By Rich Heidorn Jr.
Environmentalists and state officials called on FERC this week to broaden its review of natural gas pipeline applications while gas producers and electric generators said only minor changes are needed to the commission’s 1999 policy statement.
FERC received about 2,000 comments in response to its Notice of Inquiry asking whether it should reconsider how it balances project benefits against adverse consequences in light of the shale gas revolution, global warming and other changes since it last considered the issue almost 20 years ago (PL18-1). (See FERC Outlines Gas Pipeline Rule Review.)
Most of the comments before Wednesday’s filing deadline came from individuals opposed to fracking and pipeline expansions.
The commission asked for comments on four topics: the reliance on precedent agreements to demonstrate project need; landowner interests and the use of eminent domain; the evaluation of alternatives and environmental effects under the Natural Gas Act and National Environmental Policy Act; and the efficiency and effectiveness of the commission’s certificate process.
Status Quo
The Edison Electric Institute, Electric Power Supply Association, American Petroleum Institute, American Gas Association and Interstate Natural Gas Association of America (INGAA) generally supported continued use of precedent agreements, while calling for a streamlining of the permitting process and opposing regional reviews of pipelines or consideration of greenhouse gas emissions.
“EPSA believes the assessment of project need should continue to be based on precedent agreements (i.e., contracts with pipeline project customers), which remain the most objective evidence of market demand for pipeline capacity,” said the group, which represents independent power producers. “EPSA urges the commission not to make the certificate review process more unwieldy or challenging at this time in which significant investment in infrastructure will be needed to meet expected demand and ensure reliability.”
The industry groups proposed only modest changes, for example, improvements to FERC’s website and communications to make it easier for landowners to participate in the process.
Other gas backers cited the economic boost the shale revolution has provided. “The energy renaissance that has occurred in this country, spearheaded by the increased development of natural gas production in Pennsylvania, has increased domestic economic activity, has dramatically improved air quality, and has significantly increased the nation’s energy security and global competitiveness,” said the Pennsylvania Chamber of Business and Industry.
The Marcellus Shale Coalition, which represents about 200 producing, midstream, transmission and supply chain members in the shale play, said producers have been hurt by limited pipeline capacity. “Natural gas produced in some regions of Pennsylvania has sold for over 65% less than natural gas produced and sold in other basins across the nation,” it said. “While efforts continue in Pennsylvania and throughout the Appalachian Basin to grow natural gas demand and usage, it is clear that the natural gas produced in Pennsylvania must also be transported to larger, more established markets where demand is greater,” the group said.
Calls for Change
The attorneys general of Massachusetts, Illinois, Maryland, New Jersey, Rhode Island, Washington and D.C. countered that the commission’s reviews are too narrow. “In assessing project need, the commission generally fails to account for the extent of regional need for new gas capacity or the evolving market for gas demand and relies too heavily on precedent agreements as proof of need for isolated projects,” they said.
“The commission’s single-minded reliance on precedent agreements is also contrary to the existing policy statement, which directs the commission to ‘consider all relevant factors reflecting on the need for the project,’ including studies of projected demand, the market to be served and potential cost savings to consumers.”
The American Antitrust Institute said FERC should evaluate precedent contracts between a pipeline and an affiliated customer differently than one with an unaffiliated customer to support the commission’s policy of promoting competition.
“Importantly, the repeal of the Public Utility Holding Company Act in 2005 removed restrictions on integration between energy companies. Vertical integration, particularly between pipelines and electric or gas distribution companies, can create anticompetitive incentives to engage in conduct that restrains competition and harms consumers. These possibilities can strongly influence the incentives motivating pipeline construction and the effects of affiliate precedent contracts on competition and ratepayers.”
INGAA said the commission shouldn’t differentiate between affiliates and non-affiliate customers agreements “because both appropriately represent market need. While FERC has the authority to investigate allegations of undue discrimination in favor of an affiliated entity if it has any concerns, it is unnecessary for the commission to distinguish between precedent agreements with affiliated and unaffiliated entities.”
The Industrial Energy Consumers of America said the current process “does a good job in identifying the need for new pipeline capacity within the context of serving domestic demand.”
But it said the commission should set a higher bar for pipelines intended to deliver gas for LNG exports. “The LNG export ‘cost versus benefit’ equation is significantly different because the supply is not serving the domestic market, which is the ‘public interest.’ LNG exports serve the public of other countries,” the group said.
Regional vs. Individual Review
Others, including the Nature Conservancy and Virginia’s U.S. senators, Mark Warner and Tim Kaine, said FERC should look at the combined impact of multiple projects in a region and seek to collocate them where possible.
