July 19, 2021 — As July rolls on, a look back at the midstream sector in the first six months of the Biden administration draws a stark contrast to the first six months of the Trump presidency. The industry has been met with much less glam, calamity, or frequency in mainstream headlines. As ambitious clean energy targets, tax credit extensions, and federal land drilling bans receive the regulatory and policy focus and fame, sleepy pipeline infrastructure policy has taken a back seat.
But it is not just the lack of headlines that is of note, but the administration’s corresponding lack of action, at least from the progressive environmental base’s perspective. We have jokingly said that the Biden administration has so far done more for the midstream sector than the entirety of the Trump administration by providing at least some certainty and clarity (albeit on a delayed timeline) on the state of play, compared to the corner-cutting approach of the Trump administration that often led the industry to dates with appellate judges. This month, it became clear that we aren’t the only ones to notice. Twice, Capstone employees, in our office a few blocks from the White House, had their commutes upended by large pipeline protests filled with environmentalists unhappy, and losing patience with the administration’s pace.
To advance climate change objectives, the theme of weaponizing litigation and policy against midstream assets steadily increased over the past decade and accelerated under the Trump administration as opposition groups increased both fundraising and expertise in execution. Now the expectation from progressives is that this strategy must be codified through the actions of the executive branch—after all Biden did promise to “transition away” from the industry. But decades of US policy, and a regulatory structure designed to serve public-market needs, create a barricade.
Notably, besides the Keystone XL decision, it is hard to point to a significant “win” for environmental advocates—and environmentalists will say that Keystone was not a win more so than an expectation. Rather, drastic pivots in policy and or permitting approvals have not taken hold. Courts have steadily arrived at conclusions that bolster continued energy infrastructure development, on balance. From Dakota Access, Line 3, Line 5, Mountain Valley, PennEast—high profile, hydrocarbon infrastructure seems to be moving towards success—inching at times, but still moving forward. This begs the question: what and when will be Biden’s statement mark on pipelines?
The pace of the Biden administration has lagged the message delivered to environmental groups. Since the election, Capstone has maintained that Biden would champion efforts towards a clean economy. But we also emphasized that the Biden victory did not necessarily equate to a victory for progressive environmentalists on all fronts—that Biden, the pragmatic dealmaker, would not transform into the stalwart environmental loyalist overnight. The commitments and promises of clean energy are manifesting themselves through an approach that divests much of the political capital needed to enact energy policy change to Congress. But working with Congress is slow, methodical, and subject to the winds of the day in order to secure support and time to advance change. But what about the executive branch, what will it do?
Undoubtedly, in our view, FERC will play a critical role here. But will incorporating the cost of carbon in its cost-benefit analysis for projects or rewriting policies on affiliate agreements compelled by the Spire ruling be enough to claim victory in the progressive wing of the Democratic constituency? We don’t think so.
In the final days of the Obama administration, the Army Corps of Engineers denied an easement to the Dakota Access pipeline to cross Lake Oahe in North Dakota. The late Saturday news came as the boiling point of civil disobedience was about to break, and armed conflict at the site was a legitimate possibility. The move was recognized nearly immediately as a short-term delay rather than a long-term impediment, but was likely the most aggressive step able to be taken by the government at the time.
Several projects could be pressed against the federal regulatory grindstone, but that is decidedly not the approach of this administration—yet. The administration has effectively endorsed the review processes for Line 3 and Mountain Valley Pipeline in the past weeks—technocratic processes that leave little room for politics. But pressure from environmentalists is mounting. And if larger priorities, such as a clean electricity standard, fail to gain traction, a pipeline “win” becomes increasingly important.
We do not have a crystal ball, but we have confidence that the administration will assert some form of political will in the midstream sector at some point— the probability of which only increases over time and as other energy priorities encounter their own hurdles. Investors should be paying attention. This political will’s target, magnitude, and longevity are the only questions for now.
— Cory Palmer, Director, Energy & Natural Resources
By: Andrew Gier, Capstone Energy and Trade Analyst November 20, 2022 - For much of this year, congressional Democrats and staff worked furiously on a reconciliation package incorporating a long wish list of healthcare, climate, and tax provisions. The pressure to pass...