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Under New Chairman, FERC Refocuses Its Priorities for Natural Gas Pipeline Projects

Empowered

September 15, 2021

In the eight months since Richard Glick took the helm of the Federal Energy Regulatory Commission (FERC), a number of changes to federal regulation of the development of natural gas infrastructure are in the works and several recent orders have showcased diverging positions at the Commission.

In several recent orders, Chairman Glick has made clear his intent for FERC to refocus its priorities and update the factors considered when reviewing and authorizing proposed natural gas pipeline projects. These orders have showcased the diverging positions on the Commission, particularly between Chairman Glick and Commissioner James Danly. While the US Supreme Court’s decision in PennEast Pipeline Co. v. New Jersey affirmed the authority of certificate holders to exercise the federal eminent domain power, recent developments at FERC stand to significantly change what applicants must demonstrate in order to obtain those certificates.

Proposal to Consider Environmental Justice Communities in Certification Process

On February 18, FERC issued a notice of inquiry (2021 NOI) seeking new information and comments on whether it should revise its policy statement on the certification of new interstate natural gas transportation facilities (Policy Statement). Under the Policy Statement, FERC considers the following when reviewing a certificate application:

  • Public need for the project
  • Impacts on landowners in the pipeline’s path
  • Environmental effects of the project

The 2021 NOI posed follow-up questions to topics presented in a similar notice of inquiry issued three years prior (2018 NOI)—when Chairman Glick was serving as a commissioner. These topics included the wisdom of FERC’s treating precedent agreements as evidence of public need, whether certificate applicants should be required to take steps to minimize the exercise of eminent domain, and the scope of FERC’s assessment of a project’s environmental effects.

The 2021 NOI also presented a new topic for comment: transportation facilities’ effects on environmental justice communities. Specifically, FERC sought comment on whether and how it should consider the effects of transportation facilities on these communities in its certification process. This new topic follows Chairman Glick’s separate comments that FERC should more aggressively fulfill its responsibilities to ensure that FERC’s decisions do not unfairly impact historically marginalized communities, and also his creation of a new position, senior counsel for environmental justice and equity. Numerous parties filed comments on the 2021 NOI, which has been pending action by FERC since the comment period closed on May 26.

First GHG Emissions Analysis in Certification Process

In the 2021 NOI, FERC asked how, “[i]n conducting an analysis of the impact of a project’s [greenhouse gas (GHG)] emissions, . . . the Commission [could] determine the significance of these emissions’ contributions to climate change.” Prior to its issuance of the 2021 NOI, FERC had never assessed in its certification process the GHG emissions of a proposed natural gas facility. But on March 18—two months before comments to the 2021 NOI were due—FERC assessed and found insignificant the GHG emissions of a proposed pipeline constructed by Northern Natural Gas Company in Nebraska and South Dakota. The Commission’s analysis—which accounted for three brief paragraphs—proceeded by “compar[ing] the project’s reasonably foreseeable GHG emissions to the total GHG emissions of the United States as a whole.” FERC acknowledged that its GHG analysis would likely evolve “in response to the particular record before [FERC] in those proceedings.” In support of FERC’s order and its decision to assess GHG emissions, Chairman Glick said that FERC is “committed to treating greenhouse gas emissions and their contribution to climate change the same as all other environmental impacts [FERC] consider[s]” and that FERC would continue to “refine [its] methods for doing so.”

More recently, in August, the US Court of Appeals for the DC Circuit rejected FERC’s environmental analysis of several liquefied natural gas facilities in Texas. The court concluded that FERC failed to adequately analyze the GHG emissions associated with the facilities and that FERC was required to use the social cost of carbon or some other method to evaluate the GHG impacts. The court also rejected FERC’s environmental justice analysis for failing to fully consider the effects the facilities could have on minority and low-income communities. However, the court declined to vacate FERC’s orders, finding that it would needlessly disrupt completion of the projects, and determined that FERC could likely remedy its errors in remand proceedings.

Requirements Under Standard Pipeline Authorization Condition

On March 24, FERC issued an order (Notice to Proceed Rehearing) affirming its December 2020 decision (Notice to Proceed) to permit Mountain Valley Pipeline, LLC (Mountain Valley) to recommence construction of 17 miles of pipeline in the Mountain Valley Pipeline Project. FERC issued Mountain Valley a certificate in 2017 (2017 Certificate Order), but on August 3, 2018, it ordered Mountain Valley to cease construction after the US Court of Appeals for the Fourth Circuit vacated authorizations Mountain Valley had received from the US Department of the Interior’s Bureau of Land Management and the US Department of Agriculture’s Forest Service. FERC allowed Mountain Valley to partially resume construction on August 29, 2018. However, Mountain Valley had to again suspend construction after the Fourth Circuit vacated permits issued to it by the US Army Corps of Engineers (Army Corps). On September 25, 2020, the Army Corps reissued permits to Mountain Valley, but the Fourth Circuit stayed those permits on December 1, 2020. When FERC issued the Notice to Proceed Rehearing, the Army Corps permits the Fourth Circuit had stayed were still pending before the Fourth Circuit.

