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The midterms and gas: Big projects stare down federal scrutiny, local hurdles

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The midterms and gas: Big projects stare down federal scrutiny, local hurdles

This article is part of a package of stories that explore how the 2018 midterm elections may impact the U.S. energy business. The package also includes articles about how the oil, coal and power sectors may or may not be disrupted by election results.

The U.S. midterm elections could result in more federal oversight of interstate energy pipeline building, and politics might have a larger impact at the state and local levels as several large natural gas infrastructure projects fight to make it to the construction stage.

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S&P Global Market Intelligence explores the potential impacts of the 2018 midterm U.S. elections on the economy, industries and individual companies across the globe.

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If Democrats take control of the U.S. House of Representatives, the Committee on Energy and Commerce would pressure U.S. Department of Interior agencies and other federal agencies that work with the Federal Energy Regulatory Commission to roll back Republicans' deregulation agenda in a series of hearings, energy industry analysts said.

For developers, that would mostly maintain status quo at the Interior Department. A Democrat-controlled House might still consider the Interior Department to be a "bad actor," Height Capital Markets analyst Katie Bays said in an interview, but the committee could have more of an effect on pipeline companies through its scrutiny of FERC.

"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 Equity LP] as a result of the multiple [Rover Pipeline LLC] pipeline spills," analysts at Bays' Washington, D.C.-based research firm 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, would transport natural gas from the Marcellus and Utica shales to East Coast markets and pipeline connections to the Southeast.

Democratic members of the House committee, including Rep. Bobby Rush, D-Ill., the Energy Subcommittee ranking member, could still lend an ear to the energy pipeline industry.

"Mr. Rush is a little bit of an unknown quantity, just because he hasn't been deeply involved in energy issues in the past," Dena Wiggins, president of the Natural Gas Supply Association, said in an interview. "On a personal level, I like him. I think he is open to hearing from those of us in the energy sector,"

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After elections at the state level, things may get even tougher for pipeline developers in New York, as a challenging regulatory environment shows no sign of relenting. Gov. Andrew Cuomo is widely expected to win re-election following a contentious gubernatorial primary in which Cuomo, who has already moved his agencies against major pipeline projects, moved further to the left on energy issues to adjust to a Democratic primary opponent. Pipeline giant Williams Cos. Inc. has struggled against the New York State Department of Environmental Conservation, which denied Clean Water Act certifications to both the Constitution Pipeline Co. LLC project and Transcontinental Gas Pipe Line Co. LLC's Northeast Supply Enhancement project.

Constitution, seen by the gas industry as a key project to move Appalachian supplies to the sometimes constrained market of the Northeast, remains in limbo after asking a federal appeals court to help it overcome decisions by FERC that allowed a state permit denial to stand. Williams is optimistic that the Northeast Supply Enhancement project, which would transport gas to New York City, will move forward after the election.

In local contests, a race in Oregon for one of the Coos County Commission's three seats could jeopardize a proposed LNG export facility and the pipeline that would supply it. The Sierra Club is supporting Democrat Katy Eymann, whose campaign platform focuses on opposing the troubled Jordan Cove facility that Pembina Pipeline Corp. inherited from Veresen Inc. in 2017 and the accompanying Pacific Connector gas pipeline.

The approximately $10 billion Jordan Cove venture faces permitting difficulties at the local, state and federal levels. In 2017, Pembina 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. Eymann's election could result in the commission overturning that order and create yet another delay for Jordan Cove and the Pacific Connector pipeline.