FERC, CFTC, and State Energy Law Developments

Following the declaration of a global pandemic due to the widespread transmission of the coronavirus (COVID-19), the issuance of shutdown and/or stay-at-home directives cascaded from commercial enterprises and state and local governments across the United States. During this period of extreme disruption to daily routine, the continuity and integrity of energy operations were necessary to ensure that the massive shift to home-based life could exist with minimal business disruption. Front- and back-office personnel engaged in trading energy commodities quickly transitioned to a work-from-home (WFH) posture, ensuring that their firms could preserve market access for production or output while also consummating the transactions needed to procure an adequate fuel source, managing price exposure to highly volatile commodity prices, or executing preexisting trading strategies.

FERC issued a proposal on May 21 to modify its policy regarding requests for waiver of public utility tariff provisions that are subject to FERC’s review and approval under the Federal Power Act and the Natural Gas Act.

In light of federal court opinions that have discussed FERC’s authority to change a filed rate, the Commission acknowledged that past orders approving tariff waivers have “drifted beyond the limits imposed by the filed rate doctrine” and the related rule against retroactive ratemaking.

The Federal Energy Regulatory Commission (FERC) issued a notice on May 20 that it will convene a Commissioner-led technical conference to consider the ongoing, serious impacts that the emergency conditions caused by the coronavirus (COVID-19) pandemic are having on the energy industry. The conference will be free, open to the public, and held remotely on Wednesday and Thursday, July 8-9, 2020. Attendees may preregister online here.

In mid-March the Commission began issuing guidance to address the immediate needs of FERC-jurisdictional entities, including various waivers and extensions necessary to assist energy companies with managing their regulatory responsibilities while dealing with the pandemic. The conference will be more forward-looking, and is expected to focus on the potential longer-term impacts from the pandemic on energy companies, energy markets, energy system reliability, and consumer protection.

In response to President Donald Trump’s declaration of a national emergency due to the coronavirus (COVID-19) pandemic, the Pipeline Hazardous Materials Safety Administration (PHMSA) issued a notice that it does not intend to take enforcement action related to certain new gas pipeline safety regulations with which gas pipeline operators must comply by July 1, 2020.

PHMSA stated that it will resume its normal enforcement processes and sanctions after December 31, 2020, but retains the discretion to enforce the July 1, 2020 compliance deadlines in the event of a significant safety issue or if otherwise warranted. Similar to PHMSA’s prior notice of enforcement discretion (which we discussed in our March 27 posting), this notice recognizes that gas pipeline operators may be facing personnel resource constraints due to the COVID-19 pandemic.

Although the Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27  does not expressly provide relief for energy companies, many of its provisions impact energy sector companies. Read our recent LawFlash to learn more.

Commission Chairman Neil Chatterjee held a press conference on March 19 to discuss FERC’s work during the current pandemic, provide updates regarding the coronavirus (COVID-19), and respond to questions from the media. According to today’s announcements, FERC plans to keep operating as usual but will provide extensive flexibility to the regulated industry in addressing the effects of the pandemic on FERC-jurisdictional activities.

A cyberattack on a single gas compression facility resulted in the shutdown of a natural gas pipeline for two days, according to a recent alert from the US Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA).

The Pipeline and Hazardous Materials Safety Administration’s (PHMSA’s) long-awaited final rule on the minimum safety standards for underground natural gas storage facilities (UNGSFs) was published in the February 12 Federal Register. The final rule amends the pipeline safety regulations applicable to depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. These pipeline safety regulations were established in an interim final rule that PHMSA issued in December 2016 in response to a recent significant gas leak and the mandate in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the PIPES Act). The PIPES Act directed PHMSA to establish minimum safety standards for depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. The final rule becomes effective March 13, 2020.

A declaratory order issued by the Federal Energy Regulatory Commission (the Commission) on January 30 in Docket No. RP20-41-000 grants pipeline developers greater certainty in planning and siting construction. The order was issued after a split 2-1 vote. It may also significantly reduce pipeline developers’ expenses by avoiding costly disputes with states over the possession of state-owned land. The order resulted from a petition filed by a company (Pipeline) seeking to construct an approximately 116-mile greenfield natural gas pipeline designed to provide firm natural gas transportation service from receipt points in the eastern Marcellus Shale region, in Luzerne County, Pennsylvania, to delivery points in New Jersey and Pennsylvania (the Project). The petition requested the Commission’s interpretation of the scope of the eminent domain authority in Section 7(h) of the Natural Gas Act (NGA).

A notice of proposed rulemaking (NPRM) titled, “Update to the Regulations Implementing the Procedural Provisions of the National Environmental Policy Act,” published today by the White House’s Council on Environmental Quality (CEQ), is likely to have far-reaching effects for the energy and public infrastructure sectors, and could facilitate more efficient implementation of energy production/generation projects for all major energy sources (i.e., renewable, fossil, nuclear, and hydroelectric sources) as well as transportation projects.

The proposed rule has four major elements: (1) to modernize, simplify, and accelerate the NEPA process; (2) clarify terms, application, and scope of NEPA review; (3) enhance coordination with states, tribes, and localities; and (4) reduce unnecessary burdens and delays.

It will be important for industry entities that depend on federal agency action when advancing projects and securing permits to actively participate in the proposed rulemaking, and to provide meaningful comments that will help the CEQ build a sufficient agency record to defend against any later litigation challenges to new regulations.

Read the full LawFlash.