Pipeline Update: Here Today, Gone Tomorrow? FERC’s Natural Gas Pipeline Greenhouse Gas Analysis Policy

Stephen C. Zumbrun

The Republican majority of the Federal Energy Regulatory Commission (“FERC” or “Commission”) has drawn a clear distinction with how and when the Commission will analyze upstream and downstream greenhouse gas (“GHG”) emissions when reviewing natural gas pipeline projects. But with the recent announced resignation by Republican Commissioner Robert Powelson, a pending Notice of Inquiry issued by the Commission, a separate advanced Notice of Proposed Rulemaking issued by the Council on Environmental Quality (“CEQ”), and a recent petition to the D.C. Circuit Court, this current established protocol may not last and by this time next year we may see a whole new approach to pipeline GHG analysis coming out of FERC.

The current dynamic began with the D.C. Circuit decision in Sierra Club[1]. As Blank Rome’s Energy and Environmental Trends Watch blog previously discussed, in this case the D.C. Circuit Court vacated and remanded FERC’s certification of the Southeast Market Pipelines (“SMP Project”) and instructed the Commission to consider potential “downstream” GHG emissions from the end-use power plant customers of the SMP Project. On remand, FERC calculated the potential GHG emissions caused by the proposed power plants, but FERC determined that it could not find an appropriate method “to attribute discrete environmental effects to the potential GHG emissions.”

Since that time, on March 14, 2018, FERC reinstated the Certificate for the SMP Project[2]. In that order, FERC restated that there are “[n]o appropriate targets for GHG emissions due to Clean Power Plan repeal and Paris Climate Accord Withdrawal.” Further, FERC reaffirmed that “there is no widely accepted standard to ascribe significance to a given rate or volume of GHG emissions” and reemphasized that FERC does not find the Social Cost of Carbon tool “appropriate for estimating a specific project’s impacts or informing our analysis under NEPA.” Finally, FERC put forth that its job is to determine if a natural gas pipeline is too harmful for the environment, not to evaluate whether the use of the product passing through the pipeline is too harmful for the environment; and that job “is for Congress or the Executive Branch to decide national policy on the use of natural gas.”

Building off of the March 2018 SMP Project decision, on May 18, 2018, FERC announced its new natural gas pipeline GHG analysis policy in a decision involving the separate Dominion Energy New Market Project in New York. In the decision, FERC stated that the Commission “will only continue to analyze upstream and downstream environmental effects when those effects are sufficiently causally connected to and are reasonably foreseeable effects of the proposed action.”[3] Regarding upstream impacts, FERC held that upstream analysis of non-pipeline production activity only warrants an analysis if the pipeline was the only way to transport the product because otherwise the impact cannot be known. For downstream impacts, and specific to the New Market Project, FERC stated that the project will deliver to two distribution companies and no party was able to determine the ultimate end-users; rendering FERC unable to calculate the GHG emissions and the ultimate indirect GHG impacts from the project.

FERC has adhered to this new GHG analysis policy in subsequent natural gas pipeline decisions. For projects connecting to an existing pipeline grid, FERC determined an analysis of upstream natural gas development activity is not required because the connection would not increase the upstream natural gas development activity.[4] Additionally, in a decision striking a rehearing for the Mountain Valley Pipeline Project, FERC did in fact quantify downstream GHG emissions, but reemphasized that the Social Cost of Carbon tool is not meaningful to decisions under the Natural Gas Act (“NGA”) and further pointed out that the Commission does not control the production or consumption of natural gas.[5] The votes for these decisions were split on clear party lines, where the outnumbered Democratic Commissioners argued that FERC’s policy too narrowly viewed FERC’s National Environmental Policy Act (“NEPA”) obligations and the Commission was not using its best efforts in considering environmental consequences of GHG emissions.

With these recent decisions, the first half of 2018 established a clear and predictable trend for how and when the Commission would analyze upstream and downstream GHG emissions. However, this trend could be short lived. First, on June 28, 2018, Republican Commissioner Powelson announced his resignation from the Commission, effective in August 2018. On the issue of GHG emissions, Commissioner Powelson’s resignation creates a temporary even two-two split between the Commissioners, which would likely create a deadlock on decisions regarding natural gas pipelines until a new Commissioner is nominated by the President and approved by the Senate.

Next, the Commission on April 19, 2018, issued a Notice of Inquiry seeking public comment on FERC’s currently effective policy statement on the certification of new natural gas pipelines established in section 7 of the NGA. Specific to GHG emissions, FERC asks for comment on all of those topics discussed above, including, whether and how FERC should analyze upstream and downstream GHG emissions, and whether FERC should reconsider its position on the Social Cost of Carbon. Adding to the upheaval, on June 20, 2018, the CEQ issued an advanced notice of proposed rulemaking seeking comments on the implementing regulations for the procedural provisions of NEPA. GHGs were not specifically referenced in the CEQ advanced notice, but the scope of the questions were wide ranging, including the process for environmental studies. Any ultimate decision from CEQ could include changes to the now-existing FERC GHG emission analysis policy. Comments to CEQ on the advanced notice are due by July 20, 2018.

Finally, on July 16, 2018, opponents of the New Market Project petitioned the D.C. Circuit to review FERC’s May 18, 2018, decision—where FERC first announced its new approach to GHG analysis for pipelines. A decision by the D.C. Circuit will either solidify the legitimacy of FERC’s GHG approach in the eyes of the courts or send it back to the drawing board.

Absent these new developments, the FERC GHG analysis policy we saw in the first half of 2018 created a clear understanding of what to expect out of FERC for natural gas pipeline projects. However, as these new developments progress, we may see a whole new FERC GHG analysis policy for natural gas pipe projects relatively soon.

[1] Sierra Club v. Fed. Energy Regulatory Comm’n, 867 F.3d 1357 (D.C. Cir. 2017).

[2] See gen. 162 FERC ¶ 61,233.

[3] See gen. 163 FERC ¶ 61,128.

[4] See e.g. Okeechobee Lateral Project 163 FERC ¶ 61,158; The Broad Run Expansion Project 163 FERC ¶ 61,190.

[5] See gen. 163 FERC ¶ 61,197.

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