Tag: DOE

Biomass Research And Development Initiative Provides Seven Projects With Up To $10 Million In Funding

On May 9, 2016, the U.S. Department of Energy (DOE), the U.S. Department of Agriculture (USDA), and the National Institute of Food and Agriculture (NIFA) announced the recipients of up to $10 million in funding through the Biomass Research and Development Initiative (BRDI). BRDI is a joint program through DOE and USDA that helps develop sustainable sources of biomass and increase the availability of biobased fuels and products. DOE selected two of the grant winners to receive between $1 million and $2 million: the Ohio State University (OSU) project is “Biomass Gasification for Chemicals Production Using Chemical Looping Techniques,” and the Massachusetts Institute of Technology (MIT) project is “Improving Tolerance of Yeast to Lignocellulose-derived Feedstocks and Products.”

USDA then selected five grant winners to receive a total of $7.3 million in funding:

  • University of California-Riverside, to convert poplar to ethanol and polyurethane via pretreatment and lignin polymer synthesis;

  • University of Montana, to quantify ecological and economic opportunities of various forest types and to quantify benefits of replacing fossil fuel with forest-based bioenergy;

  • North Carolina Biotechnology Center, to optimize production of educational resources on biomass sorghum production in the Mid-Atlantic region;

  • Dartmouth College, to overcome the lignocellulosic recalcitrance barrier; and

  • State University of New York College of Environmental Science and Forestry, to provide life cycle understanding for the production of willow and forest biomass to mitigate investment risk.

Article By Kathleen M. Roberts of Bergeson & Campbell, P.C.

©2016 Bergeson & Campbell, P.C.

U.S. DOE Disclaims Jurisdiction over Canadian Gas and Authorizes LNG Exports to Non-FTA Nations from Bear Head LNG Project

On February 5, 2016, the U.S. Department of Energy’s Office of Fossil Energy (“DOE/FE”) issued two orders to Bear Head LNG Corporation and Bear Head LNG (USA), LLC (together, “Bear Head LNG”),1 formally announcing DOE’s comprehensive policy for considering applications involving liquefied natural gas (“LNG”) exports from Eastern Canada to global markets.

  • In Order 3769 (“In-Transit Order”), DOE/FE determined that it lacks jurisdiction under Section 3 of the Natural Gas Act (the “NGA”) over Bear Head LNG’s proposed imports of Canadian natural gas travelling by pipeline through the United States on its way back to Canada (i.e., in‑transit shipments).2  In this regard, DOE/FE dismissed Bear Head LNG’s application seeking authorization to access Western and Central Canadian natural gas supplies that necessarily must cross the U.S.-Canada border (due to transportation pipeline configurations), en route to the proposed Bear Head LNG project.

  • In Order 3770 (the “Non-FTA Order”), DOE/FE granted Bear Head LNG long-term, multi‑contract authorization under Section 3(a) of the NGA to export U.S. natural gas by pipeline to Canada for subsequent liquefaction and export (i.e., re-export) to nations with which the United States does not have a free trade agreement (“FTA”) requiring the national treatment of natural gas (“non-FTA nations”).3

The Bear Head LNG proceedings presented legal issues of first impression4 and “an unusual factual circumstance,”5 as DOE/FE stated.  Certainly, as discussed below, DOE/FE’s legal determinations in the Bear Head LNG proceedings were significant.6  However, the legal significance of the Bear Head LNG Orders is dwarfed by the political implications of DOE/FE’s announced policies of (i) adopting a laissez-faire approach to applications for Canadian gas in-transit through the U.S., and (ii) giving the green light to natural gas exports of U.S. natural gas to Canada for liquefaction and export to non-FTA nations.

The Legal Standard:  FTA or Non-FTA

Specifically, DOE/FE was called upon to determine which of the two legal standards found in Section 3 of the NGA (i.e., FTA or non-FTA) properly applied to Bear Head LNG’s applications filed for the purpose of securing gas supply for the Bear Head LNG project.  For diversity of supply, Bear Head LNG sought authorizations for in-transit shipments of Canadian natural gas, as well as pipeline exports of U.S. natural gas to Canada.  As described in Bear Head LNG’s applications, LNG produced at the project is intended for export to FTA and non-FTA nations.

