I recently sat down with Alan Armstrong, the former CEO of Williams (one of America’s foremost natural gas pipeline companies) and now the freshman Senator from Oklahoma, to talk about a key part of the ongoing permitting negotiations: the Clean Water Act.
I knew the Clean Water Act had problems. But in our exchanges leading up to this interview, Senator Armstrong convinced me that its current state is even more insane than I had realized.
Natural gas pipelines do not emit liquids or solids that contaminate water. Their main water-related “risk” is temporary muddying of the water during construction—on a scale less than storms or even beavers create. Any theoretical risk to fish is dwarfed by the billions of fish we kill every year through recreational and commercial fishing.
Yet the Clean Water Act’s “state certification” process lets states effectively veto interstate pipelines that cross their land by claiming the project violates their water quality standards—even when the real objection has nothing to do with water quality.
Many Democrats assume Clean Water Act reform has little to do with their priorities. But this is wrong. Today, state certification is a major weapon against natural gas pipelines, which are crucial to keeping electricity reliable and affordable. But in the future, if Congress unleashes more transmission without fixing the Clean Water Act, that same state veto power will absolutely be used to block interstate transmission lines.
Here is my conversation with the Senator on how Clean Water Act abuse blocks pipelines, how the same abuse could threaten transmission, and how Congress can fix it.
Alex Epstein:
All right. Senator Alan Armstrong, welcome to Power Hour.
Senator Alan Armstrong:
Thank you. Glad to be here today.
Alex Epstein:
Let’s jump right into this permitting issue. So let’s start off with, you’ve made a lot of your career in pipelines, specifically gas pipelines. Why are gas pipelines so crucial for our country?
Senator Alan Armstrong:
Yeah, it’s becoming more and more evident, I think, but we have such a great abundance of low-cost resource here in our nation and we desperately need to be using that to our advantage as a country, not just for obviously domestic purposes as well, but it’s also giving us a very powerful geopolitical tool as well via our exports.
But having all that abundant resource is one thing, but being able to get it to the place where it’s used and needed to be used for growth is the next thing. And so pretty obviously, we’ve got to be able to build that infrastructure. The cost of those bottlenecks is enormous. And if you think about any kind of linear big energy infrastructure, you’re building for peaks and you have to be able to build for peaks to accomplish that. And so that’s—
Alex Epstein:
As in peaks of demand?
Senator Alan Armstrong:
Peaks of demand. And that really is getting to be a bigger and bigger issue and one that’s not very well understood, I think, sometimes, in terms of what really the impact of having those constraints are and what that means for our energy system writ large.
So the good news is, I will tell you, people have kind of started to give up on the notion of, well, “we don’t really need fossil fuels for the future.” And I do see that people are really backing off of that at the moderate level. Obviously on the extremes, you’re going to have different perspectives. But I do think that people are understanding how incredibly important natural gas is to our country and for our allies as well.
Alex Epstein:
Yeah. I’ll just add for people, natural gas, whether you like it or not—and I do like it—is by far the number one source of electricity for our grid. And so you see in events particularly where the grid is strained, like during storm Fern, you see these skyrocketing natural gas prices. And guess what? If we had more pipeline infrastructure, then we could bring more gas to market and your electricity prices would be a lot cheaper.
So one thing I think it’s important for everyone of both parties to recognize is this is an affordability issue. If you cannot bring gas to market, your heating bills and your electricity bills are absolutely going up and it accomplishes nothing at all to make it—
Senator Alan Armstrong:
The last part of my tenure as CEO with probably some of the very best years ever in the pipeline—
Alex Epstein:
—CEO of Williams, just for people who don’t know.
Senator Alan Armstrong:
CEO of Williams. Thank you. Thank you, Alex. Were some of the best times ever because pipeline capacity is constrained. That’s a great thing if you’re in the pipeline industry and you have that capacity. It’s a terrible thing though for our country and for consumers.
And in fact, if politicians and regulators and even the NGOs actually understood the energy systems better, they would understand that what they ought to do is get the capacity overbuilt and completely eliminate those bottlenecks and let the market of supply and demand dictate what we’re using, not the constrained infrastructure in between.
But today that is truly what we’re managing off of. The lowest cost part of the entire value chain being the infrastructure, and it’s the part we’re letting constrain the ability of using our own natural resource on one hand and growing our economy on the other.
Alex Epstein:
This is a purely political preventable thing. And let’s talk about, given how crucial gas pipelines are, how difficult is it to build them? So having been CEO of Williams, witnessing this firsthand, what do people need to know about how difficult this is versus how relatively simple it would be to just build it if you didn’t have all these crazy barriers?
