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Marathon CEO: Midstream permitting is the new energy battleground

While the U.S. oil and gas industry has met the challenge oflow commodity prices by driving costs down, the biggest threat to the industry'sgrowth is regulatory, MarathonPetroleum Corp. CEO Gary Heminger told shale gas executives inPittsburgh.

"In the pipeline industry, there is no better examplethan the administration's recent decision to delay the after thedevelopers followed all the rules and a federal judge shot down a lawsuittrying to stop the project," Heminger said in a speech to open the ShaleInsight 2016 conference. "It's disturbing that how someregulations are applied depends not necessarily on the law itself but on theindividuals in charge of enforcing the rules," Heminger said. "Thisapproach is at odds with our character as a nation of laws and certainly isn'tconducive to a flourishing business environment."

Heminger's address set the tone for a conference that hasevolved over its five-year history from a showcase for gas producers to thisyear's emphasis on how to transport billions of cubic feet per day of naturalgas and liquids to markets.

Marathon recently enteredinto a joint venture with EnbridgeInc.'s EnbridgeEnergy Partners LP to buy a 36.75% stake in the Bakken oil pipelinesystem for $2 billion. Marathon would pay $500 million for its 9.2% stake whenthe deal closes later this in 2016. The Bakken project, which includes theDakota Access pipeline and the Energy Transfer Crude Oil Pipeline projects,would consist of nearly 1,200 miles of a new 30-inch-diameter crude oil pipelinefrom North Dakota to Patoka, Ill., and more than 700 miles of pipelineconverted to crude service from Patoka to Nederland, Texas.

Heminger said environmental groups have unjustly painted hisindustry as a villain in the environmental debate, saying the U.S. particulateemissions have declined by 60% while the economy has grown 150% since 1980. "Despitethe enormous benefits we have brought to our nation and its citizens, we faceactivists who tell us we should keep oil and natural gas in the ground,"Heminger said. "But we know that there are no energy sources capable ofreplacing what we produce every day. Without doing what we do, much of theworld would simply go withoutenergy."

Thus, Heminger said, pipeline permitting has evolved intothe new battlefield between industry and environmental groups, where often theloudest voice in the room wins, not the sanest.

"Federal agencies that once served a critical purposehave become almost militant in their approach to our industry and its members,"Heminger said. "Regulations now are often applied with significantoverreach, or they are not really followed at all, and are simply reinterpretedto meet the agency's needs or the administration's agenda."

"Virtually every aspect of our business requirespermits," he said. "When we don't know what to expect from oneproject to the next, let alone from one locality to the next, it stifles ourability to invest by creating a tremendous amount of uncertainty."

"It's important that our lawmakers and regulatoryagencies hear from us on these matters clearly and often," Heminger toldan audience of more than 1,000 professionals. "As an industry, we are manyconstituents, but we need to speak as one strong voice. And I don't use thatphrase lightly. The reality is that what we are doing in this basin has had,and will continue to have, global implications. We have shifted the energylandscape of our planet … shifted it for the better, and in our nation's favor."