In addressing this issue, DOE/FE opted to apply the discretionary, non-FTA standard (i.e., the NGA Section 3(a) public interest standard), inasmuch as LNG produced at the Bear Head LNG project is intended for delivery and end-use in non-FTA nations.  DOE/FE reiterated the rationale supporting its determination, previously unveiled in the FTA Order, in the Non-FTA Order.  It explained that its decision is rooted in Congressional intent that all exports destined for non-FTA nations be reviewed for their consistency with the U.S. public interest.  To do otherwise, DOE/FE reasoned, would permit potential exporters to evade the non-FTA public interest analysis simply by transiting natural gas and LNG through an FTA nation.7

Balancing NGA Mandates with U.S. International Trade Obligations

Undoubtedly, Bear Head LNG’s proceedings presented DOE/FE with the challenge of discharging its statutory mandate under the NGA, without violating U.S. obligations under NAFTA or trampling on an already strained U.S.-Canada energy relationship suffering from the highly politicized discord over the Keystone XL Pipeline.8

As a starting point, consider that DOE/FE’s decision to exercise its NGA Section 3(a) jurisdiction in effect extends beyond the U.S.-Canada border (where the export of U.S. natural gas by pipeline will occur) and follows the gas into Canada (where the export of LNG by vessel will occur).  In this regard, the Non-FTA Order arguably is an exercise of extraterritorial jurisdiction by DOE/FE—which is not to say it is impermissible.9  To further complicate matters, prior to DOE/FE’s issuance of the In-Transit Order, there was uncertainty regarding which NGA Section 3 standard DOE/FE would apply to in-transit shipments of Canadian gas, and whether DOE/FE would be consistent in its view of in-transit gas when Canadian gas was in question, as opposed to U.S. gas in transit for delivery to the Bear Head LNG project.10

Then consider that the NEB has authorized (without restriction) the export of Canadian gas intended for liquefaction and export from U.S. West Coast projects.11

With the lawsuits stemming from U.S. decision to reject the Keystone XL Pipeline as a backdrop, and a newly elected Canadian government looking for a fresh start with the Obama Administration, particularly in energy and climate change, DOE/FE’s favorable determinations in the Bear Head LNG proceedings mark a positive step in strengthening ties between the two nations.

The NEPA Challenge

A secondary, but very significant legal issue, arose under the National Environmental Policy Act (“NEPA”), which requires DOE/FE to consider the environmental impacts of its decisions on applications seeking authorization to export natural gas.  In the past, DOE/FE could meet its NEPA obligations as a cooperating agency in the NEPA review process led by the Federal Energy Regulatory Commission (“FERC”) for U.S. LNG terminal facilities.  In the case of the Bear Head LNG project, the environmental and safety review would be conducted by Canadian federal, provincial and local authorities.

At the time Bear Head LNG filed its applications, relevant DOE/FE non-FTA precedent could be summarized in a single bullet:12

  • Applications involving the construction of new, or the modification of existing, LNG facilities subject to FERC jurisdiction:  DOE/FE acts as cooperating agency in the NEPA review process led by FERC.13  DOE/FE then adopts the NEPA documentation prepared by FERC (be it an environmental assessment (“EA”) or environmental impact statement (“EIS”)), provided DOE/FE has conducted an independent review of such NEPA documentation and determined its comments and suggestions have been satisfied.  In those instances that an EA is prepared, DOE/FE issues a finding of no significant impact (“FONSI”).  In other instances that an EIS is prepared, DOE/FE issues a record of decision.

Since then, relevant DOE/FE non-FTA precedent has evolved as follows, culminating with the most recent decisions issued on February 5, 2016:

  • Applications involving existing LNG facilities not subject to FERC jurisdiction: DOE/FE grants categorical exclusion under its regulations at 10 C.F.R. Part 1021, Subpart D, Appendix B5.

  • Application involving the construction of new CNG facilities not subject to FERC jurisdiction: DOE conducts NEPA review process and prepares NEPA documentation.14

  • Applications involving the construction of new LNG facilities in Canada (i.e., not subject to FERC jurisdiction):  DOE/FE grants categorical exclusion in accordance with its regulations at 10 C.F.R. Part 1021, Subpart D, Appendix B5, with authorized export volume in proportion with level of existing U.S. pipeline capacity.15

New Rules for In-Transit Canadian Gas Shipments

DOE/FE dismissed Bear Head LNG’s in-transit application on the grounds that in-transit shipments returning to the country of origin are not “imports” or “exports” within the meaning of NGA Section 3, such that they fall outside of DOE/FE’s NGA Section 3 jurisdiction.  In reaching this conclusion, DOE/FE noted Congress’ likely intention that the terms “import” and “export” apply only to those categories of shipments that, by their nature, could have a material effect on the U.S. public interest.  Shipments of Canadian-sourced natural gas between Canadian points, according to DOE/FE, are “categorically unlikely” to have a material impact on the U.S. public interest and are, therefore, outside of DOE/FE’s NGA Section 3 purview.