Senator Alan Armstrong:
Yeah. I think people really are shocked when they hear how little the actual construction time is on a 5, 6 year project, and the fact that most of that pipeline, the pipeline itself, not all the compressor stations that go with it, but the pipeline itself is sell to more than a 6-month-long construction window. The rest of that is all spent in very low value added efforts that originally were designed to protect the local environment that the pipeline was impacting.
Today, that’s not that hard to do. We know how to do that. To build a pipeline today that’s done in an environmentally sensitive way is not rocket science, it’s not complicated. We know how to do it. We know what the right standards for doing it are, but we’ve let it turn into a perfectly politicized process that is exactly where the handles are.
And it’s actually the litigation that causes the problem. It’s actually not, for the most part, it’s not the federal agencies that are the problem. It’s the litigation that the federal agencies face from the NGOs and from anybody else that wants to try to make money in the business of stopping infrastructure. The litigation is really where the problem is.
Yes, we could do a lot better job at an agency level and in coordination of our agencies, but until we fix the litigation problem, we’re going to continue to add tremendous amount of cost both in terms of time and uncertainty to the mix.
And so if you think about today, there’s a number of projects, including one of Williams projects, that got the certificate—after the pipeline was up and operating—a certificate from the FERC actually got vacated by a court, after a billion dollars had been spent, after the pipeline was up and running almost at full load already and a DC circuit actually pulled that certificate. Same thing happened to a next decade LNG project in Texas.
But that is, the amount of impact that that has on icing up capital and raising the cost of capital because who in the world wants to take that risk of being able to—I remember very crisply, I remember being in front of our board answering questions from the board like, “What do you mean we spent a billion dollars and we got our permit pulled? And why in the world would we ever do that again?”
And so those are the kind of things, those kind of tough questions that really frees up capital and just at the end of the day, raises the cost to the consumer when we have constrained infrastructure because nobody can afford to take that risk.
Alex Epstein:
I mean, just to recap some of this, I mean, just how crazy it is that, hey, we’ve got a natural gas driven grid, we’ve got natural gas driven heating, they’re constrained by pipelines which are fundamentally cheap to build and easy to build.
You’re saying you build them in six months. We’ll talk about how little of a threat they are if they’re built properly. And yet we’re talking about 5 plus years plus some of these things just get killed. And so it’s 5 five years to infinity. And then the infinity in particular drives away people.
So whereas, in a rational world, investors would just be immediately investing in this because it’s just such an obvious high ROI thing to unconstrain natural gas delivery in a country that needs it, in a world that wants our LNG desperately, particularly in the wake of the Iran war. It’s just so insane.
And just to add to that, let’s add, we’re going to talk about the Clean Water Act, but just on the face of it: a natural gas pipeline. How can that be that much of a threat to the water? It’s a gas. You think of the Clean Water Act, you talk about liquids and solids that in a certain concentration can affect the water, but this is the gas. What is it? The gas magically mixing with the water and poisoning everyone? I mean, what is going on here? What’s the actual threat profile?
Senator Alan Armstrong:
Yeah, I think natural gas via its name of “gas” and gas prices at the pump has suffered that issue for a long time that politicians do a pretty good job of confusing those two sometimes. Sometimes I’m convinced on purpose. But it’s a gas that’s lighter than air, but the public doesn’t appreciate that.
The real risk to the water quality issue is generally in the construction of the pipeline project, not in the actual operation of the pipeline project for a natural gas pipeline. And so the issue of how do you cross a river, what’s the best way to cross a stream, are the issues that need to be dealt with.
But again, we’ve had standards for this for a long time. We know the best way to do it. We know the safe way to do it. We know what to look out for. The Corps of Engineers has under—their NWP 12, their Nationwide Permit 12 has very good standards for how you cross a water body with a pipeline. Yet we have decided to make that politicized.
I’ll give you a great example. When Williams was crossing, or was permitting a project that looped an existing pipeline across the New York Harbor, the state of New York, their veto right existed in the 401 water quality certificate, which looks at the impact on water quality under the Clean Water, under their rights under the Clean Water Act.
Williams had to actually wait until the Corps of Engineers got done with their annual dredging process across the harbor. We had to wait for the water and the turbidity set to settle to take a water sample and then we were actually going to use silt containment sheets, in other words, curtains that we lay down for our dredging through the same area, even though the Corps on an annual basis does annual dress and the state stopped that project over water quality concerns with our controlled dredging versus the uncontrolled dredging in the exact same section of water across the New York Harbor. So clearly, was not a water quality concern. It was purely just a politicized issue.
