As Lack of Quorum at FERC Stretches Out, Consequences and Backlog Pile Up

With the energy industry anxious to have a quorum restored at FERC, the consequences of going three months without a quorum is becoming evident and the backlog of projects for any new commissioners to address is growing, sources have told The Foster Report.

The lack of a quorum “has definitely had an effect” on the natural gas pipeline sector and contractors/suppliers who work on pipeline construction projects, said Donald Santa, president and CEO of the Interstate Natural Gas Association of America (INGAA). The group performed a tally of pending certificate applications at FERC and found roughly $14 billion of capital investment sitting on the sidelines, unable to begin construction because FERC cannot vote on the applications. A different group’s estimate put the figure at $16 billion, Santa told The Foster Report in an interview.

So clearly there are “real world consequences here in terms of projects not being initiated for construction” and “people not being employed” to work on those projects and pipeline transportation being delayed.

The three vacancies are expected to be filled by Neil Chatterjee, energy policy advisor to Senate Majority Leader Mitch McConnell (R-Ky.), Kevin McIntyre, an attorney and co-leader of the energy practice at the law firm Jones Day, and Commissioner Robert Powelson of the Pennsylvania Public Utility Commission (PUC).[1] Those three have been the likely nominees for Republican commissioner spots at FERC for many weeks, with sources indicating that the vetting process and background checks are taking a while to gain clearance for the White House to send the nominations to the Senate.

Lawmakers from both political parties, energy trade groups and others have urged President Donald Trump to submit the paperwork to the Senate to provide FERC with a quorum to vote on pending matters. “I think the White House knows how important this is” to the development of energy infrastructure and industry investments, said Dena Wiggins, president and CEO of the Natural Gas Supply Association (NGSA).

“I continue to hear that this is simply a ‘bandwidth issue’ on completing the paperwork” and that the delay in receiving nominations from the White House is due to the number of open positions across the government that need to be filled, Wiggins said in an interview.

Other energy industry sources, who declined to be identified, agreed with that assessment. “We all would like to see nominations made official, but we’re giving the White House the benefit of the doubt. They have assured those who ask that the selections have been made and an official announcement is awaiting the customary FBI clearance process,” said one source.

The White House press office did not respond to questions for this story.

“All three of those men are qualified and capable and would make terrific commissioners,” Wiggins said of Chaterjee, McIntyre, and Powelson. “I’ve heard that their names will be sent to the Senate soon, with soon being a relative term,” she said, noting that others have said “any day now” for several weeks.

With three commissioner vacancies, FERC has been without a quorum since the 2/3/17 departure of former Chairman Norman Bay, leaving Acting Chairman Cheryl LaFleur and Commissioner Colette Honorable, both Democrats, at the Commission. FERC has delegated authority to FERC staff to act on some matters, but that authority is limited and there are items that require a quorum of commissioners to be voted upon.

“The longer we go without a quorum the more things there are in the queue to be acted on,” Wiggins said.

In an April 24 video interview with media outlet E&E Daily, Honorable said the same thing. “We have quite a backlog developing” of items that will need to be voted upon once a quorum is restored, she said.

“I’m hopeful that any day, any week, we will hear who the nominees will be” Honorable said during the interview, adding that she realizes for parties with business at the Commission, the length of time without a quorum is affecting investment decisions, credit ratings and “could be frustrating” to many stakeholders.

As the lack of a quorum stretches into May and perhaps longer given the time needed to gain Senate approval, the three vacant seats could see another, with the term of Honorable expiring at the end of June. Under regulations, Honorable can serve beyond that date, through the current term of Congress if a replacement has not been named. The timing of nominations from the White House, however, is fueling speculation about which nominees would be serving which terms at the Commission. McIntyre has been expected to be named chairman, but the longer the official announcement takes, the more conjecture creeps into the discussion about the nomination process.

Several sources indicated Honorable has an interest in staying at FERC for another term if nominated by Trump. The idea of pairing a Democrat with the three Republicans – to ameliorate Senate Democrats who would not be too keen on moving through three Republicans without having a say on a Democrat commissioner seat – has some appeal, a source indicated. “It could easily become four nominees rather than just three,” the source said, and combining the fourth with Chaterjee, McIntyre and Powelson “could facilitate getting the those three through” the Senate confirmation process, the source said.

“This is of keen interest to the people in the industry,” Wiggins said, declining to speculate on whether Honorable will be tapped for another term by the Trump administration.

Because Chatterjee has been on McConnell’s staff and background checks and vetting would be less time-consuming for his paperwork, the notion of sending his name to the send to provide FERC with a quorum of three commissioners has been a possibility, but several sources indicated that will not happen. If that were to happen, it could have been done previously, and such a move would make it harder to get other nominees through the Senate confirmation process without some political bargains, they said.

In terms of impacts from the lack of a quorum, Santa related how he was at a conference and a supplier of construction equipment to pipeline companies raised a point about once a quorum is restored and FERC can vote on certificate applications, there may be a flood of orders that his company may not be able to meet.

Individual pipelines that have expansion projects pending at the Commission also may have contracts with shippers that have in-service date commitments or financial penalties, depending on the timing of the FERC approval and project construction, Santa said. Those impacts are specific for the individual pipelines and the terms of the contracts between the pipelines and shippers, he said, noting that INGAA doesn’t track the financial fallout of such individual proceedings.

“The other aspect that hasn’t gotten much attention” is that tariff filings for pipeline rates and service changes, clarifications and other energy market matters have not been addressed. “All of that has effectively been paralyzed” by the lack of a quorum for the last three months, he said.

Among the theories about the delay in FERC nominations coming from the White House, Tyson Slocum, energy program director for consumer group Public Citizen, said the Trump administration may be trying to gain some type of pledge for FERC to review wholesale power markets with an eye toward favoring fossil fuel generation resources. The issue came to light in an April 14 memorandum from Energy Secretary Rick Perry, who asked his chief of staff to conduct a review of wholesale power market designs, whether markets are adequately compensating generation resources with on-site fuel supply, and if the changing fuel mix is hindering power grid reliability.

With the changing generation resource mix using more renewables and less coal and nuclear generation, “the erosion of critical baseload resources” presents a reliability concern, Perry said in the memo.

State policies have been put in place in some states to support compensation for nuclear generation assets through zero emission credits, which has angered competitive wholesale power suppliers and brought charges of subsidies in those states.

FERC is holding a two-day technical conference starting on May 1 to examine the interplay between wholesale power markets and state policies.

“I think there is a connection between the continued delay from the White House and the Perry memo,” Slocum told The Foster Report. The Department of Energy’s authority in wholesale power markets is rather tenuous, and the Trump administration may be seeking FERC nominees that would support what Perry outlined in the memo, he said.

Because FERC is an independent agency and has enjoyed nonpartisan political appointees in the past, Slocum said he would challenge any type of connection between a FERC nominee promising to pursue a policy guided by DOE or the White House.

“I can’t understand what the holdup is, other than trying to ensure that a new chairman or others would support the steps” Perry laid out in the memo, Slocum said.

By Tom Tiernan TTiernan@fosterreport.com

[1]   See, Trump Expected to Name FERC Nominees Soon, With McIntyre, Chatterjee Mentioned, FR No. 3139, pp. 3-5.

 

This article appears as published in The Foster Report No. 3146, issued April 28, 2017

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