As Congress considers spending money to upgrade the nation's infrastructure, Interstate Natural Gas Association of America (INGAA) CEO Donald Santa told lawmakers that the existing network of natural gas pipelines would continue to evolve and needs several enhancements.
In testimony Thursday before the Senate Committee on Energy and Natural Resources, Santa urged Congress to recognize that while the United States has "a robust, well-developed natural gas pipeline network," that network must also be flexible and responsive in order to meet the public interest.
"This evolving situation is illustrated by the recent emergence of the Permian Basin as a significant source of associated gas that is close to markets on the Gulf Coast and in Mexico," Santa said. "Additional pipeline capacity will be needed to bring this gas to market."
The Natural Gas Act (NGA) "has been remarkably durable and should not be upset," Santa said but an effort by Congress to strengthen FERC's role as the lead permitting agency for interstate natural gas pipelines "has not been entirely successful."
The Federal Energy Regulatory Commission has overall responsibility for reviewing applications to construct interstate natural gas pipelines, but “other federal agencies, and in some cases the states, review and permit discrete activities associated with pipeline construction," Santa said. "Experience demonstrates that the pace of action, or inaction, on these other permits can delay and frustrate the timely and predictable approval of pipeline projects."
Restore 'Cooperative Federalism'
Under the doctrine of "cooperative federalism," championed by the Trump administration, federal law assigns some permitting responsibilities to the states. Santa said that while that doctrine "worked smoothly" for many years, some states are attempting to use their authority "to dictate national energy policy." He specifically cited New York, which has blocked progress of several projects, including the Valley Lateral Project and the Constitution Pipeline.
INGAA "respects the rights of states to protect the resources within their borders, and supports the cooperative federalism framework upon which many of these environmental statutes are based," Santa said. However, “this is more than just respective roles of federal and state authority, because one state's abuse of its role in this relationship can affect the ability of other states and their citizens to enjoy the benefits of interstate commerce.
"We do not believe that this result was intended by Congress.” INGAA members are encouraging Congress to remedy the issues by providing guidance on appropriate role of a state under Section 401 of the Clean Water Act (CWA) “and by providing meaningful recourse should a state abuse its authority."
Santa said INGAA members were encouraged by several bills before Congress, especially HR 2910, which calls for strengthening the lead agency role of the FERC and further defines the process for federal and state regulatory agencies involved in the permitting process for interstate natural gas pipelines.
Other bills favored by INGAA include S 1844, which would strengthen the lead agency role of FERC under the National Environmental Policy Act for natural gas projects within its jurisdiction, and parts of S 1460, which would streamline pipeline permitting, better facilitate liquefied natural gas (LNG) exports and provide more resources for workforce training in the energy sectors.
INGAA also backed an executive order signed by President Trump last August directing the federal government to expedite its review and permitting of major infrastructure projects. "These goals also are being advanced through executive branch reform initiatives," Santa said.
In questions from the committee, Santa told Chairman Lisa Murkowski (R-AK) that investors in pipelines and other energy infrastructure need two things: certainty and predictability.
"The NGA framework has been favorable to encouraging private investment to develop the infrastructure to support this industry," Santa said. Now, however, a situation exists where “there are multiple other permits that are required. That permitting process can be coordinated more, without violating the purposes of many of those statutes that are intended to protect the environment and various resources.
"I would encourage, as a compliment to whatever may be done on publicly funded infrastructure in a bill, to also look with an eye toward what can be done to improve permitting for infrastructure."
Sen. Shelley Moore Capito (R-WV) lamented the delivery last month of Russian LNG to the Boston area, as well as additional LNG shipments from the Canaport LNG terminal in New Brunswick to New England. Santa also cited a winter storm -- bombogenesis, aka a bomb cyclone -- tha thit the East Coast last month. Regarding the bomb cyclone,Santa said gas for delivery to the Boston area on Jan. 6 was priced at about $78.80/MMBtu. By comparison, gas in Leidy, PA, in the heart of the Marcellus Shale and near several storage facilities, was priced at $4.20/MMBtu.
"It is a remarkable situation," Santa said. "If there are no pipeline constraints, that differential should be little more than the price of pipeline transportation."
The New England market "is clearly capacity constrained,” he said. “While FERC can authorize new pipelines, and while pipeline companies are interested in market opportunities, it requires demand on the other side -- in particular, customers willing to sign up for pipeline capacity on a long-term basis to finance those projects.
"In New England, the wholesale electricity markets are structured in a way that does not provide incentives for generators to contract for that pipeline capacity. Nor on the electric side is there the equivalent of the natural gas local distribution company that can aggregate demand and then sign up for capacity based on that. So that's why we have the highly anomalous result that while Marcellus gas is only a couple hundred miles away from New England, imported LNG is an economically attractive alternative because of that scarcity."
When Capito asked if there was a way to cite the national interest in trying to compel FERC to approve more energy infrastructure, Santa replied that in the early days of the Federal Power Commission -- the precursor agency to FERC -- natural gas pipelines were often approved over the objections of states that wanted to keep the gas for themselves, or were resistant to expanding the marketplace.
"The problem we've got now is this cooperative federalism issue, where the State of New York has utilized its authority under the CWA to effectively veto FERC's approval of a pipeline," Santa said. "What we need is clarification from Congress on the scope of states' authorities under the CWA, and then also some effective recourse should a state overstep its bounds or act in a way that's contrary to the national interest."