Gas Projects in Limbo as Energy Regulators Split on Emissions

The Biden administration’s guidance asking the Federal Energy Regulatory Commission to weigh greenhouse gas emissions caused by natural gas pipeline projects has prompted a stalemate at the independent agency that energy experts warn threatens to delay infrastructure decisions.

Regulators have debated for years how to analyze and weigh the significance of gas pipeline emissions. Environmental groups and front-line communities argue the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) require FERC to consider upstream emissions caused by producing the gas feeding the pipeline and downstream emissions from burning the gas delivered by the pipeline.

FERC has largely insisted on estimating emissions directly from a proposed pipeline project, saying upstream emissions aren’t “reasonably foreseeable” indirect emissions as defined by NEPA and has only occasionally quantified downstream emissions.

But in January, the White House Council on Environmental Quality added fuel to the debate. CEQ released interim guidance that strongly encouraged, but didn’t mandate, federal agencies to consider the full scope of greenhouse gas emissions under NEPA.

The White House singled out gas projects. “Natural gas pipeline infrastructure,” CEQ wrote in a footnote, “creates the economic conditions for additional natural gas production and consumption, including both domestically and internationally, which produce indirect (both upstream and downstream) GHG emissions that contribute to climate change.”

Seeking Compromise

FERC Chairman Willie Phillips, a Democrat presiding over a commission split 2-2 between the political parties, hasn’t said how the commission will interpret CEQ’s guidance. Phillips told Sen. John Barrasso (R-Wyo.) in May that commission staff was still assessing it and that the guidance was “advisory and not binding.”

Phillips has pledged legal stability for the gas industry and has approved gas capacity at a faster pace than in recent years, garnering support from Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee. Last year, the commission tabled an effort to impose a greenhouse gas emissions threshold that would automatically trigger a more stringent environmental review, and hasn’t reopened it.

But Phillips may have to address it soon—one way or another—or face project delays.

The latest twist came at FERC’s July meeting, when the commission unexpectedly struck six of nine proposed gas projects from consideration. While FERC can’t discuss internal deliberations, the unusual move to strike so many items at once—and commissioners’ statements on other gas orders—led analysts to suspect a split over emissions drove the disagreement.

FERC needs to explain how it’s interpreting the White House guidance and addressing greenhouse gas emissions, ClearView Energy Partners, an independent research firm in Washington, wrote in a note to clients last month.

“Overall, the commission appears to be losing common ground instead of gaining it,” ClearView analysts wrote.

In July, Phillips pointed reporters to a “compromise” approach to gas reviews, first brokered in April with Mark Christie, a Republican commissioner. Phillips and Christie said FERC can estimate emissions from construction, operation, and downstream emissions but decline to determine significance of their impact on climate change.

There aren’t criteria for determining significance, and the courts in May backed up FERC on the issue, the commissioners wrote in July in concurring with an order approving a gas project.

Different Views

But the commission’s other two members disagreed with that—for divergent reasons.

Commissioner Allison Clements, a Democrat, has pressed the commission to do more to study gas projects. Commissioner James Danly, a Republican, argues the commission can’t begin to venture into assessing upstream or downstream emissions.

Clements called for FERC to figure out how to assess the significance of emissions. “The commission’s failure to come to grips with the difficult questions surrounding the assessment of GHG emissions is fraught with legal risk,” she wrote in a concurring statement.

Danly, in a partial dissent, called out Phillips and Christie for ignoring the White House guidance, suggesting “my colleagues are reluctant to declare that we are declining to implement CEQ’s non-binding guidance.”

Project developers didn’t respond to requests for comment or declined to comment on FERC’s actions.

Some FERC watchers have blamed Danly, who has called for the agency to act quicker to advance gas projects, for holding up orders.

Shortly after the July meeting, Neil Chatterjee, a former FERC chairman and Republican, posted online that Phillips’ and Christie’s joint statement shows “what the path forward is for approving gas projects.”

“It appears Commissioner Danly’s opposition to the framework is what is holding up these much needed projects,” Chatterjee wrote on X, the platform formerly known as Twitter.

“I appreciate Commissioner Danly’s legal acumen - but sometimes you can’t let perfect be the enemy of the good,” he wrote. “These are necessary projects with significant economic implications that must move forward.”

Looking for Certainty

FERC meets Sept. 21 and is scheduled to revisit four of the six proposed natural gas projects that were struck in July, according to an agenda released Sept. 14. Gas developers are looking for certainty, said Daniel Archuleta, a partner at Troutman Pepper who leads the firm’s gas pipeline practice.

“Given that we do not know why exactly these projects were previously pulled from the agenda, I very much think that there is a significant risk of projects facing significant delays if we don’t see them come back up in the near future at FERC for a vote,” Archuleta said before the agenda was released.

“And even if they are put on the agenda in the near future, there’s no guarantee they’re going to get out or if they could be pulled again,” he said.

At the same time, FERC is facing a torrent of litigation from environmental groups who argue the commission is abdicating its duty under NEPA to analyze direct, indirect, and cumulative effects and under the NGA to balance economic needs against environmental impacts.

This month, the U.S. Court of Appeals for the District of Columbia Circuit heard arguments in a case about whether FERC should have made a significance determination related to the level of greenhouse gases emitted by the proposed Evangeline Pass Expansion Project in Louisiana and Mississippi.

FERC is ignoring the law when it avoids CEQ’s NEPA guidance, said Moneen Nasmith, a senior attorney for national climate issues at Earthjustice, which isn’t litigating that case. Such analysis would lead the commission to reject gas projects, instead of approving virtually all of them, she said. Natural gas is primarily composed of methane, a greenhouse gas that is 80 times more potent than carbon dioxide.

“FERC doesn’t get to say, oh, we’re going to ignore one of those harms because we don’t have consensus across commissioners,” Nasmith said. “And they’re going to just keep getting sued because they’re not complying with the law.”