North American Oil & Gas Pipelines

JUL-AUG 2018

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

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16 North American Oil & Gas Pipelines | JULY/AUGUST 2 018 "Maybe climate change is a threat, and maybe climate change has been tarted up by climatologists trolling for research grant cash. It doesn't matter." — P.J. O'Rourke Historically, the Federal Energy Regu- latory Commission (FERC) has been relatively apolitical, with political party affiliation not being a good barometer of a commissioner's vote on a particular is- sue. But recent FERC orders indicate that climate change politics can signal some commissioners' decisions involving au- thorization for new, interstate natural gas pipelines. Below, we discuss those orders and how they may foreshadow the outcome of the pending Notice of Inquiry (NOI) on possible policy changes to FERC's process for evaluating new pipe- line construction proposals. Climate Change "If you don't like the weather in Oklahoma, wait a minute and it'll change." — Will Rogers "Global warming" and "climate change" are often used interchangeably, but refer to two different things. Global warming means the relatively recent in- crease in temperatures around the world, while climate change includes global warming, but also refers to a veritable host of horribles, such as, melting ice caps, rising sea levels, and extreme weather events. Climate change activists believe the underlying cause is greenhouse gas (GHG) emissions from the production and consumption of fossil fuels (e.g., natu- ral gas) and argue that reduced production and consumption will ameliorate climate change. That explains why they generally oppose new pipeline development–limit- ing new pipeline development effectively caps production and consumption. FERC's Certificate Policy Statement "A policy is a temporary creed liable to be changed, but while it holds good it has got to be pursued with apostolic zeal." — Mahatma Gandhi Section 7 of the Natural Gas Act (NGA) requires that a pipeline must obtain from FERC "a certificate of public convenience and necessity before it extends, acquires, or operates any facility for the transpor- tation or sale of natural gas in interstate commerce." FERC grants certificate au- thorization upon finding that the pipeline is required by the "public convenience and necessity," a term not defined in the NGA, but rather left to FERC's discretion. To make the finding, FERC considers sev- eral factors, which have changed over the years, as pipelines have evolved from mer- chants to transporters and were memori- alized in a 1999 "Policy Statement." Under the Policy Statement, FERC bal- ances the public benefits of the pipeline project against the potential adverse con- sequences. If the benefits outweigh the potential adverse effects, FERC addresses environmental issues, as required by the National Environmental Policy Act of 1969 ("NEPA"). NEPA directs federal agencies to incorporate environmental consideration in planning and decision- making. FERC satisfies the requirement by preparing an environmental assess- ment (EA), but larger projects require more detailed analysis–an environmen- tal impact statement (EIS). Notice of Inquiry "Sometimes an active policy is best advanced by doing nothing until the right time - or never." — James Baker Much has changed in the two decades since FERC issued the Policy Statement, e.g., the shale revolution and increased dependence on natural gas by the elec- tric industry to become more dependent upon natural gas-fired electric generation. Existing pipelines simply cannot satisfy requested levels of transportation service from new supply areas to markets across the country. Meanwhile, certificate ap- plications for new pipeline projects have been met with stiff resistance from envi- ronmental interests. As such, FERC issued an NOI (Docket No. PL18-1-000) seeking comments, by July 25, 2018, about pos- sible revisions to the Policy Statement. In the main, the NOI asks whether, and if so how, FERC should adjust its (1) method- ology for determining whether there is a need for a proposed project, including consideration of precedent agreements and contracts for service as evidence of such need; (2) consideration of the poten- tial exercise of eminent domain and of landowner interests related to a proposed project; and (3) evaluation of the environ- mental impact of a proposed project. A Politically Divided FERC "To err is human. To blame someone else is politics." — Hubert H. Humphrey Recent certificate orders reveal that the battle lines have been drawn over FERC's role in addressing climate change issues in certificate proceedings. As discussed in a prior column, the DC Circuit vacated cer- tificates that FERC issued in the Southeast Market Pipelines (SMP) proceeding–three related projects to provide transporta- tion service to markets in Florida and the Southeast–because FERC had not es- timated the projects' downstream effects of GHG emitted by power plants that will burn the transported gas. In response, FERC issued a supplemental EIS that quantified downstream GHG emission, but did not attribute any discrete envi- ronmental effects to those emissions and, later, by a 3-2 vote along party lines, re- instated certificate authorization (Docket No. CP14-554-002). The Democrats dis- sented, claiming that downstream GHG emissions are indirect environmental im- pacts of the pipeline project and must be considered under NEPA. The Democrats also argued that FERC's environmental analysis did not utilize the WA S H I N G T O N WA T C H By Steve Weiler Will "Climate Change" Change FERC's Certification Process for Natural Gas Pipelines?

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