For our COBT listeners and viewers, it's Maynard, Mike, and Bill Flores here with a really special guest and a good friend. We're going to get to talk to Senator Alan Armstrong. We got to know Allan as the CEO of Williams, but we also got to know him through the years as someone who cared a lot about energy policy, the country, infrastructure, everything we need to do to make the country work better. It's exciting that he is now a senator from Oklahoma and he's up in Washington trying to get some of these things done. Allan, thank you so much for joining us. We can't wait to talk with you about your impressions, what you've learned, the American Energy and Mineral Infrastructure Act, just the whole thing. So, thanks so much for making time.
Glad to be here. Thank you all for having me today. It's always nice seeing you, Maynard.
Awesome. Well, Mike, before we jump in with Allan, anything you tell us about the markets or the news?
Yeah. And just a couple points. We'll make it quick. You know, we talked about it on Tuesday's COBT that the CPI print came in well below expectations. Today, we had PPI came in well below expectations. So, the 10-year bond yields down to around 4.55%. And so it's taken a little bit of the pressure off the Fed to raise interest rates. So, that news today basically sent the stock market up. We've had the stock market pull back a little bit today, but we're up probably a quarter percent or thereabouts. As far as oil, WTI and Brent are pretty much flat at around 80 and $85 respectively. Obviously Trump, there's a lot of commotion going on in the Middle East, but it's surprising that oil prices aren't up more, but that's where we are. As far as the S&P 500 today, the biggest gainers today are telecom. And the reason telecom is doing well today is because Google is being purchased by Buffett that came out today. So obviously there's some follow-through with investors. One last thing before we hand it off to Allen here. I just wanted to give a little history of Williams. When Allan became CEO, this was early in January 2011, the market cap of Williams was 14.5 billion, the enterprise value is around 24-25 billion, EBITDA was about three billion, so eight times EBITDA. Today, Williams is a $90 billion market cap company, 125 billion enterprise value company, 8.5 billion in EBITDA expected for next year, so 14 and a half times EBITDA. So over those 14 to 15 years, you've seen market cap go up by six times, EV go up by five times, EBITDA go up by three times, and the valuation multiple increase six and a half multiple points. That is value creation I've ever seen it. So, back to you, man.
Well, that was like we're going to talk to the coach. He's had a number of good seasons before he went to Washington.
Allan, it is great to have you. I was thinking, over the years, the Sierra conference always had big moments and one of the big moments was you were at Sierra one year and you told people how much it cost to build a pipeline and you exposed that so much of the cost had nothing to do with the pipeline itself. And it was staggering, it was kind of one of those moments where I think everybody at the whole conference said we got to fix that. The problem is it's been around for a while. So,
May I can give you the quote if you
Okay, here's Mike's got the quote.
Said it to Sarah Con. One of our current projects, the permitting cost alone are twice as much as what we're spending on the pipe itself.
There you go. But you're there now and you're on the ground zero of where all this is happening. What would you tell us about what it is like to go from outside in and now try to get it done there in DC?
Yeah, I thank you all for having me again. First of all, I would say overall it's been a pretty positive experience. It's a real challenge to go from something that you've done for a long time and you kind of know the plays get a little slower and the same problem comes in every day but it's got different shoes on, but here totally different set of skills required to get things done. And so I find that kind of new challenge as really kind of invigorating frankly. So I've enjoyed that part of it. On the one hand, on the other hand, it has kind of reaffirmed my perspective that while there's a lot of great dedicated talent here within the Senate, the direct expertise a lot of times that we would hope, firsthand experience with some of the challenges is not known all that well. And so the good news is I think because of that I have a lot to offer. The bad news is I would say it's not always just the best ideas that win around here. So a lot of focus on seniority and committee structure and jurisdiction within the committees that tends to stand in the way of getting the very best ideas brought forth into law. But I've been really focused. Love the staff I get to work with. And there's a lot of really well-intended senators on both sides of the aisle. And I'm trying to marshal those folks into support for a bill that would really move the needle for our country on permitting. And I find it interesting. A lot of times people will say, "Well, duh. You're the pipeline guy. Of course, you're going to come in here and want to try to get permitting done for the sake of your own business." And I always kind of remind people and your audience knows this as well as anybody. It's not a bad thing to be an incumbent pipeline company when it's really impossible to build new pipelines. And it tends to drive up the value of a scarce commodity in terms of pipeline capacity. But long-term I think that's a terrible thing for our country and it's ultimately bad for the industry to the point that we drive the cost of our product and the services that we provide beyond what people are willing to pay for them long term. But this really is an effort to take on what I think can really stop our country long term. It's kind of like the public debt. Everybody knows it's bad. Everybody knows it's got to get solved, but it's always kind of gets just pushed down the road one more day. And permitting is kind of that same issue where it can really strangle our country and the competitive advantages that we've had for so long if we don't fix it. But it's not a particularly popular issue because the everyday person doesn't understand how that drives their utility prices higher, how it lessens the competitiveness of our nation. And so it really does take some long-term thinking and frankly somebody like myself that has no political ambition to come in and try to tackle something that's really important for our country but is not a super popular issue, frankly. So I'm glad I'm here and having the chance to try to tackle this and pushing hard on it every day.
