President Trump picked former Oklahoma Attorney General Scott Pruitt to lead the U.S. Environmental Protection Agency (EPA) as its administrator in February of last year. The Trump administration has ushered in a new era—one of rolling back regulations that are unnecessary and duplicative. According to the White House, the Trump administration has rolled back 1,579 planned regulatory actions in its first year. It estimates that to be a lifetime net savings of $8.1 billion.
It’s not difficult to see the EPA’s actions on regulatory reform this past year as the tip of the spear for the Trump administration’s regulatory rollback efforts. It looks tough—for every one regulation the EPA has put forward, about 18 have been rolled back. The EPA has faced a number of challenges and was dealt some setbacks.
An Oklahoman heading the EPA is great for the energy industry generally, but it’s even better for the midstream, specifically, because so many midstream companies are either based in Oklahoma or have operations there. With a team of expert staff members advising him, and with highly knowledgeable assistant administrators in place, Administrator Pruitt has the EPA moving in his direction.
Shrinking the EPA
According to the U.S. Office of Personnel Management (OPM), from December 2016 -January 2018, the EPA’s staff shrank by 1,500 people; the agency currently employs 14,162. Shrinking the size of the federal government has been a Trump administration priority, and it appears that Administrator Pruitt is out in front of that initiative. I expect the reduction to continue throughout Pruitt’s time at the EPA.
However, the midstream is highly dependent on regulatory certainty. That means midstream operations need permits to complete projects. Reducing EPA staff levels potentially could delay the time it takes to get a permit since fewer EPA employees and resources would be dedicated to working on that permit.
Infrastructure buildout is a Trump administration priority that will be a focus this year. Although roads and bridges tend to engulf the infrastructure conversation and policy debates, it’s important to remember that energy infrastructure will also be part of this package.
Scientific board policy
Pruitt changed policy regarding the scientific boards that advise the EPA. He put a new policy in place that currently blocks any researchers from participating on the boards if they receive grant money from the EPA. This topic has long been popular on Capitol Hill, with Congress raising issues of impartiality with previous EPA science board members who either received funding directly from the agency in the form of grants or who received funding indirectly (i.e., through grants to their organizations).
Since these boards can provide important science and research to the EPA, Pruitt felt it was important to have them staffed with impartial members and has implemented that change. The agency is also making moves to reexamine and alter greenhouse-gas regulation.
Methane from existing sources is one of the main regulations facing the midstream. Essentially, the EPA is in the process of rolling out two new stays that, if successful, will provide it with additional time to develop a new OOOOa (Quad Oa) rule.
The EPA previously attempted to issue a 90-day stay and was challenged in court by environmental activist groups, who succeeded in defeating the first stay. Now with two new stays expected to come down soon, the agency will most likely find its efforts challenged in court again by the activists.
The new Quad Oa rule being developed is also referred to as the New Source Performance Standards (NSPS) for the oil and natural gas industry, Subpart OOOOa rule. Quad Oa was promulgated in June 2016 for new, modified and reconstructed sources at oil and gas facilities (these would be the sources that possibly could have new regulations placed on them).
The Obama administration’s Quad Oa proposed rule is also responsible for introducing a wide-ranging leak detection and repair (LDAR) program for impacted well sites and compressor stations. Of the requirements imposed by NSPS OOOOa (as well as the LDAR program), a large amount of them will force regulatory costs on those in the midstream, and those costs are significantly higher than any expected benefits.
This subpart imposes extraordinarily high costs and unnecessary demands on the midstream industry.
Losing the first Quad Oa stay was frustrating for the EPA, and it was one of the first setbacks faced in this administration. However, with two legal battles over the two upcoming proposed stays likely to happen while the agency is also crafting a new version of Quad Oa, the agency has stayed the course.
EPA has a chance to prove the old saying, “It’s not whether you get knocked down; it’s whether you get up.” Although this initially is a setback for the midstream and the EPA, I think there will be multiple upcoming opportunities that will provide a number of chances for the EPA to succeed, even if challenged by the environmental activists.
Matthew Hite is vice president of government affairs for the GPA Midstream Association.
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