Market, not regulators, should judge LNG, climate projects, says Chatterjee

Houston — Decisions about whether new liquefaction projects in the US are commercially viable should be left up to developers, "not unelected bureaucrats in Washington," Federal Energy Regulatory Commission Chairman Neil Chatterjee said Friday in a wide-ranging interview that also touched on climate, landowner and workflow issues.

The comments come amid a debate within the industry on whether any of the second wave of LNG projects that are targeted to start up around the middle of this decade will ultimately advance to construction due to extraordinary market turmoil exacerbated by the coronavirus pandemic, and whether it makes sense to approve project certificates amid that uncertainty. The commission has been issuing certificates to LNG projects at a relatively steady pace over the last year.

The question is whether FERC is facilitating the development of too much LNG capacity for the market to bear — creating future stranded assets. Global oversupply based on existing infrastructure has already helped spur record low international prices.

"I'll let the company make those decisions," Chatterjee said in the interview with S&P Global Platts. "The commission has approved projects in the past that were not built because the project sponsors made the determination there would not be investor interest or market demand for a particular project."

Climate considerations

Much the same holds true for efforts to reduce greenhouse gas emissions and limit the impacts of climate change, Chatterjee suggested, asserting that the market will drive such decisions.

"Market forces are working to reduce carbon emissions," he said. "I think if you look at the power sector, in a growing economy, we have seen significant reductions in carbon emissions."

In 2016, a year before Chatterjee joined the commission, FERC rejected certificate authorization for the proposed Jordan Cove LNG export project in Oregon and affiliated Pacific Connector feedgas pipeline. At the time, the agency cited in part a lack of demonstrated market support for the pipeline. The project's parent company has not announced any firm offtake agreements in the four years since.

The project's second certificate application was scheduled to come before the commission on March 19, but that meeting has been canceled due to precautions over the coronavirus pandemic. Commissioners are planning instead to vote notationally on matters that were to have been voted on at the meeting.

Depending on the timing of the vote and when FERC's general counsel, James Danly, is sworn in as a commissioner, it is possible there could be a third Republican member voting on the order. Danly was confirmed by the Senate Thursday, but it was unclear Friday when he would be sworn in.

During the interview, in which Chatterjee also addressed gas pipelines, electric power infrastructure and battery storage, the chairman chafed at the notion posited by Senate Democrats that moving ahead with Danly, without a second Democrat on the commission, undermined bipartisanship at the commission.

"I'm personally frustrated by this," Chatterjee said. "In 2016, the commission was reduced to just three members, all Democrats. There were no Republicans on the commission. We are currently 3-1 and I see people bemoaning that. None of those sentiments were expressed when it was 3-0 Democrats."

He added, "Some of the folks making arguments about disbalance .. need to simply look back to short-term history."

Regardless, Chatterjee said he believes that the commission, under his leadership, has been fair in its decisions and, for the most, bipartisan. "We've seen some narrow divisions in a couple areas over what the commission's authorities are under the Natural Gas Act for project approvals," he said.

Eminent domain

There have also been questions about how the commission has been addressing eminent domain issues as they relate to approvals of gas pipeline projects. At issue is whether the commission should avoid approving pipelines that might not get built because a state is signaling it will not issue approvals or the market is signaling there is not support for the project. The developers of the Constitution Pipeline in the US Northeast recently scrapped the project after local opposition delayed it.

"We have processes in place and I think our processes are rigorous ones," Chatterjee said. "I stand by the work that we do to evaluate these projects."

He said he has "empathy" for the plight of landowners and he believes it is incumbent on the commission and project sponsors to better inform the landowners of what is going on before the commission. FERC is updating its website and building on a landowner hotline, and it is encouraging developers to reach out and work closely with communities, he said.

Power interests

On the power side, Commissioner Richard Glick has expressed a desire to get to all rehearing orders more quickly, not just those for landowners. Chatterjee said he believes that could create a resource issue and that the commission was working as hard as it could. He declined to speculate whether more funding and staff would allow for rehearing orders to be issued more quickly.

Chatterjee said he is a big believer in ensuring sufficient transmission infrastructure is in place to allow for a grid of the future that includes more renewable power. And, he said, competition is good for power markets, though he said that "a decade into Order 1000, it is not working exactly as it was intended." Order 1000 is FERC's landmark transmission planning and cost allocation rule issued in 2011.