Revamped policies that would guide FERC’s review of natural gas and liquefied natural gas infrastructure, as well as interim guidance for greenhouse gas (GHG) emissions, are likely to create more uncertainty and lengthier reviews, critics said.

In a split 3-2 vote, carried by the Democratic majority, the Federal Energy Regulatory Commission on Thursday issued policy statements to guide how future natural gas infrastructure is approved. The Commission also approved an interim GHG policy to ensure the “legal durability” of its decisions.

“There’s nothing remarkable, and certainly not radical, in taking environmental considerations into account while determining the public interest,” Commissioner Allison Clements said of approving the revisions.

The natural gas industry does not see it that way. Major natural gas industry groups slammed the policies, as did several GOP legislators. Even Democrat Joe Manchin of West Virginia, who chairs the Senate Energy and Natural Resources Committee, called the policy approvals “reckless.”

The move to increase scrutiny over infrastructure has been signaled for months by FERC”s Democratic Chair Richard Glick. He was appointed to lead the Commission in early 2021 by President Biden.

Glick was joined by fellow Democrats Clements and Willie Phillips in approving the policies. Republican commissioners Mark Christie and James Danley, who had chaired FERC before Glick, voiced their opposition. 

Adding Uncertainty To Permitting Process

The Interstate Natural Gas Association of America (INGAA) and the Natural Gas Supply Association (NGSA) both came out swinging against the revamped policies. 

The policy statements “replace the bipartisan and unanimous decision reached by the Commission in 1999,” said INGAA CEO Amy Andryszak. They also “call into question the durability of FERC’s certificate policy review framework and add additional uncertainty to the already complex natural gas pipeline permitting process.”

In addition, the interim GHG statement “does not add clarity to the certification process, but instead creates more questions,” Andryszak said. “In the interim GHG policy statement, the majority established a seemingly arbitrary number to determine the significance of incremental GHG emissions from a project.

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“The Commission also suggests that developers may be required to mitigate the effects of emissions created by downstream natural gas consumption, but other federal agencies and the states – not FERC – have the legal authority to impose these requirements.” She also questioned “how much mitigation will be required of developers to satisfy the Commission.”

FERC already has a “significant backlog of natural gas project applications that have been awaiting a decision, while the Commission has been considering these policy changes,” Andryszak said. “Subjecting project applications that have been pending for years to the new policies established…creates additional uncertainty for those pending projects and significant delays for much needed infrastructure.

“Given the increasing reliance on American natural gas domestically and globally, FERC should promptly take action to advance needed projects to meet energy affordability, reliability, and climate needs.”

NGSA CEO Dena Wiggins said the statements “represent a major overhaul in the way FERC intends to analyze pipeline certificate applications.

“We are very concerned that these revisions will have a chilling immediate effect on pending and future projects,” Wiggins said.

Citing the Energy Information Administration, Wiggins said “interstate capacity additions were lower in 2021 than at any time since 2016.  This is a disturbing trend that will be exacerbated by these revisions. I share the concerns raised at the open Commission meeting that FERC’s actions impinge on the existing statutory framework of the Natural Gas Act and arrogate authority to the Commission that can only be exercised by Congress.”

The U.S. Chamber of Commerce’s Global Energy Institute also criticized the changes. The actions, said policy counsel Health Knakmuhs, “unnecessarily add barriers to the transport of this reliable and affordable energy resource and will mean higher prices for domestic energy for consumers and businesses.”

‘Insurmountable’ Hurdles – Or Not?

In a note to clients, ClearView Energy Partners LLC analysts said some of the updates to the  certificate policy statement “appear to be incremental and we do not consider them to be particularly disruptive to the prospects of jurisdictional natural gas project approvals.

“For example, FERC formally articulated its intent to require more than precedent agreements between pipelines and prospective shippers to demonstrate economic need for all projects, and not solely in the case of projects among corporate affiliates. We do not view this as an insurmountable hurdle.”
The Commission also would require “project utilization projections and other market/demand information to establish economic benefits,” the ClearView team said. 

Following the order by the U.S. Court of Appeals for the District of Columbia Circuit to vacate and remand the FERC certificate for the Spire STL pipeline, the ClearView team said, “we do not consider this to be a surprise.”

ClearView analysts said the policy statements may reduce approvals for pending projects in the near future. “However, FERC could argue that in this case, delays would be the product of sponsors choosing to voluntarily bolster their applications, not the Commission taking additional time to review them.”

Regarding the interim GHG policy, which could require proposed projects to complete an environmental impact statement (EIS), again the ClearView team suggested patience to see how FERC rules on new projects.

“Overall, we consider the designation of a particular significance level to have small incremental practical impact, assuming it is limited to triggering an EIS.” Analysts said it was not clear yet “whether these policy statements will accelerate or slow projects.”

Analysts with Mizuho Securities USA LLC said the update would require a project sponsor to demonstrate whether it was needed or not – beyond precedent agreements –  to be of most consequence. 

“We expect the…change to raise a lot of question marks as the interstate pipelines that would be transporting incremental gas molecules are not themselves the end users of the gas,” said the Mizuho analysts. “As the need for low cost, U.S. natural gas becomes more visible both domestically and internationally, we expect FERC’s decision, on top of recent court decisions in the Northeast, to defer (if not outright end in regions like Appalachia) new interstate pipeline infrastructure investment.

“The news is supportive of our bullish call on long-term natural gas prices ($3.30/Mcf) and likely positive for operators, but at the expense of consumers in our view.”

Political Posturing?

Politicians moved to their usual sides of the aisle for the most part regarding the FERC policies. That is, except Manchin, the powerful senator who joined his Republican colleagues in questioning the impact on future infrastructure. 

“The Commission went too far by prioritizing a political agenda over their main mission — ensuring our nation’s energy reliability and security,” Manchin said. “The only thing they accomplished…was constructing additional roadblocks that further delay building out the energy infrastructure our country desperately needs.”

The “reckless decision by FERC’s Democratic commissioners puts the security of our nation at risk,” Manchin said. “The Commission went too far by prioritizing a political agenda over their main mission – ensuring our nation’s energy reliability and security.”

Sen. John Barrasso (R-WY), ranking member of the Energy committee, said, “President Biden is trumpeting the importance of infrastructure at the same time his appointees are working to kill energy infrastructure.” FERC “is determined to make it nearly impossible for Americans to maintain or improve access to abundant and affordable supplies of natural gas. 

“Delaying and then denying approval of natural gas pipelines and storage facilities will only drive up already inflated energy prices. It also threatens natural gas and electric reliability. This is just the latest attack in Biden’s war on American energy.” 

Meanwhile, Rep. Frank Pallone (D-NJ), who chairs the House Energy and Commerce Commission, praised the policy changes. 

“I applaud FERC for taking these necessary and long overdue actions to ensure that climate change and environmental justice are core considerations of its natural gas infrastructure certification process,” Pallone said. “The courts have repeatedly instructed FERC to take greenhouse gas pollution into account when deciding whether new gas infrastructure is in the public interest. 

“FERC’s approach is consistent with those court directives, the plain text of the law, and the overwhelming scientific consensus that we must act quickly to address the climate crisis.” The decisions “are significant steps toward tackling one of the defining challenges of our lifetime.

“What’s more, I am encouraged that today’s orders are responsive to the concerns of American landowners and environmental justice communities, who for far too long have been bulldozed by pipeline companies without adequate due process of law.”