In further support of its jurisdictional determination, DOE/FE cited a 1977 agreement, the Agreement Between the Government of the United States of America and the Government of Canada Concerning Transit Pipelines, which espouses a laissez-faire policy for in-transit shipments of hydrocarbons between the two countries.

Definition of “In-Transit Shipment Returning to the Country of Origin.”

DOE/FE explained these are shipments of natural gas through the U.S. between points of a single foreign nation that are physical and direct.  “Physical” means transportation between two cross-border points, and excludes “exchanges by backhaul, displacement or other virtual shipments.” “Direct” means that the natural gas travels a commercially reasonable path between foreign points consistent with an intention merely to transit through the U.S. without being diverted for another purpose.  Lastly, citing U.S. Customs and Border Protection regulations, DOE/FE noted that the natural gas must enter and exit the U.S. within a 30-day period to qualify as “in-transit.”

Filing and Recordkeeping Requirements.

Despite dismissing the application and disclaiming jurisdiction, DOE/FE drew on its authority under Section 16 of the NGA to direct Bear Head LNG to file monthly reports.  When in-transit shipments occur, Bear Head LNG is to report:  (1) the volumes of natural gas delivered into the U.S., (2) the entity that has title to the natural gas on first entry into the U.S., (3) the points of entry into the U.S., (4) the name of the U.S. pipelines used at the points of entry to and exit from the U.S., (5) the points of exit from the U.S., (6) the entity that has title to the natural gas at the point of exit from the U.S., and (7) the volumes of natural gas delivered to the points of exit.  Lastly, in the event of any discrepancy in volumes, Bear Head LNG must show that no deliveries into U.S. commercial markets occurred.

The In-Transit Order further directs Bear Head LNG to maintain “records of the pipelines used for each in-transit shipment for a period of one year after completion of each in-transit shipment.”  These records are to be provided to DOE/FE upon request.

In Conclusion

DOE/FE rendered Bear Head LNG’s Non-FTA Order in under 12 months.  Certainly, that processing time very likely would have been cut by more than half had DOE/FE applied the FTA standard instead.  Nonetheless, given the complexity of the legal issues and the political implications affecting the Bear Head LNG proceedings, having the benefit of a thoughtful and deliberate analysis carries many tangible benefits.

As to intangible benefits, considering that Bear Head LNG was the second applicant raising issues of first impression before DOE/FE, its chances of achieving timely resolution were not very high.16  Recognizing this, Bear Head LNG pulled together an experienced team of advisors to forge and implement a permitting strategy to improve its odds.  In the end, whether by fortune, miracle or design, Bear Head LNG managed to walk by the awakened snake without getting bitten.  It did not suffer the deluge of public comments that most proponents of LNG exports experience, and it did so in record time.

DOE/FE also is to be commended for resolving Bear Head LNG’s applications in a manner that preserves each sovereign’s interests in its natural resources, but also is consistent with international principles of free trade, reciprocity and comity.  To the extent the Bear Head LNG Orders may be viewed as bringing North American LNG a step closer to serving global demand, consider the words of President Dwight D. Eisenhower:  “Accomplishment will prove to be a journey, not a destination.”

Article By Tania S. Perez & Lamiya Rahman of Cadwalader, Wickersham & Taft LLP

© Copyright 2016 Cadwalader, Wickersham & Taft LLP

1 Bear Head LNG is developing the proposed natural gas liquefaction terminal to be located on the Strait of Canso in Cape Breton, Nova Scotia, Canada.

2 Bear Head LNG Corporation & Bear Head LNG (USA), LLC, DOE/FE Order No. 3769, FE Docket No. 15-14-NG (Feb. 5, 2016), available here.

