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Despite Democratic win, US House to have limited effect on gas pipeline projects

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As ranking member, Rep. Frank Pallone Jr., D-N.J., could be the next House Energy and Commerce Committee chairman. With the Senate under strengthened Republican rule, the House committee's reach looks to be limited.

Source: Associated Press

While a Democratic majority in the U.S. House of Representatives will target the White House's energy deregulation policy agenda, its ability to institute more federal oversight of interstate pipeline building is limited, several industry experts said.

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Democrats on Nov. 6 won control of the House for the 116th Congress, paving the way for the next chairman of the House Committee on Energy and Commerce to lead efforts to support clean energy and probe the Trump administration's actions to roll back Obama-era air and water quality rules. There has been no official indication of committee assignments, but Rep. Frank Pallone Jr., D-N.J., is the committee's ranking member.

Democrats can use hearings to pressure U.S. Department of the Interior agencies and other federal offices that work with the Federal Energy Regulatory Commission to reverse relaxed regulations for energy producers and pipeline developers, but they may not be able to cancel what has already been done.

"Democrat oversight via House committees can complicate timelines through oversight hearings and potentially materialize in pressure on agencies such as FERC with threats of budget riders to constrain policy, but control of one house [of Congress] may not necessarily halt agendas altogether," Christi Tezak, managing director at the research firm ClearView Energy Partners, said in an email.

With Republicans increasing their majority in the Senate, the House energy committee will have a hard time imposing its new political orientation on the law books.

"A divided Congress means that bipartisanship becomes even more important to legislative success," Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America, said in an email. "In other words, Congress is likely to legislate less, unless bipartisan consensus can be achieved on issues."

For developers, that would mostly maintain the status quo at the Department of the Interior, but the House committee could have more of an effect on pipeline companies through its scrutiny of the Federal Energy Regulatory Commission. "While we do not see legislation or a change in regulation as a result of these hearings, we do think it is reasonable to expect that FERC may levy fines on [Energy Transfer LP] as a result of the multiple [Rover Pipeline LLC] pipeline spills," analysts at the Washington, D.C.-based research firm Height Capital Markets wrote in an Oct. 8 note to clients. "We could see other companies building major gas pipelines, like [EQT Corp.] and [Dominion Energy Inc.], dragged into the fray, as well."

EQT's EQM Midstream Partners LP is the lead developer of the Mountain Valley pipeline project, which, like the Dominion-led Atlantic Coast pipeline, would transport natural gas from the Marcellus and Utica shales to East Coast markets and pipeline connections to the Southeast.

Republicans' control of the Senate means Bernard McNamee, a U.S. Department of Energy official picked by President Donald Trump to fill the empty seat at FERC, should become the fifth commissioner and give Republicans a 3-2 advantage over their Democratic colleagues on the usual divisive issues such as how to measure the climate impacts of natural gas infrastructure.

"The House can voice its displeasure with potential commission direction, but we do not view the House as being in a position to force FERC into a more stringent review process than it cares to take," Tezak said. "We see such questions being continually placed before the courts, and expect that FERC may pull off more wins than losses."

The Constitution pipeline, seen by the gas industry as a key project to move Appalachian supplies to the sometimes constrained markets of the Northeast, is one of those long-haul pipeline projects whose fate could be determined by the U.S. Court of Appeals for the District of Columbia Circuit. Since the New York State Department of Environmental Conservation denied the pipeline's initial application for a Clean Water Act certification in April 2016, the Williams Cos. Inc.-led venture has been locked in a legal battle with state and federal regulatory bodies to move the project forward.

Constitution most recently filed a Sept. 14 petition with the federal appeals court requesting that the court review FERC orders that declined to remove the New York agency from the permitting process and denied Constitution's challenge of the first order. On Nov. 5, FERC issued an order granting the pipeline project two more years to be placed into service, extending the deadline from Dec. 2, 2018, to Dec. 2, 2020.

In local contests, meanwhile, Democrat Katy Eymann's defeat in the Oregon race for one of the Coos County Commission's three seats is a positive development for the troubled Jordan Cove LNG export facility and accompanying Pacific Connector gas pipeline that Eymann opposed.

The approximately $10 billion venture that Pembina Pipeline Corp. inherited from Veresen Inc. in 2017 faces permitting difficulties at the local, state and federal levels. Pembina in 2017 submitted a modified application to FERC after the commission in 2016 denied Veresen's request for authorization. In November 2017, Oregon's Land Use Board of Appeals sent an approval for the export project back to Coos County commissioners after determining that the August 2016 order did not fully address concerns of environmental groups and Native American tribes.

With Republican John Sweet defeating Eymann, the commission is less likely to overturn that order and create yet another delay for Jordan Cove and the related long-haul Pacific Connector pipeline.