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An overabundance of domestic fossil fuels, coupled with pandemic-driven stay-at-home orders and other travel restrictions, already had dampened the growth prospects of the nation’s oil-and-gas industry through most of 2020. And that was before the presidential election.
Now President Joe Biden, in his first months in office, has set into motion a climate change agenda with major proposed changes to the nation’s energy policies and environmental regulations. Amid all of this anticipated change, it is vital to consider the forewarnings, the risks, and the legal implications for the energy industry. Having a preventative or even a proactive mindset about the legal and regulatory implications for any energy business may be one of the most important steps that can be taken at this very dynamic time.
So what can the energy industry – and local economies – expect amidst a charged political climate aiming to increase environmental regulations and usher in an era of “green,” renewable energy?
“De-fossilizing” the country – political emphasis on renewable energy
“I think most people are aware of the fact that there has been a significantly different perspective brought to Washington than from the Trump administration,” said Attorney Joseph Reinhart, a shareholder with Pittsburgh law firm Babst Calland who serves as co-chair of the firm’s Energy and Natural Resources practice. “For example, we had the Trump administration putting into place executive orders that were intended to expedite permitting of infrastructure to foster the domestic development of oil and gas and coal.
“You have almost the exact opposite going on now, with the regulatory freeze,” he continued. “You’ve got the Biden administration, which campaigned essentially on de-fossilizing the whole country and coming in with a whole host of different people and practices that are intended to go the other way, if you would, in terms of energy development…And every sign at this point is that now there’s going to be a heavy emphasis on different types of energy, particularly renewable energy, with much less attention devoted to fostering the development of oil and gas.”
Reinhart was one of three attorney colleagues who participated recently in a discussion with the Pittsburgh Business Times named “Energy perspectives in a new administration.” Babst Calland, one of the region’s largest law firms, also has one of the region’s largest energy and natural resources law practices.
Reinhart suggested that the energy industry can expect major changes because of the built-in perspectives of a new cabinet coming into the Biden administration.
“It’s going to be very significant because, in addition to having new executive orders and memoranda forecasting a freeze or reversal of key regulations, you don’t want to underestimate the effect of assigning people with a much different perspective on the energy industry to manage important federal agencies that oversee industry,” he said. “For example, when you look at the Interior Department Secretary nominee, you have Deb Haaland taking over who has stated that fracking is a danger to the air we breathe and the water we drink. Obviously, any decision that involves oil and gas development that would fall under her jurisdiction is going to be influenced by that perspective.”
Climate change agenda across the federal government
Attorney Jean Mosites, a shareholder with Babst Calland’s Environmental and Energy and Natural Resources practices, agreed with Reinhart but emphasized that the administration’s overriding climate change agenda likely will effect significant changes across the entire federal government.
“With this priority on climate change and the approach that this administration is taking, the entire federal government is to be geared to accomplish climate change goals,” Mosites said. “So people in the Departments of the Interior and Energy, but also in Treasury and Commerce – every department and every agency – are going to have someone coordinating a focus on procurement, so that federal dollars are spent differently, away from fossil fuels and toward renewables, in permitting, in policies, and in every way they can. It’ll be something we’ve never seen before – this type of coordination across the entire federal government.”
Sweeping changes, perhaps – but not overnight
Still, Mosites noted, the energy industry can expect such regulatory changes to take considerable time in many cases, with the exception of the president’s early executive orders to immediately stop certain fossil fuel-related activities.
“There were some executive orders issued right away that said stop any regulation that you can,” she said, “but if something has been published and is effective, you have to go through a longer process to be able to revoke or reverse those [regulations]. And that was one of the things that the Trump administration struggled with because they wanted to reverse and revoke some of the Obama administration’s regulations and ended up in litigation over many of them for alleged failures to follow administrative processes.
“But the process requires that you really take steps that take a long time,” Mosites added, “so on the regulatory front, we’re not going to see anything immediate unless it was really not effective yet.”
The administration’s effect on states
Meanwhile, Mosites also suggested that state governments likely will “wait around” for the federal government to fully address climate change.
“But those kinds of things are still going to matter” to the state governments, she said. “We’re also seeing investment in infrastructure in fleets for electrical vehicles. Building codes are going to be changing for appliances and buildings. And in some places, we’ve seen bans on natural gas hookups, for example, so there are a variety of actions that still can be taken.”
Asked specifically about the 10-state Regional Greenhouse Gas Initiative, which Pennsylvania Gov. Tom Wolf is pushing Pennsylvania to join, Mosites responded: “It remains to be seen what the pros and cons would be. There’s really no consensus on whether or not that should move forward. It’s really uncertain whether it will have an effect on climate change because the emissions in Pennsylvania have dropped pretty dramatically over the last 10 years with more use of natural gas, as opposed to coal.”
Tightening regulations on oil and gas pipelines
Attorney Keith Coyle, a shareholder with Babst Calland’s Pipeline and Transportation Safety, as well as Energy and Natural Resources, practices, expressed his own concerns with the new administration over oil and gas pipeline regulations, driven by environmental safety fears. And that, he said, likely will lead to greater federal regulation down the road.
“We’re going to see much greater emphasis on climate change and other environmental issues when it comes to pipeline regulation,” Coyle told the Pittsburgh Business Times. “I do think that, with the events that are ongoing right now in Texas, we need to be careful and deliberative on how we proceed when it comes to changes to energy regulation. We all want to make sure that we’re doing everything we can to make sure we have safe and reliable energy transportation in this country.
“Pipelines are going to play a key part of that,” Coyle continued. “I have not read any analysis or study that shows we’re in a position where we can operate a modern society – where we have light and power and water – without pipelines. They’re a critical and necessary part of this country’s energy infrastructure. I hope the new administration remembers the critical part that pipelines and energy transportation itself plays and making sure that we all stay safe.”
That said, Coyle did suggest that the Biden Administration likely will place greater regulatory focus on pipeline leak detection and repairs with regard to the nation’s network of energy pipelines.
“There was a rule-making mandate that was included in a recent piece of federal legislation directing firms to come up with some new regulatory requirements for pipeline leak detection and repair,” Coyle said. “And I think we’ll also see a focus in that regard and in other respects, to gas gathering lines.”
The benefits of energy impact fees
There’s another close-to-home concern to consider when it comes to tightening the screws on the oil and gas industry, particularly in regions like southwestern Pennsylvania: impact fees. So said Reinhart, who explained that many local municipalities, especially in Washington and Greene counties, receive much-needed impact fees from energy companies. Such fees, he said, offset local taxes and help fund regional economic development efforts that create jobs.
“You know, many municipalities in our region get a significant amount of revenue from oil and gas development,” Reinhart said. “I think the danger when we talk about oil and gas is that people visualize an oil well or pipeline and they don’t really think about the overall consequences of natural gas development on the economy, particularly here in southwestern Pennsylvania.”
“It’s never as bad as you think”
While the new presidential administration has set its course for a clean-energy agenda driven by climate change and promises significant changes to laws and regulations, Reinhart is quick to remind energy executives and counsel to assess the overlapping legal and regulatory challenges posed by federal, state and municipal authorities and establish a strategy that takes into consideration the critical legal, business and financial implications going forward.
“There are a lot of folks in our practice groups that have been through several of these administration changes at the state and federal levels, and it’s never as bad as you think or as good as it could get,” Coyle said. “So I think we’re all prepared to help counsel our clients through these times.”
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