3 Bear Head LNG Corporation & Bear Head LNG (USA), LLC, DOE/FE Order No. 3770, FE Docket No. 15-33-LNG (Feb. 5, 2016), available here. DOE/FE previously granted Bear Head LNG authorization under Section 3(c) of the NGA to export U.S. natural gas by pipeline to Canada for subsequent liquefaction and export to FTA nations.  See Bear Head LNG Corporation & Bear Head LNG (USA), LLC, DOE/FE Order No. 3681, FE Docket No. 15-33-LNG (Jul. 17, 2015) (the “FTA Order”), available here.

4 See Non-FTA Order at 155.  DOE/FE further stated, “[t]his is among the first two proceedings in which DOE/FE has been asked to review an application to export U.S.-sourced natural gas by pipeline to Canada for liquefaction in Canada, for subsequent re-export of that natural gas in the form of LNG to non-FTA countries” (emphasis added).  Concurrent with Bear Head LNG’s Non-FTA and In-Transit Orders, DOE/FE issued an order to Pieridae Energy (USA), Ltd. granting it similar long-term authority for Non-FTA exports of U.S. natural gas.  See Pieridae Energy (USA) Ltd., DOE/FE Order No. 3768, FE Docket No. 14-179-LNG, available here.

5 Id.  See also id. at 156 (“Most applications to DOE/FE for authority to export natural gas to non-FTA countries involve the ready availability of natural gas through an integrated grid of multiple interstate natural gas pipelines. This Application, by contrast, calls for the transportation of U.S.-sourced natural gas through a single interstate natural gas pipeline.”).

6 As U.S. regulatory counsel to Bear Head LNG, we express no view herein on the merits of DOE/FE’s legal determinations.

7 Significantly, the transiting concept is not ingrained in NGA jurisprudence, but it does arise in the context of marking rules and country of origin rules under the North American Free Trade Agreement (“NAFTA”), and in U.S. Customs and Border Protection regulations, as referenced below . Unlike the U.S. legal framework, the Canadian National Energy Board Act and its implementing regulations specifically address gas that is in transit.  But even in instances involving National Energy Board (“NEB”) “in transit” orders, the recently issued corresponding DOE/FE orders have been silent on the “in transit” concept. See, e.g., Terasen Gas Inc., Order Authorizing the Exportation of Gas for Subsequent Import, NEB Order GOL-07-2010, File OF-EI-Gas-GOL-T101 01 (Jun. 7, 2010) and corresponding Terasen Gas Inc., Order Granting Blanket Authorization to Import and Export Natural Gas from and to Canada, DOE/FE Order 2619, FE Docket No. 09-11-NG (Feb. 19, 2009).

8 See Maritimes & Northeast Pipeline, L.L.C., Order Amending Presidential Permit and Authorization Under Section 3 of the Natural Gas Act, 128 FERC ¶ 61,070, P10 (Jul. 21, 2009) (stating that approving exports in addition to imports on the Maritimes & Northeast Pipeline would “promote national economic policy by reducing barriers to foreign trade and stimulating the flow of goods and services between the United States and Canada, both of which are signatories to the North American Free Trade Agreement, providing for fewer restrictions on natural gas imports and exports.”).

9 While there is an extensive body of domestic and international law instructive on this issue, our discussion herein—like DOE/FE’s analysis in the Non-FTA Order—is controlled by the NGA.

10 See Notice of Application, Bear Head LNG Corporation and Bear Head LNG (USA), LLC; Application for Long-Term, Multi-Contract Authorization To Import Natural Gas From, for Subsequent Export to, Canada for a 25 Year Term, 80 Fed. Reg. 20,484 (Apr. 16, 2015)  In an unprecedented move, DOE/FE requested comments on whether section 3(c) of the NGA, 15 U.S.C. § 717b(c), or section 3(a) of the NGA, 15 U.S.C. § 717b(a), provides the appropriate standard for review of Bear Head LNG’s in-transit application.

11 See e.g., Jordan Cove LNG L.P., DOE/FE Order No. 3412, FE Docket No. 13-141-NG (Mar. 18, 2014) (granting long-term, multi-contract authorization to import natural gas from Canada); Jordan Cove Energy Project, L.P., DOE/FE Order No. 3413, FE Docket No. 12-32-LNG (Mar. 24, 2014) (granting long-term, multi-contract authorization to export LNG to Non-FTA nations); LNG Development Company LLC (d/b/a Oregon LNG), DOE/FE Order No. 3465, FE Docket No 12-77-LNG (Jul. 31, 2014) (granting long-term, multi-contract authorization to export LNG to Non-FTA nations).

