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FERC Initiates Review of Its Long-Standing Pipeline Certificate Policy Statement

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Last Thursday, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued a Notice of Inquiry (“NOI”) seeking comment on possible changes needed to its 1999 Policy Statement on certification of new interstate pipelines. The NOI notes the almost two decades since the 1999 Policy Statement was approved and acknowledges that the Commission may have to reconsider how it balances project benefits against adverse consequences in light of the shale gas revolution, technological changes, global warming, and other environmental concerns, as well as increasing concerns raised by land owners and communities affected by the projects.

While all five commissioners welcomed an in-depth review of the Policy Statement, Chairman McIntyre cautioned that the Commission’s issuance of the NOI does not mean FERC will ultimately change its current procedures. The Commission will consider only generic issues and will not consider any comments that refer to open, contested proceedings currently before FERC.

The NOI identified four general areas of examination: (1) potential adjustments to the Commission’s determination of need; (2) the potential exercise of eminent domain and landowner interests; (3) the Commission’s evaluation of alternatives and environmental effects under the National Environmental Policy Act and the Natural Gas Act; and (4) the efficiency and effectiveness of the Commission’s certificate processes. These four areas will frame a debate over whether and how the Commission should take into account new environmental and social considerations – such as evaluating greenhouse gas impacts of new pipelines or requiring that applicants work with landowners and communities affected by proposed projects – while at the same time expediting pipeline approvals in response to President Trump’s Executive Order #13807.

Currently, the Commission does not look “behind” or “beyond” precedent agreements when making a determination about the need for new projects or the needs of the individual shippers. The Commission appears willing to consider changes in how it determines whether there is a public need for a proposed project. The NOI seeks comments as to the types of additional or alternative evidence that the Commission should examine to determine project need as well as the litigation risk that may arise in considering such new evidence. The Commission further questions whether evidence of need, in general, should be examined on a regional basis, particularly where there are multiple pipeline applications in the same geographic area. With respect to the precedent agreements themselves, the NOI seeks comments about additional factors that may need to be taken into account when considering these agreements, such as the counterparty to the precedent agreement (affiliates or non-affiliates), the duration of the precedent agreement, or the need for state approval of the precedent agreement.

To address increasing concerns expressed by landowners and affected communities in recent cases, the NOI seeks comments about ways to improve the current certificate process to adequately take into account landowner interests and encourage landowner participation in the certificate process. Among other things, the Commission inquires whether: (1) the use of eminent domain should be considered in reviewing each application against the need for the project; (2) the Commission should take additional measures to minimize the use of eminent domain; and (3) there is a need to evaluate alternatives beyond those currently evaluated (i.e. no-action alternative, system alternatives, design alternatives, and route alternatives).

Environmental assessment is a key issue in the NOI. One of the main questions is whether the Commission should take into account the cumulative environmental impacts at the regional level instead of on a project-to-project basis and, if so, how to define the relevant region. New types of environmental impacts — such as the social cost of carbon — are also addressed in the NOI. The Commission seeks comments as to how to quantify, monetize, and assess these impacts against the need for the project.

Finally, the NOI seeks to streamline the Commission’s certification process in compliance with Executive Order #13807, which encourages agencies to make timely decisions with the goal of completing all federal environmental reviews and authorization decisions for major infrastructure projects within 2 years. To that end, the NOI inquires whether certain aspects of the Commission’s application review process (i.e., pre-filing, post-filing, and post-order-issuance) should be shortened, performed concurrently with other activities, or eliminated to make the overall process more efficient. And, to the extent that the process is streamlined, the Commission inquires as to how it can ensure that interested stakeholders have an adequate opportunity to participate in the evaluation process, and whether efficiency gains can be achieved by improving the Commission’s interactions with other federal agencies and the states.

Overall, the NOI signals a consensus that the 1999 Policy Statement may be outdated. However, with four new Commissioners, it is difficult to gauge the direction any review might take. Comments on the NOI are due 60 days after its publication in the Federal Register. (FERC Docket No. PL-1-000.)

For more information about the issues discussed in this post, please contact us.

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