And so good example, though, of what the actual water quality is supposed to look for. It’s supposed to look for things like turbidity and impacts that are uncontrolled when the construction’s going on, but it’s been used well beyond that in a number of cases. In fact, if you actually read all of these denials, you’ll see there’s 30 pages of greenhouse gas and climate concerns and a lot of things that the state actually doesn’t have any legal right to object to. And then there’s a couple of sentences on the water quality impact.
And the truth is it’s not really—very, very seldom is it actually a water quality issue that can’t be dealt with. And the Corps of Engineers—by the way, the Corps of Engineers has already signed off on this process with their own standards—and then the state takes another swipe at it.
Alex Epstein:
I want to get in a little more depth in that in a second, but I just want to highlight. So even when you’re talking about water quality, I think people equate—they think the Clean Water Act is drinking water, which it’s not. That’s the Safe Water Act.
And even these terms like “turbidity,” I think, get misleading because “turbidity” means the water gets temporarily muddy. If you’re talking about dredging and this kind of thing, now granted, you’re doing a lot less than was being done before, so that’s absurd.
We’re talking about, I mean, we’re moving around water and rocks and dirt, which by the way, we do with all sorts of other activities, and nature does all the time with a storm. And the number one casualty, as far as I can tell, of all of this is some unprovable, usually risk to fish populations. By the way, we kill billions of fish voluntarily every year through recreational fishing and commercial.
So it’s this is—a lot of my philosophy is a lot of the environmental movement is not at all about protecting humans and a human environment. It’s just about we shouldn’t impact anything. And this is just the absurd version of it.
We can’t move around any dirt and rocks, even if it’s going to help us all eat food with our fertilizer from natural gas and heat our homes and have electricity. We can’t move around water even though we’re doing sometimes less than beavers do or less than storms do. And it’s all in the name of these fish that nobody cares about, and that they’re trying to kill anyway through fishing.
It’s just so outrageous. And I don’t think people think, “Oh yeah, it’s going to damage the water,” and they think their drinking water has nothing to do with that at all. Yeah, that—
Senator Alan Armstrong:
Yeah. Don’t get me started on that, Alex. I could go on for hours.
Alex Epstein:
Well, yeah. I’ve gotten—so we’ve had a couple of conversations about this, and I myself have just gotten progressively outraged as I looked into this because people think, oh wow, we really better be—we really better have many, many, many different successive approvals.
And you’re thinking, this is not even like a refinery or a mining operation or something like this can actually dump something in the water. It’s a natural gas pipeline that can’t really do anything except as a construction project.
But it’s just like any other construction project that’s going to cross a waterway. It’s not that. It’s just like a transmission line, which, by the way, they’ll—people will use that to oppose transmission lines. Democrats should know.
But let’s just—I just want to make sure I understand the process. So what’s the current process and the sequence in terms of what the Army Corps does, what happens under NEPA, and then what happens with this issue of state certification that even many Republicans, I think, are trying to protect, and I just think is insane because I think the federal process is already way too long.
Senator Alan Armstrong:
Yeah.
Alex Epstein:
But yeah. Tell us how it goes.
Senator Alan Armstrong:
Yeah. Today, the way if you’ve got any kind of major project, a gas pipeline project, the FERC has oversight authority on that. And so they manage—under NEPA, they manage what is called the EIS or the environmental impact statement that has to be written for a project like this, and that effort takes into consideration the community’s concerns, the Corps of Engineers, 404 water quality concerns, Fish and Wildlife, any species that would be impacted, highway departments. You name it.
It is a very long list of agencies that historical preservation groups, tribal preservation, any people’s concerns that should be related to what is the best route for us to take to make the least amount of environmental impact associated with this route.
So that process has been in place for time. It is arduous, but at least it’s a defined process. The FERC, I would tell you, given the litigation risk around them, I think they do an actually a pretty good job of managing that today for what it is. But now the state says, “Well, sorry, but we’re not going to be subject to the FERC authority on this—
Alex Epstein:
And this is interstate—let’s just stress this interstate project, right.
Senator Alan Armstrong:
The interstate project, that’s right.
Alex Epstein:
Interstate commerce, so this is federal government.
Senator Alan Armstrong:
And even if you were building a gas pipeline project that was in addition to an existing interstate project, you likely would fall under that jurisdiction. But for this argument, let’s say it’s an interstate project and the state now says, “Well, whenever you get your EIS done, after you spend your 3 or 4 years getting your EIS done, come back and see us and we’ll tell you what we think you should do with your water quality—for to not impact water quality certificate.”
So you’ve had all of these parties, including the Corps of Engineers that has well-defined standards under the water quality certificate issues and the 404 permit. You go through that process, and then the state says, “Okay, now we’ll take our year to tell you what route we think you ought to take.”
