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EPA, FERC Need Bigger Roles in NatGas Pipeline Permitting, Senate Panel Told

Executives from the oil and gas industry told a Senate panel on Thursday the Environmental Protection Agency and FERC needed to play bigger roles to ensure a fair regulatory climate to permit natural gas pipelines, adding that Congress may need to change some laws to help make that possible.

In testimony before the Senate Energy and Natural Resources Committee, the executives appeared to agree with Republican assertions, from both panel members and officials within the Trump administration, that states opposed to natural gas pipelines are using Section 401 of the federal Clean Water Act to try to block projects from being built.

"Regulatory uncertainty brought on by delay or, worse, deadlock at the Federal Energy Regulatory Commission, is increasingly of concern," said Committee Chairman Sen. Lisa Murkowski (R-AK). "What's more, the denials of necessary state approvals for projects on political grounds, or the failure of other federal agencies to meet FERC-established schedules, are problems that must be addressed."

Other Senate Republicans agreed. "In some cases states have abused the authority to block projects for political reasons," said John Barrasso (R-WY), who chairs the Senate Environment and Public Works Committee. "They're using that permit as basically a 'stop action' form, rather than dealing with clean water itself."

Sen. Steve Daines (R-MT) said, "we've seen instances where one state can interrupt and shut down projects that are necessary to other states. We've seen repeatedly the abuse of Section 401 of the CWA to stop sensible projects...and Congress needs to take action on this."

Kinder Morgan Inc.’s Curtis Moffatt, general counsel, said FERC needed to be "more bold" in exercising its role as the lead agency in pipeline certification.

"More leadership out of the executive branch, from EPA, with clear guidance to the states when implementing their delegated authority, is welcome,” Moffatt said. "The administration needs to be in support of the entirety of the process. Guidance from the executive department to the executive branch agencies should be in sync with the administration's policies."

Former FERC Chairman Joseph Kelliher, who now serves as an executive vice president at NextEra Energy Inc., testified that it was important for regulatory policies governing energy infrastructure development "be highly merits-based and nonpolitical, and that there be a reasonable level of regulatory certainty" with decisions made in a timely fashion. Although FERC is "ideally suited" to meet those goals, Kelliher said the primary challenge facing interstate natural gas pipelines was the siting process.

"Pipeline siting has become highly litigious, involving advocacy groups that are dedicated to blocking infrastructure development," Kelliher said. "Some states also have been very aggressive in their use of federally-delegated authority to effectively veto projects."

Kelliher, who was a Republican member of the Commission, said he supports FERC's review the 1999 policy statement on pipeline certification.

"I think after 20 years, it's reasonable to review whether the policies that are reflected in the policy statement are sound," Kelliher said. But while the "policy statement is sound and no major reforms are warranted," there were a couple tweaks that could be made.

"I think there's a need for FERC to be more transparent in the balancing of benefits and adverse impacts in their certificate orders. I think there's also a need for FERC to clarify whether and how environmental impacts should be weighed in this balancing, and whether environmental review is governed” by the National Environmental Policy Act “or by the Natural Gas Act itself."

When Daines asked what Congress could do to prevent states from using Section 401 "as a political pawn" to block natural gas pipeline projects, Kelliher said the law could be amended but added "it would seem to be arguably an unnecessary amendment to say [states] shouldn't include conditions that are completely divorced from water quality.

"It could be EPA guidance might be sufficient to explain what the limits are on state water quality permitting authority,” he said. Or, “it could be that there's a need for some kind of appeal...could there be a provision to appeal a state 401 permitting decision to EPA, and let EPA rule as to whether the state permit went too far afield."

Infrastructure Said Key To Grid Resiliency

Shortly into his testimony, Kelliher rebuked the Trump administration for backing subsidies to struggling coal and nuclear power producers. Department of Energy Secretary Rick Perry has argued that a notice of proposed rulemaking (NOPR) presented to FERC last September was a necessary bulwark to maintaining grid resiliency, but FERC unanimously rejected the NOPR in January.

"Strengthening the energy infrastructure is the real resilience issue," said Kelliher. "The resilience associated with on-site fuel is insignificant by comparison."

Several pipeline projects remain in limbo over disagreement with state regulators.

Last month, Constitution Pipeline Co. LLC asked FERC for a two-year extension to build a proposed pipeline because of the New York State Department of Environmental Conservation's (DEC) denial of a Section 401 permit. One month earlier, Transcontinental Gas Pipe Line Co. LLC re-filed for a 401 permit from the DEC for its Northeast Supply Enforcement Project.

Meanwhile, regulators in New Jersey have yet to issue a Section 401 permit for the PennEast Pipeline, and last May took the unusual step of asking a federal court to review FERC's certificate order authorizing the project.

And last Tuesday (July 10), FERC gave final authorization for Millennium Pipeline Co. LLC to enter its Valley Lateral project into service. Millennium and FERC had sparred with the DEC over the New York agency's refusal to issue a 401 permit for the project.

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