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Previewing the energy Cabinet


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Previewing the energy Cabinet

A weekly recap of SNL Energy's coverage of major themes in the natural gas industry.

Judging by his recent Cabinet selections, President-elect Donald Trump is poised to align his administration closely with the U.S. energy industry.

Rick Perry, who succeeded George W. Bush as Texas governor in 2001 and was elected three times in his own right, was formally announced Dec. 14 as Trump's pick to serve as secretary of energy in the next administration. If confirmed, he would lead a federal agency with a portfolio that includes regulation of nuclear waste and promotion of new energy technologies. It is also a department that Perry said he wanted to abolish during his aborted 2012 campaign for president.

But it was Texas' track record on energy while Perry was governor that stands out the most, both to supporters and detractors.

Salo Zelermyer, senior counsel at Bracewell LLP's Washington, D.C. office and a former lawyer in the U.S. Department of Energy, said Perry has the background to be an effective energy secretary.

"As governor of the state of Texas for 15 years, Rick Perry led a state that has, for decades, been critical to our domestic energy policy. During his time in office, Perry embodied the type of 'all of the above' approach to U.S. energy production that many have advocated on both sides of the aisle," he said. "Rick Perry's Texas was not only a world leader in oil and gas production; it was also a global leader in wind power and renewable energy investment."

Environmental groups were quick to seize on Perry's background too. "The nomination of Texas Gov. Rick Perry — yet another out-of-touch climate denier — to head the Department of Energy (DOE), an agency he vowed to eliminate, completes the dangerous trio of climate denial and obstruction. This may be the most stunning expression of how money in politics work. The richest corporations win and everybody else loses," EarthJustice said in a statement.

Perry could also be in a position to help U.S. LNG exports, including streamlining the agency's approval process.

Barry Worthington, executive director of the U.S. Energy Association, said the DOE could seek to speed up approvals without a mandate from Congress. "If I'm in the administration, I would restructure the process to expedite permits instead of waiting to have Congress pass a statute that does that same thing," Worthington said in an interview. "[The energy secretary] has that authority. It's a matter of getting the bureaucracy moving."

Trump's nominee as head of the U.S. EPA is Oklahoma Attorney General Scott Pruitt, a leading voice in the ongoing legal battle to take down several key Obama-era environmental regulations, including the Clean Power Plan and Clean Water Rule. He has been supportive of Trump's pledge to roll back those rules and has previously said he expects to see substantial changes at the EPA under the new administration.

League of Conservation Voters President Gene Karpinski likened the appointment of Pruitt to leaving "a fox guarding the henhouse." Natural Resources Defense Council President Rhea Suh in a Dec. 5 blog post said Pruitt has dedicated much of his life to trying to block EPA regulations that reduce emissions of mercury, arsenic and other pollutants.

"The mission of the EPA and its administrator requires an absolute commitment to safeguard public health and protect our air, land, water and planet. That's the litmus test. By naming Pruitt, President-elect Trump has flunked," Suh said in a Dec. 7 statement. "The American people did not vote to return the country to the dirty old days or to turn a blind eye on dangerous climate change. If confirmed, Pruitt seems destined for the environmental hall of shame."

But Pruitt's peers in the legal industry offered praise for the move, including Bracewell LLC's Scott Segal, who heads the firm's policy resolution group. Segal called Pruitt a "measured and articulate student of environmental law and policy" who has fought for states' rights to address their own environmental concerns without federal interference.

"These skills will serve him well not only in leading EPA but also in participating meaningfully in the legislative and regulatory reform efforts promised by the next administration," Segal said.

Rep. Ryan Zinke, President-elect Donald Trump's choice to head the U.S. Department of the Interior, would provide energy producers with an ally who supports energy development on federal land.

Zinke, R-Mont., is likely to try to reverse Obama administration Interior policies often cited as limiting to energy production. The Montana lawmaker opposed the U.S. Bureau of Land Management's recently finalized rule to limit methane emissions from oil and gas wells on public and tribal lands, calling the regulation "duplicative and unnecessary." He said the rule was a "stark reminder" that the U.S. needs to invest in infrastructure projects such as TransCanada Corp.'s Keystone XL crude pipeline to reduce flaring of excess gas.

Like Trump, Zinke also opposes the transfer of federal lands to state or private ownership, something many Republicans on Capitol Hill support to varying degrees.

With Trump's vision for the energy industry coming into focus, FERC could change its "tone and emphasis" and perhaps alter policies when the president-elect enters office, despite not being "designed to make radical" decisions for the sector, according to former Commissioner Tony Clark.

The president-elect's resistance to climate regulations means that the U.S. EPA's Clean Power Plan is "toast," according to Clark. The former FERC commissioner also expects the Trump administration to repeal guidance for the government to consider carbon emissions-related costs for infrastructure projects undergoing federal environmental reviews.

The sitting commissioners, including FERC Chairman Norman Bay, are all Democrats. Clark said that with Trump coming on board, the next chairman will be a Republican, but there is "no heir apparent." The next chairman will not have prior commission experience, since that person will not be one of the sitting commissioners, and no veterans are likely to come back to FERC, he said.

Trump's energy Cabinet would include the nation's top diplomat, too.

The selection of Exxon Mobil Corp. CEO Rex Tillerson for secretary of state has sparked significant debate on Capitol Hill, where his confirmation is expected to come down to whether his experience running a multinational oil and gas business outweighs his established ties to Russia.

Though Tillerson, 64, has never served in a diplomatic capacity before, some observers cited his track record as the leader of the world's largest publicly traded oil and gas company as evidence of his ability. Kevin Book, managing director of research at ClearView Energy Partners, called Tillerson a "diplomat with a drillbit."

"Supermajors are diplomats who happen to produce oil. You can't find someone in private industry that has better experience negotiating contracts than the head of a supermajor," he said. "They know their way around sovereigns. He's actually been in contact with and doing deals with governments for a long time. That kind of extended engagement and capital commitment [by Exxon] builds stronger relationships."

However, Tillerson's relationship with Russian President Vladimir Putin raised concerns among a number of Republican senators, including one of Trump's opponents for the 2016 presidential nomination.

"Being a 'Friend of Vladimir' is not an attribute I am hoping for in a Secretary of State," Sen. Marco Rubio, R-Fla., tweeted on Dec. 12. Veteran GOP Sens. John McCain and Lindsey Graham have also voiced concern over Tillerson's nomination on geopolitical grounds.

Sen. Robert Menendez, D-N.J., called the idea of Tillerson as secretary of state "alarming and absurd."

"With Rex Tillerson as our Secretary of State, the Trump administration would be guaranteeing Russia has a willing accomplice in the President's Cabinet guiding our nation's foreign policy," he said in a Dec. 10 Facebook post. "The term conflict of interest doesn't even begin to describe the web of dubious business interests and bank accounts that Tillerson and his company Exxon shares with Vladimir Putin and Russian oil companies."

"He's certainly not a foreigner to dealing with the international landscape. That's kind of what works in his favor," said Ken Medlock III, senior director of the Center for Energy Studies at Rice University. "He's well known. He's a known commodity with some of the actors he'd be dealing with. Familiarity is good, because he knows a lot of people he would be dealing with, especially in oil producing states."