The US Federal Energy Regulatory Commission (FERC) last month issued new guidelines on the approval process for pending and new natural gas pipelines and LNG plants. The revisions, FERC’s first since 1999, included a section addressing greenhouse gas (GHG) policy to ensure the “legal durability” of future rulings following “a series of court decisions raising concerns about the Commission’s prior approach,” FERC said.
FERC issues project certificates under authority granted by Section 7 of the Natural Gas Act and said that the policy revisions would address “many need, environmental, and public interest issues” arising when companies seek to build new gas infrastructure.
In its Updated Certificate Policy Statement (PL18-1) FERC explained that in making future determinations it “intends to consider all impacts of a proposed project, including economic and environmental impacts, together.” FERC also called for a “robust consideration” of impacts to landowners and environmental justice communities in its decision-making process.
Interim GHG Policy Statement (PL21-3) sets a threshold of 100,000 tonnes/year on emissions. Projects under consideration with emissions above that level will require preparation of environmental impact statements. FERC will consider proposals by project sponsors to mitigate all or part of their projects’ climate change impacts and may condition approval on further mitigation of those impacts. In quantifying GHG emissions, FERC will consider emissions that are “reasonably foreseeable and have a reasonably close causal relationship to the proposed action.” This will include emissions from construction and operation of the project and may include GHG emissions resulting from upstream production and downstream combustion of the transported gas.
Interstate Natural Gas Association of America President and Chief Executive Officer Amy Andryszak said the new requirements will “add additional uncertainty to the already complex natural gas pipeline permitting process” and could cause “significant delays for much-needed infrastructure.”
The inclusion of pending projects in the new guidelines is important to note. Equitrans Midstream Corp.’s Mountain Valley Pipeline, though more than 90% complete, is still pending final approval due to the vacating of permits previously approved. Other projects that would be affected include Kinder Morgan Inc.’s proposed 2-bcfd Evangeline Pass pipeline expansion in Louisiana and Mississippi, Williams Cos.’ 1-bcfd Regional Energy Access expansion in the US northeast, and a 3.5-bcfd pipeline through Louisiana that would supply feedgas to Tellurian Inc.’s proposed Driftwood LNG plant.
“If we are going to ensure legal durability of our orders, it is essential that [FERC] satisfy its statutory obligations the first time,” said FERC Chairman Richard Glick. He wasn’t speaking about Mountain Valley with this comment. But he could have been. And given the ongoing imperative to increase gas flows to the northeast US and LNG exports to Europe, increased immediate delays for the sake of longer-term certainty seems wrongheaded.
Yes, regulatory certainty is valuable to both regulators and industry, ensuring that valuable time and resources are not spent pursuing projects that will ultimately be denied or unnecessarily delayed. But so is the ability to finish a project under the terms in place when it was approved, or even applied for.
An open market and regulatory certainty are two of the things that make the US an attractive place to do business. To the degree either is undermined, dollars will flow elsewhere.
FERC’s new guidelines may be cloaked in a desire to improve market certainty. But the breadth of their potential reach at an already unsettled time in the history of hydrocarbon production will likely only be clearly defined through further litigation and the confusion and delays that come with it as the markets await each new ruling.
At the very least, the new guidelines need a grandfather clause to protect money and time already spent in good faith under previous regulations.