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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napipelines.com JULY/AUGUST 2 018 | North American Oil & Gas Pipelines 17 Social Cost of Carbon (SCC)–a tool that estimates the net present value of climate change impacts over the next 100 years (or longer) of one additional ton of carbon emissions today. FERC explained that the tool is not applicable to new pipeline deci- sions, that FERC lacks jurisdiction over the production or consumption of natural gas (where the tool could be useful), and that "monetized" climate change damages are inherently subjective, involving a number of different assumptions for the 100-year analysis. The Democrats recognized these shortcomings, yet claimed it would help develop a more complete record. The majority and minority positions became more entrenched in subsequent orders. In Dominion Transmission Inc., Docket No. CP14-497-001, FERC ex- plained that "environmental effects re- sulting from natural gas production are generally neither caused by a proposed pipeline project nor are they reasonably foreseeable consequences of our approval of an infrastructure project...." Therefore, FERC found that the underlying EA ap- propriately omitted the impacts from natural gas development and consump- tion: "When those effects are not indirect or cumulative effects, and thus are not environmental effects of the proposed ac- tion, the Commission is not required to consider them under NEPA." The Demo- crats dissented, labeling this a "change in policy" and advocating for more climate change analysis using SCC. Democrats echoed their calls for in- creased climate change analysis again, when FERC granted Florida Southeast Connection, LLC certificate authorization to construct a new lateral to serve a gas- fired generation plant being developed by an affiliate (Docket No. CP17-463-000). Additionally, one Democrat also ques- tioned whether precedent agreements among affiliates can establish that a natu- ral gas pipeline is needed. Finally, Tennessee Gas Pipeline Com- pany's Broad Run Expansion Project re- ceived certificate authorization to replace old compressors with newer, more effi- cient, clean-burning compressors (Docket No. CP15-77-000). On rehearing, FERC rebuffed claims that it should have re- quired the pipeline to submit information about specific upstream production or downstream uses, reasoning that neither the pipeline nor its shippers would likely know the source of any gas, and that the gas would simply be delivered into the pipeline grid: "The Commission does not know where the gas will ultimately be consumed or what fuels it will displace, and likely neither does the entity over which the Commission has jurisdiction, i.e., the transporting pipeline." The Democrats were unsatisfied and issued separate statements. One agreed with the majority's decision to uphold the certificate authorization, but laid down a marker: "I do believe that it [cli- mate change analysis] should be thor- oughly reexamined as part of our ongo- ing Notice of Inquiry on the Certificate Policy Statement." Predictions "Those who have knowledge, don't predict. Those who predict, don't have knowledge." — Lao Tzu The single biggest issue in the NOI ap- pears to be, when reviewing a pipeline certificate application, whether FERC will analyze the direct and indirect environ- mental impacts of the project, both up- stream and downstream, and, whether SCC will be part of any such analysis. An- other issue will involve the role of affiliate precedent agreements in FERC's "need" determination for a project. These "pol- icy" issues are important: the greater the required showing of "need" and/or the more that upstream and downstream en- vironmental impacts of a proposed pipe- line are analyzed, the less likely the project is to receive certificate authorization. Tell- ingly, the Democrats' positions on these issues could lead to fewer pipelines being built. However, Republicans outnumber Democrats 3-2, so don't expect the NOI to produce any major changes that would significantly hamper the development of new natural gas pipelines. That said, look for environmental activists to appeal the FERC certificate orders discussed above and support their arguments with quotes from the Democrats' dissenting opinions. In the end, the courts may be the final ar- biter of FERC's certification policy. "Let us not seek the Republican answer or the Democratic answer, but the right answer." — John F. Kennedy Washington Watch is a regular report on the oil and gas pipeline regulatory landscape. Steve Weiler is partner at Dorsey & Whitney LLC in Washington, D.C. Contact him at weiler.steve@dorsey.com.

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