12 In reviewing potential environmental impacts of a proposal to export natural gas, DOE/FE considers both its obligations under NEPA and NGA Section 3(a).

13 While DOE/FE authorizes the export of LNG pursuant to NGA Section 3, under the same section, FERC exercises exclusive jurisdiction over the siting and construction of LNG terminal facilities (to be located onshore or in state waters). Under the NGA, FERC also serves as the lead federal agency for conducting NEPA analysis for LNG terminal facilities.

14 To date, DOE (through its National Energy Technology Laboratory) has issued only one EA. The final EA, FONSI and order granting export authorization were issued contemporaneously.

15 In denying a motion filed by Pieridae Energy (USA) Ltd., DOE/FE affirmed well-established NEPA precedent.  DOE/FE stated, “we must deny Pieridae US’s Motion to Lodge because the Goldboro Project, to be located in Nova Scotia, Canada, is outside the scope of our environmental review under NEPA in this proceeding, which necessarily focuses on potential environmental impacts within the United States.”  See Pieridae Energy (USA) Ltd., DOE/FE Order No. 3768 at 190.

16 By way of illustration, consider the two-year gap (minus three days) between the issuance of the first Non-FTA LNG export authorization from the Lower-48 and the second one. Applications for the two projects were filed 3 months and 10 days apart.

DOE Releases 2014-2015 Offshore Wind Technologies Market Report

On September 29, 2015 the Department of Energy released the 2014-2015 Offshore Wind Technologies Market Report, assessing the nation’s offshore wind potential and planned projects through June 30, 2015. The report summarizes domestic and global market developments, technology trends, and economic data with the purpose of aiding U.S. offshore wind industry stakeholders. The Report builds upon previous market reports conducted by the Navigant Consortium between 2012 and 2014, which would track U.S. wind projects that had reached an “advanced stage” of development. The 2015 Market Report not only assesses the progress of offshore wind projects in various stages but it also analyzes projects in a range of countries. To learn more about where the U.S. offshore wind industry stands in comparison to other countries as well as about domestic and global ongoing projects and expected trends, read on!

New Method for Tracking Offshore Wind Projects

The National Renewable Energy Laboratory (NREL) re-developed its system for classifying and tracking the progress of projects within the development pipeline. The purpose of this new method is to increase connectivity across markets and regulatory regimes as well as to objectively assess the status of projects.

Global Offshore Wind Market on Target to Set Annual Deployment Record in 2015

The increase in offshore wind projects in the pipeline is leading to an upsurge in operational capacity spread out across the world. While 1,069 megawatts (MW) of new wind capacity was installed in 2014, it is expected that 2015 will provide approximately 3,996 MW of wind capacity, making 2015 a record year for offshore wind deployment. The total global installed capacity is now 8,990 MW. At this rate, the global cumulative capacity could exceed 47,000 MW by 2020. Projects are also beginning to spread out beyond Europe. While currently 63% of the projects are located in Europe, 23% are located in Asia, 9% in North America, and 5% spread across the rest of the world.

15,650 MW of U.S. Projects are in Various Stages of Development

There are 21 U.S. offshore wind projects in the development pipeline, which equates to 15,650 MW of potential installed capacity. 13 of these projects have achieved site control or a more advanced phase of development. While most of the offshore wind projects are located in the North Atlantic region, there seem to be feasible offshore resources in the South Atlantic, Great Lakes, Gulf of Mexico, and Pacific regions of the U.S.

Deepwater Wind Begins Installation of First U.S. Offshore Wind Project

The Block Island Wind Farm (BIWF) began offshore construction in 2015. Led by Deepwater Wind, clients of ML Strategies, BIWF is expected to be the nation’s first offshore commercial wind project, it also has the potential to lower electricity prices for the residents of Block Island, provide substantial clean energy to the mainland townships of southern Rhode Island as well as produce approximately 300 jobs during its construction phase.

Cost Trends and Learning from Europe

Offshore wind projects are capital-intensive, where utility scale projects (>200 MW) generally require investments of over $1 billion. With projects expected to be built in locations that are located in deeper water, further away from shore, and larger in size, operating costs becomes an even greater concern. The industry is focused on introducing a variety of technological innovations to drive down the cost. The DOE’s Report suggests the U.S. will likely enact a cost structure similar to that of Europe. Part of the reason Europe’s offshore wind industry is so widespread is due to its ability to subsidize projects via investors and its action on the part of policymakers. For instance, policymakers in the UK have set goals to reduce the Levelized Cost of Electricity (LCOE) and are implementing programs designed to lower costs, reduce risk to developers, and minimize the prices required to make projects financially viable as evidenced by their initiation of competitive auctions for subsidies, their classification of zones that emphasize size affordability (choosing projects closer to shore), and their sponsoring early-stage development activities to reduce uncertainty about site conditions. Recent state and federal policy developments including President Obama’s issuance of the Clean Power Plan regulation and the initiation of the BIWF project provide hope for the U.S.’ offshore wind industry.

