Martin Hupka, Sempra Infrastructure’s president of LNG, kept hearing a recurring question at CERAWeek by S&P Global conference: Is this a new day for natural gas?

Hupka seemed somewhat bemused by the question.

“I'm not sure if there was ever a day that it wasn't a gas day,” he said during a panel discussion on challenges and opportunities facing the natural gas market.

Natural gas market opportunities, panelists said, are widespread. Domestically, needs are rising due to surging power demand for data centers. The European market continues to crave natural gas imports. In the Asia Pacific region, China will remain a large buyer while growth expands in India, Indonesia and the Philippines, panelists said.

The U.S., the world’s largest natural gas exporter, is well positioned to take advantage. Whether it can meet that demand, even after numerous LNG export facilities have come online while others are being developed, will come down to what companies, and how fast, they can build infrastructure.

But the primary obstacle remains daunting: infrastructure permitting. A rash of federal layoffs haven’t helped, as crucial workers may no longer be in positions at the Federal Energy Regulatory Commission or Environmental Protection Agency to shepherd projects along.

When asked what industry and policymakers could do to create a more stable environment, Orlando Alvarez, chairman and president of BP America and senior vice president of BP’s Gas & Power Trading Americas, said what stable means to him is certainty.

“It all boils down to understanding that investments take time,” he said. “So you may see that volatility while the investments, whether it's a launching facility, whether it's a pipeline, takes time to build it. That's where you see the volatility. So what we need goes back to permitting, whether its siting, environmental reviews, whatever, …. we need to have a process that we can understand it and be more predictable.”

With billions of dollars in investments riding on approvals, Alvarez said companies can't afford to have infrastructure permitting requests sitting on a desk.

To get permitting to the right place, it needs to be efficient and a company investing in a pipeline or other infrastructure needs a clear understanding on when things will happen.

Hupka echoed Alvarez's comments, but went further.

“People need to understand that it's not just about getting the permit where you need to have a service,” he said.

The real challenges ahead lie in the execution and life of a project.

A company may get an environmental permit, take a final investment decision and embark on a five-year project. But permitting doesn’t stop.

“Throughout that entire four- or five-year period, you are getting sub-approvals every week to say, ‘yes, you can put that piece of equipment, you can do that.’”

Without a firm timeline companies are in limbo—they can't wait an extra two weeks for a permit to set equipment on a foundation while contractors are “standing around waiting for that permit,” Hupka said.

Permit reform has to be infused through the “whole life cycle of the project. It's not just getting a more efficient first permit,” he said.

RELATED

Williams’ CEO: Pipeline Permitting Costs Twice as Much as Steel

Hupka said that the dovetails back into the U.S.’ natural gas prowess: “No matter what LNG project … anywhere in the world, it’s at the end of a pipeline. So we need more pipelines being built [to] get the gas where we are going to build our project.”

Whether bipartisan permitting reform is in the cards remains murky, said Dustin Meyer, the American Petroleum Institute’s (API) senior vice president of policy, economics and regulatory affairs. API President and CEO Mike Sommers recently said the best permitting reform is likely to come from regulatory agencies in the short term, according to a report by S&P Global.

The right ingredients are in the mix because permitting doesn’t just affect the oil and gas industry—though it bore the brunt for the past two decades—but everyone, Meyer said.

 Whether “we're trying to build a highway, we're trying to build a bridge, an airport—it's all the same issues,” he said. “I also think that there's a deeper appreciation now than what there was three years ago to the reality of energy demand and just how resilient it is. The demand is going to be there.”

The question is where the supply will come from, and API thinks it should be export from the U.S. and that a regulatory structure should be in place to make that happen.

“But the political window is still a little difficult to see,” he said.

Tariffs, layoffs

Recent reports suggest the Trump administration’s cuts to federal workers at multiple agencies led by Elon Musk’s Department of Government Efficiency are slowing permitting for energy projects.

The cuts could prove to be damaging to facilitating President Trump’s goal of energy dominance.

Cuts have included nearly 300 workers at the Interior Department, the parent agency of the Bureau of Land Management and the Bureau of Bureau of Ocean Energy Management—agencies crucial to onshore and offshore permits, according to a recent Reuters report.

New Mexico’s BLM offices, which administer drilling permits on the state’s portion of the huge Permian Basin, have also been hit, according to a letter sent by the state’s Congressional delegation to Trump, Reuters reported.

Former Democratic Sen. Mary Landrieu, a senior policy adviser for Van Ness Feldman LLP, said the cuts are a serious concern.

Landrieu said during the discussion that many of the reductions have not been thoughtfully carried out.

“Strategic disruption is important. We've all engaged in it. When we run new things that need to get run better, we know how to do it,” she said during the panel. “Creating chaos is something completely different.”

In that chaos, she said workers at the EPA who can address permitting challenges need to get to work on solving problems.

“I hope they have the staff to do it,” she said. “Having said that, we really have to make sure that the agency is staffed correctly to do this work to fill an unprecedented energy demand.”

She said that the energy situation facing the country isn’t like anything seen in modern times.

“Just talk to any utility executive... They've not seen this demand on our grid for 25 years,” she said.

“So the politicians are slow. I'm a Democrat, Republicans, we're both slow to understand this,” she added. “The industry's getting it. But I think this demand has really got to wake us up and figure we have to permit and reform regulatory reform, build things faster, just move faster to meet this demand, to keep America competitive and to help our allies around the world.”

Hupka took note of the federal layoffs, saying that industry needs FERC, for example, staffed with “engineers to review your application; but you need engineers throughout the life of that project, working with you in partnership to make sure you build your project safely.”

Hupka also said Trump’s tariff policies are also problematic.

“So some can increase costs, some can stop projects, can stop growth,” he said.

He took up the example of steel tariffs. Hupka said he would “love to buy all the steel in the U.S.”

The problem is that it doesn’t have either the capacity or quality for certain types of industry uses. And steel mills cannot be built overnight.

“There's a lot of steel and energy,” he said, whether in pipelines, the Gulf of Mexico or on onshore drilling. “So you increase prices by 25%, you are making us as an industry less competitive. There will not be tariffs on Qatar, for example. So energy dominance, that's a goal. It cannot be accomplished if [the U.S. has] steel tariffs. That's just the reality.”

Meyer said API has done its best to convey to the administration that U.S. energy is an example of trade policy that's working very well.

“It's working very well for America. It's working very well for American consumers. We're a net energy exporter. We're the world's largest exporter of LNG, the world's largest producer of oil,” he said. “This is all working very well. So as you move to rebalance these trade relationships around the world's, just make sure that your efforts there don't run into conflict with your broader vision for American energy dominance.”

Comments