Federal agencies criticize cross-border permit reform bill

Nov. 11, 2013
Three federal agencies expressed concern that a US House bill aimed at standardizing the process for energy projects to get cross-border permits actually could preclude environmental and other significant reviews.

Three federal agencies expressed concern that a US House bill aimed at standardizing the process for energy projects to get cross-border permits actually could preclude environmental and other significant reviews.

"This bill actually could force approval of a pipeline that the [US Department of State] would consider contrary to the public interest," said Henry A. Waxman (D-Calif.), House Energy and Commerce Committee's ranking minority member, during a hearing on HR 3301 before the committee's Energy and Power Subcommittee.

The bill's sponsors, committee chairman Fred Upton (R-Mich.) and member Gene Green (D-Tex.), said this was not their intent. "For those concerned about the environmental and safety standards applicable to these projects, the good news is that none of these standards are changed by the bill," Upton said.

"This bill simply brings uniformity to current administration policy that a cross-border decision does not in and of itself trigger a [National Environmental Policy Act] determination," Upton noted.

The measure would create a new approval process for oil and gas pipelines and electricity transmission lines that would cross the US national boundary into Canada or Mexico. Requests for approval of cross-border oil pipelines would be submitted to the US Secretary of Commerce; gas pipeline permit requests would be submitted to the US Federal Energy Regulatory Commission; and electricity transmission permit requests would be submitted to the US Department of Energy.

HR 3301's Section 3 also would establish a requirement for a project to be approved within 120 days unless it is found not to be in the interest of US national security. That would preclude environmental and other significant reviews and not allow enough time for a proper decision, a FERC official testified and US Department of Commerce (DOC) and DOE officials said in written statements.

Conflicts possible

"The current siting process for natural gas facilities, including those facilities at the US border with Canada and Mexico, has resulted in a significant increase in the US gas infrastructure meeting the needs and answering the concerns of all stakeholders with decisions that are fair, thorough, and legally sustainable," Jeff C. Wright, direct of FERC's Office of Energy Projects, told the subcommittee. "The proposed legislation raises questions as to conflicting federal authorities and procedures that would be followed to authorize gas border facilities."

The bill's most notable change would be to alter the review standard from one in which the US Energy Secretary is empowered to issue a permit if a project is found to be within the public interest to one in which a permit would have to be issued within 120 days unless a project is determined to not be in the national interest, Michael Knotek, DOE's Deputy Under Secretary for Science and Energy, said in his written submission.

"This would eliminate consideration of criteria currently evaluated that bear on our public interest but not on national security," he said. "The bill would prevent the thorough consideration of complex issues that could have serious safety, environmental, and other ramifications."

Kevin J. Wolf, assistant US Commerce Sec. for Export Administration, also cited HR 3301's proposed replacement of public interest with national interest as a review standard for energy project's cross-border permits as well as possible preclusion of NEPA considerations in his submitted statement.

Noting that DOC's Bureau of Industry and Standards has administered crude oil export controls consistent with existing statutory requirements, Wolf said DOC "has never operated under the framework that would be created by [HR 3301]," adding, "The department is continuing to review the draft legislation, but the administration has serious concerns."

Reforms needed

But the current process doesn't always work well, another witness told the subcommittee. "While delay of the Keystone XL pipeline project has garnered widespread public attention, there are many other presidential permit applications stuck at the State Department also facing multiyear delays," said John H. Kyles, senior attorney at Plains All American Pipeline LP, who also testified on behalf of the Association of Oil Pipelines.

"It is my understanding that many of these projects are simple changes of ownership filings with no impact on the pipeline's operations or border-crossing status, yet they face lengthy reviews [at DOS]," he continued.

Kyles said PAA has two presidential permit applications pending for seven pipelines crossing the US-Canadian border that it bought in 2012 and that already had a pending name change permit application from a previous change of ownership in 2007.

"For as long as 5 years, [DOS] has been considering whether to issue a presidential permit for something almost as simple as a name change at the top of the permit," he said. "There have been no operational changes of the pipelines, no change in materials or any physical or environmental impacts. Just many years of review, document requests, pubic notices, additional document requests, but still no decision."

PAA is allowed to continue operating the pipelines consistent with terms of the existing presidential permit, "but we face the uncertainty of not knowing when or if we will ever get the presidential permit we are supposed to have for these pipelines and whether constraints might be placed on our future use of the pipelines," Kyles said.

Fewer permits

For gas pipelines crossing the US border into Mexico or Canada, HR 3301 would reduce the number of required approvals to two from three, Interstate Natural Gas Association of America Pres. Donald F. Santa said in an Oct. 28 letter to Energy and Power Subcommittee Chairman Ed Whitfield (R-Ky.) and Ranking Minority Member Bobby Rush (D-Ill.).

If HR 3301 was enacted, gas pipelines from the US into those countries would require the same certificate of public convenience and necessity that FERC already issues, including all associated environmental and land use permits, and separate FERC approval for both the Natural Gas Act Section 3 authorization and authorization under HR 3301's Section 3 that would replace the current presidential permit requirement, Santa explained.

"Section 4 of HR 3301 would remove the redundant requirement that DOE approve the import-export of gas to/from Canada and Mexico," his letter added. "This section of the legislation amends section 3(c) of the NGA, which already renders DOE's review of the import-export of gas to a free trade agreement nation (such as Canada or Mexico) a largely irrelevant exercise."

The bill also could be "a bold first step" toward establishing a North American Common Energy Market, suggested Mark P. Mills, a senior fellow at the Manhattan Institute for Public Policy Research.

"Imagine what would be possible with a bold North American initiative to optimize and rationalize each nation's projects and infrastructure," he said. "The North American continent has more than double the oil and gas resources of the entire Middle East. Unleashing North America's capabilities would ignite jobs and growth from the Yucatan Peninsula to the Arctic Circle. In less than 2 decades, North America could surpass Middle Eastern production and become the dominant player in global energy markets."

Also testifying were Mary J. Hutzler, a distinguished senior fellow at the Institute for Energy Research; Jim Burpee, president of the Canadian Electricity Association; David Mears, a commissioner in Vermont's Department of Environmental Conservation; and Paul C. Blackburn, an attorney and regulatory consultant at Blackcreek Environmental Consulting.