Two of the biggest U.S. Appalachian producers asked a court to review the U.S. government approval of a certified natural gas pooling service pitched by Tennessee Gas Pipeline Co. that the producers said could undermine the emerging market for fuel that meets methane emissions targets.
The producer shippers' challenges, filed separately in late October at the U.S. Court of Appeals for the District of Columbia Circuit and recently consolidated, came just days after the Federal Energy Regulatory Commission explained its reasoning for refusing to consider its June 30 authorization of the Tennessee Gas plan (Antero Resources Corporation, et al v. FERC, 22-1278). The shippers, an EQT Corp. subsidiary and Antero Resources Corp., joined the Environmental Defense Fund in arguing before FERC that the Tennessee Gas plan would give the Kinder Morgan Inc. pipeline unit too much discretion over the emerging certified gas trade (RP22-921).
Certified gas — sometimes called differentiated gas or responsibly sourced gas, known as RSG — meets certain intensity thresholds for planet-warming emissions and other environmental, social and governance standards. EQT and Antero are among the prominent supporters of expanding the certified gas trade and developing related criteria.
"There is no uniform standard for what qualifies as RSG, and we believe it is appropriate to allow the development of RSG to occur organically," FERC said Oct. 25. "If another pipeline adopts a different set of criteria, the market, state regulators, and other stakeholders can respond to those standards, and in doing so illustrate how the programs can be improved."
1st-of-its-kind service
The Tennessee Gas case marked the first FERC-regulated interstate pipeline to receive approval of a tariff proposal to facilitate the marketing of certified gas through a pooling service option. The service gives shippers the option to aggregate certified gas at paper pooling points if the gas meets a methane intensity threshold of less than or equal to 0.2% under a series of voluntary frameworks for certifying gas.
EQT and Antero had staked out different arguments in the Tennessee Gas case. But a key point of contention in the proceeding centered on the FERC decision to allow Tennessee Gas to list the criteria for certified gas on the pipeline company's website instead of incorporating them in its FERC tariff.
FERC rejected a previous proposal by the pipeline company to include the criteria in the tariff, citing a lack of established standards for certified gas that could guide the commission's review. The FERC majority determined the criteria for certified gas did not need to be included in the tariff because it would not affect jurisdictional rates and service. Republican FERC Commissioner James Danly dissented over the tariff issue, saying the commission had violated Natural Gas Act requirements that hold that practices "that significantly affect rates and service must be included in a tariff."
Tennessee Gas tried to ease shipper concerns by agreeing to include the criteria and list third-party certifying entities in the FERC tariff. The gas can qualify for Tennessee's pooling locations if it has been certified as meeting low-methane emissions standards from Project Canary Inc., MiQ or Xpansiv Ltd.'s Digital Fuels Program.
Critics' arguments
EQT Energy LLC, a subsidiary of the country's biggest gas producer by volume, said the FERC decision to keep criteria out of the tariff could encourage similar unregulated proposals with a conflicting array of criteria for gas quality. The regulator was "continuing to mischaracterize its own jurisdiction and potentially undercut the success and growth of this nascent market" and should have rejected the pooling plan, EQT said.
The market for certified gas will likely take time to develop, but commitments by U.S. producers to certify their gas have surged in recent years amid growing market pressure for cleaner supplies. These producers have turned to multiple certification providers amid the uncertainty around which certification or standard will become dominant in the market.
EQT, which has obtained certifications for most of its gas production under Equitable Origin Inc. and MiQ standards, argued that a "well-functioning RSG market" and "one that justified premiums from purchasers" would need to be "more exacting" than what Tennessee Gas proposed. Certification should evolve so that it covers 100% of an operator's production in a specific basin, "because it will incentivize operators to maximize their emissions reduction efforts against the backdrop of what is possible within their areas of operations without allowing for cherry-picking," the producer said.
Antero has only dipped its toe into certified gas in terms of volume and approach compared to some of its Marcellus basin peers. The company announced a pilot project in 2021 with Project Canary to certify production from multiple well pads, which the company announced it had completed in early 2022.
Antero, in its comments to FERC, said shippers that could not meet the criteria under the pooling service would be "bereft" of benefits that could include the ability to sell gas at a premium compared to non-certified gas.
"Access to this service is important and valuable to customers," Antero said. "The PCG criteria that define such access are therefore important as well."
The Environmental Defense Fund had not filed an appeal of the FERC decision as of Nov. 4, and a spokesperson for the environmental group declined to say if they planned to.
"Allowing Tennessee to define so-called 'certified gas' and be the sole gatekeeper to the market without any safeguards renders the 'certified gas' standard meaningless," the group argued to FERC.
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