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‘Increasing Complexity’ to Natural Gas Industry’s Role in Climate Issue, Says FERC’s LaFleur

The natural gas industry needs to proactively address the fuel’s “complicated relationship” with climate change, FERC Commissioner Cheryl LaFleur told a group of executives and other stakeholders Monday during a speech in Washington, DC.

LaFleur, speaking at the North American Gas Forum hosted by Energy Dialogues, said natural gas has come under increasing scrutiny for its climate impacts despite the role it has played in cutting emissions by reducing reliance on more carbon-intensive fuels like coal.

The “increasing complexity in the relationship between natural gas and climate change” has complicated the Federal Energy Regulatory Commission’s pipeline certificate review process, according to LaFleur, one of two Democrats serving on the Commission.

“The facts haven’t become any more complex, but the ways that they’ve been looked at seem to be more complex,” she said. While natural gas has helped curb carbon emissions, “on the other hand, as events have moved on, more people are pointing out that natural gas itself has its own greenhouse gas implications” that are “smaller than coal but potentially less than carbon-free ways to make electricity.

“...For the people who are in the gas industry, getting ahead of this issue is really important, because I don’t think it’s going anywhere.”

Last year’s federal court ruling to vacate the certificate issued to Sabal Trail and two related pipelines, which found that the Commission failed to properly assess downstream greenhouse gas emissions, has brought the climate issue to the forefront for FERC.

“Ever since that case we have been grappling and debating how to deal with it and how to properly apply the law in our cases,” LaFleur said.

LaFleur, joined by fellow Democratic Commissioner Richard Glick, has openly dissented on a number of recent FERC pipeline decisions. LaFleur has critiqued FERC’s approach to assessing climate change impacts from gas projects.

LaFleur said Monday she strongly supports having a national or international policy on climate change, including carbon pricing and aggregate goals for curbing emissions that could provide something for regulators to work toward.

“That has not happened. In fact, since the federal government has stepped further away from even the climate change efforts of the past, the policy has become more state-based, local-based and fragmented rather than broad,” LaFleur said. “And what’s happening is that to our dismay we are debating these issues in specific dockets.

“The place to decide how much carbon dioxide the United States should accept is not in a case about a compressor terminal or one pipeline in one state,” the commissioner said. “That’s just not a sensible way to make policy, nor is FERC the one that should make that decision. It should be Congress and the other branches of government. But we are finding it in our dockets nonetheless.”

LaFleur later acknowledged that a straightforward quantitative analysis to weigh a project’s potential benefits to the climate or otherwise against its potential harms won’t always be possible. However, she framed the call for more in-depth climate assessments as part of a broader desire to see FERC incorporate more information into the record when it analyzes project need, including the anticipated end-uses of the gas.

“Sometimes we do know where the gas is going, and we can say this is needed for this power plant, the state has approved it, it’s needed for reliability,” helping with both the need and having numbers to analyze, LaFleur said. “...There’s a balancing in our dockets whether we try to do a formula or not.

“We’re putting our names on the fact that this is required by the public convenience and necessity; that the benefits outweigh the costs,” she said. “That’s in our orders already. This is just spelling out a piece of it more. But I would not pretend that the whole thing’s going to be an algorithm, because we’re not there yet as a society. Not everything can be reduced to numbers.”

FERC Policy Risks Pipeline Overbuild

On the topic of FERC’s pipeline certificates, LaFleur called for FERC to go beyond precedent agreements in evaluating the need for a pipeline project. She said basing FERC’s certificate decisions solely on precedent agreements could lead to pipeline overbuild.

“Given the growth in natural gas production, the numerous overlapping projects in the same region, and the overall trends in the country toward lower carbon resources, I think if we assume because of the fact you have 10- or 15-year precedent agreements that there’s long-term regional need” for a project, there could be “a significant risk of pipeline overbuilding, which is a factor that the 1999 certificate policy statement indicated FERC would look at but has not been a theme of most of our cases in the last 15 years,” LaFleur said.

“...I’ve been in favor of building a record that looks more deeply into what’s driving the pipeline construction. What’s the end use? Is it driven by local distribution companies, by electric generation? Is it driven by export?” That way “we can understand how it’s going to be used to do both the need and the environmental work more carefully.”

LaFleur said she knows such changes to FERC’s approach could be controversial or “maybe even scary” to some.

“But I think it’s better to look at it holistically and actually start a dialogue where we hear from all sides of the issues so that when we start a new practice we can be clear and predictable about what kind of factors we’ll look at, what we’ll rely on to establish need” and evaluate environmental impacts, she said.

“I don’t really want to have this argument docket by docket. That’s not fair to the people in those dockets who put their money into those pipelines.”

Coal, Nuke Resiliency Arguments ‘Commercially Motivated’

LaFleur offered a candid assessment of the Trump administration’s recent regulatory efforts to prop up coal and nuclear plants that have struggled to compete against natural gas.

“The way competitive markets work, things that are better and cheaper win,” she said. The arguments for compensating the less competitive plants have generally focused on “resilience or criticism of some aspect of dependence on natural gas for generation. Some of it is sensible,” such as concerns about having too many power plants relying on one pipeline.

“Some of it is I think more commercially motivated, like criticizing the security and cybersecurity of natural gas pipelines, all the sudden bringing that up as an issue,” LaFleur said. “But the answer has not been ‘let’s make them more secure,’ which would seem to be the obvious answer if you have a security issue, but rather it’s been, ‘let’s pay some other resource that we like more.’”

LaFleur suggested that the White House will continue to press for changes to electricity markets that would favor coal and nuclear resources.

“There have been continued rumors of additional steps by the Trump administration to order the additional compensation, particularly for coal units, so we will wait and see what happens there,” she said. “But I think in the meantime, we just have to try to apply the rules as fairly as we can and make sure if there’s a problem we come up with a solution to the problem...rather than using it as an excuse for market changes that might not be driven by that problem.”

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