I was thinking, go ahead, Bill. I saw you smiling a little bit, so you know what it's like to go up there.
Well, I was, if you don't mind, I was going to start off by asking a personal question for Senator Armstrong. I served as a sea level guy in the upstream industry for several years before deciding to run for Congress. What caused you to do that?
You know, I was in the process. Chad Zamron, who's the new CEO, had taken the CEO role back in July and I was super excited about that. He's doing a fantastic job. And July of '25 and I was exec chair. And really this came along and it was one of those things where the governor asked you to do it and I thought, wow, I can sit around and gripe about this the rest of my life and blame everybody else for not getting anything done, or I can take my turn in the ring and give it my best. And so it wasn't any more complicated than that, frankly.
Well, that's great to hear. For me, it was cap and trade passed the House, right?
Right? And I said, you know, somebody's got to go stop that. And ultimately decided to do that myself. Maynard, sorry to interrupt the flow here, but I thought I'd start off with the mirroring of you two guys, you know, energy exec goes to DC. That was a good catch there, Bill.
I did. I was going to ask you, Alan, we had a China expert on the podcast. It goes back maybe a couple months ago and it really detailed how ambitious China is, how pronounced the competition is with the United States, things like they're developing small tactical nuclear weapons. I mean, just really laid out the rivalry. And then the comment was quote, "Everybody in Washington understands this, that this is a bipartisan thing. Everybody gets it." And our comment was, well, that may be, but we don't have permitting reform. So, how can you be serious about like we're in a national competition, we got to win AI, we have security threats, we care about Taiwan, all these things, and you can't build stuff. So, I'm curious how the permitting discussion fits into the national security discussion. Just what your take is on all that.
Well, we're certainly trying to drive that home, but again, I think, more than I'd like to admit or more than I probably wanted to know, the issues that are good for our long term for our nation are not necessarily top of mind when it comes to what people are going to focus on, particularly in a right here ahead of the midterm. So, I would just say I've been surprised by how the more topical popular issues tend to grab people's motivation and what they're willing to spend time and what can make it to the floor and what can't. And so that's the answer to your question. It again, it's just like public debt. Everybody knows it's an issue and needs to be dealt with, but it's not necessarily going to get action on it until there's a crisis. And I always tell people that our infrastructure is like bridges. Nobody really cares about a bridge until it falls down. And the weakness that we're building for ourselves by not having adequate infrastructure is starting to show itself into political topics like people's utility bills. And so I would say unfortunately even though I would say that our national security is an even more important thing than people's utility bills, the utility bill aspect of it is the thing that'll catch politicians' attention more if you can connect it. If you can force and really educate people to say, "You want to know why your utility bill is so high? It's because your governor decided or your governor in the state next door decided to not allow infrastructure to be built across the state. That's why your utility bills are high." And trying to connect the Sierra Clubs of the world to why your utility bills are so high. And so I think having to, whether I completely agree with you that it's longer term more important from a national security perspective, but in the short term you have to connect it to something that is going to actually politically motivate people around here unfortunately.
And do you find, Allan, as you, it seems like one of the issues in permitting over the last handful of years has been sort of a left-right energy transition. There's been this Hatfields and McCoys around types of energy and both sides could never come together and say build it all. How do you see those dynamics now? Have people stopped debating natural gas and we can all agree like hey that's an awesome fuel we should be using it? How much of that old transition debate shows up in this permitting discussion?
