Week Ending November 16, 2018

McNamee Pledges to be “Impartial Arbiter” at FERC, Senators Question His Stance

This Article Appears as Published in Foster Report No 3224
McNamee Pledges to be “Impartial Arbiter” at FERC, Senators Question His Stance

Democrats on the Senate Energy and Natural Resources Committee questioned Bernard McNamee about his role at the Department of Energy and whether he will truly be an “impartial arbiter” in the cases that come before FERC as he told them he would be during a November 15 hearing.

Questions centered on FERC’s rejection of a DOE proposed rule to improve compensation for coal and nuclear generation resources and the subsequent proceeding where it took comments on grid resilience issues. Several senators questioned whether McNamee would recuse himself from any FERC action due to his policy work at DOE in support of a Trump administration effort to subsidize coal and nuclear generation assets.

McNamee told senators he would seek the guidance of counsel and ethics officials on whether he would have to recuse himself, noting that because FERC rejected a proposed rule from DOE that he was involved in, that case is closed.

Some of the more direct questions for McNamee and statements of concern came from Sens. Ron Wyden (D-Ore.), Catherine Cortez Masto (D-Nev.), Tina Smith (D-Minn.), and Angus King (I-Maine).

The Trump administration effort would increase power costs for all consumers only to support certain resources and it appears that the White House wants McNamee at FERC to support such efforts, said Wyden. He likened the situation to something beyond the fox guarding the henhouse, as “this is putting the fox inside the chicken coop.”

Despite assurances from McNamee that he does not believe FERC or government agencies should pick and choose winners and losers or favor particular resources for the power sector, his past work “remains a source of concern for me,” said Smith.

FERC has overseen the competitive energy sector produce benefits for all consumers and McNamee said he would strive to see such steps continue. “I think that markets are the best way to allocate resources and set prices and, if confirmed, I am committed to continuing FERC’s independence in its decision-making,” he said in his opening statement.

Committee Chairman Sen. Lisa Murkowski (R-Alaska) and Ranking Member Sen. Maria Cantwell (D-Wash.)  also questioned McNamee on whether his policy work at DOE would unduly influence his work at the Commission if he is confirmed. In response to most questions, McNamee vowed to be an “independent arbiter” that would not be influenced by politics. At several points during the hearing, he noted that he has worked for clients in different areas of the energy sector, including solar power facilities, natural gas-fired generation, conversion of coal-fired power plants to biomass, and state renewable portfolio standards.

 

Republican members of the committee generally asked questions related to their state interests, such as LNG project approvals from Sen. Bill Cassidy (R-La.), state actions on natural gas pipeline application reviews from Sen. Shelley Moore Capito (R-W.V.) and the need for baseload coal-fired generation assets from Sens. John Barrasso (R-Wyo.) and John Hoeven (R-N.D.). Cassidy also indicated that he planned to provide a follow-up question to McNamee regarding FERC’s ruling on the income tax recovery for master limited partnership pipelines.

Responding to Republican senators on the coal-fired generation issues, McNamee said FERC’s role is not to pick generation resources but ensure that markets perform in an open and clear manner and that coal-fired power plants are currently important for meeting electricity demand. There are challenges for the changing generation mix and a transition to alternative resources, including renewables and distributed energy resources that are not utility-scale facilities, he said.

Answering questions from Sen. Martin Heinrich (D-N.M.) McNamee said he was not at DOE in June of 2018 when a Trump administration memorandum was leaked to the media about possibly using emergency authority under the Federal Power Act and/or the Defense Production Act to support coal and nuclear generation assets. He told Heinrich he believes the plan is in the intergovernmental review process.

Heinrich and others asked about FERC’s rule allowing energy storage assets to participate in wholesale energy market operations within organized markets. McNamee limited his comments due to the rule being pending on rehearing, but said storage assets can be a “game changer” that enable more renewable resources to be used.

As she has in previous forums, Cantwell said she is troubled by the Trump administration efforts “to try to interfere with our electricity markets in order to subsidize high-cost coal and nuclear generation at the expense of our ratepayers.” She questioned whether there could be a scenario with grid resilience and fuel supply issues would make McNamee support a proposal to mandate use of coal or nuclear generation.

