Representatives from the oil and gas industry are beginning to worry that the partial shutdown of the federal government, now the longest in U.S. history, could impact drilling on federal lands and blunt permitting for infrastructure, including pipelines and liquefied natural gas (LNG) export facilities.
The shutdown was in its 26th day on Wednesday, and there appeared to be no end in sight. More than 380,000 federal employees nationwide have been furloughed across nine cabinet-level departments, including the Department of Interior. Funding for the Environmental Protection Agency (EPA) has also been affected. An additional 420,000 federal employees have been deemed essential and are working without pay.
Western Energy Alliance President Kathleen Sgamma said Interior's Bureau of Land Management (BLM) was processing some drilling permits that were already in the queue, thereby ensuring that rigs are not idled.
"Operators request permits many months in advance because there are many steps along the way that can create delays," Sgamma told NGI. "A few weeks of shutdown are not going to be that impactful because companies already plan for months of processing time on permits."
Sgamma is concerned about what happens when situations change in the field.
"Oil and natural gas development is a dynamic process, and when circumstances change as drilling proceeds, operators contact BLM for approval of those changes," she said. "When no one answers the phone at BLM, the delays can hold up active drilling, or even raise safety concerns. That's where it's most important for BLM to be responsive during the shutdown, as an essential service."
That said, she doesn’t expect too much impact on the timing of lease sales. "There's already enough time in advance of each sale for BLM to take public comment, so the shutdown shouldn't delay them. If the shutdown drags on for several more weeks however, timelines could be impacted and sales pushed back or consolidated with quarterly sales later in the year."
Center for Liquefied Natural Gas’s Charlie Riedl, executive director, said FERC is working on six LNG export projects whose environmental impact statements (EIS) are due between now and early July. "It's difficult to quantify the exact impacts, but those projects could potentially be facing delays," he said. "When you look at the number of other government agencies involved in an EIS that the Federal Energy Regulatory Commission issues for an LNG project, they play a pretty crucial role."
Government agencies involved, he said, include the U.S. Army Corps of Engineers, the National Oceanic and Atmospheric Administration, the Pipeline and Hazardous Materials Safety Administration, the U.S. Coast Guard and BLM.
"A shutdown and furloughed workers, where folks aren't able to continue on, is obviously problematic for these projects looking for an EIS on the timeframe that they've been given," Riedl said. "The longer this goes on, the likelihood that those EISs issued within the range that they were suggested is difficult to perceive. Couple that with the fact that it doesn't look like the votes currently exist at FERC, then you've got a pretty large set of challenges that need to be resolved rather quickly."
Last week, American Petroleum Institute (API) CEO Mike Sommers said the shutdown, then in its 18th day, hadn't had a major impact on the oil and gas industry, but he warned that could change should the impasse continue.
Federal Agencies Changing Plans
The BLM said last week that it would postpone eight public meetings to discuss a draft EIS for an oil and gas leasing program in a portion of the Arctic National Wildlife Refuge. The draft EIS is the next step toward opening Alaska's coastal plain, aka the 1002 Area, to energy development. Despite the postponement, BLM reiterated that it would accept written comments on the draft EIS until Feb. 11.
According to a contingency plan released last week by Interior's Bureau of Ocean Energy Management (BOEM), 124 of its 558 employees would be available to serve essential functions on an on-call basis during the shutdown. Of the 124, 84 would be available to assist the twin Bureau of Safety and Environmental Enforcement with permitting operations, while another 40 BOEM employees would prepare Outer Continental Shelf decision documents.
At the time the contingency plan was released on Jan. 8, BOEM said if the lapse in appropriations were to extend beyond Tuesday (Jan. 15), “additional personnel will be designated as exempt to complete work to publish Proposed Notice for Gulf of Mexico Sale 253 and Final Notice of Sale and Record of Decision for Gulf of Mexico Sale 252.” Lease Sale 252 is scheduled for March 20. "These employees will be designated as exempt for only the amount of time needed to complete this work,” and would be paid through carryover funds.
At FERC, which is not directly affected by the shutdown, ClearView Energy Partners LLC analysts said no LNG projects were scheduled at the next scheduled meeting Thursday (Jan. 17). The Calcasieu Pass LNG export project in Louisiana and Dominion Energy Transmission's Sweden Valley Pipeline Expansion in Ohio and Pennsylvania initially were listed on the Federal Energy Regulatory Commission's open meeting agenda in December, but they were removed. Venture Global LNG on Tuesday urged FERC to approve a proposed certificate for Calcasieu Pass by next week.
"The absence of Calcasieu Pass and Sweden Valley suggests that the Commission is deadlocked 2-2, and cannot move either project forward at this time," ClearView analysts said in a note to clients. The omissions "will be read by the natural gas community as an indication that the Commission is presently unable to move forward on natural gas infrastructure dockets while it lacks a fifth commissioner."
FERC Chairman Kevin McIntyre died on Jan. 2 after battling cancer. ClearView said "given the shutdown crisis, it is unclear when a nominee will be announced. If the delays on project approvals continue, we could see the Senate move quickly to confirm a nominee for the vacant seat when finally identified by the White House.”
Senate Democrats have threatened to block all legislation, as well as nominees to various posts, until Republicans introduce legislation to reopen the government. But Riedl said the projects' removal from the FERC agenda "has probably less to do with the shutdown and more to do with the fact that there's an impasse between the commissioners. There is probably a deadlock and a 2-2 vote right now."
Meanwhile, EPA also released an updated contingency plan on Monday to retain six employees who were either appointed by the president or confirmed by the Senate, including Acting Administrator Andrew Wheeler, whose confirmation hearing before the Senate Environment and Public Works Committee began Wednesday.
EPA planned to retain 12 employees deemed necessary "to perform activities necessarily implied by law," and 28 employees required "to the discharge of the president's constitutional duties and powers." Another 845 employees, including 444 at EPA headquarters and within the agency's field and laboratory components, were retained "to protect life and property."
However, in a letter to Wheeler sent last week, Senate Democrats said they were concerned the agency was diverting essential resources toward the confirmation hearing. "If EPA is diverting resources that are intended to be used to 'protect life and property' to prepare you for your confirmation hearing, the already dire consequences of the shutdown on public health and the environment could be even greater," wrote Sens. Tom Carper of Delaware, Sheldon Whitehouse of Rhode Island and Maryland’s Chris Van Hollen and Ben Cardin. Carper is the committee's ranking member.
Environmental groups also blasted the decision to advance Wheeler's nomination. Earthjustice spokesman Martin Hayden called the move "a slap in the face to the millions of people suffering from this misguided impasse."
The current shutdown, the third to occur during the Trump administration, affects one-quarter of the federal government. It began at midnight on Dec. 21 after the White House and Congress could not agree on funding for a wall along the U.S.-Mexico border.