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As FERC Review of NatGas Pipeline Policy Nears, House Lawmakers Divided Over Priorities

Two days before FERC holds an open meeting to discuss reviewing its policy for evaluating the need for natural gas pipelines, House lawmakers gave very disparate views on how the Federal Energy Regulatory Commission should proceed -- with some calling for faster permitting and others a more transparent process to appease landowners.

Meanwhile, a Texas lawmaker on the House Subcommittee on Energy voiced concern over how the oil and gas industry will be affected by FERC's recent policy change involving master limited partnerships (MLP), as well the Commission's efforts toward advancing the permitting process for infrastructure to support liquefied natural gas (LNG) exports.

At the start of Tuesday's three-hour hearing, Rep. Greg Walden (R-OR), chairman of the full House Energy and Commerce (E&C) Committee, said that as the nation's generation mix shifts toward natural gas "we're going to need more pipelines."

"I am hopeful that Chairman [Kevin] McIntyre's review of FERC's procedures for evaluating applications for new gas pipelines will result in more efficient and timely decisions," Walden said. "With our abundant shale resources, we can be entirely self-sufficient on natural gas, but we must construct new pipelines."

Walden added that "while cross-border trade with our neighbors Canada and Mexico may be a win-win, we should never have to be reliant on Russian imports again," referring to the two occasions this year that New England had to import LNG from Russia to meet winter demand.

But Rep. Frank Pallone (D-NJ), E&C's ranking member, said he hopes FERC's review of its 1999 gas pipeline certificate policy [PL18-1] will lead to greater protections for property owners.

"For years, I have expressed concern with the process FERC uses to review pipeline applications, and its tendency to green light the construction of potentially unnecessary pipeline projects," Pallone said. "Homeowners in the path of a pipeline have little recourse to stop pipeline companies from seizing their land through eminent domain.

"It's time for a new approach. I believe a more regional review of these projects should be implemented rather than the current process where every pipeline appears to be reviewed individually, without any consideration of the pipelines in the area."

McIntyre, who was sworn in as FERC chairman last December, struck a conciliatory tone in his opening remarks.

"As a matter of good government, I believe that it is appropriate for us, as with any other governmental body, to review our policies and processes from time to time to explore whether any improvements can be made," McIntyre said. "Our review of gas pipeline certification processes is timely in light of the many changes that the natural gas industry has witnessed in the past 20 years."

Rep. Morgan Griffith (R-VA), whose district includes the Mountain Valley Pipeline (MVP), said he was disappointed that FERC didn't hold more than two public hearings over the project -- despite requests from him, Rep. Bob Goodlatte (R-VA) and former Rep. Robert Hurt (R-VA). FERC authorized construction of the MVP last month.

"[We] begged for more public hearings, so that people could travel a shorter distance to get to these hearings, because it was affecting their communities," Griffith said. He then asked McIntyre for reassurances that FERC would review the processes for public hearings and transparency over public comments.

"It's been so frustrating," Griffith said, adding that the situation compelled him to introduce last June House Resolution (HR) 2893, aka the Pipeline Fairness and Transparency Act. He also questioned why MVP and another project, the Atlantic Coast Pipeline, could not share the same right-of-way. The companies backing both projects, which were approved by the Commission in a rare split decision last year, rejected the collocation idea in 2015.

"[HR 2893] is to express these concerns that our constituents having been living with now for several years and still feel very frustrated," Griffith said. "As we go forward, are you willing to work with us to try to get some legislation that makes folks feel like it's not just being crammed down their throats, but that they actually have input and that somebody out there is actually listening?"

McIntyre said FERC "welcomed the opportunity" to work with lawmakers.

"I don't want to leave the false impression that we don't have mechanisms in place today for proper public input, because we certainly do," McIntyre said. "One of the key issues before us under our existing policy is to make a determination as to whether a particular project is needed."

But Griffith countered "the frustration level in Virginia is so high. While you have a system in place, I appreciate you looking at it because it apparently isn't working to give confidence in the public."

Dust-up on MLPs

Lawmakers also touched on FERC's announcement last month that it would no longer allow MLPs for interstate natural gas and oil pipelines to recover income tax allowances in cost of service rates.

"I've heard from a number of Houston-area companies that are worried about changes that FERC did on whether pipelines can recover their costs under MLP structures," said Rep. Pete Olson (R-TX), adding that Enbridge Inc. would seek a rehearing over the policy change. "Their argument is that FERC made this move without allowing enough time for debate, and you didn't take into account that not all MLPs are created equal."

McIntyre told Olson that FERC's action was the result of a series of steps it took in response to a 2016 decision by the U.S. Court of Appeals for the District of Columbia Circuit. In the case United Airlines Inc. et al v. FERC et al [No. 11-1479], the court held that the Commission had failed to demonstrate that there was no double-recovery of income tax costs when permitting SFPP LP, an MLP, to recover both an income tax allowance and a return on equity determined by the discounted cash flow methodology.

"We felt we had no choice but to take decisive action in a manner that we read as being directed by the court," McIntyre said. "It doesn't surprise me that a number of companies out there affected adversely, monetarily by that would have a quarrel with it. They are not bashful in sharing their views with us on that, I assure you."

"It is their right under the governing statutes to seek rehearing where they are aggrieved by an order of ours. We would look forward to processing those in accordance with our law and procedures."

Commissioner Neil Chatterjee concurred, saying FERC's "hands were tied by the courts."

FERC Hiring to Address Backlog

Olson, the subcommittee's vice chairman, then segued to voice concern over FERC permitting for LNG export infrastructure. The Texas lawmaker said he was in India two weeks ago to discuss that country's imports of U.S. LNG. He said he also spoke recently with Department of Energy (DOE) Secretary Rick Perry -- who met with the subcommittee last week before heading to New Delhi to discuss growing U.S.-India energy ties -- over LNG exports.

"I've heard some concerns back home that you are slipping behind schedule of some very viable Gulf Coast LNG projects," Olson said. "I've heard rumors that FERC has only six to eight employees [tasked] with approving these booming permits. I've heard you actually approached the DOE for new members to help out with the backlog of approving LNG permits. Is that true?"

"We are paying very close attention to the pending applications, not only for LNG export infrastructure but also for natural gas pipeline infrastructure. It's consuming an enormous amount of attention and manpower within the agency. We are looking to beef up the ranks of our Office of Energy Projects, and we are actively pursuing hiring in that regard right now.

"If there's any suggestion that we are somehow not giving it our full effort right now, I can assure you that that is not the case at all."

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