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This Is What Regulatory Capture Looks Like

PennEast had 31 DEP meetings, 30 conference calls, & 65 letters over 5 years

 Christie DEP Weakened Regulations To Promote Expansion of Gas Infrastructure

[See End Note]

I write a lot about political influence on DEP, industry lobbying, government ethics, the public interest, scientific integrity, corruption, and the revolving door.

I’ve found another case that illustrates them all.

Incredibly, back in the day, this stuff used to be kept quiet. It was considered unseemly to reveal how much access and influence and assistance and cooperation a polluting industry had on and extracted from DEP. The public posture was of a frequently adversarial and minimally arms length relationship between DEP and permit applicants (AKA the “regulated community”).

But now, they not only openly admit it, they brag about it and institutionalize what used to be considered, at best, compromised if not outright corrupt practice.

To start, consider a common definition of “regulatory capture” – (boldface mine, to emphasize criteria of relevance)

What Is Regulatory Capture?

Regulatory capture is an economic theory that says regulatory agencies may come to be dominated by the industries or interests they are charged with regulating. The result is that the agency, which is charged with acting in the public’s interest, instead acts in ways that benefit the industry it is supposed to be regulating.

Understanding Regulatory Capture

Regulatory capture, also known as the economic theory of regulation, became known in the 1970s due to the late George Stigler, a Nobel laureate economist at the University of Chicago, who first defined the term. Stigler noted that regulated industries maintain a keen and immediate interest in influencing regulators, whereas ordinary citizens are less motivated. As a result even though the rules in question, such as pollution standards, often affect citizens in the aggregate, individuals are unlikely to lobby regulators to the degree of regulated industries.

Moreover, regulated industries devote large budgets to influencing regulators at federal, state and local levels. By contrast, individual citizens spend only limited resources to advocate for their rights.

In many cases, the regulators themselves come from the pool of industry experts and employees, who then return to work in the industry after their government service. This is a version of the system known as the revolving door between public and private interests. In some cases, industry leaders trade the promise of future jobs for regulatory consideration, making revolving doors criminally corrupt.

Regulatory agencies that come to be controlled by the industries they are charged with regulating are known as captured agencies. Eventually, a captured public-interest agency operates essentially as an advocate for the industries it regulates. Such cases may not be directly corrupt, as there is no quid pro quo; rather, the regulators simply begin thinking like the industries they regulate, due to heavy lobbying.

After reading this, please read the material below from the PennEast pipeline permit application – particularly the boldface criteria – and consider whether this constitutes – or is compelling evidence of – regulatory capture.

1. Industry lobbying and access to DEP dwarfs citizens access

PennEast’s permit application states:

To further identify opportunities to avoid and minimize impacts to regulated resources, PennEast engaged in a robust pre-application process with the New Jersey Department of Environmental Protection (NJDEP), specifically the Office of Permit Coordination and Environmental Review. This process included 31 in-person meetings, 30 conference calls, and 65 pieces of correspondence over a period of 5 years. These numerous interactions provided NJDEP with the opportunity to examine the route and provide feedback and guidance based upon their expertise. Consistent with NJDEP’s long-standing policy, articulated in NJDEP’s December 2011 Large Linear Infrastructure Project Guidance Document, NJDEP’s primary suggestion for pipeline routing focused on collocation with overhead electric ROW and collocation within roadways to avoid and minimize impacts to regulated resources.

(Source: PennEast Pipeline Permit Application – Compliance Statement, page 5)

Repeat: there were “numerous interactions” between PennEast lawyers, lobbyists and consultants and NJ DEP of a period of 5 years. This includes, at least 31 meetings, 30 conference calls, and 65 pieces of correspondence.

Some couples don’t have sex that often.

DEP has not resisted or tried to minimize the harm and corruption of the “agency capture” model. Rather, they have legitimized and institutionalized it. The stated mission of the DEP Office of Permit Coordination is as follows:

The mission of the Permit Coordination Unit is to insure that complex multi-media, high value projects receive proactive and facilitated communication and coordination in support of timely, predictable, and positive permit decisions.

What is a “positive permit decision”? Sure sounds like “YES!” to me.

The DEP permit process is rigged.

Things to consider:

• How many times did you or your organization meet with DEP over the last 5 years?
• How much feedback and help in advancing your concerns did the DEP provide?
• How extensively did DEP explains their policies and regulatory requirements?
• When did you even learn of the DEP’s consideration of this project? Was it 5 years ago, when the PennEast meetings began?
• Were you kept apprised of each and every meeting, email, letter, and phone call between DEP and PennEast?
• Were you provided an opportunity to observe or participate in these important meetings?
• Is there a detailed paper trail that is publicly available that documents these “numerous interactions” between PennnEast and DEP?

2. Changes in State Policy and DEP Regulation To Promote Gas Infrastructure

Additionally – a critical fact not mentioned by PennEast – is the fact that the Christie DEP made specific regulatory changes to the freshwater wetlands regulations, stream encroachment regulations, and water quality certificate regulations that specifically apply to this proposed pipeline project and in a favorable way.

Also, during the period of these interactions with the DEP, the Christie Board of Public Utilities (BPU) adopted an Energy Master Plan and economic regulatory policies that promoted expansion of gas markets, provided subsidies to natural gas, and expanded the capacity of natural gas infrastructure (gas plants, pipelines, compressor stations) in NJ.

Based on this history, are you confident that DEP can be an independent, neutral, and objective review agency in serving the public interest?

 3. PennEast Benefits From Revolving door

PennEast brags about using the revolving door: