Minerals management at the department of the interior. And joseph stanko, partner at hunted williams. Good morning, everyone. Thanks for sticking in with us. Its terrible. Its raining out there. Good to be with you. Im delight tobd here. I will just say a word about the bipartisan policy center. The essence of our mission is the constructive collusion of ideas. We are not nonpartisan or post partisan. We dont believe in abstract objectist. We believe on having practitioners with strong personal spiritual and economic interests willing to come together and hash it out. Come up with a good set of ideas. So i feel like im in very good company with the panel i will introduce immediately to my left, sarah, someone ive known for a long time, director and senior fellow of energy and National Security at csis, one of the real anchors here in the washington thinking community. Next to sarah, kate mcgregor, the recently appointed Deputy Assistant for land and minerals at the department of interior. And there is really no one else appointed there. Sarah can pretty much tell you everything you want to know about our nations interior. Joe stanko, joe is a long time friend. Hes a partner at hunter williams. Were going to press him a little bit on the power sector. So i will just set the stage in about 60 seconds which is to Say Something very obvious which is we have an incredibly dynamic political and policy moment on energy policy. The amplitude of the discussion were having right now is pretty remarkable. We also have an incredibly Dynamic Energy system for those who follow this even a little bit fuchlt remember back a dozen years, the story of American Energy was a story of, you know, cold showers and warm beer, right . It was despair. Natural gas was 13 a cubic foot. Manufacturing was fleeing the country. The dependence on foreign imported products seemed like it was getting larger every was g every year. Our Climate Emissions could only be imagined to go up. Congress came together out of the urgency and passed some pretty good energy legislate. If you fast forward to 2017, the President Trump administration comes in on pretty solid footing. Energy prices have been relatively slow and stable the last few years. Breakthrough, driven by Public Policy has entered the american posture. We are now the largest producer of hides carbons on the globe. Were restructuring our imagination about our fourpoint footprint. Weve seen breakthroughs in renewable technologies. The natural gas boom has dramaticcally shifted the industry both in terms of manufacturing and the power sector and gas emissions are going down. So pretty good moment to have a pretty Big Conversation and i guess i will try to do three things today. A little bit of a big picture. Were going to talk a bit about abundan abundance, what actually can the government do to capture and embrace those benefits. And climate change. Im going to kick it off with kate here in the hot seat. Great. So, you know, president has put out some pretty, you know, bullish executive orders focused on capturing this Energy Abundance. How do you see the moment . Do you think the way i framed it is reasonably similar to what youre thinking or whatst the process of your 18hour days as you try to make good on the president s commitments. I think that youre characterizing it cell. I think its a really exciting time r especially for the department of the interior to play a strong role in what the president would like to achieve. When he says Energy Dominance and strength, i think that derives from energy diversity. When you look at federal lands, which is what the department of the interior has an speshts in, obligation and jurisdiction in, we have a quite divers array of Energy Wealth that we can bring to the table. It already part of our Nations Energy dynamic. I think federal lands right now are accountable for 2 is 1, maybe a little more than that but around 21 of our nations oil production, 26 of our Nations National gas. Coal leasing on blm is 60 of coal produced in the United States, so all of this is at the department of the interior. When the president has requested us to take a hard look at what we can bring to the table, i think well be ready to answer that call. So every agency is supposed to come up with a specific set of recommendations, activities . Can you say a little about how thats going . Sure. I mean, right now without giving too much away because of why theyre all here. Were still deliberative. However, when we look at what doi can do, its going to break into several different buckets. Were going to talk about access to federal lands. Were also talking about regulatory certainty which is a rt pa of that executive order. On top of that we will also be talking about time frames. Which you and i talked about a little bit. So as we look at that now, thats how were organizing some of the directives in the executive order and taking a hard look at some of the regulations from the past administration, what should stay, what should go, whats the smart choice to make sure that we achieve a good balance between providing and accessing our Energy Abundance without sacrificing our safeguards to protect the environment. You put your purple tie on, which i appreciate. Bipartisan for you, jason. Before we go deep on the Clean Power Plant and other sundry