Geoscience Policy Monthly Review
january 2018

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energy

FERC rejects Department of Energy proposal to subsidize coal and nuclear plants

January 8, 2018

On January 8, the Federal Energy Regulation Commission (FERC) rejected a proposal that was submitted by Secretary of Energy Rick Perry in September 2017 to subsidize the operating costs of coal and nuclear power plants, since the rule did not satisfy certain statutory standards. However, the agency recognized that this issue warrants further attention and initiated a new proceeding to specifically evaluate the resilience of the bulk power system in certain operating regions. The Secretary’s proposed rule highlighted the need to diversify our fuel resources in order to improve the resiliency and reliability of our nation’s electric grid in the face of potential outages from threats such as cyber-attacks or natural disasters. In a letter to FERC Commissioners, Secretary Perry noted that the proposed rule would rectify the artificial devaluation of coal and nuclear power created by market inefficiencies that have led to the “premature” closure of these power plants in recent decades.

Congressional proponents of the proposed rule include those representing coal-producing states, such as Senators Steve Daines (R-MT), Shelly Moore Decapio (R-WV), and Joe Manchin III (R-WV). Private-sector support is almost exclusively from coal producers. Critics of the proposal include energy suppliers from the oil, gas, and renewables sectors, electrical power suppliers, free-market groups, and energy regulators, which have expressed concerns that the rule would violate the free-market principals necessary for a competitive and healthy wholesale electricity market – a market which has been deregulated since the 1990’s in order to ensure the lowest-cost sources of power.

Sources: Department of Energy; Federal Energy Regulation Commission; Government Publishing Office

Interior Department announces plans for U.S. Outer Continental Shelf Oil and Gas Leasing Program

January 10, 2018

Secretary of the Interior Ryan Zinke announced on January 4 plans for the development of the National Outer Continental Shelf Oil and Gas Leasing Program (National OCS Program) for 2019-2024. The new Draft Proposed Program (DPP) aims to make more than 98 percent of the undiscovered, technically recoverable oil and gas resources in the OCS available for leasing and exploration. By comparison, the current 2017-2022 Program implemented by the Obama Administration makes available 70 percent of the OCS resources economically recoverable at an oil price of $40 per barrel and nearly one-half of all the estimated undiscovered, technically recoverable resources in the region.

The original 2015 draft of the Obama Administration’s 2017-2022 Program had included many of the same leasing areas as the new DPP for 2019-2024, with the notable exception of the Pacific, southern portion of the South Atlantic, and entire North Atlantic regions, but the final draft of the 2017-2022 Program was revised to remove those highly contested areas in Alaska and the Atlantic that are currently under scrutiny in the recently proposed program. The 2019-2024 DPP, which is the largest lease sale proposal for the National OCS Program to date, includes 47 potential sales in 25 offshore planning areas, of which 19 are in Alaska, 12 in the Gulf of Mexico, 9 in the Atlantic, and 7 in the Pacific.

Although this recent move to increase the nation’s offshore energy development is consistent with the current administration’s priorities as outlined in President Donald Trump’s Executive Order 13795, it is facing opposition on both sides of the aisle. Earlier this year, Representative Alan Lowenthal (D-CA-47) led a group of over 100 Democratic members of the House of Representatives in a letter urging Secretary Zinke to keep Atlantic and Pacific oceans off-limits to new oil and gas leases. Similarly, a number of Republican lawmakers representing some areas recently proposed for leasing have opposed Secretary Zinke’s OCS leasing plan. Representative Scott Taylor (R-VA-2) recently stated his opposition to the DPP due to the potential negative impacts it would cause to military operations and tourism in Virginia. Senators Susan Collins (R-ME) and Angus King (I-ME) also opposed the plan in an open letter arguing that drilling off the coast of Maine would harm the state’s fisheries and coastal resources.

