FERC Review Could Upend U.S. Pipeline Approval Process
The approval process for new natural gas pipelines in the United States could be up for an overhaul, after the Federal Energy Regulatory Commission (FERC) asked for comments on a regulation that has been in place for nearly 20 years.
“The once-routine approval of natural gas pipelines has become fraught in recent years, as environmental protesters have tried to lean on the commission to get it to reject pipes in the name of climate change,” Politico Morning Energy reports. FERC decisions “often wind up in court,” and the D.C. Circuit Court of Appeals “has already kicked one pipeline back to FERC over its failure to consider end use impacts.”
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The commission has also heard from homeowners protesting construction projects, and environmental groups asking it to assess pipeline projects “holistically, and not in small, individual segments,” ME notes.
In a profusely-footnoted letter to the five FERC commissioners, a group of 11 major environmental groups led by the Natural Resources Defense Council and the U.S. Sierra Club applauded the agency’s decision to revisit its 1999 Natural Gas Policy Statement and called for a “21st century approach to pipeline review”, adding that the “threshold question” in any review should be the need for new pipeline infrastructure.
“The key determinant in deciding whether a project is in the public interest is whether the project is needed to support energy demands,” the organizations stated. “A project that is not needed to satisfy energy requirements that also will cause permanent environmental and economic impacts is antithetical to the public interest.”
The commission’s official Notice of Inquiry (NOI) “seeks comment on how FERC evaluates the need for pipelines, its use of eminent domain, the environmental impact of pipeline projects, and the efficiency of FERC’s permitting process,” Utility Dive states. Parts of the NOI focus on transparency and efficiency for generation owners and utilities, and “the order would also benefit energy storage by classifying it as a large-scale generator for interconnection.”
In the months leading up to the NOI, FERC commissioners questioned the practice of approving new pipelines based on contracts, or “precedent agreements”, signed before the projects were approved. Those deals were previously taken as reasonable evidence that there was demand for a project, but FERC is now less confident in the approach, particularly when the deals are signed between pipeliners and their own affiliated companies.
The existence of “precedent agreements that are in significant part between the pipeline developer and its affiliates is insufficient to carry the developer’s burden to show that the pipeline is needed,” Commissioner Richard Glick wrote in January, in a dissent to FERC’s approval of the proposed PennEast pipeline in Carbon County, Pennsylvania.
But “the Republican majority at FERC has consistently voted to approve pipeline projects under current rules since the agency’s quorum was restored last year, and at Thursday’s FERC meeting they sought to reassure the gas sector that they are not looking to overhaul the approval process,” Utility Dive notes.
“We don’t build pipelines in this country on speculation,” said Trump-appointed commissioner Robert Powelson, and that’s a “damn good thing for consumers.”
But one analysis cited by the Seeking Alpha investment blog predicted that closer attention to public input and actual market need for pipelines would lead to longer approval processes. The story lists a handful of pipelines and one export facility for liquefied natural gas (LNG) that would be affected by the change in process.