items. You were with a lot of big producers. Right. There a whiplash between last year and this year . How are people taking this opportunity . I think in the energy kmient theres optimism and we have a proproduction, pro infrastructure president , and as you know, the executive branch and the president are bound in authority by statues and criteria that are passed by congress, and there are many who think on a number of key programs that the last administration went right up to the edge, maybe outside of the swim lanes on some of the interceptions that would push certain policies in energy distribution, and i think if youre looking at whats going to go on, i think the nearer term is going to be a reexamination of some of those prior policies and probably some proposals to move them back within the zone that arguably Congress Granted the agency to act. That is probably going to take a fair amount of time. And then after that, then youre going to see the administration applying the existing statues, i thi statutes i think that will try and balance a number of issues but still get the increased production in the infrastructure that has really created a lot of manufacturing, industrial activity in the past couple of years. I want to ask you to speak a little bit to the process here to those who do not have an administrative act under their pillow like you do. Sure. President s come to down and are surprised that theres these labor russ activities that are required before one can change the direction of policy. You say its going to take some time . Sure. Its not a flip in the switch. The way that the administrative procedure act and resume making works, which is the procedure for any significant major regulatory action under a statute is the agency has to develop a proposal. They publish it for comment. They open a docket and receive extensive tens of thousands, if not hundreds of thousands of comments, many of them putting which theyre actually obligated to read . Which they read. One of the most exciting things is the response to comment document. It looks like about eight manhattan yellow pages put together. And then they develop a final rule. And that rule can be challenged and litigated through the appellate courts. So a rule of thumb that we use in any significant rule making is its about a year if you do it quickly from, you know, proposal to final rule. Sometimes longer if its a tough issue. In the litigation of that rule going through, in some instances, the d. C. Circuit and potentially the supreme court, can be a two to fouryear adventure. So that industry has some issues with certainty, but i think that if agencies stay, you know, more or less down the middle, you end up with a product that even if it is challenged, industrys got a pretty good idea that its not tanned regulated community and stakes and stake holders have a pretty good idea its not going to swing too far one way or the other. Sara, for purposes of this panel you are all things international. Cis has a lot of expertise in this regard. How would you situate the moment in the broader context of the Global Energy . Its really interesting. I think jason, you characterize it to well. Were both an energy super power, which weve always been influential in Global Energy markets but we are in different and new ways going forward. I think whats interesting is were finding that much of the world is in a state of transition. Right. Most of the Global Energy demand growth will be coming in fundamentally different places than it eastward to. If you were to ask any normal person on the street, who are the Biggest Oil Producers in the world they wouldnt have the u. S. In the top three. But theres three producers in the world that produce over 10 Million Barrels a day and were one of them. We have tons of gas, tons of coal. Where were pretty influential in a lot of Energy Market dynamics right now, and not least of which our leadership on energy inslowvation of Clean Technologies is also pretty pro found. We carry a lot of fwhat that global arena. A lot of people ask these days if the United States is changing its course on energy, how much is that going to matter to other countries around the world. From an economic respect it matters. Were really influential in a lot of energy sectors, but also in setting direction on policy and regulation and the multilateral framework. But id also say that its also being absorbed by a lot of things that this new administration wants to change that arent necessarily Energy Related but do change the geopolitical framework. So you cant just say were take changing the way were dealing with energy. Were changing a lot of tax policy and trade policy and things that affect energy. Energy is one of the things people care about in sort of the new u. S. Persona globally by it is one of many. Theyre trying to figure out where it falls within their own priority stack, visavis the United States. That was the opening lightning round. Now were going to mix it up a little bit. Answer questions you werent asked, ask other questions. If you look back at the last few years, youd say key power plant and keystone became the crews buildings in which much broader arguments took place, and my own moderated editorial here is neither of them were that big a deal, right . Weve got a lot of pipelines going back and