“When multiple projects are being proposed [in the same region], we recommend that FERC consider cumulative impacts through issuance of a programmatic environmental impact statement (PEIS) that would simultaneously consider the purpose and need of each project, the aggregate impacts of all proposed or foreseeable projects on the affected area and the optimal combination of pipelines to deliver gas from the production areas to markets,” the environmental organization said. “This request is consistent with the Council on Environmental Quality guidance on ‘Effective Use of Programmatic NEPA Reviews’ issued on Dec. 18, 2014.”
The senators also agreed with the Conservancy and New Jersey Department of Environmental Protection that FERC should do more to limit pipelines crossing land set aside for conservation.
Some commenters said the commission should not issue final certifications for projects that haven’t obtained all required state and federal environmental permits.
Tolling orders
The senators and others also said FERC should end its use of tolling orders, which keep rehearing requests in legal limbo.
“As a result of this strategy, FERC prevents court challenges to its decision in a meaningful time frame,” said the VOICES coalition, which represents more than 200 organizations opposed to fracking. “Meanwhile, it grants the pipeline company the power of eminent domain and the right to begin and continue construction, all the while knowing that challengers are awaiting their ability to challenge the project in court. The result is that even in those cases where legal challenges to FERC approvals have succeeded, the victories have come too late to genuinely impact the FERC decision already rendered.”
The group cited the nearly yearlong tolling order that preceded a successful court challenge to the TGP NorthEast Upgrade Project. “The court determination that FERC had violated the National Environmental Policy Act by engaging in illegal segmentation and failing to consider cumulative impacts came only after the pipeline was fully constructed and in operation.”
A coalition of environmental groups, including the Natural Resources Defense Council, Sierra Club and Earthjustice, said FERC should use an “all relevant factors” approach in determining project need. Relying almost exclusively on precedent agreements, they said, ignores that “there may be alternatives to the proposed capacity to meet the purported demand, such as using underutilized existing pipeline capacity or alternative, cleaner energy resources.”
The groups also said pipelines may not remain economic for their entire 40- to 50-year lifespan because flat load growth and competition from renewables and distributed energy resources may undermine gas demand.
“An integrated, more comprehensive review would assess the need for new pipelines based on the energy needs of the region(s) directly affected by the project. Such an assessment would examine factors such as existing and proposed pipeline capacity, long-term energy needs and state policies.”
GHG Emissions
Perhaps the most contentious issue FERC will have to navigate is pipelines’ contributions to GHG emissions.
Most of the individual comments filed were form letters from fracking opponents and climate activists in which only the first sentence varied. (“Dear Secretary: Your greed in placing profit ahead of respect for the Earth and its inhabitants is appalling.” “Dear Secretary: We need to keep as many fossil fuels in the ground as possible, and we need to protect our families and our homes from pipeline leaks and environmental damage.” “Fracking is an irresponsible action, which puts our health in danger. It devastates water and land.”)
All five commissioners voted in favor of initiating the pipeline review. But Democrats Cheryl LaFleur and Richard Glick have repeatedly dissented or issued concurrences in protest of the Republican majority’s refusal to consider GHGs on individual projects.
Last August, the D.C. Circuit Court of Appeals ruled that FERC’s environmental impact statement for the Southeast Market Pipelines Project should have included “reasonable forecasting” of the project’s impact on GHG emissions. In May, however, the Republican majority said FERC will no longer prepare upper-bound estimates of GHG emissions when “the upstream production and downstream use of natural gas are not cumulative or indirect impacts of the proposed pipeline project.” Republicans Kevin McIntyre, Neil Chatterjee and Robert Powelson said they were taking the action to “avoid confusion as to the scope of our obligations under NEPA and the factors that we find should be considered” when determining whether a project is in the public convenience and necessity under the NGA. (See FERC Narrows GHG Review for Gas Pipelines.)
Numerous commenters disagreed in their filings this week.
The Harvard Electricity Law Initiative argued that “accounting for the economic risks and environmental harms of downstream and upstream greenhouse gas emissions in a certificate proceeding is consistent with judicial precedent and commission practice.”
The NRDC coalition quoted from a March dissent by Glick, who called climate change “the single most significant threat to humanity.”
“It is difficult to understand how NEPA’s demand that an agency take a ‘hard look’ at the environmental impacts of its actions can be satisfied if the impacts of GHG emissions are ignored,” he wrote.
EEI and individual utilities said, however, that pipelines have helped reduce CO2 emissions by allowing gas generators to replace coal.
The Competitive Enterprise Institute, a conservative think tank, opposed considering GHGs, saying “Saving the planet one gas pipeline at a time is a fool’s errand.
“Worse, importing climate concerns and [social cost of carbon] analysis into public convenience and necessity determinations will fuel spurious ideological controversies, discourage economically beneficial investment in U.S. energy infrastructure and make natural gas prices more volatile.”
