed 73-Million Acre Oil and Natural Gas Lease Sale for Gulf of Mexico – a new five year program to lease 73 million acres off the shores of Texas, Louisiana, Mississippi, Alabama and Florida for oil and gas exploration and development. The sale is scheduled for August 16, 2017.

Proposal to Repeal Recent Amendments to Federal Energy Valuation Rules – this proposal is to repeal the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Rule (2017 Valuation Rule) in its entirety. Interior postponed part of the rule that called for coal, oil and gas companies to pay millions in extra royalties to comply with a new federal accounting system. 

Environmental Protection Agency Actions: 

Withdraws Information Request for the Oil and Gas Industry – the request asked owners and operators in oil and natural gas industries to provide information on equipment and emissions in their operations.

Reconsideration of an Oil and Gas Rule - the agency will reconsider the Oil and Gas New Source Performance Standards for New, Reconstructed, and Modified Sources Rule which sought to instill new standards for the oil and natural gas source category set standards for both greenhouse gases (GHGs) and volatile organic compounds (VOC).

Seeks delay over rule curbing coal plants’ toxic pollution – the agency asked a federal court for a delay in the oral argument regarding a challenge to 2012 regulations that limited mercury, lead and other toxins from power plants.

Implications:

From a policy standpoint, energy independence has implications in strengthened national security and economic growth production. The less the United States and its government operations is reliant on foreign oil, the better for U.S. security interests. For example, the Defense Department spends billions of dollars out of its budget securing access to oil. In FY 2017 so far, according to FPDS data, the Defense Logistics Agency has spent an estimated $1.3 billion in obligations under contracts for “petroleum refineries.” Of that amount, approximately $256 million has been to companies listed with foreign addresses.

An increased domestic energy presence also ensures that less money from the U.S. is spent on importing oil, possibly leading to a reduced trade deficit. Moreover, it secures more jobs for American workers and increases the manufacturing operations and presence in the U.S. However, domestic production also means an increase in manufacturing and equipment prices.  The ideal 100% energy independence in the U.S. could even eventually lead to an export environment for oil, natural gas, coal and renewable energy markets.    

From a contractor standpoint, while energy independence may equate to more expensive equipment, more support and assistance will be needed in the federal programs supporting energy independence. For example, the Interior budget within the President’s blueprint prioritizes and increases funding for agency programs that support responsible development of oil, natural gas, coal and renewable energy on federal lands and waters.