With Bay’s Departure, Lack of Quorum at FERC Looms Large Among Industry Concerns

With no news coming from the White House on a nomination to fill any commissioner vacancies at FERC, a collection of 14 energy trade groups on February 2 sent a letter to President Donald Trump pleading him to quickly nominate candidates for the vacancies to address an impending lack of a quorum at the Commission.

With a February 3 deadline for the departure of Commissioner Norman Bay, FERC will be without a quorum and unable to vote on significant decisions such as pipeline certificate applications and other items. It will mark the first time that FERC will be without a quorum, and the uncertainty and questions about how the Commission will operate with Acting Chairman Cheryl LaFleur and Commissioner Colette Honorable has energy firms concerned.

In a podcast and in statements issued since being named acting chairman by Trump, LaFleur has said the work of FERC will continue without a quorum and that the amount of delegated orders that can be issued by FERC staff is greater than most people appreciate. FERC also is looking at ways to expand the authority it can delegate to staff during any time without a quorum.

“We’re basing that on past Commission orders on the subject and the experience of other agencies. So, people should stay tuned for that,” LaFleur said in the podcast that was posted on the FERC website.

Some of the things FERC staff will be able to do in the absence of a quorum includes reviewing filings that are pending or come before FERC, coordinate staff delegated actions, proceed with environmental reviews of projects, hold FERC meetings, technical conferences and workshops and prepare orders for future votes, LaFleur said.

FERC on February 3 issued an order delegating authority to staff to meet certain statutory obligations for the period it is without a quorum. The order provides authority to the Director of the Office of Energy Market Regulation to accept and suspend natural gas and electric power rate filings; to make them effective subject to refund; and set them for hearing and settlement procedures. It also delegates authority for FERC staff to institute a proceeding under Federal Power Act Section 206 to protect the interests of consumers.

The order provides FERC staff with authority to extend the time for action on matters where additional time is allowed by statute, and to accept settlements not contested by any party or participant.

The authority delegated to staff is effective until such time as FERC regains a quorum and takes action to lift the delegation, and in no event will it extend beyond 14 days after the date a quorum is re-established.

It could be several months before the Trump administration names a nominee or a slate of nominees to fill the FERC vacancies, said Dave McCurdy, president and CEO of the American Gas Association (AGA). McCurdy and other trade group leaders spoke at a January 31 United States Energy Association (USEA) event in Washington, with several noting that it could be May or later before FERC has a quorum.

As LaFleur mentioned in the podcast, it is not unchartered water for the Commission to delegate authorities to FERC staff in anticipation of a non-quorum period. In the spring of 1993, before William Massey, Donald Santa, Vicky Bailey and James Hoecker were all sworn in on May 20 of that year, FERC delegated various authorities to certain office directors and the secretary at FERC. Those included the ability to issue tolling orders to address rehearing requests and other notices to extend the time for FERC to act on matters, suspending tariff filings or rate schedules for an appropriate length of time under the Natural Gas Act and the Federal Power Act and taking whatever action is needed to process those tariff filings or rate schedules.

A similar order was expected before Bay’s departure, but because the lack of a quorum would prevent FERC from voting on major projects, including several large gas pipeline applications, energy groups had a lot of concerns about how long FERC would be without a quorum, what it could accomplish during that period and who would be nominated by Trump to fill the vacancies.

The letter from the trade groups noted that the lack of a quorum will prevent FERC from making major policy decisions that could benefit energy consumers, including hydropower license applications, petitions in connection with oil pipeline construction, pending mergers and rate proceedings. The delays and inaction at FERC could harm the nation’s electric, natural gas and oil customers, they said.

“Given our shared sense of the importance of regulatory certainty in promoting energy infrastructure investment and just and reasonable rates, we are aligned in urging the Administration to promptly nominate candidates to fill the Commission’s three existing vacancies as quickly as possible so a quorum can be reconstituted without undue delay,” the groups said in the letter to Trump.

The letter was signed by the American Gas Association (AGA), American Petroleum Institute, American Public Gas Association, American Public Power Association, Association of Oil Pipe Lines, Edison Electric Institute (EEI), Electric Power Supply Association, Independent Petroleum Association of America, Interstate Natural Gas Association of America (INGAA), Large Public Power Council, National Hydropower Association, National Rural Electric Cooperative Association, Natural Gas Supply Association and the Nuclear Energy Institute.

The letter was preceded by other pleadings to the White House from individual groups like INGAA and NGSA, and many requests made at FERC to act on applications or decisions before Bay’s resignation becomes effective February 3. INGAA President and CEO Donald Santa said the group would like to work with the Trump administration to identify at least one nominee with a background in natural gas and pipeline matters.

McCurdy also would like to see someone with pipeline or gas industry experience, he said at the USEA event. With several vacancies on the Commission, it would be good to have someone with a gas industry background at FERC, McCurdy told reporters after speaking on a panel at the USEA event.

Trump is expected to name a Republican to serve as chairman, and the leading candidate to fill at least one of the vacancies is Neil Chatterjee, energy policy advisor to Senate Majority Leader Mitch McConnell, R-Kent., who could be confirmed by the Senate without much delay.

