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Green lights for pipelines

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Green lights for pipelines

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

President Donald Trump and his new administration gave a significant boost to the midstream energy industry in their first week. But for some pipeline projects, when one regulatory door opens, another could close.

On Jan. 24, Trump signed executive actions to facilitate the construction of the Keystone XL and Dakota Access oil pipelines, following up on promises made during his campaign to streamline oil and gas infrastructure projects.

In his order, Trump asked Keystone developer TransCanada Corp. to resubmit an application for the pipeline, which would would transport oil sands product from Alberta to Nebraska. The U.S. Department of State then has 60 days to reach a final decision on the project using a January 2014 final environmental impact statement, according to the memo.

"This is on the Keystone pipeline, something that has been in dispute, and it is subject to a renegotiation of terms by us," Trump said while signing the documents. "We are going to renegotiate some of the terms, and then, if they like, we'll see if we can get that pipeline built."

Two days later, TransCanada reapplied for a presidential permit. The Obama administration in November 2015 denied the project a presidential permit, the final authorization to build the line, after nationwide environmental opposition.

A separate executive action involving Energy Transfer Partners LP's Dakota Access pipeline calls for expedited review of the easements sought for the project and asks the U.S. Army Corps of Engineers to consider rescinding or modifying the corps' Dec. 4, 2016, decision to withhold the easement for a portion of the pipeline near Standing Rock Sioux Tribe land. Under the terms of the memo, the corps would also consider withdrawing its intent to prepare an environmental impact statement.

White House spokesman Sean Spicer suggested in a briefing that the administration will include Standing Rock in negotiations involving Dakota Access. "He's willing to sit down with all of the individuals that are involved in the Dakota pipeline to make sure that it's a deal that benefits all of the parties of interest, or at least gets them something they want," Spicer said.

Trump's memo on Dakota Access is likely to elicit a quick approval from the U.S. Army Corps of Engineers on the last portion of the project that needs an easement, but the contentious venture will still probably end up in court, analysts said.

A threatened legal challenge by the tribe could hold up the project's in-service date until about April, said Katie Bays, an energy analyst at Height Securities LLC. She expects Standing Rock to seek an injunction against the project to prevent construction work under the Missouri River, and although the challenge is likely to be denied, it may take "several weeks" to be addressed by U.S. District Court Judge James Boasberg, even on an expedited basis, she said.

FBR & Co. analyst Benjamin Salisbury said Trump might have saved the project from some legal holdups by signing a presidential memo rather than a more sweeping and forceful executive order declaring the pipeline approved. That would have left an avenue for opponents to challenge the thoroughness of the administration's review, since the action fell on Trump's fourth full day in office, he said.

Trump's home state of New York may be close to overplaying its hand and losing for all states the authority to issue Clean Water Act permits after the state blocked the Williams Partners LP-backed Constitution natural gas pipeline project, Williams Cos. Inc. President and CEO Alan Armstrong said. Environmental groups will probably fight harder under President Donald Trump, and New York Gov. Andrew Cuomo will have more opportunity to respond to these constituents, Armstrong observed Jan. 24 after a keynote presentation at the Hart Energy Marcellus-Utica Midstream Conference in Pittsburgh.

The next priority for the new administration would then be appointing new FERC members if it wants to keep the momentum for oil and natural gas pipelines going. Trump's first move in this regard was to appoint Cheryl LaFleur as the acting chairman of FERC, returning the commissioner to a leadership position she has held previously.

"While I recognize that FERC is in a state of transition as we await nominations to fill vacant seats at the agency, it is important that FERC's work on the nation's energy markets and infrastructure move forward," LaFleur said in a Jan. 26 statement.

When serving as chairman previously, LaFleur indicated her intent to improve capacity markets, coordinate the natural gas and electric power industries and keep the agency independent of political influence.

Hours later, however, Commissioner Norman Bay resigned from his position at FERC, effective Feb. 3. The announcement will most likely will leave FERC, with only two of five seats filled, without the quorum needed to vote out orders for some time.

Bay's decision to leave the agency in early February was a surprise, given that it will most likely leave the agency without the ability to act on pipeline applications until Trump nominates and gains Senate approval of a Republican to fill one of the agency's empty seats. In the past, even after a president has nominated someone to a FERC seat, having the nominee vetted and confirmed by the Senate has taken months.

In a statement, LaFleur acknowledged that FERC "is in a state of transition as we await nominations to fill vacant seats at the agency" but stressed the importance of continuing FERC's "work on the nation's energy markets."