FERC’s breakthrough

Breakthrough came to more than a queue of LNG export projects when the US Federal Energy Regulatory Commission approved Venture Global LNG’s Calcasieu Pass venture on Feb. 21. Compromise enabling this welcome move shows hope for progress away from the all-or-nothing approach that frequently mires regulation addressing climate change.

Approval of a 12 million-tonne/year gas liquefaction project by a commission split 2-2 over a crucial topic of regulation is important by itself. Twelve other LNG export plants await FERC approval, and five more are in prefiling stages. Not all those ventures will advance to construction. But LNG is a rapidly growing export commodity as gas production increases from unconventional resources. Liquefaction projects are vital to realization of this economic promise and must be ready when the market needs them.

A ‘new approach’

Just as important as buildout of export capacity, though, is the way commissioners eased political deadlock. FERC “applied a new approach for consideration of direct greenhouse gas [GHG] emissions from LNG facilities,” reported Chairman Neil Chatterjee in a press statement. “I anticipate we’ll be able to use the framework developed in this order to evaluate the other LNG certificates that the commission is considering.”

For Calcasieu Pass, the commission assessed direct emissions of GHGs—3.9 million tpy of carbon dioxide-equivalent, according to the environmental impact statement—as a share of total US emissions in 2016—0.07%. Under a 2016 court ruling, FERC doesn’t review indirect GHG emissions upstream and downstream of projects. The Department of Energy accounts for indirect emissions in its public-interest decisions about LNG exports, which precede FERC review of project facilities.

The new approach cited by Chatterjee didn’t fully satisfy Commissioner Cheryl A. LaFleur, a Democrat, but enabled her to join the commission’s Republicans, Chatterjee and Bernard L. McNamee, in support of the project. The other Democratic commissioner, Richard Glick, dissented. FERC has been politically balanced since the Jan. 3 death of former Chairman Kevin McIntyre, a Republican.

Glick disagreed with FERC’s finding that Calcasieu LNG’s fractional contribution to national GHG emissions was environmentally insignificant. “The result is that climate change plays no meaningful role in the commission’s public-interest determination,” he wrote.

His conclusion suffers from overstatement but nevertheless identifies a genuine problem. FERC has no framework within which to distinguish between environmentally significant and insignificant levels of GHG emissions from individual projects. This indicates no procedural lapse. It instead reflects the core vexation of climate regulation and the futility of applying it project by project.

Climate change is a global phenomenon. No one project can affect it much. Activists therefore try to block as many CO2-emitting activities as they can, hoping to make a collective difference. Yet, even if they were to succeed in foreclosing projects that would have accounted for, say, one third of global GHG emissions, what would the effect be on globally averaged temperature? The answer depends on equilibrium climate sensitivity, the long-term temperature response to a doubling of CO2 in the atmosphere. About that, the generally accepted scientific estimate varies by a factor of three. With such a wide range of uncertainty, warming—the core concern of climate change—from incremental CO2 loading of the atmosphere under reasonable assumptions might or might not be significant. It thus might threaten human welfare, or it might not.

Skirting myopia

Glick and LaFleur wish for some way to condense these perplexities into manageable quanta convenient for regulation. Both extol the social cost of carbon (SCC), which estimates costs attributable to CO2 emissions. But the SCC is arbitrary and subject to political manipulation. Given the complexity of climate phenomena and uncertainty about the CO2-temperature relationship, it is, at best, guesswork.

Regulation of GHGs is prudent and necessary. To be effective, however, it must apply at meaningful scale, avoid unreasonable precision in performance metrics, and work within broader environmental programs with clearer benefits in relation to cost. By skirting project-level climate myopia, the FERC decision moves constructively in that direction.