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FERC polarization, carbon tax biggest risks to gas development, experts say

The greatest upcoming risk to energy infrastructure in the U.S. is likely to be increased polarization at the U.S. Federal Energy Regulatory Commission, the head of an energy-focused advisory firm said at a gas industry conference.

Chip Moldenhauer, CEO of the technology and analytics firm Law IQ, said midstream natural gas development could face more challenges than it already does if a Democrat is elected as U.S. president in 2020 and has three "anti-fossil fuel" commissioners on the five-member panel at FERC.

While that could leave companies that have completed gas pipelines and LNG terminals in a good position, it would make things more difficult for those trying to develop new infrastructure, Moldenhauer said. He spoke Oct. 22 at the North American Gas Forum in Washington, D.C., organized by Energy Dialogues.

His comments came as FERC grew more polarized on gas infrastructure decisions in 2019. When it had four commissioners, the commission split 2-2 on party lines in many reviews of gas infrastructure projects over the question of how far the agency should go in considering the impacts of greenhouse gas emissions. The commission is now down to three members — one Democrat and two Republicans — with routine sparring over gas issues.

President Donald Trump's recent nomination of a Republican to fill an open slot without putting forward a Democrat for pairing in the Senate confirmation process could add to momentum to the partisan clashes at FERC, and potentially leave more slots open for a Democratic president to fill after 2020.

Kevin Book, managing director of consulting firm ClearView Energy Partners LLC, separately suggested that the gas industry may need even more lawyers going forward. He noted that 11 of the 12 candidates in a recent Democratic presidential primary debate favored ending oil and gas production on federal lands, a policy shift that could affect about 14% of 2018 U.S. gas production, according to Book.

While gas can be part of the solution to carbon reduction goals, building the infrastructure to get it to market might get harder, Book said. Even without a shift in politics in the U.S., there is the potential for the carbon policies of trading partners, for instance in Europe, to result in "non-zero odds" of a carbon tax in the U.S., he said.

"[Even with] the permitting challenges of the present, in many ways if we look back at this ... we might think these are the good times for construction," Book said.

Interstate gas transportation projects have faced increasing legal challenges from environmental groups and states in parts of the U.S., and some of these have sidelined major projects, or resulted in major delays. Book said such litigation is the new normal, and it will likely continue no matter what the political environment looks like.

When there are eminent domain challenges in Texas, "you can start to see opposition show up where it hasn't been," Book said.

To overcome the increase in resistance, some project developers have started to engage stakeholders upfront, as opposed to bringing in lawyers first, Book said. In addition, some companies are beginning to communicate to investors earlier than they once did about potential challenges to schedules, he said.

Moldenhauer said companies are also trying to be more proactive about preparing for potential permitting complications.

Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.