The Energy Producing States Coalition (EPSC) met on Sunday, December 2, 2012 in conjunction with the Council of State Governments National Convention in Austin, Texas. There were in excess of 35 attendees at the meeting, including numerous state legislators and staff, state executive branch leaders and staff, corporate, trade association and community organization representatives.

Elected officials representing five states, Alaska, Colorado, Texas, Utah and Wyoming, provided a summary of energy issues that their states are facing. A consistent theme was the challenges posed by federal regulations and the increased role that those regulators are playing with respect to state natural resource development. Additional concerns related to the increase in regulations, excessive time in granting necessary permits, the increased use of lawsuits under legislation such as the Endangered Species Act, the inability of states to develop public lands and the increase in activity by local communities in trying to eliminate potential energy development within their boundaries.

Following the state update, a panel discussion was held with corporate and trade association representatives focused on the challenges and opportunities for the industry in 2013-2014. Representatives from Exxon Mobil (environment), the Port of Corpus Christi (infrastructure), Apache Corporation (natural gas), Shell (Alaska), Jackson Walker (coal), Nuclear Energy Institute (nuclear) and the American Fuel and Petrochemical Manufacturers Association (regulations) provided their perspectives on these issues. Regulatory concerns applied to each of the presentations, particularly related to consideration based upon things other than science. Another recurring theme was the belief that regulations pose a “death by a thousand cuts” challenge. Among the regulations and challenges cited as an impediment to domestic energy development were: Endangered Species Act, Greenhouse Gas Regulations, Mercury Air Toxic Rule, Coal Ash being designated as a hazardous material, Renewable Fuel Standards, Low Carbon Fuel Standard, Tier 3 Gas Regulations, Ozone NAAQS, Wetland Designations and the requirement to ship on U.S. flagged vessels within U.S. ports.

Growth opportunities exist in each of the sectors, assuming improvements in the regulatory environment. Shell is expected to invest $5 billion in Alaska and Noble Energy and Anadarko have committed to investing $8 billion in Colorado.

The following issues were discussed during the Question and Answer Session

• If there was one wish each representative’s had for the holidays, what would it be?
  • The most consistent answer was for an improved regulatory process.
• Is there legislation that the panelists would like to see implemented within the states?
  •  Answers included the importance of designating projects of national importance and the importance of states legislating primacy.
• Could NEI provide an update on the expansion of nuclear facilities?
  • There are two projects under construction in both Georgia and South Carolina as well as one project that was started in the 1980’s that ran out of money that is now back under construction. The challenge is that currently in China, there are 20 nuclear facilities under construction.

Following the opportunities and challenges discussion, Utah Congressman Rob Bishop (R, UT 1) discussed issues related to public lands. He mentioned five aspects related to public lands: the purpose always changes, it has never been planned, stewardship responsibilities have always failed, historically every 40-50 years public views change and that there has been a consistent abuse of the concepts of “sound science” and “multiple use.” Rep. Bishop stressed the importance of organizations like EPSC and suggested that the group work with the Western Caucus by offering to facilitate a relationship. He also touched on the impacts of certain regulations that have increased recently, including the use of the Antiquities Act and EPA’s attempts to regulate hydraulic fracturing.  He highlighted the discrepancy between increased oil and natural gas production on private versus public lands.

Congressman Bishop stressed the importance of the energy sector and mentioned that it could help ease some of the financial issues facing the country. For example, if drilling in ANWR was allowed, it would generate $50 billion. He also mentioned that he has been working with Wyoming Representative Cynthia Lummis (R, WY) to take the public land message back to those on the East Coast. One area that they have tried to highlight is the impact that public lands have on education funding. He provided the statistic that in states with public land issues, education spending growth was 35% versus in states without public land issues where it is 68%.

The following questions were posed to and answered by Congressman Bishop:

• How should states approach issues related to science? How should states develop their own data?
  • Representative Bishop stressed the need for states to get their own data and analysis related to the impact of public land issues.
• How can states alleviate regulatory concerns and potential changes to the revenue split with the federal government related to royalties?
  • He said the federal government is looking at every possible way to generate additional revenue, including changing the royalty split to 70%-30%.
• Is it a sound strategy to invite Congressional members to the states to learn more about public land issues? What are the best strategies to educate lawmakers on public land issues?
  • With respect to bringing Congressional members to local communities, he cautioned that while the strategy has worked in the past, it is important to make sure the local officials are careful to plan the trip and destination in a way that guarantees the members see what the communities want them to see.
  • He said the most effective method of generating interest in these types of trips is to have their colleagues request their participation.