forth across the u. S. Canadian border. It was a big Infrastructure Project but it was not the central issue in the future of American Energy policy. Personal editorial. You guys can hopefully dispute or engage. And the Clean Power Plant, fascinating enough when our last epa administer speaks she said no biggy, its all going to happen anyways. The targets are going to be met. The system has essentially we were riding the wave, so whether the next president revokes it or not were going to get to the same place, anyways. Reflexes on either of that and where do you see these issues going . Ill hop in on the clean maurer plant. I think no shocker there. One of the things that i think its important to delineate is the difference between changes that are made by market or Technology Forces and things that what are attempted to be super accelerated in a program that is not reflective of the natural order of those two. And former administer of epa is mccarthy is correct in saying that when you look across the generation, the United States, it has shifted in a way due to the price and availability of natural gas, which has a gone to the print than 15 or 20 years ago. The keyword there is price and availability of natural gas. Not doing ago we were in a world of eight to 12 natural gas. It was really tough for manufacturers. I know many of you, maybe not all of you, dont know that natural gas in addition to an efficient feed stock is used to produce chemicals and pharmaceuticals. There was a big hit on American Manufacturing because of that. Now, the issue with the Clean Power Plan in plain english, fortunately, is it is a mechanism by which epa is supposed to go to an existing facility and to look at the equipment that is there to reduce emissions and make jumtsz about what to require of all existing facilities, the evil word is best system of Energy Reduction adequately demonstrated. For 30 years this was an adventure in sending engineers to existing plants, looking at things that took air out, seeing if they worked and ask them the question, can Everything Else in the industry do this . With the Clean Power Plan, best system of Emission Reduction turned into an examination of the entire Electricity Generation and delivery system. And asking not engineers but a comment of modelers to see if the Energy Production and Distribution System as a whole with a number of controls on it could reduce the carbon footprints. I would argue that thats sernld a departure from the past and not really promoting, i think, the kind of adequate push of delivery of existing technology that congress intended. So there may be a couple of investors in the room, and thats why i kind of i think, certainly embraced the sense that that was an extension of authority that this president has decided is not in the youre right. In his interests thats going to be rolled back or repealed. Hopefully touch on that. But do you believe based on your sense of the availability of natural gas, that when a Clean Power Plant is rolled back, that is going to have a Significant Impact on the trojectory of emissions . Do you think emissions will go up . I think to some extent, the market has moved and i think the portfolio of generation and therefore existing emissions is really going to reflect the price and operational differences between a coal plant and a power plan in some renubls. Renubls are part of the mix. One little that i would have on that is regardless of and have been subsidized here for quite some time with the goal of trying to deploy technology, but our a lot of our states have shifted to not a regulated Utility Industry but a market industry. I think however you feel about renewables like wind power, when they bit into a competitive market at either zero cents per kill watd our or negative one, because you you can still pay the grid to take your electricity and make money often of the subsidies and the credits, thats a distortion that has other implications. Its very tough to build base load power in those markets. So i think across the board, renewables are definitely part of the nix. You know, everybody that i work for in the electric generation has some most of them have some wing that does renewables. But were going to have to grapple with some of those in order to have a stable grid and diversity going forward. Can i add to that real quick . Please. I think i agree with everything you said and i think that one of the things we forget is that so much in the electric power sector behind the Clean Power Plan was changing, that those are the winds that everybody was thinking would be rode that cpp was sort of underlying. I do think that that its likely to continue, but i also think we bsh not forget that there was an examination, if there was a Different Administration that it was a step in a further process. Right. So there are those longerterm market signals that utilities are kind of saying, ok, what do we want to do about this. I dont know about you. But i havent been to a meeting lately that the word pendulum hasnt been brought up and what about the pendulum of the United States where we keep swinging along the edges of a debate were we dont need to build new generation, so thats killing the Business Models for a lot of places. So grappling with that new reality of not needing to build a lot of new electric supply