On April 20, 2016, the U.S. Senate passed S.2012, the Energy Policy Modernization Act of 2015, by a vote of 85-12. If enacted, S.2012 would be the first comprehensive energy legislation since the Energy Independence and Security Act of 2007. This bipartisan bill is intended to expand domestic energy systems, facilitate investment into critical infrastructure and improve the performance of federal agencies while protecting the environment.
S.2012 contains two notable provisions that would impact domestic oil and natural gas production and infrastructure development. First, the Act would designate the Federal Energy Regulatory Commission (“FERC”) as the lead agency responsible for coordinating all applicable federal authorizations and National Environmental Policy Act (“NEPA”) review for proposed natural gas projects and facilities. According to the Act, once FERC determines that an application for a project or facility is complete, all required federal authorizations must be issued within the timeframe specified by FERC, which “should” not exceed 90 days. The provision would likely speed the federal approval of interstate pipeline and liquefied natural gas (“LNG”) projects.
Second, the Act creates a Bureau of Land Management (“BLM”) pilot program that would allow operators to lease and develop certain mineral interests owned by the federal government without a federal drilling permit. Specifically, the pilot program would include 2,000 spacing units in which the federal government owns 25% or less of the mineral interests and none of the surface estate. BLM would be authorized to waive the requirement that operators obtain a federal drilling permit for the spacing units if BLM determines that the mineral interests are adequately protected by the lease terms or other laws and regulations. The proposed pilot program may lead to permanent programs that ease the restrictions on exploration and production activities affecting mineral interests in which the federal government owns only a minority share.
The White House has previously threatened to veto legislation aimed at speeding the federal authorizations necessary to construct LNG facilities and pipelines. However, no such veto statement has been issued with respect to S.2012. This legislation may not face opposition from the White House because it was developed after numerous listening sessions were held with stakeholders across the country and after weeks of negotiations by many senators seeking common ground for modernizing energy policy. Senator Murkowski (R-Alaska), Chairman of the U.S. Senate Committee on Energy and Natural Resources, stated that she expects a formal conference with the U.S. House Energy and Commerce Committee to merge the Senate and House bills, but no timeline for a meeting has been established.