FERC Amends Pipeline Approval Policies to Address Climate Change Concerns – Energy and Natural Resources

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The Federal Energy Regulatory Commission (FERC) has made historic changes to its policies for approving the construction of natural gas pipeline facilities. These changes, which took the form of two policy statements issued on February 17, 2022, reflect an enduring priority for FERC Chairman Richard Glick, who has long called for greater consideration by the Commission of the effects of proposed natural gas on climate change. . (See Holland & Knight’s previous blog post, “FERC Chairman Signals Extensive Environmental Review”, October 8, 2021.) Indeed, the revised policies mark the culmination of various notices of inquiry that the Commission has issued on this subject over the past few years, the most recent being published on February 18, 2021. (See Article from Holland & Knight’s previous blog, “FERC to the pipeline industry: what about environmental justice?“, February 25, 2021.)

Interstate Gas Pipeline Certification

In the initial policy statement, FERC approved its first changes since 1999 to its rules on certification of interstate gas pipelines under Section 7 of the Natural Gas Act (NGA). As part of the reviews, the Commission will consider four main factors before approving a project:

  • the interests of the promoter’s existing customers

  • the interests of existing pipelines and their customers

  • environmental interests

  • the interests of landowners, environmental justice populations and surrounding communities

Going forward, under this policy, the Commission will weigh all the purported benefits of a natural gas project against all of its anticipated negative impacts. Moreover, candidate promoters cannot simply cite previous agreements with potential shippers to justify the need for a project. Instead, applicants must demonstrate specifically why their project is needed, including indicating the intended end use of the gas. FERC further indicated that it may consider other evidence of need, including demand projections, estimated capacity utilization rates, potential cost savings for customers, regional assessments and statements from state regulators or local utilities.

Greenhouse gas impact assessment

In the FERC second policy statement, which it has released on a provisional basis while it continues to gather feedback from stakeholders, the Commission explained how it would assess the greenhouse gas impacts of natural gas projects when considering whether to approve them under the NGA and the National Environmental Policy Act (NEPA). The revised policy sets a threshold of 100,000 metric tons per year of greenhouse gas emissions for potential projects, with those expected to emit above that level requiring the preparation of environmental impact statements under the NEPA.

In quantifying these anticipated emissions, FERC noted that the plaintiffs would only be responsible for calculating reasonably foreseeable emissions plausibly caused by their projects during construction and operation, although the Panel suggested that it could also hold accounts for emissions caused by upstream production and downstream combustion of gases. In addition, project proponents can demonstrate to the Commission how they would mitigate the emissions impacts of their projects, and the Commission can condition project approval on the implementation of these mitigation measures.

Conclusion and considerations

Since these are policy statements only, they do not establish rules that are binding on FERC. Additionally, the revised policies will only apply to pending and new projects, and developers with pending applications will be able to complete their submissions to meet the new policies. Ultimately, the revisions were only supported by FERC’s three Democratic commissioners, with its two Republican commissioners dissenting, so it’s likely that the future of policies will depend on the Commission’s partisan setup.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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