And they don’t have to look at it with all these other complexities in mind. They can look at it purely for, we’re here to see that you protect our water quality in the area via your construction, and we can tell you whatever we want to. And if you don’t do that, if you don’t follow us, then we’re not going to give you your certificate, but if you do take our new route, you’re going to have to go back to square one through the EIS process.
And by the way, this group’s already looked at it once and said, “This is the best route.” And so now you’re telling whatever other issues were being debated, whether it was a species issue, a community, whatever the issue was, you’re telling them, “We don’t really care what you thought. This is the route you’re going to take.”
So immediately you’re into a do loop that one way or the other is going to cause court litigation because the EIS has already said this is the best route to take, and the states and the NGOs know that. So that is—it is a, once you hit that state’s abuse of the 401 water quality certificate, you are in a do loop that is almost impossible to clear.
If you sue the state, you say, hey, this was a denial that was wrongly delivered to us. The judicial standard today is “arbitrary and capricious.” So the court has to find that the state was acting in an arbitrary and capricious manner. Any general counsel of a Department of Environmental Quality for a state knows enough to write enough in there to say, for this one item for this water quality, here’s why we thought that they should change their route. And once—And that’s all a court has to hear, that there was some reason that they had for you changing your route.
And that’s almost like it’d be hard to screw that up that bad if you were the general counsel, to not be able to write it to meet such an incredibly low standard for denial on that.
So that’s how that process goes today, and what needs to happen really is that needs to be moved to be in parallel or in concert with the same permitting process as the EIS, not sequentially to the EIS.
Alex Epstein:
Yeah. So let’s talk about the fixes. I mean, just from talking to you and from studying it more after talking to you, my sense is just we want, you can have a simple, efficient, and safe—particularly given what you’re talking about with pipelines and transmission lines—you can have one simple, safe process that should be fast.
I don’t know if we’re going to get that fully in permanent reform, but the state certification for interstate seems insane to me now, which it didn’t at the beginning. So you helped convinced me of this, but I’m curious where you are in terms of what you’re advocating as the fix.
Senator Alan Armstrong:
Yeah. So I think there’s 3 primary things. There’s a lot of things that beyond this we could improve with, but there’s 3 primary things. First, is you have to—if you look through the list of pipeline projects that have either been stopped in court or stopped by a state, it’s almost always been the 401 water quality certificate at the heart of what we call the handles. In other words, what stopped the project in the first place? It’s almost always the 401 water quality certificate because it’s so easy to sue around.
The second thing though is the judicial standards that we’ve been talking about and move it to where somebody has to have “clear and compelling” evidence that you’re actually going to harm the environment through the method. Not just we think you might, but they actually need “clear and compelling” evidence that there’s actually going to be harmed under the environment and that’s why they should be allowed to stop a project.
And then finally getting to a “no vacatur” rule so that a court, if an agency is issued a certificate that a court doesn’t have the right to just turn around and pull a certificate from an operating company after the project’s already in service.
Now, if they violated something about the permit conditions, that’s an enforcement issue and we’re not suggesting that you shouldn’t be able to be stopped if you’re not operating it or you didn’t construct it in a way that was consistent with what was required. But once you’ve done what the lead agency tells you to do, you ought to be protected as the operator under that and vacatur should not be the remedy for a court. It’s a very powerful remedy today and the NGOs know it and they know that it really ices up capital in the space when you can actually get a certificate vacated.
Alex Epstein:
Gotcha. So you’re understandably focused on natural gas pipelines because you’re so aware of the consequences, but what other type of infrastructure can Clean Water Act reform help with?
Senator Alan Armstrong:
So what’s going to be fascinating if this doesn’t get handled, and in fact, there’s already a few cases where this existed, but we’ve built so little interstate transmission lines these days, power transmission lines, that this really hasn’t come to fruition yet. But if we get to where like EPRA would’ve taken us and a lot of the new—
Alex Epstein:
That’s a 2024 Energy Permitting Reform Act.
Senator Alan Armstrong:
Yeah. Thank you. So that was a Manchin-Barrasso bill. If we actually get back to building power transmission and that being cited by the federal government, this same issue is going to hit transmission.
The only reason it hasn’t hit power transmission is because we haven’t been building any interstate big long haul power transmission to speak of. And so this issue hasn’t come across us yet where states don’t want it coming across their land.
Now, there’s two big transmission projects. One which was the Grain Belt project, which was trying to go permit across Missouri is still in the process of trying to do that. And another one that took wind power from Texas into the Tennessee Valley authority market. Both of those projects have been stopped because there was inadequate eminent domain rights for those transmission.
