FERC Changes Pipeline Approval Policies to Reflect Climate Change Concerns
The Federal Energy Regulatory Commission (FERC) has made historic changes to its policies for approving the construction of natural gas pipeline facilities. These changes, which came in the form of two policy statements released on Feb. 17, 2022, reflect an enduring priority for FERC Chairman Richard Glick, who has long pushed for enhanced consideration by the Commission of the effects of natural gas projects on climate change. (See Holland & Knight's previous blog post, "FERC Chairman Signals Enhanced Environmental Review," Oct. 8, 2021.) Indeed, the revised policies mark the culmination of various Notices of Inquiry that the Commission has released on this subject during the past several years, with the most recent issued on Feb. 18, 2021. (See Holland & Knight's previous blog post, "FERC to Natural Gas Pipeline Industry: What About Environmental Justice?", Feb. 25, 2021.)
Certification of Interstate Natural Gas Pipelines
In the initial policy statement, FERC approved its first changes since 1999 to its rules on certifying interstate natural gas pipelines under Section 7 of the Natural Gas Act (NGA). Under the revisions, the Commission will consider four major factors before approving a project:
- the interests of the developer's existing customers
- the interests of existing pipelines and their customers
- environmental interests
- the interests of landowners, environmental justice populations and surrounding communities
Going forward under this policy, the Commission will weigh all of the purported benefits of a natural gas project against all of its projected adverse impacts. Moreover, applicant developers cannot merely rely on precedent agreements with prospective shippers to justify the need for a project. Instead, applicants need to demonstrate specifically why their project is needed, including by showing the intended end use of the gas. FERC further indicated that it may consider other evidence of need, including demand projections, estimated capacity utilization rates, potential cost savings to customers, regional assessments, and statements from state regulators or local utilities.
Evaluation of Greenhouse Gas Impacts
In FERC's second policy statement, which it issued on an interim basis while it continues to field comments from stakeholders, the Commission outlined how it would evaluate the greenhouse gas impacts of natural gas projects when considering whether to approve them under the NGA and the National Environmental Policy Act (NEPA). The revised policy sets a threshold of 100,000 metric tons per year of greenhouse gas emissions for potential projects, with those expected to emit above that level requiring the preparation of Environmental Impact Statements under NEPA.
In quantifying these anticipated emissions, FERC noted that applicants would be responsible only for calculating the reasonably foreseeable emissions plausibly caused by their projects during construction and operation, although the Commission suggested that it may also consider emissions caused by the upstream production and downstream combustion of transported gas. Moreover, project developers may demonstrate to the Commission how they would mitigate the emissions impacts of their projects, and the Commission may condition project approval on such mitigation measures being implemented.
Conclusion and Considerations
Given that these are merely policy statements, they do not establish binding rules on FERC. Additionally, the revised policies will apply only to pending and new projects, and developers with pending applications will be able to supplement their submissions to address the new policies. Ultimately, the revisions were supported only by FERC's three Democratic commissioners, with its two Republican commissioners dissenting, so it is likely that the future of the policies will depend on the Commission's partisan configuration.