2023 Heading to Gridlock or Rampant Bipartisanship?

As we bid goodbye to 2022, we take a moment to look forward to 2023 with our crystal ball for what it might hold. The reverberations of the 2022 election at all levels of government will likely be a key determinant of what happens to energy infrastructure in the coming year, for better or worse.

In our crystal ball, we don’t see rampant bipartisanship breaking out in 2023. We do think energy affordability, security, and reliability will be more prominent than the energy evolution. And gridlock at the federal level may just be what some forms of energy need, but it will be a mixed result for the natural gas industry as there are likely to be both winners and losers. Today, we look at five key issues:

LNG

Energy Evolution Stalls

Executive Action

Mountain Valley Pipeline

FERC Chairman

How Did We Do Last Year as We Looked Forward to 2022?

One year ago, in our look forward to 2022, we focused on five key areas:

First, we asked whether the environmental purists would be willing to compromise and the answer was “yes” to a degree as they worked with Senator Manchin to pass the Inflation Reduction Act, which, despite its name, is the biggest energy bill ever passed.

Second, we wondered if Mountain Valley Pipeline could find a path forward, and sadly, as you’ll see below, that is still a key open question for 2023.

Third, we questioned whether Senator Barrasso would be successful in his effort to block Chairman Glick’s reappointment, but it seems the chairman’s “own goal” led to his demise. By putting out and then withdrawing a revised certificate policy statement and GHG policy, he basically did all that Senator Barrasso could have done.

Fourth, we noted that Commissioner Phillips was not like his fellow Democrats and suggested that he might just break ranks with them over gas pipeline policy. While he joined with them to issue the ill-fated policies in February, his reversal in position appears to be what drove the chairman to withdraw them in March, and Commissioner Phillips has been a consistent vote for pipeline projects since then.

Fifth, we speculated that the best hope for Enbridge’s Line 5 would be for a change in the Democratic Governor and Attorney General in Michigan. However, both of them easily won re-election in the failed red wave. But that project appears to have been given a lifeline by a federal district court judge appointed by George W. Bush who refuses to return the state’s challenges to the project back to the state court system.

Looking Ahead to 2023

This year’s list of topics that we will be following in 2023 sadly has some repeats from last year, but also some that we did not anticipate for 2022.

LNG

The biggest unexpected event from a year ago was the war in Ukraine and the unified response by the European Union to turn against pipeline gas from Russia. While earlier this year we expected that this may allow some of the proposed LNG terminals here in the U.S. to reach a final investment decision, so far, there has been limited movement on that front. However, Russia’s invasion has certainly put energy security ahead of most other issues and we see that continuing into 2023 and likely beyond. The key question we will be following is how Europe adjusts its energy portfolio to address this concern. We expect LNG to continue to be the growth engine for U.S. production, but it could see a huge uptick if Europe embraces LNG as a solution for at least the next decade. Also, we expect the outage at Freeport LNG to continue well into next year, which will likely impact the markets for at least the first quarter.

Energy Evolution Stalls

There is always the possibility that a wave of bipartisanship breaks out given the razor-edge majorities that the parties hold in the House and the Senate, but we wouldn’t bet on that. Instead, the more likely scenario is essentially two years of Congressional inaction on anything related to energy and maybe on everything in general. As most environmental realists are acknowledging, the current permitting system in this country makes addressing climate change in a timely manner difficult, if not impossible. But with gridlock as the key assumption, that will create winners and losers. In particular, as the ability to permit large renewable projects and the needed transmission projects grind to a halt, the traditional forms of energy, like natural gas and coal, will continue to be needed for a longer period of time than most anticipated following passage of the Inflation Reduction Act. We will be watching for this by keeping an eye on the generation queues, but also delays in announced retirements of power plants using traditional energy sources.

Executive Action

If Congress is stymied by polarization, the Democratic base will likely be howling for the president to take action using his executive powers and by adopting new regulations that push the limits of current law. However, as we saw in the Trump administration, executive orders have very limited utility and certainly a shelf life that expires when a new administration is sworn in. With regard to regulations that push the envelope, the Biden administration will have to deal with a recently emboldened and activist Supreme Court, which appears willing and able to require clear Congressional mandates over any regulations that raise “major questions” about regulatory authority. The Supreme Court’s 2022 decision in West Virginia v. EPA to rein in the EPA’s authority over greenhouse gas regulations is probably not the last time we will hear from the court if the Biden administration attempts to go beyond the traditional lanes of regulation.

Mountain Valley Pipeline

The one project that it looks like we will be following for at least another year is the Mountain Valley Pipeline. Just last week we recounted the travails of that project in 2022. It now seems to be relegated to following the traditional path of getting its voided permits reissued and then sustaining them in the courts. We don’t see that process being resolved completely in 2023, which means this project is likely to be on our list for 2024 as well. Given the substantial investment the majority owner in the project has made, we think that it will continue to be pursued through at least the 2024 election.

FERC Chairman

At this month’s open meeting, Chairman Glick acknowledged that he saw no viable path for his reappointment and that he would need to step down when Congress adjourns “sine die.” That adjournment is expected by the end of the month, which would leave FERC with just four commissioners, likely until Commissioner Danly’s term ends on June 30. But as soon as Chairman Glick is forced from office, President Biden will appoint one of the remaining commissioners as the Chair of the Commission. It will certainly be one of the two Democrats, either Commissioner Phillips or Commissioner Clements. Presuming that President Biden wants to keep Senator Manchin as part of his working majority in the Senate, we think he will appoint Commissioner Phillips.

Such an appointment could be a key to speeding up the review and approval process for pipeline projects. Chairman Glick has been using his power as chairman to intentionally slow to a crawl the environmental review of every pipeline expansion project. We would expect that if Commissioner Phillips is appointed as chairman, he would return FERC to the review processes that existed under the Obama administration, which would be a vast improvement to those under Chairman Glick. If, however, Commissioner Clements is appointed as Chair, we expect there to be no improvement, which is why we think President Biden will appoint Commissioner Phillips if he wants to keep Senator Manchin on board with the rest of his agenda.

Quarterly Calendar

If you would like to keep track of the known or likely events in the coming quarter, you can download our quarterly events calendar here.