But if this bill gets done and you give the Feds the right to give eminent domain across the state for a power transmission line, those red states are going to have that same weapon that the blue states have been stopping pipelines with. You’re going to see the same thing occur.
So we just can’t have a world where interstate commerce can be so easily stopped without real standards existing for why you’re going to stop a project. And so my point is, yeah, it’s been seen as a pipeline issue. It’s going to become a transmission issue very quickly if that doesn’t get solved.
Alex Epstein:
I think I have a piece coming out about this soon about the bipartisan case for Clean Water Act reform, and you and some others have really solidified this point in my mind because if you look at the Democrat position negotiations, they say, “Well, we want NEPA reform, National Environmental Policy Act, because that affects everything. And then we want transmission reform because we don’t want it to be easy for interstate or interregional transmission to be vetoed. And we think that’s important for our vision of a grid. But Clean Water Act, we don’t care about that.”
And the point you guys have made is, “Well, that’s insane because if you get rid of these other barriers, then it’ll be super easy to kill these transmission projects based on Clean Water Act.” Just like we’ve seen with the lack of permitting certainty that both Republican administrations can kill Democrat-favored projects and Democrat administrations can kill Republican-favored projects.
So I think you’re helping wake people up to all these things are bipartisan. All these reforms are bipartisan. It shouldn’t just be Democrats care about transmission or Republicans care about Clean Water Act.
Senator Alan Armstrong:
Yeah. And if you think about a process where you said, “Hey, we really want a fair effort done at considering all of these various factors that have to be considered when you’re choosing that route to say that you ought to do something that’s already duplicative to the Corps of Engineers effort, but you’re going to do it sequentially to the process instead of part of the process?” Who can say that actually makes sense? There’s just no rhyme or reason.
Even if you said, “Well, I’m a transmission, power transmission guy, and I don’t think the states are going to block me.” Okay, but still why would you not want to have that process—
Alex Epstein:
Well, they say we don’t want fossil—I mean, you look at some of the states who are rejecting this and New York specifically said, “Hey, this is part of our war against fossil fuels.” Even though that’s obviously not a mandate under the Clean Water Act to deprive somebody of a permit because you want to wage a war against fossil fuels.
So I think it is very important for them. I mean, it’s very important for them to see for affordability, you need these gas pipelines, but also the transmission is going to get killed just as easily as the gas if you don’t change this.
One final question before we open it up to some others is what can people do? So executives and others, what can they do? Because we’re in the midst of negotiations right now, there’s not a lot of time. So what can they do to make sure that the right reforms get passed or at least maximize the chances?
Senator Alan Armstrong:
I do think we listed them out there a while ago, obviously NEPA reform and some of the judicial standards that go with that. The Clean Water Act is something you must insist on with the Senate right now, and finally making sure that the no vacatur issue gets dealt with, I think most of those are going to be dealt with.
The one that kind of seems to be the on that the Dems are really holding tight is the Clean Water Act and they’re smart to because they know that’s what’s stopped project after project after project. So really enforcing the importance of that to whoever you’re talking to on the Hill, but please don’t misunderstand the power of coming and being specific on these issues.
Because I actually have Senators from both sides of the aisle tell me, “Well, I’ve never heard anybody talk about that. So can’t be that important if nobody else is talking about that.” And so your voice on these issues is more important than you think it is.
When I was on the other side of this discussion, I’d always like, yeah, well, that’s just a lobbyist telling me it’s important because I’m going to pay them to march me around the Hill, but nobody’s really listening to me anyway. The truth is they really are listening.
They particularly are listening to the companies that do business in the states that they represent. And so it is really important that you do get your voice out there and I would target that voice right now, particularly within the Senate, I would target on the moderate Dems. That’s the people that really need to hear that this is important.
On the Clean Water Act, I would say every member of the EPW and the ENR, so the Environmental Public Works Committee and the Energy and Natural Resources Committee within the Senate, take a list, look at those committee members, both red and blue, and really target those individuals as to how important it is that we get this right, not just get a bill passed.
Because the bad news about this permitting reform is getting it right is hard and nobody really necessarily wants to do that. They just want to say we got a bill passed because everybody hears how important it is, but nobody’s going to know whether it was effective or not until 2 or 3 years down the road. And so it’s really important that you insist that we get some of these critical elements solved.
Alex Epstein:
All right. Well, I would definitely say knowing you, you care. If something good is done, you’re clearly not trying to become a lifetime politician and secure a Senate seat for life. I care, and I know that a bunch of the administration and Congress do as well, so thanks for your work.
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