Read on DigitalOilGas.com
By Geoffrey Cann
While the ability to get a FERC certificate becomes increasingly unpredictable and the process more lengthy, for developers, it may be the first of many obstacles to in-service.
The developers of Mountain Valley Pipeline (a project authorized by FERC in October 2017) originally stated it would begin flowing gas from the bottlenecked Marcellus Shale by the end of 2018. But anyone who follows industry news will recall the many headlines since, as the project has been stymied by repeated appeals of its federal permits. Legislation directing federal agencies to “continue to maintain” those permits was included in the recent debt limit bill (the Fiscal Responsibility Act of 2023). And, as an additional protection against the three-judge panel of the court that repeatedly voided them, it also stripped the courts of authority to review the required approvals, and directed any challenge to the statute’s constitutionality be heard in the DC Circuit. However, twice last week, the same court again issued stays of two of the pipeline’s required permits (ignoring the law passed by the other two branches of the U.S. government). MVP may well be the 4th pipeline case to reach the US Supreme Court in the last half decade.
Over the past decade, the U.S. has taken note of a changing global view of energy transition, the successes of a resurgent China, and the possibility of losing its globally dominant position permanently in a whole range of fields, including renewable energies, clean energy products, energy storage technologies, battery electric and hybrid vehicles, and clean tech. In response the Biden Administration enacted the Inflation Reduction Act, which injected half a trillion dollars of incentives aimed at unlocking American innovation in these fields.
Globally, the amount of investment required in energy is massive, and the IRA is relatively modest, but the resulting inflows have juiced domestic demand, driving up competition in a range of fields, for products like clean hydrogen, carbon capture and storage, and related infrastructure.
The inflow of dollars aims to spur innovation on many fronts, including digital investments, new technologies, novel solutions, and creative commercial structures, at a pace not seen for almost 2 decades. The sheer volume of energy transition projects is dramatically elevated, driving up costs, clogging the regulatory approval mechanisms, and materially slowing down approvals.
There is now a frenetic race underway to secure the best projects with the best market positions, for the long term, in the face of a permitting timeline that exceeds the time available to avert the worst of climate effects. For proponents, chasing projects with high regulatory risk wastes both time and money in a race with little tolerance for error. Delayed in-service dates for projects reduce the value of their future revenue streams, exacerbated by the current higher interest rate environment. Such delays can result in promising projects falling in value and being canceled.
But just as there can be no energy transition without more power transmission, there can be no transmission pipelines without regulatory permission. Overcoming regulatory risk is now the singularly most important factor in project success.
Project proponents are asking themselves how they can more speedily and more thoroughly evaluate their growing portfolio of project investments around regulatory risk areas, so that only the best investment-grade projects proceed.
There are many factors that can help, including quality relationships with regulators and better connections with impacted communities, but one stands out: Improving the execution of the regulatory process, which is within the grasp of all proponents.
Due to the complexity and fragmentation of the regulatory and compliance landscape, and limits on individual regulatory agencies to act within their mandates, no one regulator, including FERC, can overhaul the total regulatory and compliance setting. No single project proponent or owner can undertake the development of regulatory analytics because of the risk that the data or the engine will be used just once and fail to recover its costs.
However, one technology company HAS brought together the special combination of deep multi-faceted energy industry insight, permitting process, regulatory and legal knowhow, and technology capability to help infrastructure developers, operators, and investors crack the code on this problem.
Arbo is a specialist technology-and-advisory business that has delivered the new technologies, advanced analytics and algorithms to improve the ability of project developers to execute in this environment.
Arbo targets the regulatory setting precisely because of the characteristics of this domain and its potential gains in performance:
Exceptionally large datasets for past, present, and future projects
Complex multivariable analysis
Sluggish human-centric execution
The first step that Arbo executes is to aggregate energy regulatory information into one place to ease search and analysis. This requires structured data capture integrations that tap into the thousands of applicable regulatory data sets and repositories. Arbo’s human expertise in regulatory filings and legal frameworks guides such work.
Next is the creation of a generalized data analytics engine that is tuned to respond to the contours of regulatory questions and analytic needs. This engine is the basis for the delivery of business intelligence that is useful for the commercial strategy teams, project finance, regulatory compliance, and the c-suite.
Once in place, the data and analytics engine can be extended to provide forecasting and greater predictability of regulatory outcomes. This kind of analysis is very common in plant settings, where events are tracked on a real time basis so as to detect emerging conditions that are outside planned boundaries. Applying this approach to regulatory analytics allows project proponents to flag the impacts of potential intervenors and their motivations.
The power of such technology and innovations affords Arbo and its customers the ability to anticipate regulatory changes and timetables, the possibility and likely impacts of litigation, emerging operating risks driven by changing regulations, and policy risks.
Arbo’s vision is to enable America to build its needed infrastructure and retain its energy independence, now and in the future, by transforming energy regulatory data into business intelligence and insights which inform the strategic decisions of infrastructure developers and commodity buyers.
Project proponents seeking to gain an advantage in their approval processes, high grade their portfolios, or anticipate regulatory and opposition risks should definitely investigate how Arbo can assist their market development activities.