Welcome to Power Hour. I'm Alex Epstein. It's been a while since we've done a show. Good news for those of you who like the show: we're going to probably be doing them a lot more regularly, maybe every month or so.
One of the things I do in the background is I run a network of a lot of the world's leading pro-freedom executives and investors, mostly in energy, but not exclusively in energy. And twice a month I do what are called action leaders calls with some of the people driving the most important action in the world. And I've decided to showcase some of these interviews on Power Hour.
So the first one we're going to showcase is one I did recently with Senator Alan Armstrong, who's a key figure in the permitting battle that's happening right now. Basically, permitting is destroying American industry and inhibiting our economy in all sorts of ways. It's totally terrible for the whole AI revolution and the prospects of that in the United States. So I'm spending a lot of time in the background working on this issue.
And one of the good things that's happened is Senator Armstrong has come from Williams, which is a major pipeline builder. They're also involved in AI now. He was the CEO and he is the new senator from Oklahoma. Mark Wayne Mullen, the previous senator, is running, I guess, the Department of Homeland Security. And Armstrong is a great thing because he's obsessed with this one issue of permitting. And in particular, he's obsessed with the issue of Clean Water Act permitting, which turns out to be totally crucial, totally misunderstood, and I thought it'd be great to have him on the show to discuss it. So, enjoy. Alan Armstrong on permitting and specifically Clean Water Act permitting.
Senator Alan Armstrong, welcome to Power Hour.
Thank you. Glad to be here today.
Let's jump right into this permitting issue. So, let's start off with, you know, you've made a lot of your career in pipelines, specifically gas pipelines. Why are gas pipelines so crucial for our country?
Yeah, you know, 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 domestic purposes as well, but it's also giving us a very powerful geopolitical tool as well, their 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 big energy infrastructure, you're building for peaks and you have to be able to build for peaks to accomplish that.
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 at 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 perspective, but I do think that people are understanding how incredibly important natural gas is to our country and for our allies as well.
Yeah, just to add for people, I mean, 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 Uri, 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. Like if you cannot bring gas to market your heating bills and your electricity bills are absolutely going up and it accomplishes nothing at all.
Yeah. The last part of my tenure as CEO were probably some of the very best years ever in the pipeline industry.
Williams, just for people, CEO of Williams.
Thank you, Alex. It was 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.
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, you know, 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?
Yeah. You know, I think people really are shocked when they hear how little the actual construction time is on a five, six-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 seldom more than a six-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. That's really where the problem is. It's not, 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 the DC circuit actually pulled that certificate. Same thing happened to a NextDecade 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? I remember very crisply 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 tough questions that really frees up capital and just raises 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.
I mean, just to recap some of this, 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 can 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 five plus years plus some of these things just get killed. And so, it's like five years to infinity. And then the infinity in particular drives away people. So whereas investors should just be 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 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? Like 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 a gas. What is a gas like magically mixing with the water and poison? I mean, what is going on here? What's the actual threat profile?
Yeah. You know, 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 NWP12, 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.
And I'll give you a great example. When Williams 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 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 to settle to take a water sample and then we were actually going to use silt containment sheets. So 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 dredging 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 it was not a water quality concern. It was purely just a politicized issue.
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 very seldom is it actually a water quality issue that can't be dealt with. And the Corps of Engineers, by the way, has already signed off on this process with their own standards and then the state takes another swipe at it.