Overall, even though the EU continues to lead projects in the wind industry, the industry is becoming more geographically dispersed with projects now underway in the U.S. and Asian markets. While the biggest challenge the U.S. offshore industry faces is the current high cost of offshore wind generation, the industry is focused on cutting such costs through leveraging European technology and experience.  It is also the hope that cost reductions of projects in the EU caused by its target to reduce the LCOE for offshore wind projects, the Cost Reduction Monitoring Framework set up by the UK government, and additional actions by policymakers, will translate to the U.S., further strengthening the wind industry in the U.S.

Article By R. Neal Martin & Sarah Litke of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

DOE Highlights the Need to Modernize Aging US Energy Infrastructure

Morgan, Lewis & Bockius LLP.

The first installment of the Obama Administration’s comprehensive survey and analysis of the US energy sector provides a detailed roadmap for modernizing the energy transmission, storage, and distribution system to make it more secure and resilient to the effects of climate change while taking advantage of recent advances in energy and information technologies.

On April 21, the Obama Administration released the first comprehensive survey and analysis of the United States’ basic energy infrastructure needs for the 21st century. The Quadrennial Energy Review (QER), announced by Vice President Joe Biden and Secretary of the Department of Energy (DOE) Ernie Moniz, provides a critical analysis of vulnerabilities in the energy transmission, storage, and distribution systems in the United States. The report also includes policy recommendations to modernize these systems and to make them more secure and resilient to the effects of climate change and more flexible in response to recent advances in energy and information technologies.

The first QER report includes several specific recommendations for investments in energy infrastructure upgrades and new policies designed to promote responsible development of domestic energy sources and to facilitate more timely environmental review and permitting decisions. Priorities outlined in the report will likely shape legislative and administrative actions that could affect markets and shape commercial opportunities in the energy sector. Key recommendations include the following:

Reducing siting and permitting times for energy infrastructure projects

Updating existing energy infrastructure, especially natural gas pipelines, to improve safety and enhance the delivery of abundant domestic supplies of natural gas

Modernizing and standardizing the electric grid

Enhancing the nation’s ability to respond to energy supply emergencies

Background

On January 9, 2014, President Barack Obama directed an interagency Task Force, which included members from all relevant executive departments and agencies, to submit a QER report every four years beginning in 2015.[2] The reports are intended to undertake a rigorous review of existing federal energy infrastructure and policy and to provide an integrated set of recommendations on how best to transform US energy production, delivery, and consumption systems at the local, state, and federal levels. The QER is a key component of the Obama Administration’s Climate Action Plan and is designed to ensure that new federal energy policy meets the nation’s economic, environmental, and energy security goals by providing an “analytically based, clearly articulated, sequenced and integrated actions, and proposed investments over a four-year planning horizon.”[3]

This first installment of the QER recognizes that the US energy landscape is undergoing an unprecedented transformation in the way that we generate, deliver, use, and even think about energy. These fundamental changes present challenges and opportunities to public- and private-sector stakeholders that are addressing, for example, the technical challenges associated with the influx of large quantities of variable energy resources; heightened safety concerns; the political challenges associated with competing energy, environmental, and economic policy goals; and the regulatory challenges posed by the complex, multilayered network of permitting authorities and regulations that govern the US energy system. To accommodate the interests of those most affected by these challenges, the DOE hosted 13 stakeholder engagement meetings across the country to gather public input for the QER.

Opportunities and Challenges

The first QER report focuses on US infrastructure for transmission, storage, and distribution (TS&D) of energy, because these basic components of the energy delivery system will shape supply and end-use patterns and practices for decades. Further, the federal government has recognized that once built, this infrastructure is relatively inflexible, and thus getting it right from the outset will determine whether the government can collectively meet the nation’s energy, national security, and climate change objectives.

