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INGAA Asks Congress to End Regulatory Confusion over Siting, Approval of Gas Projects

INGAA Asks Congress to End Regulatory Confusion over Siting, Approval of Gas Projects

Citing conflicts between federal statutes and challenges from state agencies, an interstate natural gas pipeline group has called on Congress to eliminate regulatory confusion by legislating that the Federal Energy Regulatory Commission is the lead federal agency over the approval and siting of interstate gas pipeline, storage and liquefied natural gas (LNG) projects.

Specifically, the Interstate Natural Gas Association of America (INGAA) urged Capitol Hill lawmakers to: 1) spell out that FERC has exclusive authority over LNG facilities; 2) codify FERC's "Hackberry" decision, which exempts LNG terminals from the agency's open-access policies; 3) resolve conflicts between various federal statutes related to the approval and siting of natural gas projects in interstate commerce; 4) issue a mandate that FERC is the lead agency for National Environmental Policy Act (NEPA) reviews of gas projects under Sections 3 and 7 of the Natural Gas Act (NGA); 5) require that FERC's administrative record be used as the exclusive record for all appeals or reviews; and 6) provide protection from burdensome state property taxes on gas pipelines.

The pipeline group submitted the policy recommendations to the Senate Energy and Natural Resources Committee for consideration at its gas supply and demand conference to be held on Jan. 24.

While the Commission "has made great strides in improving its performance, the approval and siting of natural gas infrastructure has become problematic in recent years due to conflicting federal law and the ability of other federal and state agencies who administer those statutes to delay or even halt new infrastructure development," INGAA told the Senate energy panel.

"This situation can be addressed conclusively only by the Congress acting to ensure that there is a single coherent and comprehensive process for reviewing, approving and siting natural gas infrastructure used in interstate and foreign commerce."

INGAA said it believes FERC "has gotten it right on both the law and the policy" with respect to its exclusive jurisdiction over the siting of LNG import facilities. It thinks, however, that an amendment of Section 3 of the NGA clarifying FERC's authority would be "good public policy" because it would "clear the air" and permit worthy LNG projects to proceed without a cloud over jurisdiction.

It also proposed that Congress codify the Commission's "Hackberry" decision waiving open-access policies for LNG terminals. "Statutory codification of this policy would send the signal to developers and the financial community that these regulatory changes will remain in place over the lifetime of an LNG project, and thus help to encourage additional terminal development."

Moreover, INGAA urged lawmakers to resolve the conflicts between the NGA and other federal statutes, such as the Coastal Zone Management Act (CZMA) and Clean Water Act (CWA), with respect to construction permits for gas pipelines and storage facilities.

"Pipeline opponents, abetted by state government officials, have in recent years taken advantage of this situation by using the permitting authority under the CZMA and/or CWA to frustrate pipeline projects already approved by the FERC as meeting 'the public convenience and necessity.' This end result would appear to fly in the face of the congressional intent to provide FERC with exclusive authority over pipeline construction approvals and the purpose of the Commerce Clause of the U.S. Constitution to preclude states from erecting barriers to interstate commerce," the group said.

"It is unlikely, however, that this problem can be satisfactorily resolved by the courts because legally the conflict is between competing federal statutes. Only Congress is in the position to address this growing inconsistency conclusively."

In addition, "a clear congressional mandate that FERC is the lead agency for NEPA reviews related to projects seeking authority [under] Section 3 and 7 of the NGA would send a powerful signal," INGAA said. The Commission also should be given "clear authority" to establish an administrative schedule for the NEPA review and associated permitting decisions by all relevant federal and state authorities, the group noted.

"This would ensure a single, coordinated and comprehensive approach for reviewing a proposed natural gas project, rather than the current duplicative and multi-layered reviews that present a tempting target for the opponents of natural gas infrastructure development...This proposal does not usurp or change federal and/or state agencies' existing authority...It would merely require that a relevant federal or state agency exercise its authority within a specific time frame, and do so in a cooperative fashion with FERC and other agencies."

INGAA also recommended that FERC's administrative record in a case be used as the exclusive record for all appeals or reviews. It noted that the Department of Commerce creates a new administrative record when hearing project appeals from states under the CZMA law. This leads to "inconsistent results on the merits," and creates a process that is "susceptible to manipulation by natural gas infrastructure opponents," it said.

By using the Commission's record, "this would expedite the process of...permits and any subsequent appellate reviews," and it "would create a powerful incentive for...permitting agencies (as well as various stakeholder groups) to participate meaningfully in the FERC NEPA process in order to ensure that their views were reflected in the single record development in connection with the proposed pipeline."

