OIL & GAS FINANCIAL JOURNAL: What did you do at FERC and the CFTC, Bob?

BOB PEASE: I was director of investigations at FERC for many years, which means I was in charge of all the investigations and prosecutions for that agency. From there, I went to the CFTC and was counsel to the director of enforcement for a few years before joining Bracewell.

OGFJ: And what is your current role at Bracewell?

PEASE: My job is to help clients with compliance issues related to oil, gas, power - anything in the energy field. We run training sessions for clients, and if they are being investigated by the government, we help them with that.

OGFJ: The popular notion is that Republicans are free-marketers while Democrats favor tough regulations on business. Does the regulatory climate in Washington change much when one party loses power and another gains control of the various regulatory agencies?

PEASE: There can be, but usually there isn't. If there is a swing, it takes a little bit of time for there to be a swing. I've noticed that, without question, it's become more political at both agencies. The CFTC has been an enforcement agency for a long time. The head of enforcement at CFTC now changes with the chairman [who is a political appointee]. That didn't happen in the past. And, now, FERC has become a big-time regulator and enforcer, which it really wasn't in the past. These changes have happened within the past five to 10 years. So the head of enforcement has become, perhaps, a more political position than it has been in the past.

OGFJ: Why is it taking so long to get approval for the Keystone XL Pipeline? Is it all Washington politics?

PEASE: There's been a great deal of Washington politics from the environmentalists trying to stop it, to the renewable sector saying we should be devoting our resources elsewhere instead of in oil. Oil is still a critical part of the energy mix and a critical part of our economy. However, since the US has become so proficient in producing oil, it will be interesting to see whether that will slow down Keystone. Do we need the Keystone since we're getting oil from so many other sources? That doesn't mean we'll stop building oil pipelines. I'm sure you're aware of the flaring in North Dakota that is occurring because we don't yet have sufficient infrastructure in there to take away the stranded gas. We still need to get oil and gas to markets.

OGFJ: US producers would love to start exporting crude oil overseas to open up new markets, but current US laws prohibit this. Is this likely to change any time soon, or will it be a political football also?

PEASE: On the LNG side, you can see that FERC is approving more and more facilities to be built for export, so it's coming. Of course it will be political. Some are afraid that the price of oil and gasoline will be driven up if we start exporting more of what we produce here, but I think it's going to happen. It's just a question of when it will happen.

OGFJ: You mentioned LNG exports. For gas producers, it seems that permit approvals for liquefaction and export facilities are proceeding at a snail's pace. However, FERC is systematically reviewing applications and approving them. Do you think the pace of approvals is likely to accelerate and make producers who need new overseas markets happier?

PEASE: FERC has pledged to increase the process and to prioritize the projects they're reviewing, but this is done on a first-come, first-served basis. We'll have to see how this shakes out. It is a slow process, but it is starting to move.

OGFJ: What do you think is the proper balance between government regulation on the one hand and an unfettered free market on the other?

PEASE: The idea that a market can take care of itself, that it can self regulate - that type of approach has not worked. But that doesn't mean we need so many burdensome regulations that the energy industry can't function. We're now seeing that the CFTC is taking another look at the various Dodd-Frank rules to see if they're too restrictive and preventing legitimate hedging and similar activities. We should always strive to achieve the right balance, both from a policy perspective and from an enforcement perspective. You have to have a certain number of rules, and you have to have clarity. The industry needs to be clear as to what is expected. Whenever we meet with our clients, the first thing I hear is that they want to comply with the rules, but there is often confusion as to the breadth and scope of the rules. So what we need is a better partnership between the regulated community and the regulators to resolve differences.

EDITOR'S NOTE: Bob Pease is an attorney and former regulator with the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC). He is currently senior counsel in the energy group with Bracewell & Giuliani's Washington, DC office. We spoke with Pease recently about regulations involving the energy sector.

Talking regulations with Bob Pease

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