Texas Railroad Commission Chairman Barry Smitherman discussed how the State of Texas is approaching energy development. He mentioned that his office is working to improve the time associated for permitting from the current three – five weeks to three – five days through improvements in their IT system and by developing an internet based process. He discussed three areas of development within the state. The Permian Basin currently generates 813,636 barrels of crude oil each day and is projected to produce 1,000,000 barrels by 2016 and 1,400,000 barrels by 2020. The Barnett Shale has developed 11.9 TCF of gas since 1993 and is estimated to contain an additional 20-80 TCF of gas. The Eagle Ford is an area that is 400 mile long and 100 miles wide. In 2008, it produced 1,000 barrels per day and by 2012 it was producing 379,000 barrels per day. He mentioned that the only thing that would slow down or stop the increase in production would be bad regulatory policies.

Questions for Chairman Smitherman focused on

• How Texas is improving their permitting time?
  • Chairman Smitherman mentioned that they were evaluating their IT programs and were developing an internet based system.
• What can states do related to hydraulic fracturing and how states can work together?
  • Chairman Smitherman suggested that whenever EPA or other federal regulators were testing on an oil and gas drilling site, make sure that states have their own staff there at the same time in order to do their own independent analysis.  He also said that states should pre-test water prior to drilling in order to have that information available should environmental groups sue. He stressed the importance of adequately cementing through water zones as an additional precaution. He also said that local geologists know the local area much better than those from EPA and therefore their expertise should be highlighted.

Wyoming Speaker-Elect Tom Lubnau presented the group with draft legislation dealing with how states should respond to challenges and lawsuits related to valid state issued permits. He asked for suggestions on how to improve the proposed legislation as well as how other states have approached the issue. Alaska has the ability to make those filing lawsuits pay the legal costs should they lose. Alaska also introduced two similar pieces of legislation, an Injunction Bill that requires those filing a lawsuit to put up a bond for potential lost wages and state revenue if they are going to sue to stop or delay a project. The purpose of this legislation is to force those trying to delay or stop development projects to have “skin in the game.” The second piece of legislation dealt with a freeze on permits. If someone sues to delay or stop a project, the timeframe associated with the permits freezes until after the lawsuit is finished. This eliminates the ability to sue in order to delay the project and eliminate its development. The discussion focused on whether states could invoke legislation if federal regulators take too long to issue permits, might the states take over the permit process to finish the project. The question was raised whether states might have standing to fight particular federal regulations, and if states can invoke an interstate commerce notion.

The group discussed the importance of EPSC becoming more active in the public policy debate. It was noted that EPSC members provided comment letters in July to the State Department in support of the Keystone XL pipeline and to the Bureau of Land Management in opposition to their proposed rule requiring the public disclosure of chemicals used during hydraulic fracturing operations. A draft comment letter to the Nebraska Department of Environmental Quality in support of the revised route for the Keystone XL pipeline was presented and approved. The draft letter was emailed to each participant following the meeting.

The final agenda item dealt with the leadership of the group. Wyoming Speaker-Elect Tom Lubnau, the Chairman of EPSC announced that he would be stepping down as Chairman due to his soon to be increased responsibilities as Speaker and that the Executive Committee has nominated a new slate of leadership headed by Utah Representative Roger Barrus as Chairman and Alaska Senator Cathy Giessel as Chairman-Elect.  Those in attendance unanimously approved the slate. Representative Barrus provided his goals for the group under his leadership, including: formalizing the collaboration with elected officials, defining the group’s message in order to educate the public, types of legislation that states can share among themselves to address problems related to energy development, organizing smaller working groups within EPSC to focus on specific issue challenges and increasing the participation in EPSC. Representative Barrus also provided copies of CSG’s recently released report, “Electric Transmission Line Siting Compact, Legislative Resource Kit” as an example of what legislators working together within CSG were able to accomplish.