FERC to Review Pipeline Policy Statement

New Federal Energy Regulatory Commission (FERC) Chairman Kevin McIntyre’s announcement that the commission will review its 1999 pipeline policy statement comes in the wake of pressure from the Trump Administration to ease permitting of various infrastructure projects. President Trump issued an Aug. 15, 2017, Executive Order (E.O.) 13807 entitled Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects.

But McIntyre and the four other commissioners, three of them also new, will hear voices pushing them in the opposite direction. Environmentalists will probably echo complaints from a ruling last August from the U.S. Court of Appeals for the District of Columbia, which slapped FERC’s hands for an incomplete environmental impact statement in conjunction with a major Florida pipeline project. Of course, that same court cleared the way last summer for FERC to take the unprecedented step of clearing construction for an eight-mile spur of the Millennium Pipeline when New York State dragged its feet in making a decision on a Clean Water Act permit.

Kurt Krieger, an attorney with Steptoe & Johnson, who does extensive pipeline litigating, says it is possible that parties on both sides will try to inject into the coming debate what is or isn’t pre-empted by the 1999 policy statement. Environmentalists will look for purchase, as will the industry. But Krieger believes the current policy works extremely well.

The 1999 policy statement alludes to potential adverse environmental effects as one thing FERC must consider prior to approving a certificate for construction under Section 7 of the Natural Gas Act. But the statement did not call for the elimination of all adverse environmental impacts, just a mitigation of them to the extent possible, and then weighing those remaining concerns against the benefits of the project. That could include meeting unserved demand, eliminating bottlenecks, granting access to new supplies, lowering costs to consumers, providing new interconnects that improve the interstate grid, providing competitive alternatives, increasing electric reliability, or advancing clean-air objectives.

The 1999 policy statement was adopted against the backdrop of an anticipated increase in the demand for natural gas, and concerns about the use of unnecessary rights-of-way and the potential for overbuilding with the consequent effects on existing pipelines and their captive customers. The statement ushered in the standard of “incremental pricing” as the basis for approval and changed the then-policy, which had a presumption in favor of rolled-in pricing, but was tossed out because it was considered a subsidization by the sponsor’s existing customers.

INGAA CEO Don Santa welcomed the review. “We believe that it will be demonstrated that the 1999 policy statement has withstood the test of time quite well,” he said. “The criteria specified in the policy statement continue to provide FERC with what remains a robust framework for evaluating the range of questions that must be addressed in determining whether a proposed pipeline meets the public convenience and necessity.”

Asked whether that means INGAA is happy with the 1999 policy statement as is, Cathy Landry, INGAA spokeswoman, answered, “The short answer is yes. But we will have more fulsome comments if and when FERC seeks them.”

The original commitment from McIntyre to re-examine the 1999 statement came in the form of answers he submitted to written questions presented to him by Sen. Maria Cantwell (D-Wash.) after his

September confirmation hearing at the Senate Energy and Natural Resources Committee. Cantwell alluded to a concurring opinion issued by former Obama Administration FERC Chairman Norman Bay, who suggested the FERC should reconsider its use of precedent agreements between pipelines and potential future customers to assess whether a proposed new pipeline is needed. In particular, Cantwell wrote that Bay argued the precedent agreements involving pipeline affiliates are particularly suspect.

She asked whether McIntyre agreed that the commission should reexamine its policies for assessing whether a new pipeline is necessary. McIntyre answered that FERC already does a detailed evaluation of pipeline need as part of its review of gas pipeline certificate applications. He then referred to the 1999 policy and wrote, “I also believe that agencies periodically should review their policies to ensure they are effective, and if confirmed I will give these important issues concerning pipeline need the careful attention they deserve, and will work to ensure that the Commission’s review process considers all relevant issues.”

McIntyre also referred to his intention to review the 1999 policy in answer to Cantwell’s question about the Appeals Court ruling on the final environmental impact statement (FEIS) for the Southeast Market Pipelines (SMP) Project, the major component of which is the already-completed, 515-mile Sabal Trail project in Florida, a joint venture of Spectra Energy, NextEra Energy and Duke Energy. The court censured the FERC for inadequately accounting for new greenhouse gas emissions from the SMP project.

FERC subsequently issued a draft supplemental EIS on September 27, 2017, ostensibly answering the Appeals Court’s concerns. It concluded: “…constructing and operating the SMP Project would result in temporary and permanent impacts on the environment. We also conclude that with the applicants’ implementation of their respective impact avoidance, minimization and mitigation measures, as well as their adherence to the measures we have required to further avoid, minimize and mitigate these impacts, operating the SMP Project would not result in a significant impact on the environment.”

On November 20, 2017, eight Florida Riverkeeper groups criticized the supplemental EIS (SEIS) on grounds that it still failed to quantify greenhouse gas emissions from the project and that the FERC ignored changes in the Florida picture with regard to the need for additional natural gas in the state. The eight called the SEIS “incorrect and inadequate.” The SEIS was also criticized by two Democratic U.S. senators, who faulted FERC for not using what is called “the social cost of carbon” method to estimate greenhouse gas emissions. The SCC was developed by an interagency federal working group and has been used in more than 75 federal rulemakings since 2010, according to Sens. Sheldon Whitehouse (R.I.) and Michael Bennet (Colo.).

Republican Senator Criticizes FERC on LNG Export Terminal Approval

While Democratic senators are pressing FERC to be more exacting on EIS for new pipelines, Republican senators are pressing the commission to move faster on EIS for liquid natural gas (LNG) projects. At hearings in the Senate Energy and Natural Resources committee in December, Sen. Cory Gardner (R-Colo.) asked an FERC official why the agency had not completed a single final or draft EIS for an LNG project in 2017. Gardner noted there are 11 major LNG export projects awaiting FERC action, including the Jordan Cove project in Oregon, which Gardner said was important to Colorado gas producers as a potential outlet to markets in Asia.

Gardner argued that Jordan Cove has been subjected to a “tough, long FERC approval process made even more complex and rigorous by road blocks the agency has put in place.” He emphasized that LNG export was becoming more important for his state as the Midwest becomes more developed, presumably receiving shale gas from Pennsylvania and elsewhere in the East, resulting in Colorado losing Midwest markets and Rockies gas becoming “more stranded.” He noted the importance of Far

East markets such as South Korea, Taiwan and Japan, which have all expressed interest in stable sources of natural gas. Gardner noted it is in the U.S.’s interest to serve those markets so they do not become reliant on China for supply.

Terry Turpin, director, Office of Energy Projects at the FERC, responded that FERC’s environmental review is beholden to the Department of Transportation, which has a voice in the siting of LNG facilities. The DOT has had to re-examine its regulations as LNG facilities have shifted from importing natural gas to exporting. “Having DOT put the resources toward getting those things solved is vital,” Turpin said.  ■

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