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Ukraine ‘Energy War’ Demands Fast Gas Permits, Manchin Says (1)

March 3, 2022, 3:51 PMUpdated: March 3, 2022, 5:46 PM

U.S. energy regulators’ decision to scrutinize new natural gas pipelines and export terminals are a threat to the country’s energy security and suggest a partisan Democratic agenda at the Federal Energy Regulatory Commission, the Senate Energy and Natural Resources Committee’s top Democrat and Republican charged Thursday.

Despite the bipartisan criticism, it is unlikely Congress would require FERC—an independent arm of the Energy Department—to kill a new policy to require more information from interstate natural gas pipeline developers on a proposed project’s economic justification and environmental impact.

Lawmakers could attach a rider blocking the policies to an upcoming budget resolution to block the order or pursue the Congressional Review Act, which allows Congress to repeal federal agency rules. Two Republicans floated eliminating FERC altogether. But House Democrats and the White House would have to agree to any changes.

FERC’s decision “represents a short-sighted attack on fossil fuel resources without recognizing the heavy lifting they have done and continue to do—and the integral role they play in our economy going forward,” Sen. Joe Manchin (D-W.Va.), the committee’s chair, told the five members of the Federal Energy Regulatory Commission.

The commission’s actions, along with recent court decisions against pipelines, “serve to further shut down the infrastructure that we desperately need as a country and further politicize energy development in our country,” Manchin said.

‘An Energy War’

Russia’s invasion of Ukraine, which has roiled global energy markets, raises the stakes, Manchin said.

“This is, in many ways, an energy war—and we need to treat it with that kind of gravity,” he said.

Manchin was aligned with the committee’s top Republican, Sen. John Barrasso (R-Wyo.)

“It’s difficult to overstate the damaging impact of these two orders,” Barrasso said, making it “next to impossible to build new gas infrastructure.”

In addition to the economic justification and environmental impact policy, FERC announced Feb. 17 it will require projects above a 100,000-metric-ton emissions threshold to be automatically subject to a more stringent environmental review.

FERC’s 3-2 Democratic majority—over dissents from its two GOP members—voted to advance the two gas policies that updated the 1999 certificate policy statement under the Natural Gas Act. The statement guides the commission’s project reviews, which balance a proposed project’s benefits against its environmental impacts.

‘No Other Agenda’

The commission’s new policies provide more legal certainty for gas project developers, FERC Chairman Richard Glick told lawmakers Thursday. “I have no other agenda,” Glick said.

Environmental groups have long accused FERC of being a rubber-stamp for such projects, and recent court rulings have ordered the commission to redo assessments.

The new policies lower the risk of costly litigation and project delays for pipeline developers, Glick said. Imposing new standards and asking for more information does not increase the likelihood a project would be denied, he said.

“If we sat there and didn’t do anything, these cases would be sitting there and sitting there, and we’d be getting criticized because we’re not moving cases,” Glick said. “That’s what I’m doing here: I’m trying to move cases.”

But investors have already begun pulling back, Republican commissioners James Danly and Mark Christie argued. FERC’s requirements that project developers mitigate a broader range of climate impacts are unclear and will impose extra costs and delays, Danly said.

“That makes it impossible for you to pursue any application without, at every single stage, reassessing the economic fundamentals of the project you’re proposing,” he said.

“The chilling effect is happening now,” Danly said. “In the board rooms, they’re discussing what they’re going to do for the sunk costs that have already gone into these projects.”

The policies could be tweaked, said Willie Phillips, who served as a deciding vote on the policies after he joined the commission in December.

“If there’s a better framework or there are reasonable, legally durable modifications we can make to these policies, I am committed to doing so,” Phillips said.

Change Course

The gas industry and its supporters have decried the new rules and urged FERC to change course.

The policies will have an “immediate deleterious effects,” with the greenhouse gas emission threshold would apply to 75% of projects currently under review, Amy Andryszak, president and CEO of the Interstate Natural Gas Association of America, told the committee in a letter.

The policies “advance the apparent view of FERC’s three Democratic commissioners that the use of natural gas is inherently harmful and must be ‘mitigated’ in order to be in the public interest—a view that is clearly contrary to the letter and intent of the Natural Gas Act,” Andryszak wrote.

The American Gas Association, which represents local gas utilities, and the Industrial Energy Consumers of America, both wrote to the committee to oppose the policies.

The policies are already taking effect in gas projects. About 40 pending applications before FERC may have to submit supplemental information to meet the commission’s new standards.

Commission staff on Wednesday cited the policies in finding “significant” climate impacts from the Regional Energy Access Expansion Project, proposed by Williams Companies’ Transcontinental Gas Pipe Line Company for Pennsylvania, Maryland, and New Jersey.

The project’s annual operation and downstream emissions total 16.62 million metric tons of carbon dioxide equivalent, FERC staff found in the draft environmental impact statement. The commission has yet to take action on that project.

Williams didn’t immediately respond to a request for comment.

On Thursday, Barrasso submitted to the record a letter from Alan Armstrong, president and CEO of Williams Companies.

“One thing is clear: Instead of providing more clarity and regulatory certainty for natural gas infrastructure projects, this policy statement creates more confusion,” Armstrong wrote.

(Updated with additional comments.)

To contact the reporter on this story: Daniel Moore at dmoore1@bloombergindustry.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloombergindustry.com; Chuck McCutcheon at cmccutcheon@bloombergindustry.com

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