is sort of a new problem for us to be grappling with. A week after the election, republicans like nuclear, so wed be building a lot more of that, but why . We arent going to need as much lektd generation capacity as weve been saying, so its sort of a new horizon. I know thats not your billet. Regulation is. I think this comes down to when companies are making investment decisions, a lot of the Regulatory Environment from washington has affected pricing, and when it comes down to it, if a companys looking to make an investment, whether its in a new comb plant, which we havent seen recently, new nuclear, which we also havent seen recently or natural gas, depending on the region, theyre going to be pricing out the differencedifferent aspects of that project and scrubbers and other aspects of capture technologies come into play. And as you create different regulations that change that gain and impact that pricing, it has a slow real impact nationwide, so thats something that were looking at. I think part of what interiors doing in response to the executive order is to make more of our, of course, varied Resources Available but the market will dernl what is the beth path forward with what the American Families and businesses are willing to pay for electricity prices. One more Clean Power Plan question. I cant let you off the hook. Talking about the pendulum, everybody wants serntd, if its good certainly. Nobody likes bad certainly. So certainty to itself is a good thing. I think sometimes gets exaggerated. But you made the point, i think, that you could pull this back to the lane, right, the idea that had epa gone forward and basically just kind of regulated the facility based on what you could do to the smokestacks, that would have been more definite with the past. You represent a lot of power sector clients. Is there a preference right now as to whether this should be repealed or repealed and replace . I certainly heard some concerns that and maybe not perfect, but theres a lane here. You occupy the space with something that is predictable and thats preferable than just taking the rules away and waiting for the next president to do something different, which seems like thats the signal weve been getting. I wonder on behalf of your clients, what do you think is the better outcome . Well, i never get out in front of my clients, but what i will say is, you know, i think thats a discussion. I stat through eight hours of arguments in the d. C. Circuit on the Clean Power Plan that ill never get back, but, you know, and some of them were that there was a legal justification for a null outcome, whether with it was another part of the act preemted this. Uhhuh. So i think going forward, the current epa mr, scott pruitt, i think hes a rule of law guy, a former attorney general, i think theyre going to go through the options. Certainly the path that i described is one that the agency has taken before and is definite with past actions, if you can go out and point to something that somebody is using economically and functionally and similarly situated people can use it. Theres also a part of this that got missed in the old version where epa set emissions guidelines and the states were groonted a fair amount of flexibility by congress to move the needle up or down. So we may see that. They may look at some of the arguments for a null outcome. I think theyll look at that, look at the litigation risks and the policy. I think it came up a couple of times in confirmation hearings. Hes a rule of law guy and i think hell make a decision based on legal criteria. Having picked the fights about key power plan and keystone, just to get everybodys blood flowing, one of the happy words now is frush. Critical to the energy sector, ill editorialize that a lot of people thought was a good way to accelerate the future is speed up the present. I think this president certainly does not abide that idea, right, the notion is that you accelerate the future by having a strong market. So couple of things i want to talk about. One with you, kate, is permanent infrastructure is tough. Yes. And a lot of Energy Infrastructure is long and skinny. Uhhuh. Powerlines and pipelines, the worst possible challenge when it comes to permitting something. Lot of those are federal permits, and renewables as well. How do you go after that . This is not new but do you think it will be a priority for the administration to streamline that . This will be a froirt. I think again if we have to go there, it all comes down to lengthening the permitting process only increases the cost of the project, so its not going to just be to the department of the interior. I think were going to all have to come together, a lot of interagency work to get that across the finish line. We wont be the first people who have attempted to streamline, especially on things like dipa and other issues. But we have a lot in our fieldhouse which a lot on federal land, for instance, if you need a rightofway, which key zoinz go across part of federal land, we are assessing our current backlogs in several different field offices in the west and elsewhere to transmit energy. I think thats something that we need to we realize we need to take on. How we do that is still being formulated, but we have some pretty good ideas. One of the ironies is that theres often not a huge