Less than a week after release of the DPP, Secretary Zinke announced that all of Florida’s coastline would be removed from consideration in the proposed five-year leasing program. Of particular interest is the oil-rich area of the Gulf of Mexico within 125 miles off the western coast of Florida, which is subject to a congressional moratorium until 2022 as part of the Gulf of Mexico Energy Security Act of 2006 (GOMESA) (P.L. 109-432). Although Secretary Zinke had originally planned to reopen the area for lease after the expiration of the moratorium in 2022, when Governor Rick Scott (R-FL) met with Secretary Zinke on January 9, they informally came to an agreement that drilling in Florida’s eastern Gulf of Mexico and Atlantic regions would be taken off the table. Senator Bill Nelson (D-FL), a longtime proponent of restrictions on Florida offshore drilling, labeled the closed-door meeting between Secretary Zinke and Governor Scott as a “political stunt” that may have potentially violated administrative law. The sudden withdraw of Florida’s offshore areas following this meeting has prompted questions surrounding the seemingly preferential treatment given to the state and whether others will be allowed to follow suit.

The Bureau of Ocean Energy Management (BOEM) is accepting public comments on the DPP until March 9, 2018.

Sources: American Petroleum Institute; Associated Press; Bureau of Ocean Energy Management; Business Insider; Department of the Interior; Energy for Tomorrow; U.S. Senate; Washington Post

House oversight hearing looks at DOI burdens to onshore energy production

January 18, 2018

On January 18, the House Natural Resources Subcommittee on Energy and Mineral Resources held an oversight hearing to assess the Department of the Interior’s (DOI) progress on eliminating burdens to domestic onshore energy production, pursuant to Secretarial Orders 3349 and 3354. According to the Bureau of Land Management (BLM), the onshore oil and gas leasing process takes at least 16 months from the time a parcel is nominated to the award of a lease sale.

During the hearing, witness Jarred Kubat, vice president of land, legal and regulatory at Wold Energy Partners, LLC (WEP), commented on the regulatory uncertainties, inefficiencies, and inconsistencies that he believes disproportionately impact small businesses. With only 37 full time employees and 71 percent of WEP’s assets residing on federal lands in Wyoming, Kubat explained that the 415-day average delay between parcel nomination and lease offering is far too long for small operators.

Shane Shulz, director of government affairs for QEP Resources, echoed Kubat’s sentiments, stating that lengthy impact reports and protest periods on lease nominations have decreased the overall leasing activity on federal lands. This federal “paralysis by analysis,” as Shulz referred to it, is often a major driver for energy companies to find private, state-regulated lands as more attractive investments. According to a 2016 Congressional Research Service report analyzing energy production in federal versus nonfederal areas, oil production on federal lands has fluctuated over the past 10 fiscal years but has increased dramatically on nonfederal lands.

BLM’s Deputy Director for Programs and Policy Brian Steed affirmed that recent actions to reduce regulatory burdens have created more revenue for the agency. From 2016 to 2017, the 30 percent increase in onshore oil and gas lease sales generated an 87 percent increase in revenue totaling $360 million, which is a dramatic rise compared to the previous year’s $193 million. Steed noted the DOI’s plans to further reform lease sales by rescinding the duplicative Master Leasing Plans (MLP), deferring to the Resource Management Plans (RMP), and streamlining reviews under the National Environmental Policy Act (NEPA). He also stated that the DOI intends to eliminate a 2016 rule on venting, flaring, and leaks and a 2015 rule on hydraulic fracturing.

Minority witness Nada Culver, senior director of policy and planning for the Wilderness Society (TWS), argued against the legality of dismantling BLM’s venting and flaring rule, mentioning the DOI’s past efforts to administratively eliminate the rule and a Senate rejection in May 2017 of a joint resolution that sought to nullify this rule. Culver stated that aside from the negative health effects stemming from the release of volatile organic compounds and smog particulates, the federal government also loses out on royalties that could be collected on the natural gas that is vented or flared, citing a GAO report published in 2010. Culvert claimed that the key factors in industry lease investments were mainly market forces, resource geology and distribution, and BLM acreage, as opposed to federal regulation.

Sources: Bureau of Land Management; Congressional Research Service; Energy Information Administration; Environmental Protection Agency; Department of the Interior; Government Accountability Office; U.S. House Natural Resources Subcommittee on Energy and Mineral Resources; U.S. Forest Service

House energy subcommittee holds oversight hearing to discuss permitting for offshore seismic surveys

January 19, 2018

On January 19, the House Subcommittee on Energy and Mineral Resources held an oversight hearing to identify and examine regulatory obstacles to offshore geological and geophysical resource surveying on the U.S. Outer Continental Shelf (OCS). Congress is seeking compromises within the regulatory framework that would allow the U.S. to understand our offshore resource potential and ensure national energy security, while also minimizing the negative effects of anthropogenic noise in the marine environment.

