FERC Issues Pipeline Certificate Policy NOI, Seeking Input on Process

FERC issued a Notice of Inquiry (PL18-1) on its policy for reviewing natural gas pipeline applications, with the commissioners highlighting areas they are particularly interested in and FERC Chairman Kevin McIntyre indicating that an array of topics are fair game to be examined in the proceeding.

The NOI seeks input on numerous questions reflecting concerns that have been raised in current pipeline reviews, legal challenges and other forums, with the process for public participation gaining attention from landowners and lawmakers on Capitol Hill. In the proceeding, FERC is seeking input on potential changes to its existing policy statement that was adopted in 1999 and relies heavily on precedent agreements with shippers as an indication of need for new facilities.

A lot has changed in the natural gas industry since that policy statement was issued, and the NOI provides an opportunity for the industry and any interested parties to tell FERC if it is working well, commissioners said at the April 19 open meeting. Among the items that have gained more attention are the use of emminent domain to build pipelines where landowners oppose projects, the rising use of precedent agreements with shippers who are affiliated with the companies building pipelines and the upstream and downstream environmental effects associated with increased gas use.

As he did when he announced the intention to review the pipeline certificate policy in December 2017, McIntyre said he believes it is a matter of good governance to examine the effectiveness of policies and if improvements can be made.

McIntyre said he is neutral on whether the 1999 policy statement is in need of revision and that the NOI should not be viewed as a belief that the current process is ineffective. The Commission is exploring whether and how to change its approach in reviewing applications and performing environmental analyses of planned facilities. “I have an open mind on these issues,” he said.

McIntyre noted that he and other federal officials recently signed a memorandum of understanding (MOU) to try and streamline the review process for new infrastructure, in line with an executive order from President Donald Trump. FERC’s review of its certificate policy is consistent with the goals of the MOU that include completing project reviews within two years, but the timing of the NOI is coincidental in terms of the MOU. Both documents recognize that inefficiencies can hinder infrastructure development and the NOI could assist the Commission in conducting reviews and making informed decisions on pipeline projects.

Commissioner Robert Powelson commended McIntyre for comments he made at a National Association of Regulatory Utility Commissioners meeting that FERC is not a “rubber stamp” agency that approves pipelines without a thorough consideration of many issues. There is a heightened awareness of pipelines being built, and that “we don’t build pipelines on speculation,” which is good for consumers as they are not paying for unneeded facilities, he said.

Commissioner Neil Chatterjee made that point in talking about the benefits of a robust pipeline network that has enabled increased movement of natural gas resources and lower utility bills for consumers following production gains. Private companies take the financial risk associated with building pipelines, which has led to the U.S. becoming a net exporter of natural gas for the first time since 1958, Chatterjee said.

One of the questions McIntyre addressed at a media briefing after the meeting was about the increasing number of LNG export projects and whether pipelines to feed such facilities to send LNG overseas meet a public need. Such issues are likely to be addressed in the scope of the NOI as the Commission examines how the need for new pipelines should be measured, he said.

FERC is seeking feedback on the transparency, timing and predictability of its certification process for new pipelines, along with the environmental review of proposed facilities. The NOI seeks input on whether, and if so how, FERC should determine whether there is a need for a new pipeline, including consideration of precedent agreements or contracts for service as evidence of need, FERC staff explained at the meeting.

The potential exercise of eminent domain and landowner interests also are being reviewed, as is the Commission’s evaluation of the environmental impacts of proposed projects, which was the subject of a remand from the U.S. Court of Appeals for the District of Columbia Circuit for not considering the greenhouse gas emissions stemming from the downstream use of gas in a group of pipelines serving the Southeast.

The NOI seeks comments on if there are changes FERC should consider to improve the pipeline review process, including pre-filing procedures for new applications, post-filing and post-order issues, FERC staff said. It encourages commenters “to identify, with specificity, any perceived issues with the Commission’s current analytical and procedural approaches and to provide detailed recommendations to address these issues,” staff said.

Commissioners Cheryl LaFleur commented on how FERC determines the need for facilities will be of particular interest to her, such as whether looking beyond precedent agreements or consideration of a regional approach for new facilities. It is easy to criticize the current process than it is to come up with a new one, and she encouraged commenters to provide specifics to help the Commission distill the views of stakeholders in the NOI.

Commissioner Richard Glick commented that the environmental review process and the examination of precedent agreements with pipeline affiliates will be important for him. Climate change considerations will be important in the future and how FERC addresses that will be of interest to parties, he said.

