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With 3 new members, FERC can remake gas pipeline outlook

? As many as three Republicans, including a chairman, could be named to FERC by midyear.

? Streamlining pipeline permitting could be revived as an agenda item in Washington.

? Challenges from opposition to gas pipeline projects are likely to grow.

With two of five seats on FERC vacant and Commissioner Colette Honorable's term expiring in a matter of months, President Donald Trump has a chance to remake the commission in industry-friendly ways in 2017. Gas pipelines could stand to benefit greatly from the moves in Washington with a president who campaigned in part on an infrastructure initiative. As the leader of the Interstate Natural Gas Association of America, Donald Santa has a front-row seat.

Santa recently discussed with S&P Global Market Intelligence what FERC may look like in the coming years and how market, opposition and regulatory forces could affect the industry. The following is an edited transcript of the interview.

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Donald Santa, president and CEO of the Interstate Natural Gas Association of America, was previously majority counsel to the Senate energy committee.

Source: Interstate Natural Gas Association of America

S&P Global Market Intelligence: Do you think there are going to be big changes at FERC? If not, what subtle changes can we expect to happen?

Donald Santa: All we can do at this point is speculate, as we don't know who the new members of the commission will be or what their priorities will be. There are two vacancies at the commission, and both of those are Republican seats. There's some question as to whether or not Chairman [Norman] Bay would choose to remain after the transition. Probably the last time there was such a significant opportunity to remake the commission was in 1993, when President Clinton came in and effectively four of the five seats were open. So it'll be very, very interesting in terms of what happens.

I think we can look to what President Trump has said were some of his priorities that relate to energy and infrastructure, and very much in favor of the U.S. taking advantage of domestic energy. Certainly, pipelines are a part of that, and the commission has a significant role there. One question would be: [How] does the new chairman choose to put the commission's allocation of resources? In other words, staff resources and perhaps to put more resources into the Office of Energy Projects or the legal review there to make sure the commission can keep up with the work.

What legislation will be proposed that INGAA is keeping an eye out for that might impact FERC?

We really don't know what will be proposed. There were some provisions that were in the energy legislation that was pending last time. I think there's the possibility of whether any of the pipeline-related provisions in those bills get revived, either in an energy bill or folded into a bigger infrastructure bill. The provisions that were in there were relatively modest improvements to the law that affects the siting and permitting of pipelines, and I think this is an area where there's a lot that could be done administratively, particularly with regards to the other federal agencies and their permitting responsibilities, just to have them put in the time and the resources and put the priority on processing applications in a timely manner.

With Commissioner Colette Honorable's term ending June 30, there will be three vacancies on FERC. Does INGAA have a type of candidates that it would like to see coming in?

I think one of the things that having multiple vacancies lets White House personnel and the president do is select individuals who bring a range of skill sets and backgrounds on the commission. In recent nominations, the commission's emphasis has been primarily on electricity regulation, and so a lot of individuals have come to the commission who bring experience there and perhaps not as much experience on the natural gas and the pipeline side of the equation. I think if you consider the president's emphasis on domestic energy and infrastructure the importance of pipelines as part of that we would certainly hope that some of the candidates would bring some experience and contextual background in that area.

How quickly do you see those spots being filled in? How big of a priority do you think it's going to be?

That's difficult to say. The incoming administration is literally trying to fill up 5,000 positions within the federal government, and in many instances, they've just barely gotten through naming Cabinet nominees. We have to be realistic that there's a lot of positions to be filled out ... before they get to nominees to the Federal Energy Regulatory Commission.

By the same token, I would think that compared to the normal circumstance, there would be a greater priority given to it for two reasons. One of them being all three of the sitting commissioners are Democrats, and you would imagine that the new president would want to have a Republican to designate to be the chairman and ultimately a Republican majority on the commission. And then also, with three sitting commissioners, which is the bare quorum needed for the commission to do business. I have no reason to believe that any commissioner would choose to leave, which would leave the commission without a quorum, but that's a risk. So I think it would create some priority to trying to get the commission seats filled more quickly than might otherwise be the case.

How do you see Mexican border activity shaping up with U.S. export pipeline projects?

It's very clear that one of the emerging markets for U.S. gas is Mexico, and there's been a lot of pipeline construction activity there to meet that demand. We'd anticipate that continuing.

What do you think the Trump administration will mean for protest activity? Are we going to see more activity among opposition groups?

There's some anticipation, and in fact some of the opposition groups have even said so: that they are going to redouble their efforts outside of Washington in terms of trying to affect stale and local governments in terms of the role that they have to play with pipeline permitting. So my guess would be, even though we're going to see pretty major changes inside the Beltway, I think the challenges outside the Beltway are going to remain and may even intensify.

Do you think things are going to be busier in 2017 than they were in 2016?

Well, things were pretty busy in 2016. If you consider the number of pending pipeline applications, the level of opposition and the challenges that created for both the pipeline applicants and the commission, we're coming off a pretty busy period to begin with. By the same token, we've got an incoming administration that has made domestic energy and infrastructure two parts of its economic platform, and I think that signals an effort on the part of the commission and probably even the federal government as a whole to make that happen.

Do you have any other outlooks or comments?

The one thing I would say is when you talk about the level of proposed pipelines and construction activity, let's just remember that this is in response to demand, it's in response to a need that's in the market in terms of the abundance of domestic supply and the attractiveness of that to consumers and our economy, and that's what's really driving the level of pipeline applications and pipeline construction activity.