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Incoming AGA Chairman Sees Opportunities Ahead For Natural Gas Industry

There will be opportunities to make regulatory changes that will benefit the natural gas industry under the incoming Trump administration, but greater benefits are possible by focusing on infrastructure development, according to officials with the American Gas Association (AGA).

Meanwhile, Trump's promises during the campaign to both unleash the coal industry and open more federal lands to energy development aren't being met with alarm by the natural gas industry, which also believes the two open seats at FERC will be filled soon.

Infrastructure Issues

During a media event Friday in Washington, DC, incoming AGA board Chairman Pierce Norton said he thinks there are opportunities for the federal government to streamline the permitting process for infrastructure.

"One thing we would like to push for is that from the time something is submitted -- if it's clear what it is that they're asking for and they have all the information -- that there be some definitive timeline for when it's going to come out of the process," Norton said. "Right now it's fairly open ended. Just some compression of the timeline on the federal side would help. We have to address the state and local sides probably in a similar manner.

"Laying pipe is not a highly technical process. It's been done the same way for years. That's not what's slowing everything down -- it's the regulatory process."

Norton said one of the reasons natural gas prices spiked in the early 2000s was because the natural gas industry could not move product around the country where it needed to be consumed. From mid-2003 to 2008, billions of dollars were spent to build interstate and intrastate pipelines across the United States. He said that helped the problem, but there are still areas of the country -- particularly the Northeast -- that need more pipelines.

"We’re not talking about 3,000 miles of pipe, or even 2,000," Norton said. "These areas need shorter lays of pipe to relieve some of these [supply issues].

"That's important because if your business is highly dependent on the price of energy, it affects your bottom line. If you're a residential customer, then you've got discretionary income back in your pocket if you can use natural gas versus the alternative. It's absolutely critical to the health of the economy, both on the residential side and the commercial/industrial side, that we get these pipelines built."

AGA CEO Dave McCurdy said the Trump administration is "going to be in a really strong position" when it takes over in January.

"It's inheriting a fairly robust, growing economy right now, even though maybe distribution has not been as widely felt as American voters demand," McCurdy said. He added that the administration would more than likely focus on three objectives: tax reform, infrastructure and regulation. He said all appear to have some bipartisan support in the Republican-controlled Congress.

"Those [objectives] can be done quickly through executive order. You'll see some of that. You'll see Congress, under the Congressional Review Act, propose a series of regulatory reforms," McCurdy said. He added that U.S. Sen. James Lankford (R-OK) would lead the regulatory reform effort, and that AGA had met with Lankford to discuss ideas.

"We probably could offer a few proposed regulations that need to be improved, that could have more rigorous modeling and understanding be more fact-based," McCurdy said. "We're not talking about rolling back regulations. We're just talking about improving and making sure that they're done appropriately.

"Regulation could be done fairly straightforward and quickly. Tax reform appears to be something that has some momentum. I think the [House] and the administration will come together. We need to look at that to understand from the corporate world how that impacts infrastructure and development.

McCurdy said the natural gas industry is not having problems with access to capital. "We have access to capital because of the success in the market," he said. "But we want to grow an economy, and if you encourage manufacturing it's going to be a big producer. If consumers get relief, then that's good for the economy. What's good for the growing economy is good for our sector."

One possibility would be for the Trump administration to propose a kind of "grab bag" on infrastructure, which would include pipelines and also highways, water systems, airports and other things," McCurdy said. But Trump will have to be careful, he said.

"Where the Obama administration, I think, really made a mistake in its first two years, when it had a clear [Democratic] majority, was the stimulus bill, and the fact that people reacted to that rather dramatically afterward. Then they lost control of the House and Senate."

On Coal and Opening More Federal Land

Norton said he doesn't think Trump's campaign promises to boost the coal industry will have a major impact on natural gas. One large reason for this is the fact that while 90% of coal is used for power generation, natural gas is much more diversified -- accounting for 35% of power generation, 17% of residential use, 12% commercial, 33% industrial and 3% for transportation.

"Some of these [coal-fired] power plants that are being retired, they were old," Norton said. "It was time to retire them."

McCurdy said it would be interesting if the Trump administration, in an effort to meet its promise to help the coal industry, elected to invest in technologies such as carbon capture. But those efforts have been costly and not very successful so far.

On Trump's promise to open more federal land to energy development, McCurdy signaled that this was not of much importance to the industry.

"We have such incredible domestic abundance here, and with more discoveries all the time in the continental U.S. there's not a big demand to go out [and open up more federal land]. We don't actually need more natural gas coming onto the market right now. We would like to see prices stabilize."

FERC Vacancies

Although Norton said he had no opinion over the two vacancies at the Federal Energy Regulatory Commission, McCurdy said the AGA "has heard a number of names on the Republican side and we hope that process works out.

"One of the centers of gravity in Washington usually is in the majority leader's office of the U.S. Senate," McCurdy said. "I wouldn't go too far outside that circle to see whether you might have a choice. But there are others. There are a lot of competent people out there.

"This is a real lame, lame duck. There's not a lot of incentive to do [appointments to FERC]. I had thought that there could have been a package where you pair a Democrat with the Republican. It's not good to have two big vacancies right now. In a normal transition, FERC probably wouldn't be [at] the top of the list of getting done, but I think in this case -- because of the vacancies -- it will be. And the Trump administration is placing importance on energy. So I think it will be addressed rather quickly, whether it's in the lame duck or early after the inauguration."

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