The Federal Energy Regulatory Commission (FERC) has announced it will review an outdated policy statement that has guided its decision-making on the necessity for construction of new interstate natural gas pipelines. IEEFA recommended such a review in a report two months ago.
The announcement marks an important opportunity for FERC to chart a new, practical course in the regulation of U.S. pipeline construction projects, and reverse industry trends that destroy investor dollars, kill jobs, and cause unnecessary environmental and community disruptions. A sensible discussion can bring all stakeholders to the table and set a course that builds healthier communities, sustainable progress toward climate solutions, and a stronger economy.
The commission’s decision to reopen its policy review occurs as the inadequacies of the existing policy, which IEEFA analyzed in a December report, have become painfully apparent. FERC’s failures to curb overbuilding of pipeline capacity have caused adverse economic impacts and impaired the property rights of people whose lands lie in the paths of proposed pipelines.
The decision-making policy currently in use is more than two decades old. FERC had originally proposed revising its 1999 Certificate Policy Statement in April 2018, inviting public comment on the process. The public comment period had closed in July 2018, but no further action by the agency was taken—until now.
The December IEEFA report noted FERC had abandoned the 2018 review. Instead of conducting a rigorous analysis of public need for gas pipeline projects, FERC continued to rely on the false premise that the mere existence of business contracts for the gas means the public needs it.
The report established that such deferential reliance on industry practices is misplaced. Pipeline developers have been missing the mark in adjusting to economic changes that have reduced the share of natural gas in the energy market, as well as the rate of growth in energy demand.
The report also demonstrated that FERC’s approach resulted in poor decisions. FERC approved three major pipelines that wound up being cancelled in 2020. The projects had incurred substantial costs and imposed significant burdens on agencies and the public. Subsequent reviews exposed weaknesses in the projects that FERC should have identified at the outset.
The commission’s announcement notes that “a range of changes” has occurred since the 2018 proposal. It cited new environmental regulations under the National Environmental Policy Act (NEPA), as well as President Biden’s Executive Order 14008 regarding climate change initiatives and the need to address environmental and economic justice in decision-making.
Four areas of inquiry are already part of the revived policy review process: Reliance on precedent agreements to demonstrate need; the potential exercise of eminent domain; the evaluation of alternatives and environmental effects; and the efficiency and effectiveness of the certificate process. The commission said it hopes to receive comments “that reflect additional information developed and insights gained during the interim period.”
The commission also added a fifth issue area, the analysis of disproportionate impacts on human health in “environmental justice” communities that already suffer from high levels of pollution.
The result of this process could be a major shift in pipeline project analysis and in government action that promotes economically sustainable energy development.
The deadline for submitting public comments on this Notice of Inquiry, Docket No. PL18-1-000, will be 60 days from the date it is published in the Federal Register, which is expected to occur shortly.
Suzanne Mattei ([email protected]) is an IEEFA energy policy analyst.
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