FERC has for the first time incorporated a review of climate change impacts in a natural gas certificate decision, sparking a contentious debate among the commissioners over the major policy implications for future infrastructure projects under its purview.

FERC

In a decision handed down during the Federal Energy Regulatory Commission’s open meeting last week, the agency adopted a new approach to considering greenhouse gas (GHG) emissions in its approval of Northern Natural Gas Co.’s request to build 87.3 miles of replacement line to upgrade its system in South Dakota and Nebraska.

The order, the details of which FERC made public on Monday, attempts to “assess the significance of the project’s GHG emissions and their contribution to climate change,” ultimately reaching the conclusion that those impacts “are not significant.”

“Going forward, we are committed to treating greenhouse gas emissions and their contribution to climate change the same as all other environmental impacts we consider,” Chairman Richard Glick, a Democrat, said of the order. “A proposed pipeline’s contribution to climate change is one of its most consequential environmental impacts and we must consider all evidence in the record — both qualitative and quantitative — to assess the significance of that impact. I look forward to continuing to work with my colleagues as we refine our methods for doing so.”

Glick, whom the Biden administration tapped to take over as chairman earlier this year, has been clear about his desire to see FERC take a more detailed approach to considering climate change impacts in its review process for natural gas projects.

Meanwhile, Republican commissioners James Danly and Mark Christie penned partial dissents outlining their concerns over incorporating a big policy shift into the certificate order of an otherwise small project.

Danly argued that FERC in its latest order violates the Administrative Procedure Act by reversing the agency’s “longstanding determination” on its inability to properly assess the GHG emissions and climate change impacts of a project. This reversal “provides no clarity” by failing to “establish either a replacement framework or a threshold” for determining what amount of emissions would be considered significant under FERC policy, he wrote.

“This order represents regulatory malfeasance at its most arbitrary and capricious,” Danly wrote. “We leave the public and the regulated community — including investors upon whom we rely to provide billions of dollars for critical infrastructure — with no discernible principles by which the Commission intends to consider proposed projects. We announce this dramatic change of direction without notice, in an obscure docket that is likely not to be appealed.”

Danly offered a scathing assessment of the GHG review methodology incorporated into the Northern Natural decision.

“Not only does the majority decline to institute an analytical framework, it does not even establish a threshold above which it will consider emissions to be ‘significant’ under the standard it adopts,” the commissioner wrote. “It is no standard at all, merely a black box comparison of numbers the Commission can apparently apply however it sees fit on a case-by-case basis.”

For his part, Christie argued that the issues surrounding GHG emissions and climate change analyses should be addressed through the Notice of Inquiry (NOI) process initiated last month to reconsider FERC’s natural gas certificate proceedings. 

“The whole point of this NOI proceeding — at least for me — is to give all interested persons and groups a fair opportunity to weigh in on major issues such as this one,” Christie wrote. “…It is unfair and premature at best to jump the gun on that NOI process by effectively deciding the major question of law in this order with its limited participation.”

Analysts at ClearView Energy Partners LLC said in a note to clients Monday the shifting policy at FERC on GHG emissions offers “more confusion than clarity.” The Northern Natural case “provides no substantive guidance for a project sponsor with a greenfield project of any size, since FERC offered no qualitative or quantitative discussion of why the project’s emissions are ‘not significant’ for purposes” of the agency’s obligations under the National Environmental Policy Act.

The ClearView analysts did conclude that change is likely coming for natural gas projects seeking FERC approval moving forward.

“We think all pipeline sponsors are on notice that the scope of FERC’s emissions analysis is subject to future change, and we continue to believe it will get much stricter,” they said.

Perhaps ominously for natural gas operators under FERC’s jurisdiction, Danly closed his dissent with a warning.

“This order is likely to have profound consequences,” Danly said. “…Every single natural gas pipeline company,” liquefied natural gas company, “and shipper should intervene in every single certificate item” currently before the commission.

For the “numerous other pending certificate applications” at FERC, “the ‘significance’ of the emissions of those projects are hardly likely to be deemed as minor as they were in this case,” Danly said.

He added, “I fear that today’s order marks the beginning of a series of decisions that will have profound effects on the industry, its customers, and on” Natural Gas Act “section 3 and section 7 approvals going forward.”