Other possible nominees include Patrick McCormick, a Republican special counsel on the Senate Energy and Natural Resources Committee, Janet Sena, senior vice president and director of policy and external affairs at the North American Electric Reliability Corp., Bill Marsan, executive vice president and general counsel at American Transmission Co., Kenneth Minesinger, attorney and co-chair of the global energy & infrastructure practice at Greenberg Traurig, Richard Lehfeldt, attorney and partner at Crowell & Moring, and several state regulators.[1]

An inquiry to the White House about the timing of any nominations to FERC did not receive a response by press time.

There are a lot of unknowns about when a nomination will be made, or whether any nominees will be paired together to improve the chances of gaining Senate approval, McCurdy said.

“FERC is incredibly important. I hope they’ll expedite the appointments,” EEI President Tom Kuhn said at the USEA event.

The term of Honorable, a Democrat, is due to expire in June, meaning Trump may have an opportunity to name four commissioners to FERC if he chooses not to re-nominate Honorable.

In a January 30 statement, Honorable congratulated Bay on his tenure at FERC, lauded his leadership style and noted his focus on consumers as FERC addressed issues such as gas and electricity industry coordination, price formation in power markets, energy storage and other matters.

Honorable said she is looking forward to working with LaFleur during the transition period with LaFleur as acting chairman. “Although we will lack a quorum, my team and I remain focused on continuing the business of the Commission to serve the public interest consistent with federal law,” she said.

Sen. Lisa Murkowski (R-Alaska) and chairman of the Senate Energy and Natural Resources Committee, said FERC will need a full roster of commissioners as soon as possible to carry out the important work in front of it.

“The Senate’s challenge will be to promptly consider, without undue delay, FERC nominations once they are received. I will make it a top priority to work with President Trump and my colleagues to move nominees rapidly and to re-establish a working quorum on the Commission,” Murkowski said in a statement.

During the podcast, LaFleur touched on several topics regarding the Trump administration, including whether she is aligned with the President’s agenda and if she views her role of acting chairman as a steward until the Republicans arrive with a majority or a chairman to pursue her own agenda. She said FERC is an independent agency that decides cases based on its governing laws and the facts of the cases.

LaFleur commented that she served as acting chairman in the past under former President Barack Obama from November 2013 to July 2014 and as chairman from July 2014 until April 2015, so she has experience leading the commission during a time of transition.

“Now, having said that, I’ll confront any issues that happen to come up during my tenure, working with my colleagues just like any other chairman would. I’m the chairman while I’m the chairman,” LaFleur said.

She also commented on the regulatory freeze memorandum issued by Trump and the hiring freeze for federal agencies, both of which apply to FERC. The Commission is well-staffed at the moment, but it could lose employees to retirement or attrition, depending on how long the hiring freeze lasts, so LaFleur hopes to be able to hire people again at some point, she said.

Addressing the regulatory freeze memo, LaFleur said she has completed the review of new or pending regulations described in it and sent items voted out by the Commission that need to be published in the Federal Register. She noted that previously set comment deadlines will remain unchanged.

When asked why she accepted the position of acting chairman, LaFleur said she thought about the offer and reasoned that since she’d already decided to serve out her term, which expires in 2019, she should accept the offer if she was asked to lead the agency. “I’ve been part of the Democratic majority ever since I’ve been here, and I knew that going forward I would be part of a Democratic minority,” she said.

Like others have over the past month or so, LaFleur said she hopes for nominations from the Trump administration to fill the vacancies at FERC as soon as possible.

Developers of several major pipeline projects that are waiting on a certificate order to build their facilities have asked FERC to approve the orders before FERC loses its quorum.

On the flip side of that coin, Sens. Edward Markey and Elizabeth Warren have asked FERC to rescind its order approving Spectra Energy Partners LP’s Atlantic Bridge project (CP16-9) to move more natural gas into New England markets. The Massachusetts Democrats sent a February 1 letter to FERC saying that the absence of a quorum could prevent opponents from challenging FERC’s approval of the $451.8 million project.

The Atlantic Bridge project is designed to enable Algonquin Gas Transmission LLC and Maritimes & Northeast Pipeline LLC to provide an additional 132,705 Dth/day of firm transportation service from existing receipt points in New Jersey and New York to various Northeast delivery points, including an interconnection with Maritimes in Massachusetts, through additional compression and replacement of about 6.3 miles of pipeline.

Markey and Warren have previously sent letters to the Commission regarding the Atlantic Bridge project, including the potential conflict of interest with FERC using a third-party contractor that also works for the pipeline industry in helping it prepare an environmental assessment for the project.[2] FERC has not yet responded to the senators’ 1/5/17 request for more information on that, they noted.

In the letter, Markey and Warren said the commissioner vacancies at FERC could persist for an extended period, and if opponents file a rehearing request challenging the Commission’s order FERC may not be able to address those challenges for as long as the vacancies persist.

“The American people deserve to be assured that FERC will not be hamstrung from hearing appeals of this pipeline approval for an extend period of time,” they said, asking the Commission to immediately rescind the order until a new quorum can be reconstituted at FERC.

By Tom Tiernan TTiernan@fosterreport.com

[1]   See, Trump Names LaFleur Acting FERC Chairman; Bay Resigns, Leaving Quorum Concerns, FR No. 3133, pp. 1-6.

[2]   See, Spectra Pleased With FERC Order Approving $451 Million Atlantic Bridge Project, FR No. 3133, pp. 22-26.

 

This article appears as published in The Foster Report No. 3134, issued February 3, 2017

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