Yeah, I think that has absolutely become much less of an issue. And the basic principles, in fact the bill that we put out, one of the primary principles behind it is that it's going to be energy source neutral. And so we're not here to pick winners and losers and we're not here to say that we're not going to allow wind to be built either or solar. So it is truly an attempt to be completely energy source neutral but focused on how do we actually get the infrastructure built in a way that continues to protect the environment but allows some certainty and some time frame that people can count on and invest in. And so that's really what we're trying to accomplish on that front. And I think the concept of the blue versus red issue on this is lessened except for we're going into midterm and there is a real focus and I'm seeing it as I'm gaining bipartisan support for this bill that the leadership of the Dems is saying no way are we going to let anything positive get done in this environment for the Republicans. Now, I find that really strange because from my perspective, it's positive for both sides of the House. It's positive for our country and I don't think it gets the Republicans a big win and I don't think it gets the Democrats a big win in the midterms either way. Hopefully, it's just people saying, "Thank God, we have a Congress that's focused on our country instead of who's going to win." But I would say in terms of the actual individual senators that are key to making this happen, everybody on both sides of the aisle understands how important and there's very little debate around let's don't do what's good for pipelines or let's don't do what's good for transmission. I think we're past that. So I'm encouraged by that. That's come a long ways from where it was a couple of years ago. And one of my pitches to industry has been, listen, we as industry would sit and gripe at the political leaders and say, why can't you guys get together on this? And my position to industry has been why don't you guys speak with one voice about not trying to get subsidy for this or trying to pick a fuel or an energy source. Why don't you be the one saying, "Hey, we want it good for any and all infrastructure." And when you can do that, then you'll actually have a positive motive towards getting permitting done because the issue is 60 votes, period. The House has done great work on bringing bills forward. The bill that we laid out three weeks ago actually is kind of a culmination of a lot of the great work in the House and therefore kind of reduces the amount of resistance to go back through the House in its final form. But we were very careful to try to adopt as much of the good work out of the House as we could possibly pull together.
Do you mind from your background in industry, just as you've thought about this bill and what we really need, maybe talk about some of the key ingredients as you saw them. Like what, because you can't have everything, but what are the real core building blocks we need in a permitting reform?
Yeah, sure. Well, first of all, I think in terms of getting something that can pass and get support from both sides, it does need to be energy source neutral. No subsidies towards a fuel explicit or implied. It needs to incorporate, this is probably from a pipeline perspective, this has always been the tool that's been used by environmental opposition is the state water quality rights under the 401 water quality certificate which is under the Clean Water Act. That has been a loose cannon in the permitting process for a long time because there's no real standards around which a state is obligated to hold anybody to. So they can basically make up their standards to whatever they want them to be. And under the NEPA reform, the judicial standard is arbitrary and capricious. So if you get denied a certificate, you have to go prove that the state wasn't being arbitrary and capricious. So they can always come up with, any general counsel of a DEQ can always come up with something that won't be considered arbitrary and capricious despite being able to kill a project. And so that's a really key element of this is the 401 water quality certificate. We've been working with the renewables industry and the transmission industry to say listen, if you get FERC siting authority which is another one of the key elements here, if you do get FERC siting authority for transmission, you're going to have a red state tool on your hands on the 401 water quality certificate because there's really no definition or standards, it's completely subjective and therefore it makes itself the perfect political tool. And Alan, just so maybe I think everybody follows this, but just to make sure we do. So you have a federally approved project. It's going to come through your state, but it's an interstate situation, transmission line, pipeline, whatever it is. Some state can say even under the current rules, even though it's federally approved and passed all the muster, they can say in our view under the Water Act, we're going to deny it. And I think of this as New York State and pipelines, but I know there's other examples. So not only is it a state-held weapon, it's a hard to fight weapon.
Yeah. And it really doesn't, you think about as an investor, you think about trying to invest in a project when you have this completely arbitrary issue hanging around out here that you really can't control. It really makes project, and unfortunately the way it's been set in the past, it comes after you've spent four years doing an EIS.
