April 2022 Vol. 77 No. 4

Washington Watch

New FERC pipeline policies worrisome

By Stephen Barlas, Washington, D.C. Editor

Potential impact of Europe’s new need for U.S. liquid natural gas (LNG) is now reverberating inside and outside the Federal Energy Regulatory Commission (FERC), as it attempts to implement two new policy statements setting out new roadblocks to approval of pipelines and LNG terminals. 

The two FERC statements are linked by their environmental implications and were approved by the three-member Democratic majority in February, with the two GOP-appointed commissioners dissenting. The statements establish a higher bar for proving “need” of a new pipeline and a lower bar for allowance of greenhouse gas (GHG) emissions. They will be applied to pending project applications, including those for which a final environmental impact statement (EIS) has already been issued. 

The interim greenhouse gas policy, which seeks to limit emissions from pending – and future – projects, has created the biggest controversy due to the immediate need to export more LNG to Europe. Scott Ray, CEO of Commonwealth LNG, told Underground Construction, “Commonwealth, like many other gas and LNG companies with applications pending before FERC, is concerned about how FERC may implement this new policy, and any potential delay it may cause in FERC issuing an order.” 

Commonwealth, which submitted its application to the FERC in August 2019, is an 8.4-million-ton-per-annum (MTPA) LNG liquefaction and export facility located near Cameron, La. Gas supply is achieved with the addition of a 3.0-mile pipeline interconnected to two major pipeline systems with significant excess transportation capacity. 

Amy Andryszak, president and CEO of the Interstate Natural Gas Association of America (INGAA), says the two new policy statements “call into question the durability of FERC’s certificate policy review framework and add additional uncertainty to the already complex natural gas pipeline permitting process.” 

Michael Pincus, a Washington attorney with several interstate pipeline customers, says changes to the 1999 pipeline approval policy and a new interim policy on consideration of greenhouse gas emissions when applications are considered, are “significant.” 

It is worth noting, however, that these are not permanent regulatory changes and could be tossed out the window, if and when Republicans assume a majority at FERC. Even short of a Republican takeover of the commission, which would have to wait until a Republican becomes president, a GOP takeover of Congress in 2022 could limit Democratic anti-pipeline actions. In addition, the FERC is taking comments on the GHG statement and could make revisions. 

At March 3 hearings, in the Senate Energy & Natural Resources Committee, Sen. Joe Manchin (D-W.V.), chairman of the committee, was particularly critical of the new interim policy on consideration of GHG emissions. 

“[You all] acknowledge that no federal agency, including FERC, has established a threshold for determining what level of project greenhouse gas emissions is significant,” he said. “Why do you all think FERC, whose primary purpose is to regulate efficient and reliable energy, should be the first agency to set such a standard, rather than environmental agencies?” 

Sen. John Barrasso (R-Wyo.), the top Republican on the committee, asked FERC Chairman Richard Glick how he would “clean up this mess.” Based on Glick’s response and other remarks made at the hearing, Barrasso stated he had no confidence that FERC would take action to revise the policies and he, therefore, viewed it as the committee’s duty to do so. 

Spokespersons in both Manchin’s and Barrasso’s offices did not respond to questions about what legislative actions they might take to trim the FERC’s sails. 

At the outset, the GHG policy has created the bigger firestorm because it sets a threshold for GHG emissions, both upstream and downstream, which, if surpassed, would require FERC to perform an environmental impact statement. 

According to FERC, the 100,000-metric-ton threshold “will cover the vast majority of potential GHG emissions from natural gas projects authorized by the Commission” and likely will “include projects transporting an average of 5,200 dekatherms per day and projects involving the operation of one or more compressor stations or LNG facilities. 

More problematic is FERC’s decision to consider downstream emissions, such as those emitted by pipeline customers, whether they are from power plants, LDCs or LNG facilities. Applicants would be required to mitigate those emissions even though it is the Environmental Protection Agency (EPA) that regulates GHG air emissions under the Clean Air Act. Therefore, FERC’s GHG policy may be the subject of a court challenge. 

