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In pipeline order, FERC draws 'battle lines' for upcoming policy review

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In pipeline order, FERC draws 'battle lines' for upcoming policy review

The split vote in the approval of Spire Inc.'s interstate natural gas pipeline showcased the challenge confronting the remaining members of the Federal Energy Regulatory Commission as they consider changes to the analysis of public need for pipelines and other issues that are part of a review of the agency's two-decades-old pipeline policy statement.

"Regarding the policy statement issues, the battle lines appear to have been drawn on issues related to (1) the need for a proposed project and (2) environmental considerations," Steven Weiler, a partner with Dorsey & Whitney LLP, wrote in an email reflecting on the Aug. 3 Spire decision that put public need in the spotlight.

Weiler, who has represented energy and petrochemical companies for 30 years, said the departure of FERC Commissioner Robert Powelson could be ominous for anyone hoping for changes to pipeline reviews in the near-term. "Absent a change in opinion, FERC will be deadlocked on these issues (2-2), which could mean there will be no changes to the existing policy statement," he wrote.

A deadlocked commission could work out well for Republicans on the commission, who favor sticking closely to the agency's traditional approach to reviews of pipeline project applications in the areas of public need and environmental impacts. But the situation could be detrimental to conversation and compromise as the current four commissioners sort through a stack of comments from pipeline companies, environmental groups and other interested parties on possible changes to the pipeline policy, the bulk of which came in before a July 25 deadline. There is no deadline for FERC to reach a decision on policy updates. FERC Chairman Kevin McIntyre told reporters at the commission's June meeting that there were no hard dates for next phases in the review process after the July deadline for public comment.

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FERC Commissioner Cheryl LaFleur has argued that her agency must go deeper in pipeline reviews to meet obligations under the Natural Gas Act.
Source: Associated Press

Gillian Giannetti, a staff attorney with the Natural Resources Defense Council, said FERC should not have issued the Spire order in the middle of the policy review, given that it is the exact type of order that is under fire and would be affected by the policy review. In dissenting against the Spire order, which approved an application by Spire STL Pipeline LLC to build a 400,000-Dth/d natural gas pipeline in the St. Louis area to supply LDC affiliate Spire Missouri Inc., the two Democratic commissioners said FERC should have looked more closely at the precedent agreement between the two Spire affiliates in the public need determination. The Natural Resources Defense Council wants changes in the pipeline policy statement to more closely examine a project's need and its environmental impact.

"The Spire project may be the worst example yet of the problem with relying on affiliate precedent agreements," Giannetti said. "Commissioners LaFleur and Glick's thoughtful dissents make a compelling case for why this approval violates the Natural Gas Act. We are confident that the Spire approval will be appealed and will force the courts to test the outer bounds of the Natural Gas Act's public convenience and necessity standard."

Giannetti noted that if McIntyre and Commissioner Neil Chatterjee were determined to greenlight the project, they had to issue an order either before Powelson left or risk waiting months for a new commissioner and hope that person would agree with their view. Still, she said the order was not necessarily rushed. "Rather, it reads as though FERC knew it had a doozy of a case," Giannetti said. "FERC spent 55 pages just trying to justify why this project meets the Natural Gas Act's public convenience and necessity standard and still did so unsuccessfully in our view; many certificate orders are shorter than 55 pages overall."

In the Spire order dissents, commissioners Cheryl LaFleur and Richard Glick agreed with the complaint of a rival pipeline company, Enable Midstream Partners LP's Enable Mississippi River Transmission LLC, or MRT, that after years of frustration over pipeline commercial arrangements the Spire corporate family was shifting Spire Missouri's firm gas transportation contracts from MRT to its affiliate's pipeline.

More generally, the Democrats have put pressure on the agency's traditional way of evaluating interstate natural gas pipelines, especially when it comes to questions of public need and climate impacts. They have pushed their views as the commission reviews its 1999 pipeline certificate policy statement for possible updates. They have been empowered by the loss of Powelson, who left the commission on Aug. 10. Powelson had formed a Republican majority with McIntyre and Chatterjee that favored the commission's traditional approach to pipeline reviews. The traditional approach includes accepting precedent agreements with potential shippers as proof of need for a pipeline and limiting climate impact analysis to emissions sources that can be directly connected to the pipeline.

Weiler expected the FERC dissents to come up in challenges to the Spire order at the commission and in court. "Any challenges to FERC's order would likely quote liberally from the dissents, first on rehearing and later on appeal," the attorney said. That could hold true in other cases in which the FERC Democrats have disagreed with the majority.

Powelson's departure puts the Democrats on equal footing with their Republican colleagues in any conflict over their different approaches, at least until the Trump administration can fill the seat. But Glick said in an Aug. 10 tweet that he would miss Powelson, who had not agreed with all of the administration's actions, including a U.S. Department of Energy effort to promote coal and nuclear power plants over other types of power generation. Glick said he was "sad for the commission, which is losing an independent voice at a time when independence is most needed."