With a Syria vote, debt ceiling, and continuing resolution discussions likely to dominate the conversation in Washington once Congress returns next week, how will pending energy issues play? During today's OnPoint, Kevin Book, managing director at ClearView Energy Partners, discusses lawmakers' next steps on renewable fuels policy, the Keystone XL pipeline, power plant emissions standards, and LNG export facility approvals.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Kevin Book, managing director at ClearView Energy Partners. Kevin, it's always great to have you on the show.
Kevin Book: Thanks for having me.
Monica Trauzzi: Kevin, a lot happening over the congressional recess on energy. Let's start with the discussion that will likely dominate when Congress returns, other than Syria, of course. We're expecting the CR and debt ceiling discussions to start heating up next week, and the possibility of a government shutdown. Much of the discussion will focus on what to include as part of the deal. Will energy make its way into those negotiations?
Kevin Book: Monica, right now, the prospect for a lot of anomalies, which is the term of art for something you add to a continuing resolution which makes it different from the budget you're continuing, that seems like there's not going to be an awful lot of energy-related, or pretty much any other. The demand for a clean CR seems to be pretty strong and resonate from the House right now. That said, there are always additions at the end, but this isn't late enough in the year where you might get something like an extenders package tacked on. More to the point, there hasn't been a vote on an extenders package this year. So if you were hoping for some sort of end of year saving of the ongoing battle for those subsidies, this may be a lapse year.
Monica Trauzzi: How likely is a government shutdown?
Kevin Book: A government shutdown is far from out of the cards. I think a lot of it will have to do with the sentiment coming out of Syria. A newly energized patriotic America united behind a common enemy is much less likely to turn to brinkmanship and diffuse that sort of sentiment.
Monica Trauzzi: So moving along, in early August, DOE moved to conditionally approve the Lake Charles LNG export facility. How much can we read into this approval in terms of what DOE has planned next for future approvals?
Kevin Book: Well, DOE has been a perfect sphinx when it comes to figuring out what next, but they have said a couple of things that are important. They've said that they're going in order, which we know, and they reinforced in the Lake Charles order. They said that they're going to look at cumulative impacts in their assessment of public interest. And they mentioned that they're getting close to the six BCF a day lower bound of the studies that considered impacts, which means that we're getting sort of into the fairway of outcomes where DOE might start to say, "Is this deal in the public interest?" That means that if you believe that there's a possibility of a pause coming, the question is, are we now approaching the pause? We think we may be. There may be two or perhaps three more authorizations before DOE stops to re-examine data and consequence.
Monica Trauzzi: So what kind of timeline are we looking at for those two or three approvals? Is it every four to six weeks? I've kind of heard that behind the scenes, that that might be the timeline.
Kevin Book: We're working with expectations of 45-day intervals right now on the basis of Secretary Moniz and others saying that they've been making the process smoother, now that they've done the review and they're speeding things up. But historically, it hasn't been 45-day intervals, so it's anyone's guess.
Monica Trauzzi: Let's move on to renewable fuels. The debate continues over how to proceed with the RFS. Over the Congressional break, Senate EPW Committee Chairwoman Boxer indicated that she'd like to take up the issue on her committee, and this is significant because her committee has jurisdiction over the actual policy, and up until this point, they have not engaged in the debate. So what can we expect from that committee on this?
Kevin Book: Well, this is absolutely interesting, because in 2005, the EPW Committee ceded their ownership of the issue to the Energy and Natural Resources Committee, and again in '07. And now they want it back. This is probably a bad sign for second generation biofuels and the ultimate reform outcome, because Boxer and other coastal Senators were among the coalition that formed to support 2G fuels fused to the 1G backbone. Now that second generation fuels aren't showing up and there's a lot of shortfall questions, it's not clear they're going to be staunch defenders of ethanol.
Monica Trauzzi: And so last month EPA officially cut this year's cellulosic targets, which was expected, but they also indicated that EPA would use its flexibility under the RFS to reduce volumes for all fuels moving into next year's targets. So how quickly can we expect to see those 2014 numbers, and what are you expecting in terms of how they proceed?
Kevin Book: Well, boy, we'd love to see them by Nov. 30, the statutory deadline, but that didn't necessarily work out this year, did it? Tim Chung, my colleague who covers ethanol, and I have been going back and forth over whether or not EPA has actually committed to anything yet. They've said that they intend to potentially change something, but they're also willing to receive input, it seems, before they make a final decision. So what we have is a negotiation process, and both stakeholder groups, the refiners and oil producers, as well as the ethanol producers, are going to bat right now trying to make arguments on both sides of the API/AFMP waiver request.
Monica Trauzzi: So separately, EPA is also working on fulfilling the president's Climate Action Plan. We know the agency is on a pretty tight timeline to hit all those targets before the president leaves office. The House Energy and Commerce Committee is going to have a sub-panel hearing this month on the plan. What are the potential hurdles facing EPA on this, and what are the next steps to hit those targets? I mean, what are we going to see over the next couple of months from them?
Kevin Book: Well, Sept. 20 is when we get a reproposal of the new unit rule for new source performance standards for greenhouse gases from power plants. Great. That takes us to a point where we'll find out a question of whether or not they've decided to subcategorize by fuels. If they have, it potentially sets a trajectory towards debate and argument, but it also means it's time to move on to the discussion of existing plants, and existing plants have three hurdles, really. There's states who might not necessarily agree. There's obviously the end use sectors that are regulated. And let's not overlook the small issue of an all-Republican Senate, should there be one, could always defund that line item of EPA's budget that allows performance standards to be enforced. So nothing is guaranteed, and it is a heavy slog, but they're starting the fight early, and they're - it looks like they're devoting a lot of resources to it.
Monica Trauzzi: And how willing is this EPA under Gina McCarthy to listen to the various stakeholders, including the states and industry, on how best to move forward with this policy?
Kevin Book: By all appearances, Administrator McCarthy has been committed to trying to draw in stakeholder support, and seems to be listening very well. We'll see what happens in a final rule. EPA's tendency is to start strict and then soften when they get feedback, so we wouldn't be surprised if next June the existing unit rule might raise some eyebrows.
Monica Trauzzi: So Keystone remains in the news, though a decision date is seeming less certain at this point. We've heard that there is now no time line for completion for the final environmental impact statement coming out of State. But over August, 21 state attorneys general released a petition endorsing Keystone XL. What's really happening here? Is this about making the right decision, or having the decision happen at the right time?
Kevin Book: I think it's about having the decision happen at the right time. As we've been looking at it pretty much along with everyone else now, there's an implicit KXL for NSPS swap happening. Implicitly, if you're going to have a Sept. 20 rulemaking on greenhouse gases from power plants, that can do a lot to offset the impact potentially from the environmental stakeholders when you say yes to Keystone. So a good day to start thinking that window for an FEIS opens might be sometime after Sept. 20.
Monica Trauzzi: Final topic here. When the Senate reconvenes, it's expected that one of the first things they'll take up is the Shaheen-Portman energy efficiency bill, which was left on the table before they left for recess. Will it finally cross the finish line?
Kevin Book: Shaheen-Portman looks like the Rodney Dangerfield of energy legislation right now, sandwiched between Syria and a budget fight. It is supposed to start on Sept. 10, and we'll have to see how things play out on Syria, but the days will be scant when the Senate will be able to focus on it before they head off back home. So we think it crosses the finish line in the Senate, but if it's not overwhelming, it seriously faces headwinds in the House.
Monica Trauzzi: All right. We're going to end it right there. Thank you for coming on the show. Good to see you.
Kevin Book: Thanks again.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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