President-elect Trump campaigned on the promise not only to dramatically change existing energy policy, but also to reduce the regulatory burden on energy companies and other regulated entities. For example, the President-elect committed in his Contract with the American Voter to require that for every one regulation, two existing regulations must be eliminated. Yet, rescinding existing regulations may take many months, if not years, to fully implement, given the notice and comment requirements of the Administrative Procedure Act, the need to respond to the inevitable comments in opposition, and the threat by environmental groups to challenge the administration’s actions in court.
One potentially faster way of at least partially easing the regulatory burden on energy companies is to curtail the extensive reporting and record-keeping requirements imposed on them by federal agencies. The information that energy companies must submit to federal agencies is staggering. Like most companies, energy companies must file frequent reports with the SEC (if publicly traded), the Department of Labor, and the CFTC (if they trade extensively in futures). Energy companies also must provide detailed reports to the DOE, EPA, and Department of Interior (if they explore for or produce oil or gas on federal land or in offshore areas). Interstate oil and gas pipelines must also deliver reports to FERC and the Department of Transportation. Electric companies face the added burden of supplying the data, studies, and certifications demanded by FERC, NERC, and, for those owning nuclear plants, the NRC. Collectively, these reporting and record-keeping obligations cost energy companies hundreds of millions, if not billions, of dollars per year.
The obligations imposed on utilities is illustrative. FERC requires that electric utilities must periodically submit a variety of reports, most notably Forms 1, 3-Q, 566, 580, 582, 715, and 730, that delve into each company’s assets, liabilities, operations, and management. By FERC’s reckoning, utilities collectively spend over $30 million per year to collect and report data for these forms. Gas companies face similar burdens and costs.
The reporting obligations FERC imposes are not limited to just utilities. Companies that wish to sell electric power at negotiated rates must submit analyses establishing their lack of market power and file triennial reports reevaluating that power. Market participants also must file longer-term contracts with FERC and identify their purchases and sales via quarterly reports. FERC estimates that the initial cost of compliance with those obligations totals almost $24 million yearly; satisfying continuing obligations is only somewhat cheaper. Electric companies also must seek permission from FERC to issue securities and notify FERC of specific events, such as material changes in their status or contractual arrangements, changes in interlocking directorates, and shortage contingency plans. Compliance with those obligations costs the industry several million dollars annually.
Electric companies also incur substantial sums in both complying with NERC Reliability Standards and in making required reports to NERC and FERC. Utilities that own nuclear plants expend million of dollars in compiling and submitting yearly reports to FERC on the performance of their decommissioning funds. They spend even more money completing the various reports demanded by the NRC. Gas and electric companies that are subject to FERC’s Standards of Conduct also must devote manpower to ensure that their websites post specified information and changes.
DOE has its own set of reports that energy companies must submit. The agency requires that utilities complete Forms EIA 860, 861M, 923, and 858. According to DOE, the total burden for those forms is a little under $10 million each year. Utilities owning nuclear plants must also fill out Form EIA 858.
The estimated burdens only address the direct costs of compiling and supplying the data demanded by the agencies and meeting record-keeping requirements. The estimates do not include the cost of ensuring compliance with the myriad regulations, orders, and Reliability Standards promulgated by the agencies. The estimates also do not take into account indirect costs. For example, FERC’s estimates do not include the cost of having an outside accounting firm certify that the Form 1 complies with FERC’s Uniform System of Accounts.
Putting aside the incompleteness of the estimates of the paperwork burden, the estimates are often far too low, according to industry participants. For instance, FERC estimates that each responding entity spends 1,144 hours each year to compile and submit the specified data for Form 1. Industry observers would say the number of hours required to complete the 100-plus pages of Form 1 is far greater. Similarly, many view the DOE burden estimates for completing EIA forms as vastly understated.
The aggregate burden from the bevy of reporting requirements is immense—and some would argue needlessly so. Much of the granularity in the reporting obligations and record-keeping requirements could be jettisoned without material harm to the agencies’ statutory missions. For example, DOE demands to see not only the monthly fuel consumption and output of almost 5,000 electric generators in the country, but also the heat content of the fuels for the generators and a calculation of how much fuel was consumed for electric generation versus useful thermal output. Similarly, one could question whether FERC really needs an energy company’s balance sheet broken down into 151 separate categories of assets and debts or the company’s income allocated among 78 categories on Form 1.
Assuming the Trump administration can overcome internal agency objections, few legal obstacles stand in the way of paring back the data presently demanded by the agencies. Any changes in the reporting burden probably would require notice to OMB under the Paperwork Reduction Act. Although OMB technically would have the right to object, any objections would be surprising, as the agency’s statutory mandate is to reduce the burden of information collection from regulated entities.
A change in the reporting obligations in most cases also would require publication in the Federal Register and a 60-day notice and comment period. Industry participants undoubtedly would file comments supporting a reduction in their reporting obligations, but few outside groups are likely to submit comments in opposition. The odds of a judicial challenge, much less a successful one, from public interest groups or activists are even more remote. Even if outside groups were inclined to sue to block any curtailment of reporting obligations as part of an overall strategy to oppose any changes in energy policy, they would have difficulty in establishing standing to seek judicial review.
In short, reducing reporting and record-keeping requirements may be low-hanging fruit for the incoming administration to help fulfill its pledge to reduce the regulatory burden on energy companies.