FERC, saying ‘much has changed’, will review natural gas pipeline policy

  • Susan Phillips
  • Jon Hurdle
FERC's headquarters in Washington, DC. The agency said it will review its longstanding policy on certification of natural gas pipelines.

Marie Cusick/ StateImpact Pennsylvania

FERC’s headquarters in Washington, DC. The agency said it will review its longstanding policy on certification of natural gas pipelines.

The top federal regulator for the pipeline industry said Thursday that it will review its 18-year-old policy on the certification of natural gas pipelines.

The Federal Energy Regulatory Commission gave no specific reason for the review but issued a brief statement saying that “much has changed” in the energy world since the agency began the policy on how to review natural gas pipeline applications in 1999.

The new FERC chairman, Kevin McIntyre, said it was “incumbent upon us to take another look at the way in which we assess the value and viability of our pipeline applications.”

He said the review would be “thorough,” and will take into account the views of all stakeholders.

Critics have long called FERC a “rubber stamp” for the pipeline industry because it approves virtually every pipeline application that comes before it. Claims of overbuilding in the pipeline industry were fueled in November when a report for the Natural Resources Defense Council said that over the last 20 years, FERC has approved more than twice as much natural gas pipeline capacity as was consumed in 2016.

Signs have emerged from FERC itself about reform of its certification process. Commissioner Cheryl LaFleur dissented in October from the commission’s approval of the Mountain Valley and Atlantic Coast pipelines in West Virginia, Virginia and North Carolina, saying both could have significant environmental effects. She said FERC’s evaluation process could benefit from a more balanced approach to a pipeline’s effects.

Analysts said the review signals a recognition that the certification process has been too narrowly based, and may make FERC legally vulnerable.

Carolyn Elefant, a Washington, D.C. lawyer who represents energy companies, landowners and municipalities in pipeline cases, said the review appears to be the result, in part, of growing public opposition to pipeline construction, and of increasing pressure from environmental groups to turn away from fossil fuels.

The FERC review is also likely to reflect more questions about whether the agency pays enough attention to the need for new pipelines, or whether the taking of private property through eminent domain raises constitutional concerns, Elefant said.

She argued that FERC is concerned about lawsuits that have challenged the constitutionality of eminent domain. And because it has based many pipeline approvals on builders’ contracts, it hasn’t built much of a record that it could use to defend its policy in court.

“It’s just basically said, ‘As long as we have these contracts, we have need, and that’s kind of a slim rod to hang your hat on in a federal appeals court even if it is your policy,” she said.

Those criticisms may apply with FERC’s approval of the Atlantic Coast and Mountain Valley pipelines, Elefant said, and that’s been recognized by the new chairman, who is an experienced regulatory attorney.

By submitting the pipeline certification process to review, McIntyre is trying to “get out in front” of future legal challenges, she said.

“If any of these challenges to the constitutionality of eminent domain were to prevail or get any traction, that would almost sink the entire process,” she said.

Lynda Farrell, executive director of the Pennsylvania-based Pipeline Safety Coalition, welcomed the FERC review, which she said reflects a need to more fully consider constitutional rights and environmental protections.

“There needs to be a more seamless process that is consistently considering the constitutional rights of the people who are being asked to adhere to a permit granted by the federal government on the basis that this is for the common good of the people of this country,” she said.

Montina Cole, a senior attorney for NRDC, said the Mountain Valley and Atlantic Coast pipelines run through the same areas and may be examples of overbuilding that should be examined by the FERC review.

In its review, FERC should assess the need for a pipeline on a regional basis, and give more consideration to non-pipeline alternatives to meeting energy needs such as more renewable energy or efficiency measures, Cole said.

She said the review should also look at whether affiliate agreements – in which gas buyers are commercially linked to the pipeline operator – are a true indicator of market demand.

In Pennsylvania and New Jersey, critics of the PennEast pipeline project have argued that there is no true need for the pipeline, and that the builder’s supply contracts are with business affiliates.

Tom Gilbert, campaign director for the New Jersey Conservation Foundation, welcomed the FERC review, which he said would ensure that the pipeline review process would place a priority on the public interest.

The Interstate Natural Gas Association of America, which represents pipeline builders, said it welcomed the review, reversing its earlier opposition to the idea. But the trade group predicted that the process will show that the existing policy has served gas consumers well by quickly allowing new pipelines to supply shale gas to the public.

“We believe that it will be demonstrated that the 1999 policy statement has withstood the test of time quite well,” said INGAA president Don Santa, in a statement. “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.”

 

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