desire in republican administrations is not to hire a lot of government officials but driven by the fact that theres a lot of Energy Activity and not a lot of people, do you think interior is going to be opened or a capacity to move those processes forward . We are analyzing that. Like three weeks. This is totally unfair. Her courage in being here at all is applauseplauded by everyone. I want to ask you about the infrastructure in the international context. So keystone obviously brought a lot of attention to the fact that we are connected to other nations when it comes to energy and that that hack important aspect of our resilience. We export tremendous amount of energy to mexico. There is both a desire to have kind of a strong north American Continent but we had the president basic rip up nafta. I take him seriously but not literally on that point. What do you think about the immigration issues as they relate to infrastructure and other opportunities, other risks . Theres tons of opportunity in north america. Here we are spitting distance away from energy independence, with whatever that means, but selfsufficiency and starting to question its value visavis our neighbors. I think part of that is because oil prices are low and part of it is because typically, people dont understand that awith bundance doesnt equal security. If you have in the ground, congratulations. If you cant get it to where its needed, well, then you dont youre not very secure. And so i think that we need to think about the future of the continent and the cost benefit and analysis of having an optimized market. I think with our neighbors, canada and mexico, it looks at the transition and the concerns that they have. Having done north American Energy issues for 12 years now, i im always amazed at how mexico and canada always look at us and says what does the u. S. Want now and we keep changing the answer on them. I think wed be doing better for ourselves and then if we kept that answer consistent. Whats hard for us is the issues are difficult. Keystone was a bit of an outliar. Its a symbolic issue for a systemic problem, which is that we dont have a valid path ford for dealing with climate change. But we have a big issue that this president will have to deal with. Regional energy Infrastructure Projects have real big problems. We are not doing a very good job of thinking about how to build out Energy Infrastructure in particular regions of the country, given the fact that they are changing so dramatically in terms of what they produce and export and import. Its a huge amount of change for a short period of time, so i do think that we need to think about regionalizing Energy Strategies within the u. S. But thinking about hour north american neighbors in that context and also not forgetting how many states within the United States have deep and Robust Energy ties with other countries around the world. So i think actually the administration has a lot of ingoing salvos that they use to talk to other countries action, but once they hear from states and sort of get into the numbers about what the Energy Relationships are in various states around the country, theyll realize that theres a lot of really important and mutually beneficial ties to be cultivated there. So as both Global Technology leaders, theres the capacity for you to ask questions via the app. Which i find shocking, but its working. I was going to encourage you to do that and pick one of them up. This is about did credit subsidies. You mentioned that theres been a very strong effort over the last decade or so to push subsidies to mostly renewable but evolving technologies. Now its a very successful commercial endeavor. Is it time to reallocate or reimagine that subsidy policy either towards clean coal or rather than it being based on renewables, based on a performance metric. Whats your sense of the possibility there . Well, yeah. Traditionally, i think congress has always approached these as oneoffs. You got to win did subsidies. And you could have did inevitable policy dilemma of its used to kick start or have trainitrain ing wheels on a concept and you get proof of a concept, so when is it the right time to take a subsidy off. Theres a vigorous conversation right now on the hill more or less about whether to extend the wind subsidy or whether to use the existing, you know, sort of spend down and that. Theres also folks who would like to move away from subsidies in pushing into r and d that somehow that may be a more pure approach, get the work on the technology and then have it follow out from that. There are folks who are talking about a reallocation of subsidies and i think one of the conversations thats going on is clean coal technology. I think theres a recognition when you move out to a global approach that fossil fuels have been around for a while, particularly in troubled countries and if you can drive the cost of ccus or other technologies down, you would have a deployment and perhaps have a larger impact on global emissions than some of the other policy mechanisms that are around. Ccs being Carbon Capture and i apologize. The traditional washington mistake. Thats right a quarter jar back there. Ok. Whats the administrations new policy . From a philosophical standpoint do you think im not answering for the administration. When i hear subsidy, ever