After three years of reviews, phone calls and frustration, mid-sized oil and gas operator Kirkwood Oil and Gas received a $2.7 million bill from the Nuclear Regulatory Commission to expand a mining permit in southern Johnson County.
That’s the way it works with the feds, said owner Steve Kirkwood: paperwork, fees and patience.
Kirkwood and others in the oil and gas industry in Wyoming have watched the political changes of the last few months with a personal interest. Most development in the state takes place on federally managed land or with federally owned minerals. Under President Barack Obama, operators argued, new regulations seemed to crop up every month, and permitting became a long, expensive process.
But the conservative politicians who took power last November promised an end to the federal slowdown and oversight. The oil and gas industry was described as a tethered titan, and the new order was going to unleash it.
Now, some are finding out what old hats already know: The gears of government move slowly, and political promises don’t always provide enough grease to make the machine run any faster.
Recently, the U.S. Senate failed to push through a measure that would have cut an Obama-era rule on methane emissions, as hated by industry as it was loved by environmental advocates. Congress had successfully removed 13 Obama regulations with the quick-fix method called the Congressional Review Act, which allows the House and Senate to ax the final rules of a previous administration with a simple majority vote. The methane rule was to be the last of the lot. The deadline to use the CRA came and went last week with the failed methane vote, ending the deceptively fast deregulation movement offered by the CRA.
With the election season over and the day-to-day business of government in full swing, both politics and industry are moving away from the honeymoon season, with its quick fixes and big promises, and getting into the day-to-day business of changing a political direction.
The result of the methane vote angered those in the business in Wyoming, but with characteristic pragmatism, the state’s industry hasn’t panicked.
“It’s not supposed to be easy on any side,” said Kathleen Sgamma, president of the Western Energy Alliance, an industry group. “You could quote the law of physics: For every action, there is an equal and opposite reaction.”
The story behind the methane vote
A motion to overturn the methane rule passed the House on Feb. 3. Completed in the final months of Obama’s tenure, the rule was a candidate for the Congressional Review Act. But as other regulations swiftly fell victim to the CRA, the methane rule languished in the Senate, laying bare the complexity of competing politics in Washington and across the country when environmental rules and industry come into conflict.
Environmental groups took up ad campaigns and turned to social media, lobbying hard for Congress to keep the rule.
They had two arguments. First, they say, the rule protects the environment from methane leaks and flares — a powerful greenhouse gas linked to climate change. Second, the rule secures more cash for publicly owned resources, which federal agencies manage on behalf of the American public.
Industry groups took up the opposite charge, telling those in power that the rule was a wolf in sheep’s clothing that would reduce American energy production without any of the promised benefits. They also argued that the BLM had no right to craft a rule on emissions, generally the purview of the Environmental Protection Agency.
The methane rule now faces a court case, where industry and some states will fight for its removal, and a presidentially mandated review from the Department of the Interior, which could slim down the requirements or unravel the regulation altogether.
It took only three defectors from the party line for the vote to lose in the Senate. To industry’s disappointment and frustration, the methane rule survived and the CRA’s deadline closed.
People in Wyoming’s oil and gas industry know how agencies work. Most oil and gas drilling is done on federally owned land. To operate in Wyoming is to be familiar with the BLM, the EPA and the Bureau of Indian Affairs.
Though the methane rule was well-known and widely disliked by industry, undoing it immediately was not a deal-breaker for locals.
Operators are more realistic than Washington politicians, and they’re less naive about how difficult it will be for Trump or Congress to fulfill their promises to deregulate, said Peter Wold, a second-generation oil and gas man in Casper.
“I think that the president is coming into office, quite frankly, without any kind of government experience,” he said. “I think that he’s realizing that you can make a change at the top, but to augment that change down to the lower levels of these bureaucracies is tough to do.”
Wyoming’s governor advised prudence and forethought.
Despite the political power in Washington now and the push for deregulation, administrations change, Gov. Matt Mead said Thursday at an energy conference in Cheyenne.