“FERC currently has a significant backlog of natural gas project applications that have been awaiting a decision while the Commission has been considering these policy changes,” said INGAA’s Andryszak. 

Among the major pipeline and compressor projects that have been issued final environmental impact statements, but not project certificates, are Kern River’s Delta Lateral Project, the Driftwood Pipeline LLC/Line 200 and Line 300 Project, and Iroquois’ Enhancement Compression Project. 

Kern River’s Delta Lateral Project includes an approximately 36-mile, 24-inch-diameter natural gas pipeline, tap assemblies, in-line inspection device launchers/receivers and a meter station. Rebecca Houtz, a spokeswoman for Kern River, declined to comment on the potential impact of FERC’s new policies. 

The Iroquois compression-only project would allow Iroquois to receive an additional 125 million cubic feet per day of natural gas at its interconnect with the TC Energy Canadian mainline for delivery to New York utilities. 

The ExC Project is also designed to allow end-use customers to convert from heating fuels from more emission-intensive fossil fuels (such as heating oil) to natural gas. FERC was already under pressure from the EPA prior to FERC’s issuance of its new GHG policy and after FERC issued a final EIS, to, according to the EPA, “attempt to estimate upstream emissions associated with the ExC Project…” 

Also awaiting approval after FERC issuance of an EIS are the Commonwealth LNG and the Port Arthur LNG Expansion Project. The latter would expand the current Port Arthur Liquefaction Terminal in Jefferson County, Texas, by siting, constructing and operating additional LNG facilities to increase its capability to liquefy natural gas for export by 13.46 million tons per annum (MTPA). The project would increase the terminal’s total liquefaction capacity from 13.46 MTPA to 26.92 MTPA. 

Then there are the projects at FERC, which would allow pipelines to store gas prior to the gas being delivered to an LNG facility. One is the LA Storage, LLC Hackberry Storage Project to supply 20.03 billion cubic feet (Bcf) of working gas storage capacity and 1.5 Bcf per day (Bcf/d) of gas deliverability and injectability with the CIP facilities operated by Cameron Interstate Pipeline, LLC and the PAPLC facilities to be operated by Port Arthur Pipeline, LLC (PAPL). 

The draft EIS from FERC on Hackberry drew heavy fire from the Sierra Club and a group called Healthy Gulf. They commented on Feb. 7, “The primary purpose of the project is to provide natural gas to the incredibly damaging liquefied natural gas export buildout occurring along the Gulf Coast, primarily in Texas and Louisiana.” 

They further argued, “The DEIS mistakenly concludes that FERC is ‘unable to determine the significance of the project’s impacts on climate change,’ because FERC purportedly lacks tools to evaluate physical impact or any ‘established threshold’ for determining significance, when compared to established GHG reduction targets at the state or federal level.” 

FERC’s new policy statement, updating its 1999 certificate approval policy, has drawn less controversy but makes some important changes. Its dimensions will only be clear in the future, in good part because of some gauzy language and lack of details. Two changes of note are precedent agreements between non-affiliates will remain important evidence of project needs, but will not be the only factor the Commission considers. 

Further, the Commission will consider information about the intended end use of gas associated with the proposed project to help explain why it is needed. This will include a wider range of impacts to landowners, beyond just the economic impacts associated with siting the right-of-way, though it did not provide examples of the additional types of impacts it would consider. 

The Commission also will expand the consideration it gives to the impacts of proposed projects on environmental justice communities, taken to mean concentrations of Black, Hispanic, Native American and other groups near a project. However, the Commission did not provide specific guidance on how environmental justice communities will be identified, what the ongoing consultation with the project proponent and Commission staff must entail, or what mitigation measures might be required. 

“The changes could be the biggest change to the pipeline regulation since 636 and open access,” said Pincus. “The most perplexing thing about the needs test is that it is a threshold test, but FERC doesn’t tell applicants what it will take to meet the new threshold.”

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