IEEFA U.S.: FERC neglects energy needs in pipeline decisions

May 25, 2021 (IEEFA) — The Institute for Energy Economics and Financial Analysis is urging the Federal Energy Regulatory Commission (FERC) to reevaluate its pipeline certification guidelines. In their current form, commission guidelines allow it to rely solely on the existence of applicants’ business contracts to certify the necessity of constructing new interstate gas pipelines, disregarding the sweeping energy market changes that should inform its decisions. 

FERC, which has the authority to issue a Certificate of Public Convenience and Necessity under the Natural Gas Act to authorize new interstate pipeline construction, has opened its policy for public comment. 

An overreliance on the existence of business contracts has led to the approval of pipelines that don’t make financial sense for the public or investors, according to a December 2020 IEEFA report.

“Today’s investments in the oil and gas sector are high-risk with low returns,” said Suzanne Mattei, an IEEFA energy policy analyst. “When too much capacity chases too little demand, decisions to add pipelines should require rigorous justification for the burdens and sacrifices forced on property owners and the public interest.”

IEEFA submitted its comments to address the consequences of FERC’s approach, including:

• Multiple pipeline projects being scrapped in 2020 after winning FERC approval.
• Unjustified costs to utility customers, who are locked into long-term dependence on gas when the demand for gas is dropping.
• Seizure of property under eminent domain for deals that should not have been approved.

“FERC needs to reform its approach to focus on raising questions, conducting analysis and making decisions about proposed pipeline projects based on actual market conditions,” said Mattei.

Full report: IEEFA Comments to FERC re Certificate of Necessity

Author contact

Suzanne Mattei ([email protected]) is an IEEFA energy policy analyst. 

Media contact

Muhamed Sulejmanagic ([email protected]), Media Relations Manager

About IEEFA

The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. IEEFA’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.