For the last eight years, Wyoming has been waging between 20 and 25 legal battles with federal government at any given time. But it’s not enough to just fight the federal government, he added: Wyoming has to shift.
“For a state that is the leader in exporting energy, you also have to be a leader in your own rules and regulations to our environment,” Mead said.
Part of that is simply about planning ahead. Regulations have been one of the challenges for industry in recent years and throughout the downturn, he said. But even if regulations are rolled back, investors in Wyoming will be cautious, expecting the possible return of rules and limitations under a different president.
“Now we have a different administration, and rather than say for the next four years we are just going to go gangbusters and not worry about rules and regulations, instead we have to say where is the sweet spot?” he said. “Because in the next four years, or eight years, there is going to be a new administration.”
Operators like Wold are similarly pragmatic.
As the pushback against Trump grows louder, the ability to pass certain policies may get harder, he said.
Wold supported Trump in the election, though he pointed out that the former real estate magnate wasn’t his first choice. Aside from distaste for the president’s tweeting habits, Wold is confident the new president is doing the job he set out to do when it comes to business.
“Frankly, I think it’s a little too early to tell what the impact of his administration is going to be,” he said. “It takes time to turn a great big battleship, and that’s basically what we are looking at. That’s in a nutshell, the feeling of our organization, certainly mine.”
The result of the methane rule was probably a wake-up call to some that the political landscape is not a simple as promised. But it’s also a reminder of why Wyoming operators prefer to keep things under local control, some say.
“I think it’s a fair appraisal to say they felt like they got let down,” said Charles Mason, an oil and gas economist at the University of Wyoming.
A state like Wyoming is about as even-keeled on local industry regulations as it’s possible to be. From one Legislature to the next, a Democratic governor to Republican, opinions on how the state should do business don’t fluctuate much, Mason said.
Federal rules are a different beast, he said.
“The Wyoming mindset is the oil and gas mindset, they will take care of things, sort of libertarian in their own regard,” Mason said. “From that perspective, anything that seems obtrusive is going to be objectionable.”
The methane rule is just one of many regulations, executive orders and rules that irked industry in recent years, he said. With a new conservative power in office, there were rules from the previous administration that were inevitably going to be ripe for removal, he said.
“This particular failure doesn’t change any of that,” he said. “It may just be the case that there were a few things out there that were just too iffy. In the political climate we have, where there’s a very narrow majority of the Republican Party, it did not take too many people saying ‘I don’t like this.’”
The lesson from the CRA is likely that politicians need to take scope of more than their own sureness of success, he said.
“I think a reasonable perspective [of the methane rule] would have thought carefully about the political lay of the land,” he said. “And that just doesn’t seem to be part of the modus operandi of the Trump administration.”
It’s not supposed to be easy
While some might have been incensed by the results of the methane vote, they are not wringing their hands or feeling nostalgic for Obama.
When the rule survived, Sgamma, of the Western Energy Alliance, shot out a sharply worded statement on the Senate’s failure to even debate the rule on the floor before the vote.
But industry groups are well aware of how hard it is to convince the public that environmental regulations are problematic, she said.
“I think it’s very easy to demagogue environmental issues and much harder to discuss how regulations actually work,” Sgamma said. “It’s very easy to say, ‘Oh, kids with asthma are going to suffer,’ when methane has nothing to do with asthma.”
Sgamma says industry has an unfair reputation for being irresponsible in regard to the environment. The methane rule was a perfect example of how public opinion becomes skewed, she said.
Jon Goldstein, director of regulatory and legislative affairs for the Environmental Defense Fund, said the methane rule is not an example of federal overreach but industry overreach.
“What happened here is the industry basically misread what the people and particularly people in the West wanted,” he said. “They didn’t vote for more waste of their natural resources or letting the industry go willy-nilly and not capture everything to the benefit of the taxpayer.”
The fact that the methane rule survived is proof that the industry doesn’t stand on the side of the general public on this issue, he said.
Sgamma believes many people don’t understand that industry is already heavily regulated, she said.