McNamee declined to “go that far” on a hypothetical scenario, but added that the North American Electric Reliability Corp. has made observations about essential reliability services provided by baseload facilities and that FERC is considering such issues in the pending resilience proceeding.

“I think it would be helpful if you could supply to the committee what role you played in the actual formation of this proposal and details about that,” said Senator Cantwell.

With limited time to ask questions of McNamee and two other White House nominees for government positions, Cantwell said she would submit specific questions about his role at DOE and his views on Trump administration energy plans.

Murkowski directed senators to submit any questions by the end of the day November 15, 2018, with a goal to move them out of the committee to the full Senate shortly after Thanksgiving. There is uncertainty about whether McNamee or others could be confirmed by the end of the year during a lame duck session of Congress, she said. But the nominees need some certainty and “the agencies need to have these folks in place,” she said.

Murkowski said she aims to put the nominees from the November 15 hearing into a group with seven other officials that have been approved and move them to Senate leaders for consideration as a package.

After the hearing while speaking with reporters, Murkowski said she would have no objection to pairing FERC Commissioner Cheryl LaFleur with McNamee, but said that it is up to the White House to renominate LaFleur, whose current term is due to end in June 2019.

Murkowski noted that she met with McNamee prior to the hearing and stressed that “FERC is an independent agency and must continue to function as such.”

McNamee currently is the executive director of the Office of Policy at DOE. He has had two stints at the department. In his brief time as deputy general counsel, from May 2017 to February 2018, he signed papers and was involved with the grid resilience notice of proposed rulemaking to FERC from Energy Secretary Rick Perry. That NOPR was rejected in a 5-0 vote by the Commission, which opened a separate proceeding and took comments on resilience issues.

In his opening statement, McNamee committed to be a fair, impartial, and objective judge of cases and issues that come before FERC if he is confirmed. Such impartiality “helps sustain the rule of law by ensuring that all those who come before a government tribunal have confidence that their positions will be heard and thoughtfully considered.” He told the committee he is not making such statements only to obtain their votes.

Wyden, King ,and Cortez Masto essentially asserted that McNamee should recuse himself from any FERC determination on the grid resilience issues that are pending before the Commission. “I’m surprised and disappointed” that McNamee said he would consult with counsel when the ethics rules and federal code is quite clear that recusal would be appropriate, King said.

King also asked about McNamee’s previous work at the Texas Public Policy Foundation and what entities provide funding to the organization. With a noticeable pause, McNamee said he believes oil and natural gas producers in Texas and a related company in Ohio provide financial support. When King asked if the Koch brothers help fund the foundation, McNamee said he does not know but he read that in news stories.

McNamee has led DOE’s Office of Policy since June, and earlier this year he briefly led the Center for Tenth Amendment Action at the Texas Public Policy Foundation, a think tank with connections to Perry and Sen. Ted Cruz (R-Texas). Along with being deputy general counsel for energy policy at DOE for 10 months, he had two different stints at McGuire Woods law firm, served in the Attorney General offices in Texas and Virginia, and was senior domestic policy advisor and counsel for Cruz from the summer of 2013 to November 2014.

The White House announcement on his nomination said he served four Attorneys General in two states, was a policy advisor to a Virginia governor and served as senior domestic policy advisor to Cruz, who introduced him at the hearing. McNamee earned his B.A. degree from the University of Virginia and J.D. from Emory University School of Law, the White House said.

Cruz told the committee that McNamee would “prove to be an excellent addition to FERC,” with a strong intellect and work ethic. He would examine policy issues from all angles and was interested in understanding how policies would affect all stakeholders, Cruz said, adding that McNamee understands the importance of competition providing benefits to energy consumers.

Besides McNamee, the committee also heard testimony and posed questions to Rita Baranwal, nominated to be assistant secretary for nuclear energy at DOE and David Vela, nominated to be director of the National Park Service within the Interior Department.

The hearing was interrupted by a protest from a few individuals who asked Senators to reject McNamee and said he is the poster child for conflicts of interest. They briefly held up a banner saying Vote No on McNamee and said FERC does not need a cheerleader for the fossil fuel industry before being escorted out by security.

By Tom Tiernan TTiernan@fosterreport.com

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