The More Things Change? Effect of the Elections on Environmental Law and Policy 68th Annual Oil & Gas Law Conference Houston February 17, 2017 Chuck Knauss Partner Hunton & Williams Washington, DC cknauss@hunton.com Lucian Pugliaresi President Energy Policy Research Foundation Washington, DC loup@eprinc.org Matt Leggett Deputy Chief Counsel U.S. Senate Committee on Environment and Public Works Matt_Leggett@epw.senate.gov
Questions for Consideration What are drivers for transforming the current regulatory state? Congress has a role what will it be? How to accomplish permanent or semipermanent change in policy & regulations? How long is 4 years? What does it take to change policy & regulations? Priorities -- where is Trump going? 2
How to achieve permanent/semi-permanent change in policy & regulations? Executive Executive Orders and White House Memos, including regulatory freeze and/or reform directives Direct agencies to re-visit and/or revise Direct agencies not to enforce Structural changes within OMB Stay Agency Reconsideration resulting in same rule, no rule, or revised rule New rulemakings (or interpretations) Structural changes within the agency Congress Congressional Review Act (CRA) Legislative revision Funding prohibition Budget reconciliation Oversight hearings and the like Courts Government Defends or Declines to Defend Government seeks voluntary remand and/or abeyance resulting in the same rule, no rule, or a revised rule 3
HOW LONG IS 4 YEARS? To enhance the likelihood that changes will be effective and lasting, the Administration should try to conclude the rulemaking process, including subsequent litigation, within the four-year election cycle. Therefore: four years four years, instead four years 18 months for rule revisions. 4
What does it take to change policy & regulations? PERSONNEL PRIORITIES PROCESS PERFORMANCE PACE POLITICS & PERSEVERANCE PRINCIPLES & THE RECORD 5
Priorities-- where is Trump going? Regulatory Reform Climate Action Plan & Clean Power Plan NAAQS Permit Streamlining DOE Efficiency WOTUS RMP BLM & Leasing on Public Lands ESA Methane NEPA BOEM 6
Senate Democrats Republicans 48 52 House of Representatives Democrats Republicans 194 241 7
Why Regulatory Reform Matters? Initiatives from the Trump Administration 68TH ANNUAL OIL & GAS LAW CONFERENCE Houston February 17, 2017 Lucian Pugliaresi Energy Policy Research Foundation, Inc. Washington, DC WWW.EPRINC.ORG 8
About EPRINC Founded 1944 Not-for-profit organization Studies intersection of petroleum economics and public policy Provides independent and technical analyses for distribution to the public Funded largely by the private sector, foundations and U.S. government Supports USG projects, e.g. Quadrennial Energy Review, DoD strategic outlook www.eprinc.org 9
POLITICAL FORCES BEHIND THE TRUMP VICTORY (A partial list of trends overlooked by Trump s opponents in the presidential election) Growing resentment of welfare state by working class, traditional Democrats lost confidence in the party to help them. Class divisions have translated into geography, i.e., so-called Rust Belt voted for Trump in large numbers which is important for the electoral map. Failure of Democrats to place economics at the center of the debate, employment had risen since the Great Recession, but wages remained stagnant. Growing sense that the regulatory state was an instrument of the elite, e.g. labor unions couldn t build pipelines because elites were worried about climate. 10
Four Critical Policies Which Will (or May) Expand US Oil & Gas Production Expanding access to oil & gas resources on public lands Reforming Environmental Reviews and Project Permitting (pipeline construction, environmental reviews and accelerated permitting) Climate regulation, Social Cost of Carbon, COP21, automobile efficiency standards Trade concerns and the future of the North American petroleum production platform 11
Oil & Gas Discovery Rate Hits Historic Low (billions of barrels of oil equivalent) Is this really a problem if we have shale resources? Source: IHS Market and Financial Times 12
Source: EIA & PetroNerds 13
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DAKOTA ACCESS PIPELINE ADDS SECURITY & COST SA VINGS 15
Regulatory Process Subverted Project Approval for Political Reasons, but Project Can be Restarted 16
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millions bbls/day 12 NAFTA Single Market Lens (Net Imports of Crude & Petroleum Products) Note: NAFTA PETROLEUM CONSUMPTION APPROX 22 MBD 10 8 6 total imports NAFTA Imports NAFTA Exports NAFTA Net Imports 4 net imports 2 total exports 0 2004 2005 2006 2007 2009 2010 2011 2012 2014 2015 Jul-2016 Source: EIA 19
millions bbls/day 16 North American Lens (Crude & Petroleum Products) 14 12 total imports 10 8 US Imports US Exports US Net Imports 6 4 total exports net imports 2 Note: of Net Imports of 5.3 mbd, 2.4 mbd from Canada 0 2004 2005 2006 2007 2009 2010 2011 2012 2014 2015 Jul-2016 Source: EIA 20
A Comment on Environmental Regulation How Much Should We Pay for the Last 10 Yards? Grams of GHGs per Mile 1,000 800 600 400 200 0 Grams of Greenhouse Gases vs Miles Per Gallon (MPG) 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Miles per Gallon - Increasing Efficiency ---> Analysis Based on EPA data GHG/Mile You are here EPRINC Annual fuel consumption per vehicle (assuming 12,000 miles per year) 1,200 1,000 800 600 400 200 0 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Miles per Gallon - Increasing Efficiency ---> @$3.50/gal Analysis Based on EIA data @$2.25/gal Annual fuel cost per vehicle (under two price scenarios) $4,000 $3,000 $2,000 $1,000 $0 EPRINC Source: Pugliaresi, L. and Max Pyziur, CAFE, Gasoline Prices and the Law of Diminishing Returns, March 2016, EPRINC 21