The oil and gas industry, not regulations, should be credited with declining methane emissions, Sgamma said, pointing out Western Energy Alliance reporting that shows a 21 percent reduction in methane emissions in recent decades, coinciding with the meteoric rise in oil and gas drilling due to fracking.
“Nationwide, the increased development of natural gas has caused prices to go so low, we are now switching from coal to natural gas in the electricity sector, and that is the single biggest reason that the United States has decreased greenhouse gases more than any other country,” she said.
Industry was often the dissenting voice on federal regulations in the last few years, and though politicians now appear favorable to the American energy industries, undoing the past will not be simple, Sgamma said.
The environmental lobby has only become louder now that it has fewer advocates in D.C. But it’s not necessarily a bad thing that deregulation will take time and effort, Sgamma said. The system was built to make rules difficult to create and challenging to undo, she said.
“It is never easy to roll back regulations,” Sgamma said. “There is rule-making that has to be done. There is litigation that inevitably follows. Nothing was every meant to be easy in our system. That’s where we are, but it is much better than it was four months ago.”
The uphill battle
It was a Wednesday morning when the methane rule went to vote. After a two-month delay, the separate camps were unsure of the outcome. The Senate had only two more days to shoot down the rule with the CRA. It was unclear if the opponents had secured enough votes or were simply facing a deadline.
When it failed, Sens. Mike Enzi and John Barrasso and Rep. Liz Cheney sent a flurry of blunt statements opposing the rule and criticizing those who defected. But they also pledged their commitment to deregulation.
They are also quick to point to the many rules they did ax with the CRA, despite the success of the environmental campaign to keep the methane rule.
“Any way you measure it, the Republican Congress was very successful in using the Congressional Review Act to repeal many of the Obama administration’s most abusive regulations,” said Sen. John Barrasso in a statement last week. “With respect to the BLM’s methane rule, the path ahead is straight forward. Interior Secretary (Ryan) Zinke should immediately propose withdrawing this rule. Withdrawing the rule is the fastest way to end this punishing regulation.”
Enzi’s spokesman echoed Barrasso’s sentiments in an email. But the CRA work was still a success, said Max D’Onofrio.
“The Congressional Review Act provided an opportunity for Congress to quickly reverse some of the regulations from the end of the Obama administration that might have been pushed through as President Obama prepared to leave office,” he said.
Both Enzi and Barrasso support a new act of Congress that is similar to the CRA but more extreme.
The Midnight Rule Relief Act would allow Congress to knock out all the final regulations of an outgoing administration in one blow, avoiding the step-by-step procedure that failed to eliminate the methane rule.
The rule passed in the House and is up for debate before the Senate.
On Wall Street, some blame Trump’s recent controversies, from concerns about classified material to the firing of former F.B.I director James Comey, to a recent undesirable mood spreading in Wall Street and holding back a much-needed rise in oil prices.
Despite six weeks of falling crude oil stockpiles and possible instability in the Middle East that could pump up the price, crude has proved stubborn to rally.
“What seems to be really souring the mood is the Trump slump that with the appointment of a special prosecutor may hamper his ability to push through his agenda,” said Phil Flynn, a market analyst for Price Futures in Chicago, in an investors’ note Thursday. “After revelations that President Trump may have tried to influence former FBI Director James Comey in an investigation, the market seemed to panic.”
Meanwhile, the American Petroleum Institute has asked that the Department of the Interior delay compliance on the methane rule by two years. Environmental groups say the move is egregious, that after failing in the Senate and losing a recent fight to delay the court proceedings, industry is going through a back door.
Back in Casper, the oil and gas man, Kirkwood, is contesting the permit that cost over $2 million. He’s sending one of his staff members to Washington in hopes of knocking down the charge.
“I think that things are going OK,” he said of the new politics. “You are not going to get everything you want.”
He hopes his staff can meet with a Wyoming delegate in Washington to talk about the permit costs. The outlook has changed dramatically from that of the last eight years, he said.
“These are the small things that are happening.”