So if you think about, and in fact our solution on this is to make sure that it's concurrent with the FERC process. So today you go do an EIS and you spend four years with all the other agencies, state and federal, figuring out the best path and the best route for linear infrastructure. And then after that's settled and after you have your certificate conditioned on the 401, the state comes back a year after that and says, you know, I don't think I really like that route. You need to change this. Well, if you accept that, you're back to square one in the entire EIS process all over again. And this is where you get the do loop and it kills, it makes what used to be a 10 to 12% return industry into a 30% return industry because the risk is that high of all the development costs on the front end of a project. And so what does that mean? It means that people's bills are going to be three times higher. And so that's really the thing we've been trying to advise people is like you're not killing the big bad pipeline company, you're hurting the utility customer because they're the ones going to pay the bill on this. And so that's really the reason the 401 is such a deadly and effective tool is it really has no standards around it.
Does this line of thought that you just had, as you talk to people and try to gather support, does this resonate? And by that I mean if you're pro-consumer and if you kind of don't like big companies making a bunch of money, the thing you would do is make it really easy for people to add more supply to get more competition. The big companies don't make as much and the little guy pays less. So, does this resonate with people?
The people that it doesn't resonate with are the people that get a lot of their funding from the Sierra Clubs of the world because they know this is the tool that they've weaponized. And so to them, it's easy to just continue to villainize the big bad energy company. And the average consumer isn't smart enough to know that that really isn't the problem, that really is falling back on them. So, I would say people that understand business and care about business, care about consumers, and there's a lot of them that thankfully are getting it. But the people that have kind of made their mark of being the anti-climate change guy and the people that are really aligned themselves with the NGOs on that front, they need a villain and they've done a really good job of making the energy company and the pipeline company the villain. So your understanding of the market is like I don't have to make that pitch to you, but doing that in a political form is a little more difficult.
So there's the water piece you were taking through some of these key components.
Yeah. So the water piece, making sure that any and all agencies, there are other agencies that tend to try to operate outside the one lead agency, but one of the key principles and part of this bill is to make sure that there is one lead agency. In the case of pipelines, it's FERC; in case transmission, it would be FERC. But there's other things like wind and other issues that need one lead federal agency to make sure that the entire process is governed and you don't have these concurrent do loops like I talked about earlier. Another thing is we are, as a core principle, no degradation of environmental protections that exist today. So we're not trying to do anything that would actually impact the environment negatively. And then finally, and probably one of the really important final issues here, is making sure that if you are issued a permit in a lawful manner, that a court or an executive branch can't vacate those certificates. And that's happened in a number of circumstances. In fact, Williams had the Regional Energy Access project. The project was up and running for nine months. It was a billion-dollar project. The debt of winter pipeline was nearly fully loaded with use and the DC Court of Appeals came out and vacated FERC's certificate saying that they hadn't required an adequate study of greenhouse gas emissions impact on the project. So nothing Williams had done wrong honestly because we complied with everything FERC told us to do and actually there was no law requiring a greenhouse gas emissions rule, but that's what the DC Circuit came up with. And that's happened in a number of cases where courts have actually vacated a certificate that was issued to do construction after you went through all this morass. So, if you think about the risk, I remember walking into the boardroom after we got that order and the board looking at me like, why in the hell would we ever try to invest in a pipeline project again with this kind of risk? And so that's the kind of icing you get. And if you're Equinor and you got some of your permits pulled on the offshore wind projects, you probably feel the same way. And so we've kind of gone back and forth with the administration on that topic, but I don't think it's a good idea for the executive branch as long as somebody's meeting the conditions of the permit. I don't think it's a good idea for either the executive branch or the judicial branch to be able to jerk a certificate that's been issued.
Do you think, Alan, it's funny we had a fusion show earlier this week and you think of fusion as obviously highly scientific and futuristic, but one of the things that the fusion CEO said is the NRC has put in place a regulatory framework around fusion and it is therefore now drawing capital. And so this comment you made about clarity so that investors feel comfortable, boards and investors, you're not going to put money in stuff that doesn't have regulatory clarity. Is this an argument that's resonating with people that if we don't clean this stuff up, not only does stuff not get built, but the money is just not going to show up to build it?