subsidy has to have an off set. So this will ultimately be a decision as to whether the congress would like to make extensions of existing subsidies or consider those. But of course, it always comes down to the balancing act of how do you kor that and get that through both the house and senate. Couple more conversations here. I guess i want to make sure we dont end the discussion without raising a topic in the news lately, which is the u. S. President s continued presence in the International Climate conversation as, again, described by the participation in the Paris Agreement but thats just one among a number of different avenues for this discussion. Sarah, i said you were the global gal on the panel, so i will pitch to you first. Whats your view about the importance of that agreement and dood you or your branch have an opinion . Csis doesnt take positions. It should stay involved, sure. Do i think the administration is going to stay involved . I actually think its a live discussion but its not like a hugely prioritized one, right . So i feel like if youre thinking about the value of a lot of Different International conversations, i think the Administration May be more focused on the things that its doing at home right now and secondarily considering sort of how that translates. If theres theres not a lot of downsides. If youre participating in the paris climate accord, theres not a lot of punishment to that. Theres a lot of conversation that should be a part of allies of the United States would like to see them continue to participate in that. Theres not a huge amount of downside unless you think theres terrific political blowback. Im not sure that would actually be so terrible as long as you were making the kinds love reforms that you think are official to the u. S. Knowing that this is being debated by the in this administration, joe, again, unfairly making you exxonmobil came out and said they thought u. S. Should stay part of the ow cord. What do you hear in the halls of the most important near term thing is i think folks are looking at the administration as reexamining some of the policies and regulations that arguably were where theyre going to be on domestic programs. An optimism lightning round. Energy policy has always been a place where weve had strong bipartisan i think it said they had between 85 and 86 votes, so looking for engines of collaboration in a polarized congress, wonder if each of you could offer a thought about an issue that youd like to see Congress Take up that had the to rebuild a more constructive dialogue. Sara, begin with you. I think infrastructure has been talked a lot about today. I think because its such a pressing need for the country to have bsh infrastructure. I think if you can find a way to utilize kbigss of gas and renewable sources, there are a lot of things changing in the electric power sector in the u. S. I think that Congress Needs to have a role in that again and i think the white house can have a role in that. I guess just to use a washington cliche, i mean, we are an all of the above nation in energy resources. This is a vision of the future that can optimize our production and use of all of those things. If we take an all fossil fuelings or all renewables, were going lose on every single one of those. Not a decade ago, this worlds economy is not growing gangbusters. Weaver got to create advantages that we have. Were typically not very good at that but we really should do that. Its an awesome opportunity to tell your former institute i dont think youre allowed to do that. Id just say that the congress by its very nature will represent the different varying aspects of our country where Energy Strength is. So i think when we i think this is a very unique opportunity to Work Together with our partners to look at various ways to were going to need their help, bottom line, when it comes to stream lining and looking at the staults. We have a lot of power as it is, but they can help us achieve other things, we while generation i think i take your point, were going to see older base load plants exit the system. And im not entirely convinced that its set up now for them to be replaced by base load, so you can have generation capacity, but you do need a certain amount of base load and i think thats a problem that were going to have to solve potentially through infrastructure. And then finally, building on energy diversity, we have a system thats building outs now on sustained 3 natural gas. Anybody that the price of natural gas has fluctuated. I know the 30year models are consistent. I hope for the sake of my children theyre accurate. But if theyre not, we have to have an energy and all of the wovr, appropriate all of the above to deal with a world where we spike up in natural gas and other things a better price point not to have a shock on the economy. Excellent wrapup. I want to thank all of you for your attention. Panelists, your awesome. I think were a wrap. So appreciate it. Thank you. [ applause ] cloish. Our next panel will sploir the changing regulatory and legislative landscape in washington and beyond for banking and insurance and the possibilities for Financial Sector reform from the perspective of the Trump Administration and capitol hill. What is the likely path of regulatory, supervisory changes for the u. S. Financial services