The QER report outlines a multiyear roadmap to guide federal actions at the legislative, executive, and administrative levels that relate to energy infrastructure investments, siting and permitting, electricity market integration, workforce development, and heightened grid security.

Improvements to TS&D Infrastructure Siting and Permitting

Although it is important to consider the changing energy mix and how best to integrate new technologies onto the electric grid, for example, this cannot be achieved without improving interagency coordination and transparency for project planning and siting—an issue addressed in the final chapter of the QER report. The cost, time, and complexity of siting and permitting large infrastructure in the federal system will be a serious hurdle to implementing the QER’s infrastructure recommendations. Currently, there are “more than 35 distinct permitting and review responsibilities across more than 18 Federal agencies and bureaus, implemented by staff at headquarters and hundreds of regional and field offices.” To make this system less onerous for developers, the Obama Administration has committed to reducing permitting timelines for major infrastructure projects by half while also improving outcomes for communities and the environment. But, as the QER recognizes, it is still an open question whether, absent additional legislative authority and congressionally appropriated funding, these reforms can be accomplished.

To that end, the QER adopts five key recommendations to assist with the siting, permitting, and review of infrastructure projects: (1) allocate resources to key federal agencies; (2) prioritize meaningful public engagement through consultation with American Indian tribes, coordination with state and local governments, and facilitation of nonfederal partnerships; (3) expand landscape- and watershed-level mitigation and conservation planning; (4) enact statutory authorities to improve coordination across agencies; and (5) adopt Administration proposals to authorize the recovery of costs for review of project applications.

Even if all these recommendations are followed, however, meaningful change may remain elusive unless the Administration sustains cabinet-level leadership and support for such reforms. Further, most of the decisions necessary to permit infrastructure projects are made by state or local agencies or in local field or state offices of federal agencies. To obtain truly transformative changes in energy infrastructure siting and permitting, the key agency staff at the state, local, and regional levels must be personally invested and dedicated to the Administration’s priorities.

Additional QER Recommendations

Other QER chapters identify important opportunities to modernize, expand, replace, or transform the TS&D system so that it better accommodates changes in energy supply, integrates forward-looking information and security technologies, and meets increasing demand for new consumer services. This includes recommendations for smart grid technology and distributed generation, as well as modernization of the strategic petroleum reserve and the safety challenges of methane gas. Key recommendations include the following:

Increase the resilience, reliability, safety, and asset security of the TS&D infrastructure by establishing DOE programs to accelerate natural gas pipeline replacement and maintenance and to provide competitively awarded grants to states that demonstrate innovative approaches to TS&D infrastructure enhancements, with a particular focus on resilience and reliability improvements.

Modernize the electric gridby spearheading DOE coordination with the standards organizations, other federal agencies, industry, state officials, and others to establish standards that enhance connectivity and interoperability on the electric grid.

Address environmental aspects of the TS&D infrastructure by commencing a coordinated effort between the DOE and the Environmental Protection Agency to improve quantification of emissions from natural gas TS&D infrastructure.

Next Steps

Building on the foundation laid by the Blueprint for a Secure Energy Future and the Climate Action Plan, the QER represents another step in the Administration’s efforts to leverage US domestic energy resources while strengthening energy security, reliability, and climate resiliency. Although the QER is only advisory, it recommends several specific legislative actions that would change the landscape for future and ongoing energy sector development, including funding the Interagency Infrastructure Permitting Improvement Center, a pilot version of which is currently housed in the Department of Transportation; restore appropriations to the various federal agencies responsible for infrastructure siting, review, and permitting; and update Strategic Petroleum Reserve (SPR) release authorities to allow the SPR to be used more effectively to prevent serious economic harm to the United States in case of energy supply emergencies. The QER report may also reignite stalled congressional efforts to accelerate natural gas pipeline repair to prevent explosions and accidents, decrease costs to consumers, and reduce methane leaks that contribute substantially to the US “carbon footprint.”

If nothing else, the QER report serves as a stark reminder of how much work there is to do to create the energy infrastructure necessary to support the modern economy, and of the many opportunities for innovative companies to contribute to that process. In light of the complex landscape and shifting federal priorities regarding TS&D infrastructure development, siting and security, companies doing business in this sector will benefit from counsel with the breadth and depth of experience necessary to develop a successful strategy and the acumen and relationships to execute it.

ARTICLE BY

Steve W. Black
Sarah M. Keane
Kelly M. Gorton
Morgan, Lewis & Bockius LLP