In their dissent, Chairman Glick and Commissioner Allison Clements stated that the project should not be permitted to recommence construction because it had not obtained federal authorizations required to cross all water bodies and wetlands along the project route. They argued that Environmental Condition 9 of the 2017 Certificate Order—which the majority described as “a standard condition in most pipeline authorizations”—requiring Mountain Valley to “file with the Secretary documentation that it has received all applicable authorizations required under federal law” prohibited FERC from authorizing Mountain Valley to recommence construction while federal authorizations were pending before the Fourth Circuit. In Chairman Glick and Commissioner Clements’s view, this standard language imposes an ongoing duty on certificate holders “to maintain [] permits throughout the entirety of construction.”

Paper Brief on Continued Service of Weymouth Compressor Station

On February 18, in an order joined by Chairman Glick (Briefing Order), FERC requested briefing on whether “it is consistent with the Commission’s responsibilities under the Natural Gas Act (NGA) to allow the Weymouth Compressor Station to enter and remain in service.” FERC issued a certificate authorizing the construction and operation of the Weymouth Compressor Station (Weymouth Station) in 2017, but the project faced continued opposition, including from Massachusetts Senators Elizabeth Warren and Ed Markey. FERC granted authorization for the Weymouth Compressor Station to be placed into service on September 24, 2020 (Authorization Order).

FERC explained that the Briefing Order was prompted by “numerous [] pleadings expressing safety concerns regarding the operation of the [Weymouth] project.” Whereas Commissioner Danly in dissent characterized the Briefing Order as “contrary to law” and suffering from “procedural oddities,” Chairman Glick stated that “[t]he Weymouth Compressor Station raises serious environmental justice questions, which we need to examine.” The Commission seeks briefing on several matters, including whether the Weymouth Compressor Station should be permitted to remain in service, whether FERC should “reconsider the current operation of the Weymouth Compressor Station in light of any changed circumstances since the project was authorized,” and what the consequences would be of staying or reversing the Authorization Order.

Supreme Court Affirms Authority of Certificate Holders in PennEast Pipeline Co.

On June 29, the Supreme Court issued its decision in PennEast Pipeline Co. v. New Jersey, holding that the Natural Gas Act (NGA) empowers the holder of a certificate of public convenience and necessity (certificate) issued by FERC to exercise the federal eminent domain power on all necessary rights-of-way, whether owned by private parties or states. The Court’s decision affirms that PennEast Pipeline Co., LLC (PennEast) had the authority to take 42 parcels of land controlled by New Jersey to construct its 116-mile pipeline once it obtained a certificate from FERC. Although PennEast has not yet obtained all required authorizations, including water permits from federal and state agencies, the Court’s decision brings PennEast one step closer to completing and operating its pipeline.

In January 2018, FERC granted PennEast a certificate authorizing the construction of a 116-mile pipeline from Pennsylvania to New Jersey. PennEast then filed various complaints in federal district court in New Jersey, seeking to exercise the federal eminent domain power under Section 717f(h) of the NGA to obtain rights-of-way along the pipeline route that FERC approved. PennEast sought to condemn certain parcels in which New Jersey or the New Jersey Conservation Foundation held an interest.

In a 5-4 decision, the Supreme Court held that Section 717f(h) of the NGA authorizes certificate holders to condemn all necessary rights-of-way, whether owned by private parties or states. As originally enacted, the NGA did not provide a mechanism for certificate holders to secure the property rights necessary to build pipelines and left natural gas companies to rely on state eminent domain procedures. Congress remedied this defect in 1947 when it amended the NGA to specifically authorize certificate holders to exercise the federal eminent domain power. Section 717f(h) provides that when a certificate holder cannot acquire the necessary right-of-way to construct, operate, and maintain a pipeline, “it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts.” The Court’s decision has broader implications than the PennEast project and gives private companies the right to exercise the federal eminent domain power to obtain state-held land to build natural gas pipelines.

Commissioners’ Testimony Before Congress Shows Disagreement on FERC’s New Direction

On July 27, the commissioners and Chairman Glick appeared before the Subcommittee on Energy of the Committee on Energy and Commerce to discuss FERC’s role in the country’s changing energy sector. In his comments, Chairman Glick highlighted the input sought in the 2021 NOI and “FERC’s efforts to better incorporate environmental justice and equity concerns into [its] decision-making.”

Commissioner Danly’s testimony was decidedly less optimistic about FERC’s recent changes to its regulation of natural gas facilities. Commissioner Danly wrote that “the pipeline industry is facing profound regulatory uncertainty as the result of recent Commission actions,” and urged FERC to “establish clear policies by which it will conduct its examination and adjudication of natural gas pipeline certificate applications.”