Should The FERC Change Its Approach For Licensing New Gas Infrastructure?

Former Chairman and Commissioner Norman Bay gave the natural gas industry a surprise his last day at the Federal Energy Regulatory Commission ("FERC" or "Commission"), February 3, 2017, in opening a debate about whether the Commission should modify critical aspects of its pipeline infrastructure review process under Section 7(c) of the Natural Gas Act ("NGA").1

In a statement accompanying the Commission's order in National Fuel Gas Supply Corp.,2 Commissioner Bay advocated that the Commission explore adjusting its approach to authorizing new pipelines both in terms of evaluating the need for new facilities and the scope of environmental analysis to support such projects.

Bay maintains that these changes are prompted by the twin forces of "increased controversy" surrounding pipeline infrastructure, as evidenced by a recent paper from the Sierra Club3 advocating a stop to all new pipelines in favor of investment in renewable energy, and the "considerable public interest" associated with concerns over the production of gas, methane emissions and the use of fracking (none of which the FERC has authority to regulate, as Bay readily admits).

Bay recommends that the Commission look beyond executed precedent agreements to determine the need for new projects and that, "in light of heightened public interest and in the interests of good government,"4 the Commission expand its environmental inquiry into areas that he concedes are not required by the National Environmental Policy Act of 1969 ("NEPA").5 This would entail performing a programmatic review of gas production from the Marcellus and Utica Shales and, in connection with each new pipeline project, performing an assessment of the downstream impacts of gas use and a life-cycle greenhouse gas ("GHG") emissions study.

Does Controversy Alone Justify Changing the Commission's Approach?

The controversy cited by Bay is real and immediate. Well-funded environmental groups like the Sierra Club that back a climate change, anti-fracking and renewable energy agenda are locked in what seems like an existential struggle with the Commission over the authorization of new gas projects. Their agenda of blocking all new pipelines is fundamentally at odds with the Commission's responsibility under the NGA to assure interstate consumers "an adequate and reliable supply of gas at reasonable prices."6 Because Congress has directed the Commission to address the needs of the interstate gas market and has not empowered it to regulate gas production, fracking or GHG emissions,7 the Commission's job regarding new gas projects is clear -- to authorize such projects if they are shown to be in the public convenience and necessity (i.e., demonstrated need for the project, no subsidies and an acceptable route).

But by no means is the Commission's job easy. The opposition by environmental groups has gone far beyond the expected vigorous debate presented in pleadings and filings to the Commission and reviewing courts. It has also included demonstrations inside and outside the Commission's headquarters, sit-ins at Commission's meetings, and even picketing individual Commissioners' homes.

Nonetheless, the mere existence of controversy -- without some showing that the Commission's decisional approach is demonstrably flawed -- does not justify changing the Commission's longstanding reliance on the 1999 Certificates Policy Statement to decide pipeline certificate cases.

Bay has not made the case that the Policy Statement is...