Government shutdown brings potential challenges to US energy and mining sectors

The US federal government shutdown will inject uncertainty into the US energy and mining sectors and could lead to permitting and operational delays if it drags on, industry groups told Platts.

The federal government officially shut down on Oct. 1 after Republicans and Democrats in Congress failed to reach a budget deal before funding expired. Republicans are advocating for a continuing resolution that will keep funding at current levels through Nov. 21, while Democrats are seeking limitations on the Trump administration's use of recissions to undo previously allocated funding and the extension of certain expiring Affordable Care Act subsidies.

If the shutdown were to persist, industry groups said an extended lapse in funding could create instability for energy and mining companies that rely on guidance and data from agencies to build infrastructure and make informed business decisions.

Unknowns for utilities

Larry Gasteiger, executive director of the trade organization WIRES, told Platts on Oct. 1 that a prolonged government shutdown adds uncertainty for utilities that interact with federal regulators on a day-to-day basis. WIRES represents transmission-owning utilities and advocates for investment in high-voltage transmission. Platts is part of S&P Global Energy.

Gasteiger expressed concern that the shutdown could last long enough to affect the Federal Energy Regulatory Commission, which is currently operating using carryover funds. A commission spokesperson did not respond to a request for comment on how long those funds would last.

"Regulated entities regularly meet with FERC staff and commissioners on a whole host of issues, either to educate them or to get feedback on potential proposals and get guidance from agency staff that wouldn't happen in the event of a shutdown," he said in an interview. He also noted that many utilities must submit a host of compliance filings with the commission on a regular basis.

"It would handicap the ability of an agency like FERC to act on all kinds of filings ... everything will then take longer," Gasteiger said. "Some filings may be subject to further review because they will go into effect by operation of law, and then FERC could reexamine them later on."

If FERC runs out of funds, the commission will retain about 60 employees and 18 contractors, representing about 5% of its total workforce, to perform excepted activities.

A shutdown also has the potential to affect the Low Income Home Energy Assistance Program, potentially putting pressure on utilities, states and community organizations. A short-term shutdown could also affect state allocations.

Delays, missing data for metals and mining

The government shutdown poses several concerns for the steel industry.

A lack of essential government services will lead to an inability to obtain critical data, analysis and information on steel trade, Kevin Dempsey, president and CEO of the American Iron and Steel Institute, said in an Oct. 1 statement.

The US Commerce Department tracks steel import licenses, which provide early warning signs for American steelmakers on foreign imports, Dempsey said. This could lead to unfair trade practices and a massive overproduction of steel, resulting in increased imports into the US — one of the biggest challenges the industry faces.

"Without the ability to monitor those trade flows in real time, steel imports could surge into our markets undetected," Dempsey said in a statement. "This could impact American jobs long before the industry could see the import surge in regular government import data."

The shutdown also creates uncertainty for federal projects that use US steel, which has larger impacts on the industry, Dempsey said.

US-based mining projects also face uncertainty in a prolonged government shutdown.

A longer shutdown may stall coordination with state and federal agencies and delay mining projects that support jobs and supply chains, the American Exploration and Mining Association's executive director, Mark Compton, said in an Oct. 2 statement.

"We remain committed to working with our government partners and hope to see swift resolution so progress can continue," Compton said.

Permitting concerns

Industry groups said that the shutdown could adversely affect permitting, especially as agencies prioritize different things during the funding lapse. While the US Bureau of Land Management will continue permitting activities during the shutdown, the US Environmental Protection Agency will not, according to the agencies' posted contingency plans. This could cause problems as projects often need approval from several agencies to proceed.

Dena Wiggins, president and CEO of the Natural Gas Supply Association, said impacts will depend on how long the shutdown lasts.

"In the short term, FERC is not affected by a government shutdown, as its funding structure is separate from congressionally appropriated funds," Wiggins said. "But as it lingers, the work FERC does in conjunction with other agencies could be impacted."

Some industry groups were watchful for impacts on energy project permitting and permitting reform legislation, should the shutdown drag on for long.

"The longer the government is shut down, the longer Congress remains gridlocked and unable to continue momentum towards permitting reform, which is critical to President Trump's energy agenda," American Gas Association President and CEO Karen Harbert said.

Positives for coal industry

One coal industry representative, meanwhile, took a relatively sanguine view of government operations. Michelle Bloodworth, president and CEO of America's Power, a trade group for coal-fired power generators, said recent pro-coal actions by the US Energy and Interior departments, as well as the EPA, point to a bright future for the industry.

On Sept. 29, the DOE announced $625 million in new funding programs for coal-fired power plants, while Interior said it would unlock 13.1 million acres of federal land for coal leasing, lower the royalty rates for such projects from 12.5% to 7%, and accelerate approvals for new coal mines.

The same day, the EPA said it would extend the deadlines for coal plants to comply with its 2024 Effluent Limitations Guidelines rule limiting pollutant levels in certain wastewater streams and would seek public feedback on modifying its Regional Haze rule to reduce the costs to coal plant operators.

"We are confident this important work will continue once the government reopens, ensuring coal remains central to powering America's economy and securing the nation's grid well into the future," Bloodworth said.