In a related proposal, INGAA urged Congress to approve an amendment that would require expedited judicial review of matters related to a FERC-approved natural gas project in which unreasonable delay or conditioning of permits by a relevant federal or state agency is alleged. "Should the court determine that the permitting agency was unreasonable in its denial of a permit, conditioning of a permit or failure to act on a permit application, the court would be able to authorize the construction and operation of a pipeline as approved by the FERC."

Lastly, INGAA asked Congress to bar state tax policies that discriminate against interstate gas pipelines. "Federal law currently protects interstate rail carrier, motor carrier and air carrier transportation from state property taxes that unreasonably burden and discriminate against interstate commerce. Pipelines are the only mode of interstate transportation that [do] not enjoy this protection under federal law," the group said.

"With federal protection similar to that enjoyed by other modes of transportation, interstate natural gas pipelines would be authorized to bring an action challenging such discrimination in federal court. A showing of competition would not be required. The proof required would be that other commercial and industrial taxpayers are assessed at a lower rate."

In its comments to the Senate Energy Committee, a group of large industrial natural gas consumers recommended that Congress consider statutory changes to properly oversee hedge fund activity in the natural gas market.

"Natural gas has been particularly volatile, which makes it appropriate to assess the sufficiency of the rules for trading and the oversight to make sure those rules are consistently followed and are sufficient," said the Consumer Alliance for Affordable Natural Gas (CAANG).

"The overarching focus of markets should be enhancing the ability of sellers and buyers to meet demand efficiently. The market system should not exist to reward trading for trading's sake," the group noted.

In addition, Congress should order a study of over-the-counter markets' capacity to manage natural gas contracts efficiently and fairly, the consumer group advised Senate lawmakers.

The CAANG also believes that the CFTC ought to review the effectiveness of current daily trading limit standards in reducing volatility. Specifically, it suggested that the market's experience with agriculture futures contracts be examined to determine how futures contract design could lessen volatility.

Furthermore, the CFTC should report to Congress on whether the current number of contracts a single entity can own (12,000) allows for such a concentration of contracts that it may distort free movement of the market, the CAANG said. If warranted, it noted that the CFTC should recommend changes to contract limits to Congress.

Lastly, the group called on lawmakers to direct the Energy Information Administration to review its storage reporting policies and procedures and make changes that would increase the accuracy and reliability of the data used by traders.

The CAANG and INGAA are among the 32 groups selected by the Senate energy panel to present their proposed solutions to problems afflicting the natural gas market at a conference to be held later this month.

Republican and Democratic committee staff reviewed submitted proposals and selected the 32 groups to offer 38 proposed solutions at the Jan. 24 conference, with five of the groups presenting more than one proposal. The conference, which will run from 1 p.m. to 5:15 p.m., will include six panels addressing various problems facing the gas industry.

The lead-off panel of the Natural Gas Council (NGC), Advanced Resources, National Ocean Industries Association, Western Organization of Resource Councils, New Mexico Oil & Gas Association, American Public Gas Association and the state of Alaska will discuss ways to increase domestic supplies from onshore and offshore resources.

The National Commission on Energy Policy, Dominion Energy, Center for Liquefied Natural Gas, National Association of Regulatory Utility Commissioners (NARUC) and the Federal Energy Regulatory Commission will focus on the importance of LNG as a supply source, and policies that should be considered with respect to LNG siting and safety.

The state of Louisiana, Interstate Oil and Gas Compact Commission (IOGCC), INGAA, Consumer Federation, Independent Storage and FERC will discuss the regulatory policies that are aimed at bolstering infrastructure for gas transmission and distribution lines and storage.

The issue of the environmental challenges and regulatory barriers to expanding natural gas supply will be tackled by The Wilderness Society, Natural Resources Defense Council, National Commission on Energy Policy, Independent Petroleum Association of America and the Domestic Petroleum Council.

The use of conservation and efficiency measures to reduce gas demand will be the topic of panelists Calpine Corp., NARUC, Nuclear Energy Institute, PPM Energy, Harvard University, Coal Utilization Research Council, American Gas Association and the American Council for an Energy-Efficient Economy.

The final panel will focus on the adequacy of storage and market information to ensure a well-functioning gas market. Panelists will include the Committee of Chief Risk Officers, American Electric Power, IOGCC, CAANG, the New York Mercantile Exchange, NGC and FERC.

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