Wellinghoff Departs FERC

There probably will be neither tears nor jeers from the pipeline community over the departure of FERC Chairman Jon Wellinghoff. He announced his exit in late May and is staying on until President Obama nominates a successor.

[Editor’s note: This article went to press before President Obama announced the nomination of Ron Binz, the chairman of the Colorado Public Utilities Commission from 2007 to 2011. The comments on other possible nominees below are left for the reader’s consideration.]

At the top of the list of possible replacements are the two Democratic FERC commissioners, John Norris and Cheryl LaFleur. Norris might have the edge since his term extends to 2017 while LaFleur’s ends next year. Also Norris was a public utility commissioner; LaFleur was an electric industry executive. Another possibility is Colette Honorable, chairman of the Arkansas Public Service Commission. An African-American woman, she would give President Obama a diversity bonus at a time when he has been criticized for the white maleness of appointees in his second term administration. She also has a substantial gas pipeline background, and serves on the PHMSA Technical Pipeline Safety Standards Committee as well as the National Association of Regulatory Utility Commissioners Pipeline Safety Task Force.

Wellinghoff has shown very little interest in gas issues. He delegated the issue first to Marc Spitzer, who was a commissioner until 2011, for five and a half years, paralleling Wellinghoff’s tenure.

Spitzer, now a partner at Steptoe & Johnson, says, “The fact that he didn’t go to Houston and make speeches on natural gas doesn’t mean he did not care about the issue.” Spitzer points to the new pipeline miles sited during Wellinghoff’s term, as well as some liquid natural gas facilities and the smooth working of the FERC office of energy projects, which Spitzer calls one of the best offices in the entire federal government. Spitzer adds, however, “We didn’t always see eye-to-eye on natural gas issues.”

Commissioner Philip Moeller has lately picked up the natural gas mantel, to the extent anyone at FERC has, particularly with regard to gas/electric coordination issues. However, on that latter, important issue, FERC has made very little progress. At a recent House committee hearing, Moeller and LaFleur testified. Wellinghoff was absent. In fact, the last time he testified before any congressional committee was in October 2011.

DOI Makes Industry Concessions With New Fracing Proposal

Early indications are that the Department of Interior (DOI) made some favorable changes to its proposed rule on fracing — formally called the well stimulation rule. The proposed rule that department issued on May 11 appears to take into account some of the objections oil and gas companies raised when the DOI issued an earlier proposed rule one year ago. Groups such as America’s Natural Gas Alliance criticized that earlier proposal for creating a federal regulatory structure which would supersede what many believe is strong state regulation already in place.

Drilling on federal and Indian lands has dropped off precipitously over the past few years compared to drilling on non-private lands. Some of that fall off may have been due to the recession. But industry groups argue that the difficulty of obtaining federal permits is a serious impediment to drilling, and that a new federal regulatory program tied to fracing would only exacerbate that situation.

To answer that concern, the new proposed rule adds a provision allowing the Bureau of Land Management (BLM), the agency with jurisdiction within the DOI, to approve a variance of any new federal standard that would allow technologies, processes or standards required or allowed by the state or tribe to be accepted as compliance with the upcoming BLM rule.

Amy Farrell, vice president of regulatory affairs for America’s Natural Gas Alliance, said “It is encouraging that the administration revisited its original proposal and appears to have made some favorable changes, including accounting for the expertise and work being done at the state level. We will reserve judgment on the proposal more broadly until we have had a chance to thoroughly evaluate it.”

But the American Petroleum Institute (API) continues to question the need for any new federal regulatory program. Erik Milito, API director of upstream and industry operations, says rigorous state rules and state-based tools, such as FracFocus.org, are already in place to ensure responsible oil and natural gas development. “States have led the way in regulating hydraulic fracturing operations while protecting communities and the environment for decades,” he states. “While changes to the proposed rule attempt to better acknowledge the state role, BLM has yet to answer the question why BLM is moving forward with these requirements in the first place.”

Key Republican members of Congress echo the API. House Energy and Commerce Committee Chairman Fred Upton (R-MI), Energy and Power Subcommittee Chairman Ed Whitfield (R-KY), and Environment and the Economy Subcommittee Chairman John Shimkus (R-IL) issued a joint statement saying, “The rule remains an unnecessary layer of red tape standing in the way of important energy production and job creation opportunities.”

Bills Would Speed Up Approval of Pipeline Construction Applications

New legislation designed to force federal agencies to move faster on new interstate pipeline construction applications should clear the House easily. The Senate may be a different story. Rep. Mike Pompeo (R-KS) introduced the Natural Gas Pipeline Permitting Reform Act (H.R. 1900) against the backdrop of pipeline infrastructure shortfalls in places such as New England and the Midwest.

However, the bill appears to address a problem that, if it exists at all, is not a big problem. Interstate pipelines have actually been satisfied with the FERC approval process. Don Santa, the INGAA Chairman and CEO, told the Senate Energy and Natural Resources Committee on May 14, “the current process for the review, approval, permitting and siting of natural gas pipelines generally works well.” However, occasionally agencies such as the Fish and Wildlife Service (FWS) and National Oceanic and Atmospheric Administration (NOAA) have dragged their feet on approving construction after the FERC has greenlighted a project.

The Pompeo bill for the first time sets a deadline of 12 months for FERC to approve or deny a pipeline permit application. The other federal agencies with permitting authority would have 90 days (which may be extended by another 30 days) to act on the permit to build the pipeline. If the agency does not issue a determination within 90 days, the permit is considered granted.

Santa also mentioned a second bill in his testimony to the committee. That is the Energy Infrastructure Improvement Act (H.R. 1587) which would allow the Secretary of Interior to approve construction of a pipeline through national park land. Today, before a pipeline can be built within a national park, Congress must pass a bill.

The odd situation where Congress must authorize pipeline projects in national parks is the result of an early 20th Century law which gave the Secretary of the Interior authority to approve rights-of-way across parklands for projects such as electric transmission and distribution lines, water canals and ditches (and flumes), facilities associated with mining, and telephone and telegraph lines. Natural gas pipelines did not exist when the statute was enacted, and thus were not included.

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