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Ruling on Dominion project previews FERC fight over pipeline policy

The Federal Energy Regulatory Commission has presented itself as open-minded as it considers updates to its almost-20-year-old process for reviewing natural gas pipeline applications, but a recent order from the commission showed that FERC members have already chosen sides on a major issue.

FERC said May 18 that it plans to focus its environmental reviews of pipelines under the National Environmental Policy Act, or NEPA, by keeping its analysis of project impacts tied closely to the pipeline, after increasing the scope of its reviews "for a short time." The policy shift was spelled out by a FERC majority of Chairman Kevin McIntyre and commissioners Robert Powelson and Neil Chatterjee, all Republicans, in a decision that rejected a challenge to the commission's 2016 approval of Dominion Energy Inc.'s New Market project, a 112,000-Dth/d compression-based pipeline expansion that went into service in New York in 2017.

The two Democrats on the commission, Cheryl LaFleur and Richard Glick, dissented in part. They said the commission should expand its analysis of upstream and downstream impacts, and their GOP colleagues chose a bad time to change policy amid a review of the 1999 FERC pipeline policy statement that still stands as guiding environmental evaluations.

"To me, the order and the dissents foreshadow where the '99 policy statement discussion may be heading," former FERC Commissioner Tony Clark said in a May 21 interview. "The takeaway is that you appear to have two commissioners pressing the commission to expand its NEPA review beyond where it has gone to this point, and three commissioners who may be less on board with that direction."

Environmental groups were unhappy with what they saw as a step backward on FERC pipeline reviews, as the Natural Resources Defense Council described the majority's decision. The Sierra Club said the decision might be subject to court challenge, and its director said the group is reviewing its options.

"FERC is like the child who would rather stuff everything under their bed than clean their room," Sierra Club Executive Director Michael Brune said in a May 18 statement. "Unfortunately, when it comes to climate change, out of sight is not out of mind."

Clark, now a senior adviser with law firm Wilkinson Barker Knauer LLP, supported the policy shift set down by the majority. "If it's a change, it's not much of one, since they are simply reasserting they are only going to address what they are actually required to address — which has typically been what the commission has done in orders," he said.

"I would say that it seems to me the bigger change being advocated is actually being promoted in the dissents, which I think are essentially arguing that the Sabal Trail NEPA rationale from the court be applied to a different situation," Clark said. In a decision that vacated the original FERC approvals of the Enbridge Inc.-led Sabal Trail pipeline and related projects, the U.S. Court of Appeals for the District of Columbia Circuit demanded that the commission perform additional analysis of greenhouse gas emissions from downstream power plants. Sabal Trail and the other parts of the Southeast Market Pipelines project were built in large part for gas-fired power generation customers in Florida, but such a direct relationship with activities outside the operation of the pipeline was "not the case here" with the New Market project, Clark said.

The New Market project involves the construction of two compressor stations to expand pipeline capacity. "As far as reasonably being able to assess upstream impacts, it's in a state with a fracking ban, so upstream impacts are very attenuated," Clark said. "As far as downstream impacts, since its end use is not easily identified, it's difficult to assess that, also."

"If I read the dissents correctly, I think they are asking to push NEPA analyses further up- and downstream than even the courts have gone to this point, and that does seem like a more material change than what the majority itself did in the order," he continued.

Because the majority decision sticks close to precedent, Clark did not expect significant changes to FERC orders or legal challenges of those orders. He said the commission would rather be armed with a unanimous decision if it heads to court, "although if you are going to have a fight over this issue, the majority seems to have a particularly strong argument here."