The hearing was held in response to a December 2017 Government Accountability Office (GAO) report requested by House Natural Resources Committee Chairman Rob Bishop (R-UT-1). Entitled “Offshore Seismic Surveys: Additional Guidance Needed to Help Ensure Timely Reviews,” the report details the permitting process for seismic research and identifies instances of inefficiency and inconsistency in meeting federal internal control standards. Entities seeking to conduct seismic surveys to identify oil, gas, and other mineral resources in the OCS must obtain a permit from Interior’s Bureau of Ocean Energy Management (BOEM) – the federal agency responsible for the oversight of most offshore oil and gas leasing and exploration activities. Given the possibility that seismic surveys may disturb or injure marine mammals, entities may also need to request an incidental take authorization from the National Marine Fisheries Service (NMFS) or the U.S. Fish and Wildlife Service (FWS), although this is not necessarily required. During the hearing, GAO Acting Director Jon Ludwigson testified about the report findings, which recommended that BOEM, NMFS, and FWS should analyze their time frames for reviewing applications and develop guidance that clarifies how and when staff should record that an application has been determined adequate and complete.

Ryan Steen, a partner in the law firm of Stoel Rives, highlighted the need for modernizing the Marine Mammal Protection Act (MMPA), which prohibits the “taking” of marine mammals in U.S. waters unless authorized by NMFS or FWS, depending on the species which might be affected. According to Mr. Steen, MMPA authorizations are often the primary cause of administrative delay in the offshore seismic survey permitting process. Also on the witness panel, BOEM’s Acting Director Walter Cruickshank explained that seismic surveys “support BOEM’s mission to ensure the responsible development of conventional and renewable offshore energy and marine mineral resources while protecting the environment.” Dr. Cruickshank mentioned some of the different uses of seismic data, such as identifying critical minerals and sand and gravel resources, while clarifying that this involves a different type of seismic activity than what is used for oil and gas exploration, which requires much deeper penetration to look at the geology thousands of feet below the seabed. South Carolina State Senator Tom Davis cited the potential negative impacts of seismic testing to the environment and to the local economy of coastal regions.

In response to questions from Representative Alan Lowenthal (D-CA-47) about Secretary of the Interior Ryan Zinke’s recent OCS leasing plans and subsequent decision to exclude Florida’s offshore areas from exploration, Dr. Cruickshank assured the subcommittee that BOEM will proceed with a complete analysis of all the areas in the Draft Proposed Program for OCS leasing in 2019-2024, including those areas off the coast of Florida that Secretary Zinke informally announced on January 9 would be taken off the table. Representative Don Beyer (D-VA-8) then introduced for the record a letter to Secretary Zinke signed by more than 150 members of Congress that requests the removal of all the lease sales scheduled for the Atlantic, Arctic, and Pacific Oceans, and the Eastern Gulf of Mexico planning areas. Following suit, Representative Jared Huffman (D-CA-2) brought up that he also led a letter with 36 members of the California delegation asking for California’s shoreline to be exempt from the 2019-2024 National OCS Leasing Program.

Sources: Bureau of Land Management; Government Accountability Office; National Oceanic and Atmospheric Administration; U.S. House Committee on Natural Resources

Politicians debate efforts to improve the nation’s electrical grid

January 23, 2018

The Senate Energy and Natural Resources Committee held a hearing on January 23 that underscored concerns surrounding the reliability and resiliency of the electrical power system, particularly under certain weather conditions, such as the deep freeze or bomb cyclone that the U.S. experienced in the first week of January this year. FERC Chairman Kevin McIntyre asserted that overall the nation’s grid performed relatively well during the recent cold weather event and that, although coal is a key contributor of the nation’s fuel mix, there still would not have been any widespread outages in the absence of coal.  After weather-related operational problems forced the shutdown of the Pilgrim Nuclear Plant in Massachusetts on January 5, oil-fired generators came online to offset the 680 megawatt electrical deficit. ISO New England CEO Gordon van Welie stated that natural gas price spikes due to increased demand and supply limitations made oil more economically viable during these severe weather events. He also indicated that easing the restrictions on natural gas pipeline permits would help develop the nation’s energy infrastructure and insulate the grid from similar spikes in demand.

Sources: National Geographic; Reuters; U.S. Senate Committee on Energy and Natural Resources