With a recent increase in interstate pipeline applications and an uptick in opposition, it will be a challenge for FERC to continue certificating those projects as quickly as it has in the past, said Commissioner Tony Clark.
Speaking at a breakfast roundtable hosted by ICF International in Washington, DC, Thursday, Clark said the Federal Energy Regulatory Commission has been able to process about 92% of interstate pipeline applications within one year.
“I think it will be tough to keep that average up,” given the number of pending applications, the commissioner said. “You want to make sure that every one of those intervenors, every one of those cases is given the proper attention that it needs.”
Last week, Clark testified before the House Energy and Power Subcommittee on emerging issues in the development of new infrastructure amid a resource shift driven by cheap natural gas and stricter environmental regulations (see Daily GPI, Dec. 1). Clark told subcommittee members that the nation faces the challenge of building out its infrastructure in the face of ‘just say no’ ideology from opponents to pipelines and other projects.
Clark elaborated on his House testimony during Thursday’s breakfast.
“It’s not ‘don’t put this here or there;’ it’s ‘don’t put this infrastructure anywhere.’ It’s based on an opposition to particular classes of infrastructure as a whole, not so much because of the infrastructure itself but because of what happens to flow through or over the infrastructure,” Clark said. “And that’s changed the dynamics of siting in a lot of ways. It’s made it more visible.”
According to Clark, the proposed pipeline capacity currently pending in FERC’s review process far exceeds historical averages (see Daily GPI, Dec.1), and it’s all happened “just in the last year.”
“Low-cost natural gas” has been “the story in energy, at least domestically, and in some ways worldwide, of probably the last 50 years,” Clark said. “The availability of natural gas at a price...no one anticipated we’d have access to has been a game-changer.”
But as the number of proposed pipelines has increased, so too has the opposition, leading to more intervenors and more testimony for FERC staff to process, something Clark acknowledged could potentially slow federal authorization of these projects.
“All of the intervention, the main impact that it has on us is” that “we’re very cognizant of wanting to make sure that we don’t get overturned in court, so we’ve got to make sure that for every intervenor that is involved and puts evidence on the record, we have to be able to respond to that evidence. If you just have a lot more data points on the record, then it takes more work on our part to sift through it and make sure it’s all adequately addressed,” Clark said. “So that will take a long time, but I don’t know that that alone could stop projects.”
Clark added that the time it takes FERC to review a proposal also “depends on the project. Some projects are not as controversial, especially if they’re dealing with brownfield,” or if “there’s a significant amount of co-location...or if they’re just built in parts of the country where there’s just not as much opposition to infrastructure.”
When asked about the recent passage of a House energy bill that would give FERC greater authority to set deadlines for other agencies participating in its review process, Clark suggested this could help the agency as it deals with a larger number of applications.
Though he said he wasn’t intimately familiar with the House bill, Clark said the provisions that would give FERC “the tools to ensure that there’s a timely review process, I think that is helpful.” He said “oftentimes what will delay projects is not so much anything that’s going on at FERC, it’s just that we’re dependent on all sorts of other entities, be it at the state and local level or other agencies in the federal government that have to be able to submit their comments in a timely manner so we can move forward.”
Electric reliability was another major talking point Thursday, particularly in the context of a shift from coal to natural gas and renewables. Clark referenced recent Energy Information Administration data showing natural gas eclipsed coal’s once-dominant share of domestic power generation for the first time ever in April (see Daily GPI, Dec. 2).
“I think we’re running a much tighter system than we have in the past. We’ve had the luxury of having really large operating reserve margins for some period of time in most parts of the country...The backbone was coal, and you could operate -- looser isn’t the right word -- but there was a greater margin for error in that system that we had,” Clark said. “If the backbone is coal, and the coal unit runs with a 30-day coal supply out front, that obviously gives you some operating flexibility that you don’t have if you’re primarily running on natural gas, which is dependent on gas flowing at exactly the time that it’s needed.”
Clark also addressed the potential for competition from cheap natural gas to impact reliability by driving retirements of traditional baseload assets powered by coal and nuclear.
“From a purely market perspective, a lot of folks would say that’s the market working. If you’ve got a low-cost resource that’s more efficient and is driving other generators out of business because they’re higher cost and less efficient, an argument can be made that this is the marketplace working. That’s exactly how it’s designed to work,” Clark said. “What I think FERC needs to be focused on is reliability, making sure that regardless of which resources we’re connecting in that we have the market structures in place to ensure that there’s reliability that’s delivered into the system.”
State governments will have to take the lead in determining whether to step in to protect older baseload assets from market pressure to ensure reliability, Clark said.
A lot of states “are looking at where the market is driving resources, and they’re starting to question their commitment to sort of a pure market model, because we’re starting to see the impact of a huge resource shift, which is low-cost natural gas,” he said.