UpstreamPA 2017 Conference, March 21, 2017 Michael L. Krancer Principal & Co-Founder Silent Majority Strategies LLC and Sr. Counsel, Energy Note: SMS and Blank Rome are separated and unaffiliated companies; © 2017 Silent Majority Strategies, LLC 1 Who We Are At Silent Majority Strategies LLC • A new kind of advocacy and messaging firm specializing in the energy industry. • Mike Krancer (Energy) • Nationally-recognized expert in energy law and policy; former Secretary of Pennsylvania Department of Environmental Protection; Of Counsel at Blank, Rome; past Chief Judge at Pennsylvania Environmental Hearing Board; Contributor to Forbes on energy issues. • Keith Naughton (Politics/PhD, Politics & Public Policy) • Expert in politics and political communications; political consultant whose client roster has included Senator Bob Dole, Governor Tom Ridge, Pennsylvania State Senate President Pro Tem Joe Scarnati and several Pennsylvania Supreme Court and Appellate Court Judges; author of the book, Washington Gold Rush: The Competition for Congressional Earmarks. Contributor to The Daily Caller. 2 Preview • Review of Changing Politics of Upstream, Midstream and Downstream Infrastructure Development • Political Risk • Messaging the Public and Regulators • What Can You Do? Silent Majority Strategies LLC 3 BANANA Build Absolutely Nothing Anywhere Near Anythingm 555 ?LlNGO??Leave It In The Ground He:- i'ILL IWHAT JT TMIES - HEEP FDSSIL FUELS THE BHBUHIZI TDD I BEE Silent Majority Strategies LLC 5 Where the public goes elected officials and regulators will follow Silent Majority Strategies LLC 6 Political Risk Is No. 1 'l ENERGY ENVIRONMENT Fracking Divides GDP PartialIr Silent Majority Strategies LLC 7 $15.68 million per day lost due to inadequate infrastructure* *Average loss per day in 2016; difference between Henry Hub price and Dominion South price. (Source: Silent Majority Strategies LLC) Silent Majority Strategies LLC 8 Pipeline Projects Under Siege Delayed Projects Dakota Access (in progress) Mariner East 2 (in progress) Atlantic Sunrise (pending PA permits) Projects in Question Constitution Keystone XL Cancelled Projects Palmetto Northeast Direct Silent Majority Silent Majority Strategies Strategies LLC LLC *9 Technology Is Robust But Politics Are Brittle Distribution system: Multiple Veto Points Silent Majority Strategies LLC 10 Three Categories of Risk 1) Technological 2) Financial 3) Political Political Risk can only be mitigated with direct action. Silent Majority Strategies LLC 11 Political Risk • Difficult to quantify • Changes abruptly and unpredictably • Politics is emotional and irrational • Strange coalitions of interest form • Cost is significant: Carrying costs, lost profits, market share at risk. Silent Majority Strategies LLC 12 Political Risk: Public Messaging 1) Make it personal 2) Diversify 3) Stories beat statistics 4) Work in the “Fear” Space Silent Majority Strategies LLC 13 Political Risk: Public Messaging Vote for Smith Vote for Jones FOR Smith: 25% FOR Jones: 25% AGAINST Jones: 30% AGAINST Smith: 20% Silent Majority Strategies LLC 15 a" they won?t be your friends for long Political Risk: Regulatory Messaging Understanding Regulatory Agencies: 1) Must maintain logical consistency 2) Must address all germane arguments 3) Agencies fear losing in Court 4) Agencies fear loss of funding and power from legislative or executive action. Silent Majority Strategies LLC 17 Administrative Procedures Act (1946): Mandated Opportunity for Participation • APA of 1946 is the foundational federal rulemaking law • Requires advanced notice of all federal rule proposals and substantive changes. • Requires federal agencies to acknowledge and respond to ALL comments. • Federal agencies must respond, but are NOT required to make changes – however, rarely are all comments completely ignored. • ALL state rulemaking generally follows APA of 1946. • Your opportunity to make your opinions heard – so use it! Silent Majority Strategies LLC 18 Political Risk: Regulatory Messaging 1) Disrupt their internal logic 2) Maximize your arguments 3) Set the stage for a Court challenge 4) Message outside the system Silent Majority Strategies LLC 19 Ignoring Political Risk Is Like Picking Up Pennies in Front of a Steamroller Silent Majority Strategies LLC 20 Is Politics Profitable? • Exelon Nuclear in New York • Costs: $110 million to buy FitzPatrick and $500 million in capital expenditures plus lobbying and public relations campaign. • Return: 12 years of public subsidy, up to • ROI: $5.7 Billion. Over 750% Silent Majority Strategies LLC 21 Final Thoughts: What Can You Do? • Make Yourself Heard: Comment on rulemaking; contact your legislators; contact your local elected officials • Organize Within and Outside the Industry • More Is Better. Encourage others to speak out: not just employees, but vendors, sub-contractors, your attorneys/accountants. • Engage in EFFECTIVE Messaging – send messages that change minds. Silent Majority Strategies LLC 22 Final Thoughts: What Can You Do? •You tell your story better than anyone else. •No one ever made a sale waiting for the phone to ring. Silent Majority Strategies LLC 23 Silent Majority Strategies LLC Michael Krancer, Principal and Co-Founder mkrancer@silentmajoritystrategies.com Cell: 215-880-5644 Keith Naughton, Ph.D., Principal and Co-Founder knaughton@silentmajoritystrategies.com Cell: 818-288-1360 24