FERC tackles first gas policy review since 1999

By Rod Kuckro, Jenny Mandel | 04/20/2018 07:12 AM EDT

Federal regulators expect an outpouring of comments on an inquiry launched yesterday on whether they should change the way they review and approve interstate natural gas pipelines.

The Federal Energy Regulatory Commission is taking comment on its pipeline policy.

The Federal Energy Regulatory Commission is taking comment on its pipeline policy. Ryan McKnight/Flickr (building); Bilfinger SE/Flickr (pipelines)

Correction appended.

Federal regulators expect an outpouring of comments on an inquiry launched yesterday on whether they should change the way they review and approve interstate natural gas pipelines.

In what Federal Energy Regulatory Commission Chairman Kevin McIntyre described as an exercise in "good governance," the agency yesterday announced a "Notice of Inquiry" (NOI) on its policies for certifying pipelines.


FERC’s current policy on how it reviews pipelines dates from 1999, before the shale boom pushed natural gas production to record highs and climate change became an urgent international policy priority.

In remarks on the launch of the process to reassess the agency’s stance, McIntyre said he is "neutral" on whether the policy needs updating.

"I am looking forward to the input and will make my decision on that basis," McIntyre said, adding that the NOI should not be read "as a forecast of policy direction or action FERC may take" or an indication "that the current policy statement is ineffective or that changes are going to be made."

McIntyre was just 15 days into his tenure at FERC on Dec. 21 when he announced at his first public meeting that a review of the 1999 policy would be his first significant initiative as chairman.

"We as a government institution owe it to all concerned to look at processes and policies from time to time," McIntyre said yesterday of the policy review.

"Much has changed in the energy world since 1999, and it is incumbent upon us to take another look at the way in which we assess the value and the viability of our pipeline application," he said. "Let’s dust off the existing playbook and take a fresh look at it and ask ourselves the really hard questions around ‘is there any way we can improve this?’" (Energywire, Dec. 22, 2017).

Comments on the 58-page NOI will be due 60 days after its publication in the Federal Register, likely to occur next week.

"We actually don’t have a target date for issuance" of a revised policy, McIntyre said in response to a question from E&E News.

"We’re kicking around that very timing question internally right now, but we’re not even close to a final resolution of it. And of course we’ll be driven in part by the volume and complexity of the input that we get from stakeholders in the NOI process," he said.

During the NOI proceeding, FERC will continue to process natural gas facility cases consistent with its current policy statement and to make determinations on a case-by-case basis, the agency said.

4 questions

FERC is posing four questions in the NOI, asking first if the agency should adjust its methodology for determining whether there is a need for a proposed pipeline, including consideration of precedent agreements and contracts for service as evidence of such need.

It is also asking about consideration of the potential exercise of eminent domain and of landowner interests related to a proposed project, and its processes for evaluating the environmental impacts of a proposed project.

Lastly, FERC wants to know whether there are specific changes it should consider implementing to improve the efficiency and effectiveness of its certificate processes, including pre-filing, post-filing and post-order issuance.

McIntyre said it is "quite coincidental but perhaps fortuitous" that FERC’s NOI dovetails with a memorandum of understanding he signed April 9 along with leaders of a dozen federal agencies to streamline environmental permitting processes to reach decisions in two years.

"I salute that goal," he said. "What could be wrong with looking for ways to cooperate better, to achieve more efficient and streamlined outcomes?"

Commissioner Cheryl LaFleur said the NOI is an important and probably overdue first step in reviewing FERC’s policy.

She suggested the commission should consider a regional approach to pipeline planning and "how we do our environmental review," as well as whether and how the agency factors in the social cost of carbon, and consideration of upstream and downstream greenhouse gas emissions in determining whether a project is in the public interest.

She urged those planning to offer comments to "really focus on the specificity and clarity of your comments and suggestions" about how FERC policies might change.

"It’s much easier to criticize a current process than to design a new one thinking all the way through," she said.

Big, divisive questions

The review promises to bring out starkly conflicting responses on divisive questions like eminent domain use and accounting for a project’s contribution to climate change.

On eminent domain, for example, pipeline opponents have leaned on conviction around property rights to mobilize landowners across the political spectrum, finding it an effective rallying cry. Pipeline companies, on the other hand, have in some cases had trouble accessing properties to carry out even preliminary activities like environmental assessments that feed into state and federal permitting, as in the case of the PennEast pipeline (Energywire, Feb. 20).

One of the issues highlighted by LaFleur — the increasing incidence of corporate affiliations between pipeline developers and end users — was called out in a September report by the groups Oil Change International, Public Citizen and the Sierra Club. They made the case that several of the most contentious pipeline projects currently underway have been permitted in part based on customer demand evidenced largely by such precedent agreements.

Those affiliate-company agreements are susceptible to manipulation by corporate partners claiming inflated demand projections to support pipeline build-out, the groups said (Energywire, Sept. 19, 2017).

Another of LaFleur’s highlighted questions, how FERC should incorporate greenhouse gas emissions into its permitting, is at the center of ongoing court battles over the Sabal Trail pipeline that nearly triggered a highly unusual shutdown of a pipeline after it had been put into service (Energywire, March 8).

In response to the NOI, the Natural Resources Defense Council and 10 other environmental groups praised FERC’s move to re-evaluate the policy and urged the agency to adopt a "21st century approach" to pipeline permitting.

In a preview of issues the groups are likely to submit in the NOI comment docket, they urged FERC to adopt "project need" as the first factor to consider in weighing a pipeline proposal, over the current approach of first considering who would pay for it. To evaluate need, they said, the agency should look at "all relevant factors" rather than simply end-user demand as evidenced by precedent agreements.

If those precedent agreements depend on affiliate contracts, the agency should set a more rigorous standard of review because the developer "essentially is contracting with itself," they said.

The groups also urged FERC to move to a regional review model, more closely consider climate change in its reviews and bolster public participation.

Natural gas industry advocates were quick to note that while the world has changed since 1999, the current review process has supported robust industry growth.

Don Santa, president and CEO of the Interstate Natural Gas Association of America, said it is "understandable" that FERC is evaluating its 1999 policy. But he said, "The ability to expand and modify interstate natural gas pipelines under FERC’s existing policy has served the nation well. This pipeline infrastructure has facilitated the world’s most competitive natural gas commodity market and has enabled American consumers and industry to benefit from our natural gas abundance."

The American Petroleum Institute, which represents both natural gas and oil interests, described FERC’s current review process as successful. "FERC’s robust review process has provided the commission with an effective tool to balance the concerns of the public and the industry and has enabled the U.S. to construct a safe, reliable and effective natural gas transportation system," said API Midstream Group Director Robin Rorick.

Click here to read the NOI.

Correction: A previous version of this story incorrectly stated that Sabal Trail was temporarily shut down.