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FERC's Powelson Sees No Shift in Natural Gas Pipeline Policy

Commissioner Robert Powelson told an industry audience in Pittsburgh last week that they don’t have to worry about any “tectonic shifts in policy” as FERC prepares to review how it evaluates and approves interstate natural gas pipeline projects.

“I want to give everybody peace of mind,” Powelson said during a question and answer session after a speech he delivered at Hart Energy’s Marcellus-Utica Midstream Conference and Exhibition. “It’s not like at the end of the day we’re going to radically walk away from the need doctrine. As I’ve said often...we did not build interstate pipelines on speculation. You need shippers, you need to have a business case.”

Federal Energy Regulatory Commission Chairman Kevin McIntyre said late last year that the Commissioners would review the 1999 Policy Statement of New Interstate Natural Gas Pipeline Facilities. In particular, the Commission plans to examine its definition of “need” for a pipeline, which is currently satisfied if a project has precedent contracts that make it commercially viable. FERC’s environmental procedures also will be examined. Both of those items have been vigorously challenged in recent years by groups opposing development of shale gas and the pipelines that carry it.

Powelson, a former public utility commissioner in his native Pennsylvania, where he’s widely known as a pro-market regulator, was nominated by President Trump and sworn-in at FERC last August. While he noted during his appearance in Pittsburgh last week that the Commission is often considered “fuel agnostic,” he also suggested that it’s getting harder to ignore the role natural gas is playing in the nation’s energy portfolio.

“Some might say, ‘well, you’re a little bullish on the market.’ Well, I am bullish, because when you look at what natural gas is doing in places like Pennsylvania and Texas, and the entire country...if you look at where we are today in this country and the new build-out of [power] generation in this country, we’re dashing to gas.”

Powelson’s comments were delivered in a part of the country that, according to Wood Mackenzie, will account for 75% of North American natural gas growth through 2022. Dozens of gas-fired power plants are also under construction throughout the Appalachian basin and the surrounding region that are expected to drive 1-2 Bcf/d of incremental demand within the Northeast over the next three years.

But upstream and midstream operators in the region continue to deal with staunch opposition as they work through the federal and state regulatory processes to get more takeaway capacity built. Powelson said the end-result of that opposition was on display in New England last month when a massive winter storm spawned by weather phenomena known as bombogenesis, or a bomb cyclone, hit the East Coast hard and stressed energy infrastructure.

“The bomb cyclone, which is basically a Nor’easter on steroids, wreaked a lot of havoc in the New England market, not here in PJM, but the New England marketplace,” Powelson said, adding that New England burned 2 billion gallons of oil over a four day period during the weather event.

“It wasn’t coal plants that saved the day, it was 1950s, 1960s oil burners that had to run to keep the lights on in the New England marketplace, backed up by gas storage into the marketplace by facilities” like Canaport LNG in New Brunswick, Canada. A receiving and regasification terminal on the Atlantic coast operated by Repsol, Canaport has 1.2 Bcf/d of send-out capacity.

“It was a huge savior, aside from those oil burners, that we had the Canaport facility operational,” Powelson added. “The New England ISO has alerted us that if that facility ever went down, it would create a cascading event within the power sector in New England, where between 5,000 and 7,500 MW of combined-cycle gas generation would come offline. That’s very alarming.”

Powelson said the severe cold snap “set the stage” for further debate on Department of Energy Secretary Rick Perry’s proposal to change the nation’s grid reliability policies, and FERC’s ultimate decision that directed grid operators to study the resiliency of their systems.

“I think it is something that is critically important to the FERC, and you as industry partners, that we work together to solve that problem,” Powelson said of energy constraints and building a more robust market for natural gas. In a shot at New York Gov. Andrew Cuomo’s administration, which has played a role in stopping some pipelines that would move more gas to the Northeast, Powelson added that it’s important for federal and state governments to work cooperatively as more energy infrastructure is built.

“I am a devout advocate for states’ rights, but there comes a point in time...where you as operators need that regulatory certainty to deploy capital into a project,” he said, mentioning Cuomo as one reason for less gas reaching New England. “And I do get concerned, at my level, about some of the game playing that goes on in certain jurisdictions around pipeline development. And I pledge to you, as a new FERC commissioner, that I will work with you to really solve those problems.”

Since joining holdover Commissioner Cheryl LaFleur, a Democrat, and restoring the Commission’s quorum, Powelson and his Republican colleagues Neil Chatterjee and McIntyre, along with Democrat Richard Glick, have approved $25.6 billion of natural gas pipeline projects in the last six months.

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