IEEFA U.S.: FERC adopts new policy to evaluate interstate gas pipelines
A Senate panel has scheduled a Thursday hearing to review the Federal Energy Regulatory Commission’s adoption of a new policy statement for approving new interstate natural gas facilities, such as pipelines.
The commission approved the updated policy statement on Feb. 17, taking substantial steps toward a more rigorous examination of pipeline projects. This improved scrutiny can help avoid undue burdens on other agencies to review unneeded projects and can reduce unnecessary eminent domain actions against landowners.
Richard Glick, FERC chairman, is expected to testify at the 10 a.m. (Eastern Time) hearing, which will be broadcast live on the Senate Committee on Energy and Natural Resources website.
In a key passage of the updated policy statement, the commission said it will consider evidence of alternatives to proposed projects, as well as whether other factors could eliminate the need for a new pipeline.
THE NEW LANGUAGE IS PIVOTAL. It means that the agency intends to examine the asserted need for a proposed project in light of all the evidence submitted, rather than simply rubber-stamp the project developer’s assertion of need based on evidence of business agreements.
In the past, FERC typically would dismiss public concerns about whether a pipeline was needed if the project proponent could provide so-called “precedent agreements”—contractual commitments to take the gas—from utilities or gas distributors. On occasion, FERC approved projects even when precedent agreements were with companies affiliated with the pipeline developer. Given that FERC approval gives the interstate pipeline developer the power to exercise eminent domain to seize or use property located in the proposed pipeline’s path, such a minimalist approach was particularly inappropriate.
IEEFA has long asserted that FERC is duty-bound to examine all relevant factors in assessing the need for construction of interstate gas pipelines, and should have done so under its 1999 policy statement. The commission’s reviews should include energy demand projections and the potential to mitigate demand through energy efficiency and other measures.
The commission now acknowledges that duty. It reaffirms the 1999 policy declaration that FERC will consider all relevant factors reflecting on the need for the project, and admits that in practice, it has relied almost exclusively on precedent agreements to establish project need.
FERC’s past failures to analyze energy market forces caused it to approve ill-advised major pipelines
The new policy declares that only considering precedent agreements and ignoring other factors could cause FERC to approve unneeded projects. The policy also rejects an earlier practice of relying heavily on precedent agreements made with companies that are affiliated with a pipeline project sponsor, stating that such agreements will generally be insufficient to demonstrate need.
Equally important, the policy states that FERC will consider both current and future demand for a project, based on the evidence in the record. It encourages applications to submit not only market trend information but also an analysis of how current and expected policy and regulatory developments would affect future need for the project.
IEEFA has analyzed how FERC’s past failures to analyze energy market forces caused it to approve ill-advised major pipelines that were subsequently cancelled, including the Constitution Pipeline, the Northeast Supply Expansion (NESE) Project, the Atlantic Coast Pipeline, and the PennEast Pipeline. Each generated regulatory burdens on states and communities before being cancelled. A thorough FERC analysis of the projects at the outset would have avoided such burdens.
COMMUNITY RESIDENTS AND ADVOCATES WHO FELT FERC IGNORED EVIDENCE that they provided about the ability of renewable energy and energy efficiency to address energy demand may be encouraged by the commission’s promise to evaluate the information it receives in public comments: “To the extent the Commission receives information in the record from third parties addressing the need for a project, that too will be considered in our analysis.”
The updated policy indicates the commission will have a more open ear to concerns raised about overbuilding of pipelines, the failure to address alternatives, and any conflicts between pipeline proposals and state energy plans.
Finally, the policy clarifies that the commission must assess the full environmental impact of the project—including its potential effects on environmental justice communities and greenhouse gas emissions.
The policy was developed with a lengthy public comment process. FERC said the new policy would not be applied retroactively, but it is effective immediately for new and pending applications.
Suzanne Mattei ([email protected]) is an IEEFA energy policy analyst.
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