FERC Revises Gas Pipeline Certificate Approach, Adopts New Gas Infrastructure GHG Policy

by Paul Ciampoli
APPA News Director
February 22, 2022

The Federal Energy Regulatory Commission (FERC) last week adopted a revised policy statement that significantly modifies its approach for considering new natural gas projects under the Natural Gas Act.

At the same time, FERC adopted an interim policy statement to explain how the Commission will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the Natural Gas Act and the National Environmental Policy Act (NEPA).

The Commission’s actions took place during its Feb. 17 monthly open meeting with a 3-2 vote occurring in both proceedings.

Updated Certificate Policy Statement (Docket No.  PL18-1)

In 2018 and again, in 2021, the Commission issued notices of inquiry (NOI) seeking public comment on its 1999 policy statement on the certification of new interstate natural gas transportation facilities.

In particular, the Commission requested information on the consideration of the effects of such projects on affected communities, the treatment of precedent agreements in determining the need for a project, and the scope of the Commission’s environmental review, including an analysis of the impact of a project’s greenhouse gas emissions. 

The updated certificate policy statement reaffirms many of the goals and objectives of the Commission’s 1999 policy statement, but further clarifies how the Commission will execute its public interest obligations under the Natural Gas Act.

The updated policy statement explains that, in making such determinations, FERC intends to consider all impacts of a proposed project, including economic and environmental impacts, together. It also calls for a robust consideration of impacts to landowners and environmental justice communities in the Commission’s decision-making process, FERC said.

And where the Commission traditionally has relied on precedent agreements between project applicants and shippers to establish the need for a project, the updated certificate policy statement states that applicants should provide more than just precedent agreements, to help explain why a project is needed, such as the intended end use of the gas.

It also states that the Commission may consider other evidence of need, including demand projections, estimated capacity utilization rates, potential cost savings to customers, regional assessments and statements from state regulators or local utilities.

Interim GHG Policy Statement (PL21-3)

The Commission said that it issued the interim GHG policy statement to explain how it will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the National Environmental Policy Act and the Natural Gas Act.

FERC is seeking comment on all aspects of the interim policy statement, including, in particular, the approach to assessing the significance of the proposed project’s contribution to climate change.

The guidance is subject to revision based on the record developed in this proceeding. However, the Commission will begin applying the framework established in this policy statement in the interim.

This will allow the Commission to evaluate and act on pending applications under section 3 and section 7 of the Natural Gas Act without undue delay and with an eye toward greater certainty and predictability for all stakeholders, it noted.

The interim policy sets a threshold of 100,000 metric tons per year of GHG emissions. Projects under consideration with emissions above that level will require the preparation of Environmental Impact Statements (EIS).

The Commission will consider proposals by project sponsors to mitigate all or part of their projects’ climate change impacts. The Commission may condition its 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 GHG emissions from construction and operation of the project, and may include GHG emissions resulting from the upstream production and downstream combustion of transported gas.

Applicability

As policy statements, neither document establishes binding rules.

They are intended to explain how the Commission will consider applications for natural gas project construction. They will apply only to pending and new projects; those applicants with projects now pending before the Commission will have the opportunity to supplement their records.

Commissioners Christie And Danly Dissent

Commissioners Mark Christie and James Danly dissented from both items.

In his dissent, Christie said it is a truism that FERC is an economic regulator, not an environmental regulator. “This Commission was not given certification authority in order to advance environmental goals; it was given certification authority to ensure the development of natural gas resources and their availability – this includes pipeline infrastructure – at just and reasonable rates,” Christie said,

“To construe the Commission’s analysis of the public convenience and necessity as a license to prohibit the development of needed natural gas resources using the public interest language in the NGA [Natural Gas Act] would be to negate the very legislative purpose of the statute,” he argued.

“To those who say ‘well, times have changed and Congress was not thinking about climate change when it passed the NGA,’ here’s an inconvenient truth:  If Congress wants to change the Commission’s mission under the NGA it has that power; FERC does not,” wrote Christie.

He further argued that FERC’s actions “rely to a remarkable degree on a smattering of statements from a handful of recent orders. Simply put, these authorities are simply ‘too slender a reed’ to support the great weight today’s orders place on them.”

For his part, Danly said in his dissent of the updated policy statement on certification of new interstate natural gas facilities that the Commission’s jurisdiction and the public convenience and necessity standard are not as broad as the updated policy statement suggests. He also said that a number of the changes to the certificate policy statement are misguided.

As for the interim GHG policy statement, Danly said in his dissent of the policy statement that it is “irredeemably flawed.” 

He said it is “practically unworkable because it establishes a standardless standard.  Its universal application to all projects, both new and pending (some for over two years), is an affront to basic fairness and is unjustifiable, especially in light of the many unnecessary delays already suffered by applicants.” 

Moreover, Danly argued the policy statement is unlawful “because it is illogical, it arrogates to the Commission power it does not have, and it violates the NGA, NEPA and the Commission’s and the Council on Environmental Quality’s (CEQ) regulations.”