Yeah. And if it does show up, it's going to have a much higher return expectation. You know, and therefore higher prices to the consumer. So, it's not how we built our great country. It's not why we're so lucky to have such an abundant infrastructure in our country that
drives such a massive economy. It's not how we got here by jerking pulling certificates and not giving people confidence in their ability to, if they do things right and if they comply with the law, that they're going to be able to build things.
When do you think we left the road as a nation around all this stuff? Like if you go back to World War II, we were the guys that could build, you know, however many bombers a day. Like we were it. And then somewhere along the way, we became the highly bureaucratic, highly unpredictable, can't build anything group. When did we, what was the big drop?
I mean, I think it's been a frog in the boiling pot. You know, I started with Williams as an engineer and I remember running into some silly things every once in a while where you'd think, and here's the problem. If you were a project manager and you had somebody ask you to do something silly, you'd be like, 'I don't have time to fight that. Like that's stupid and I know it's going to show up on the next project, but I got to get this project done.' So everybody, a regulator wants to be important. Everybody wants to be important in their life and if they just give you an approval and don't require something different on their project, you know, so I just think we've just seen this regulatory creep that's just gone on and on and on. And then when things started to get litigated, then it became a whole cottage industry to make money off of litigation and get paid. You know, companies get sued all the time now and then you pay off the person that's suing you so you can move on with the project and they know it because they know they stand in between you and a lot of value. And so that in fact, you know, one of the reforms that I didn't mention because I just didn't want to get into that level of detail, but a lot of litigation reform in NEPA that's part of this bill as well that will shut down people's ability to come out. No somebody that has nothing to do with the project, not a land owner, no harm, have the ability to come in and sue on these projects. But I think, you know, that's been a big driver on it. There's a lot of money made because there's enough value once you've got your, you know, once you've got one leg over the fence on these projects, you're pretty vulnerable to have to, you know, pay up on a lawsuit because it's kind of a sunk cost analysis.
And so the NEPA law today allows for litigation from anybody and everybody. And that I think has driven some of how crazy it's gotten. But I don't think there was any one, to answer your question, I don't think there was any one particular thing that happens. I mean, people always say, 'Well, gosh, you know, it was the Biden administration or Trump administration.' The Constitution project got shut down during Trump because it was a state. It was Governor Cuomo that actually shut it down. So I don't think it's any one catalyst, frankly.
Bill, any perspective you would bring to the boiling frog problem there?
Well, let me say this. He's exactly right about it being the boiling frog. It's cumulative. There's just one new regulation seems like it's appropriate, then another one. And then, of course, the way the statutes are written is that there was no standardization of how litigation could be brought or settled. And so pretty soon, as the senator said, it becomes a cottage industry. One of the key points that the senator made that I think needs to be stressed, both from a policy perspective and a political perspective, is that to the extent that we have friction in the regulatory process that drives up cost for infrastructure, the cost of that is paid by the consumer. And the senator made that point, and you, high utility costs are aggressive, there are attacks on lower income Americans more than any other group. So I think we need to stress that more often. If you really want to have affordable energy for consumers, particularly low-income Americans, we need to have permitting reform that brings us greater infrastructure and Bernie said more quickly. So I think the senator did a good job of bringing that up.
One of the things I would ask the senator is who would be against this? I mean, you did say, I think at the outset of your conversation, that the Democratic leadership has said no bills are going to pass that would benefit anybody. What consumer groups would be against this? What other groups would be against what you're trying to do here, which sounds perfectly appropriate to do today? Yeah, I don't think... I mean, come up with something. Anything out there today that doesn't cost taxpayer money, provides benefit for everybody, especially low income, grows our economy, allows us to be more competitive, and actually could reduce federal administration cost, not increase it. I mean, it's almost impossible to find something like that. And tomorrow I'm giving a floor speech on this and that particular point that you just asked, Bill, like who would be against this? Why would anybody oppose this other than the cottage industry of litigants? Who in the world would oppose this? Maybe our enemies might oppose this because they see it as a huge vulnerability and weakness of our democracy, but other than that, who in the world would oppose this? And so we're going to be asking that question exactly on the floor tomorrow as we're starting to put pressure on moving this bill forward.
Well, hopefully your set of colleagues will listen closely because you remember the anti-fracking campaign had a lot of Russian backing behind it. I'm sure that the anti-regulatory reform movement would have there. I'm certain there are probably some Chinese that could be behind some Chinese influence that could be up.
