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Trump infrastructure plan could ease wave of new energy projects

President Donald Trump's new infrastructure plan seeks federal support for new hydroelectric generation and rural power projects while proposing broad permitting reforms that could affect other energy resources, including natural gas pipelines.

The plan calls for $1.5 trillion in new investment over the next 10 years in U.S. roads, bridges, ports, the electric grid and other infrastructure. The federal government would provide $200 billion in funding, with state, local and private parties kicking in the rest of the $1.5 trillion.

Most pipeline developers and power generation and distribution owners do not rely on direct federal funding for infrastructure projects. But the White House’s outline, released Feb. 12, would set aside federal funds for rural energy projects, provide incentives for hydroelectric generation, and streamline the federal permitting process for all energy projects regardless of whether they are publicly or privately operated.

Hydropower

The proposal would provide $100 billion in federal support to encourage state, local and private infrastructure investment. The incentives, which federal agencies would distribute in the form of grants, would apply to "governmental infrastructure" projects, including airports, passenger rail, ports waterways, and hydropower.

Trump's plan would also broaden the use of tax-exempt private activity bonds to include new construction of hydroelectric generation, and authorize the secretary of the Army to allow commercial operation and maintenance of Corps-owned hydropower facilities.

According to data from S&P Global Market Intelligence, operating U.S. hydropower capacity totals 98,906 MW, with another 22,710 MW planned for construction. Of that amount, 28,031 MW of operating capacity and 3,396 MW of planned generation are owned by municipal, state or federal entities and electric cooperatives.

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Rural electric projects

Energy projects in rural areas would also get a lift. The plan would provide $50 billion in federal money for a rural infrastructure program, 80% of which would go to state governors to distribute and 20% to rural performance grants.

Rural electric generation, transmission and distribution facilities would be eligible to receive that money. The U.S. has 20,303 MW of planned government or cooperative-owned power projects. Those entities also have 1,568 miles of new transmission planned along existing lines and 1,696 miles of totally new capacity in the works.

Rural utilities are "delighted" with the White House’s focus on their infrastructure, said Kirk Johnson, senior vice president of government relations with the National Rural Electric Cooperative Association. Johnson said plenty of areas could use the $50 billion set aside for rural infrastructure, particularly development of high-speed internet and broadband in remote areas.

But funding for electric generating and transmission assets may be less of a priority for rural utilities. Johnson noted the U.S. Department of Agriculture's Rural Utilities Service, or RUS, already has a loan program for energy infrastructure. And to the extent rural electric utilities may seek to tap the $50 billion program, Johnson said he would like to see changes in how the money is distributed.

Rather than having the money go to states, some of which are not set up to award federal cash for energy projects, Johnson said the money could be administered by an entity such as the RUS. The White House's proposed block grant formula for funding rural projects "works for some areas of infrastructure but it doesn’t really work for others," he said.

NRECA also wants the Trump administration to "drop this foolish idea" of privatizing certain federally owned transmission assets, including those overseen by the Bonneville Power Administration, Southwestern Power Administration and Western Area Power Administration. In its budget requests for fiscal years 2018 and 2019, the White House proposed selling the three federal power marketing administrations’ transmission lines to private entities. For fiscal year 2019, Trump also proposed to sell the Tennessee Valley Authority's transmission infrastructure.

Public power groups blasted the move, saying the sale would raise power prices for consumers and that federal power marketers recover all their costs through customer payments, avoiding impacts on taxpayers. Johnson said he has "yet to find that person" in Congress who supports privatizing the assets. Lawmakers would need to approve the sale, but both the U.S. House of Representatives and U.S. Senate excluded the proposed divestitures from recent spending bills.

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Pipelines

Trump has made lifting barriers to oil and gas pipeline development a key part of his energy agenda. In March 2017, the president granted a presidential permit for TransCanada Corp.'s Keystone XL oil pipeline, reversing the Obama administration’s decision in November 2015 to deny the permit in response to widespread environmental opposition to the project.

Trump's support of pipeline development extended to his recently introduced infrastructure plan, which asked Congress to clarify how much time states have to grant or deny water quality certifications under Section 401 of the Clean Water Act. Oil and gas shippers have complained that states, including New York, have used the Section 401 process to hamper pipeline projects.

"It is incumbent on the administration and Congress to establish greater accountability in the Section 401 process," the Interstate Natural Gas Association of America said after the release of the infrastructure plan.

The urge for permitting reforms comes as developers are planning a wave of new pipelines in the coming years. For natural gas alone, a combined 10,354 miles of new pipeline capacity totaling roughly 84.6 million dekatherms is announced or under development, according to S&P Global Market Intelligence data. Those numbers apply to pipeline projects with a start and end point within the U.S.

In addition to proposed Clean Water Act changes, the infrastructure plan would allow the Secretary of Interior to directly authorize pipeline construction on National Park Service lands, rather than first seek approval from Congress as currently required.

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Permit changes for all

The potentially most far-reaching changes for energy under Trump's plan stem from its permitting reforms.

The president called for limiting the National Environmental Policy Act review process for new infrastructure projects to two years and consolidating authority for those reviews with a lead federal agency to cut down on duplicative analyses and speed up permitting times.

The proposal would also reduce the U.S. Environmental Protection Agency's participation in certain project reviews and revoke the EPA's authority to veto Section 404 Clean Water Act permits granted by the U.S. Army Corps of Engineers. In addition, Trump proposed shortening to 150 days the time limit to file lawsuits against federal permitting decisions. The statute of limitations for filing such suits currently is six years for many projects.

The permitting proposals drew applause from power industry groups.

"It is critical that existing statutes impacting permitting and siting are improved, simplified, and streamlined so that companies can site and permit critical energy infrastructure," Edison Electric Institute President Tom Kuhn said. He added that EEI has worked with its members to identify "administrative and legislative recommendations that will help to modernize federal laws and streamline their implementation," ideas the group will likely take to Capitol Hill as lawmakers consider an eventual infrastructure bill.

Cloudy outlook

A government-led infrastructure program will require approval from Congress, whose tight calendar for the rest of 2018 could make forming comprehensive legislation difficult.

"The further into an even-number year you get the harder it is to get things done," Johnson said in reference to the upcoming 2018 mid-term elections. But he added that NRECA would like to see something done this year.

In addition to time constraints, lawmakers are divided on how much federal money to authorize for infrastructure development and which types of projects to prioritize.

Leading Democrats have said the proposed $200 billion in direct federal funding falls far short of the American Society of Civil Engineers' recommended $2.0 trillion above current spending to get U.S. infrastructure back to good condition. Democrats have also criticized the plan’s reliance on private investors, who they said could impose large new tolls and user fees on infrastructure.

"The president's ... proposal would do very little to make our ailing infrastructure better, but would put unsustainable burdens on our local government and lead to Trump tolls all over the country," Senate Democratic Leader Chuck Schumer said.

Proposals to ease permitting for new projects will also be a tough sell. A sweeping rollback in permitting regulations "is not something that's going to get buy-in from Democrats," Sierra Club legislative director Melinda Pierce said.

A group of lawmakers met with Trump on Feb. 14 to discuss a way forward on infrastructure legislation, but Congress appears to be far from ready to introduce a bill. "I think members are still in discussion about what a broad infrastructure package would look like," said Nicole Daigle, a spokesperson for Senate Energy and Natural Resources Committee Chairman Lisa Murkowski, R-Alaska. "I know there are lots of ideas floating around, but there is no bill yet, at least not to my knowledge."