The Commission’s State of the Market report summarizing activities during 2017 noted that the total miles of interstate natural gas pipeline authorized by FERC each year fluctuates and reached a high of 2,739 miles in 2017. Compared with previous years and the era when the policy statement was adopted, when much of the pipeline capacity was contracted for by local distribution companies, today’s market has producers contracting for larger amounts of pipeline capacity, the NOI related. For many of those projects, the producers are interested in moving their supplies to a pooling point on the pipeline system, where the gas can be sold to parties serving downstream markets.

“Therefore, an increasing number of projects are being designed to transport gas to a point of distribution on the interstate pipeline grid, which may not correspond to a defined market or end use,” FERC said. That can present challenges when assessing environmental impacts of downstream uses.

FERC said the aim in the NOI is the same that drove the development of the 1999 policy statement, quoting the document that said it was formed “to appropriately consider the enhancement of competitive transportation alternatives, the possibility of over building, the avoidance of unnecessary disruption of the environment, and the unneeded exercise of eminent domain.”

It encouraged parties to provide detailed recommendations to address numerous issues and questions related to project need, compliance with the National Environmental Policy Act (NEPA) and landowner issues.

Among the questions on project need, the Commission asked if it should distinguish between contracts with pipeline affiliates and contracts with non-affiliates, and if so, how. In reaching a determination on project need, should FERC consider the intended use of the gas, it asked, and how should it take into account that the end uses for gas may not be permanent or change over time.

On a regional approach, the NOI asked if FERC should assess need differently if multiple pipeline applications seek to provide service in the same geographic area. “Should the Commission change the way it considers the impact of a new project on competing existing pipeline systems or their captive customers? If so, what would that analysis look like in practice?”

In environmental reviews and NEPA compliance, what alternatives, besides the no-action alternative that is currently used, should FERC consider, it asked. The Commission to date has considered upstream GHG emissions from the production area when it reviews pipelines, but the NOI asks if it should, and how accurately it could conduct such a review.

Related questions were posed regarding downstream GHG emissions, and what criteria could be included in such analyses.

Should the Commission reconsider how it uses the Social Cost of Carbon tool in its environmental review of pipeline projects, and how could that tool be used to weigh the costs versus the benefits of a proposed project, the NOI asked.

A series of questions seek input on the use of eminent domain, landowner concerns and how FERC could address situations when pipeline applicants are unable to access portions of a proposed route.

Many of these questions have come up in individual pipeline proceedings recently, including the PennEast Pipeline project, Atlantic Coast Pipeline and the Mountain Valley Pipeline projects, all of which drew dissents from commissioners. Besides LaFleur’s dissent on the ACP and MVP projects, former Commission Norman Bay issued a statement in February 2017 asserting that FERC should consider different approaches as it examines pipeline certificate applications under the Natural Gas Act.

In addition, the Natural Resources Defense Council (NRDC) funded a report by Analysis Group Senior Advisor Susan Tierney that says FERC’s policy needs to be updated, while three other groups – Public Citizen, Oil Change International and the Sierra Club — released a report in September 2017 that raised similar issues. That report asserted that many proposed pipelines are not needed, and that FERC should stop acting on pipeline applications until it overhauls its review process.

Comments on the NOI are due within 60 days of when it is published in the Federal Register. While the NOI is pending the Commission intends to continue to process pipeline applications before it consistent with the Policy Statement, and to make determinations on the issues raised in those proceedings on a case-by-case basis.

In an April 18 letter to McIntyre, 11 environmental groups made suggestions that included a deeper review of project need when pipeline affiliate contracts are involved, a regional approach to reviews and a fuller analysis of all relevant factors under NEPA that uses Social Cost of Carbon and Social Cost of Methane tools. Among the groups that signed the letter are NRDC, Sierra Club, Conservation Law Foundation, Riverkeeper Inc., Public Citizen and the Southern Environmental Law Center.

Several groups were reviewing the NOI and provided comments, with the head of Interstate Natural Gas Association of America (INGAA) saying it is understandable that FERC wants to take a fresh look at the policy statement with natural gas playing a more prominent role in today’s economy. The proceeding “will provide a forum to re-examine the policy statement in a way that balances the concerns of affected stakeholders and the environment with the need for an efficient, timely and predictable process for acting on applications,” said Don Santa, president and CEO of INGAA.

The American Petroleum Institute (API) said FERC’s robust review process used under the policy statement has enabled the U.S. to build a safe, reliable and effective pipeline system. API looks forward working with FERC to improve the pipeline permitting process to ensure that our nation can continue benefitting from natural gas for generations to come,” said Robin Rorick, midstream group director for API.

By Tom Tiernan TTiernan@fosterreport.com

 

This article appears as published in The Foster Report No. 3195, issued on April 20, 2018

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