Bloomberg Law
Feb. 17, 2022, 7:30 PMUpdated: Feb. 17, 2022, 10:14 PM

New Gas Pipelines Draw Fresh Scrutiny by Energy Regulators (1)

Daniel Moore
Daniel Moore

U.S. energy regulators plan to look more closely at the economic need and environmental impacts of new interstate natural gas pipelines—a consequential update of a 23-year-old policy that underpins federal pipeline reviews.

Gas pipeline reviews will take into account a proposed project’s effect on climate change, look at a wider set of impacts on landowners and environmental justice communities, and scrutinize the economic need for a project beyond its contracts with shippers, the Federal Energy Regulatory Commission announced Thursday.

The American Gas Association criticized FERC’s action, which was approved 3-2, with three Democrats in favor and two Republicans opposing. Republican commissioners argued the commission overstepped its authority.

FERC also set a new threshold to determine reviews under the National Environmental Policy Act.

The commission will automatically prepare an environmental impact statement for proposed pipelines and liquefied natural gas terminals with estimated greenhouse gas emissions of at least 100,000 metric tons per year. Proposed projects falling under that threshold will be subject to a less stringent environmental assessment.

It remains to be seen exactly how FERC applies the new guidance. At least two dozen natural gas projects are in some stage of FERC review, according to the commission. FERC is seeking comment on the greenhouse gas standard, but will apply both policy statements to the pending projects.

‘A Lot Has Changed’

FERC’s Democratic majority cited major changes in the country’s natural gas landscape: a boom in natural gas pipeline development spurred by increased shale gas production; recent federal appeals court rulings that ordered the commission to redo natural gas reviews; and the rollout of renewable energy like wind and solar.

“A lot has changed since 1999,” FERC Chair Richard Glick, a Democrat, said at the meeting’s outset.

“While we don’t have a unanimous approach today, my hope is that these policy statements will provide project developers, consumers, landowners, and residents of impacted communities—and the commission itself—with a more legally durable path forward,” Glick said.

Those actions were supported by Democratic commissioners Allison Clements and Willie Phillips and opposed by the commission’s two Republicans, James Danly and Mark Christie, who filed dissenting statements.

“I don’t think this is going to help the industry at all,” Danly said. He urged people to “read the policy statements and imagine yourself being in the shoes of being one of the project sponsors and ask yourself, after completing reading it, what is the commission requiring of you?”

The greenhouse gas standard is “a confusing mess of a policy,” Christie said, violating the due process of applicants. The policies will have “the undeniable effect” of bolstering the legal challenges of groups who oppose new natural gas developments, he said.

VIDEO: Are New Pipelines Doomed? Oil & Gas Delivery Explained

Projects Impacted

The policies, which were still in the process of being published online Thursday afternoon, were cheered by environmental groups that have long argued FERC has rubber-stamped projects without properly reviewing them.

“This is a great and historic move forward that seeks to bring balance to gas reviews that have long been very much out of balance,” Gillian Giannetti, senior attorney at the Natural Resources Defense Council. While communities have felt ignored by FERC for years, “these policies are clearly an attempt to begin to right-size that.”

FERC “hit it out of the ballpark,” said Susan Tierney, senior adviser for the Analysis Group who authored a 2019 report on how FERC could modernize gas reviews. “This doesn’t kill new projects. It just says if a project is going to be approved, it really needs to be needed.”

The greenhouse gas emissions threshold of 100,000 metric tons is appropriate, Tierney said, as it draws the line for a gas facility that “merits careful environmental review.”

The gas industry pushed back against FERC’s changes as creating uncertainty about what projects may need to show the commission.

On Thursday, the American Gas Association said it is “deeply concerned about FERC’s actions today and how they could infringe upon the ability of natural gas utilities to meet the needs of their customers affordably and reliably.”

If FERC looks at more than the contract between a pipeline and a gas utility, for example, it could second-guess decisions made by utilities and state officials, the group said.

FERC will likely clash with industry on its pledge to look at whether upstream or downstream emissions are reasonably foreseeable impacts from a project.

In previous comments, the Interstate Natural Gas Association of America rejected that FERC could properly measure greenhouse gas emissions from upstream drilling or downstream burning of gas.

“We don’t believe that the commission has the authority to look at indirect emissions,” Joan Dreskin, senior vice president, secretary and general counsel for INGAA, told reporters in a Feb. 2 press conference.

INGAA didn’t immediately comment on the policies as of Thursday afternoon.

Legal Rulings Prompt Review

The policies were advanced in the wake of recent court challenges over FERC pipeline approvals that caused some pipeline developers to back away from big-name projects. The Atlantic Coast Pipeline, PennEast Pipeline, Constitution Pipeline, Pacific Connector Pipeline were all canceled after mounting delays and legal costs.

The U.S. Court of Appeals for the District of Columbia Circuit tossed FERC’s certificate in June 2021 for the Spire STL Pipeline, an already-approved line delivering gas to the St. Louis region. The commission failed to assess the need for the Spire pipeline, whose developers relied on one shipping contract with an affiliated gas utility, the court ruled. In December, FERC issued an temporary certificate to keep gas flowing while it reviewed the Spire pipeline.

And the D.C. Circuit’s 2017 Sabal Trail decision required the commission to consider environmental impacts of greenhouse gas emissions from burning the natural gas transported by a proposed pipeline. That ruling allows FERC to reject a proposed project for environmental reasons, Glick told reporters Thursday.

And the Mountain Valley Pipeline—which has faced ballooning delays and costs following initial FERC approval in 2017—is awaiting commission action on its amended certificate.

That $6.2 billion project, proposed to transport shale gas through West Virginia to Virginia, is an example in which the certificate policy would provide greater certainty, Glick told reporters Thursday.

(Updated with additional comment)

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