The Federal Energy Regulatory Commission (FERC or the Commission) announced last month that it will review its policies governing the certification process for natural gas pipelines. The announcement was made by FERC Chairman Kevin J. McIntyre on December 21, 2017, in fulfillment of a pledge that he made during his Senate confirmation hearing in September 2017. The format and scope of the review are still being determined. Continue Reading FERC to Review Natural Gas Pipeline Certification Policies in the New Year
Recent months have seen the appointment and confirmation of top posts in key pipeline regulatory agencies, the Federal Energy Regulatory Commission (FERC) and the Pipeline and Hazardous Materials Safety Administration (PHMSA). While developments are generally good news for the pipeline industry—in that they are likely to mean expeditious project approvals and a clear chain of command at the agencies—the past few weeks have seen interesting departures from past practices, as discussed in more detail below.
On September 15, 2017, the Federal Energy Regulatory Commission (FERC or the Commission) issued an order in which it concluded that delays by the New York Department of Environmental Conservation (NYDEC or the Department) in processing Millennium Pipeline Company’s application for Clean Water Act (CWA) water quality certification constituted a waiver of the certification requirement. The order resolves a lengthy saga regarding water quality certification for Millennium’s Valley Lateral Project. It reaffirms previous FERC precedent establishing that the one-year waiver period for CWA water quality certification decisions by state agencies begins when the state agency receives a written application for certification, regardless of the state agency’s determination that the application is incomplete or requests for further information.
Recently proposed legislation in the U.S. House of Representatives would require FERC to revise its review process for proposed natural gas pipeline expansion projects to include additional analysis of cumulative impacts in a single region or State and extended environmental monitoring. While this bill is unlikely to gain traction in the Republican-controlled House, it is indicative of an ongoing debate about the need for and environmental impacts of new pipeline construction, and the role of both federal and state regulators in reviewing and approving such projects—a debate that has attracted national attention in the wake of the Obama administration’s rejection of the Keystone XL project in late 2015.
FERC recently published a revised draft Guidance Manual for Environmental Report Preparation for review and public comment. The revised Guidance Manual updates FERC’s 2002 guidance manual on environmental report preparation for projects seeking FERC authorization under the Natural Gas Act (NGA), supplementing the previous guidance as well as adding new sections explaining requirements for environmental report preparation. This substantial enhancement of the Commission’s 2002 guidance likely reflects increased scrutiny by environmental groups and others of FERC’s compliance with its NEPA obligations in authorizing natural gas and LNG projects.
Effective October 1, 2015, the Federal Energy Regulatory Commission (FERC) will allow interstate natural gas pipelines to seek to recover certain capital expenditures involving changes to pipeline system infrastructure that enhance system reliability, safety and regulatory compliance. In a Policy Statement issued on April 16, 2015, FERC provided guidance on how it will evaluate such cost recovery proposals. The intent is to encourage replacement of old and inefficient pipelines or pipeline components, such as compressors, to enhance the safe operation of pipeline systems.
Continue Reading FERC Implements New Cost Recovery Policy for Gas Facility Modifications
In light of anticipated increases in operator compliance costs associated with PHMSA safety initiatives, FERC is issuing a Proposed Policy Statement for public comment that would allow interstate natural gas pipelines to use cost recovery mechanisms, such as surcharges or cost trackers, to recoup expenditures related to improved safety, reliability, and regulatory compliance. Comments on this proposed change will be due within 30 days of the proposal’s publication in the Federal Register, with reply comments due 20 days later (thus initial comments will be due after January 3, 2015).
Recent legislative and regulatory developments at the federal and state levels signal lawmakers’ increased attention to issues related to the abandonment of oil and gas pipelines. The U.S. House of Representatives is currently considering a bill, proposed earlier this year in the wake of a release of crude oil in the streets of a Los Angeles suburb from an out-of-service pipeline. The bill would amend the federal Pipeline Safety Act to require inspections of pipelines to confirm their status each time they are listed as abandoned or transferred as part of a sale. Just after this bill was introduced in the House, the State of Louisiana passed a law requiring approval from the State Public Service Commission for the abandonment of portions of interstate natural gas pipelines entirely within the State, allowing the Commission to deny such approval if abandonment would cause gas supply inadequacies. Other states, such as North Dakota, have also recently passed legislation concerning proper procedures for pipeline abandonment. These developments reflect the range of issues associated with pipeline abandonment, from public safety to energy supply reliability.
In a decision that may affect how impacts of related pipeline construction projects are analyzed, the D.C. Circuit Court of Appeals recently remanded an environmental assessment (EA) prepared by FERC under the National Environmental Policy Act (NEPA). Delaware Riverkeeper Network et al. v. FERC, D.C. Cir. No 13-101 (June 6, 2014). The Court held that the Commission violated NEPA by improperly considering the project’s environmental impacts in isolation from three inter-related projects undertaken or proposed by the same operator on the same pipeline within a short period of time. The Court remanded the case to FERC for further consideration of the cumulative environmental impacts of the four related natural gas pipeline construction projects.
Several cold weather events in the last few years have highlighted the interrelationship between natural gas and electric markets and underscored the need for improvements in coordination across those industries. In an attempt to address what one Commissioner described as “the defining issue” facing FERC over the next few years, the Commission recently proposed revisions to its regulations intended to increase coordination between interstate natural gas pipelines and the electric industry. The Notice of Proposed Rulemaking describes the challenges faced by both sectors due to their divergent scheduling practices, which can create reliability concerns especially during times of peak energy demand. It also proposes scheduling changes to address these challenges.