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Pipeline permitting pace expected to slow as gas projects catch up to shale

Natural gas pipelines are showing signs of catching up to shale production.

In a rare occurrence for the last decade, the agenda for the Federal Energy Regulatory Commission's monthly meeting on March 21 held no orders on Natural Gas Act certificates. FERC is the lead agency in charge of permitting new interstate gas pipelines, and commission observers said the lack of certificate items on the agenda highlights a dip in new infrastructure requests.

"The pace of new nat gas pipelines has slowed as the bulk have received approval from FERC," said Katie Bays, senior vice president of energy and utilities research at Height Securities LLC. Bays said she has observed significantly fewer major pipeline items before FERC, which is likely due to legal and economic factors, as well as state regulatory uncertainty in the Northeast.

FERC itself forecast pipeline activity to slacken. In its budget request for the fiscal year 2020, the commission expected the number of gas pipeline project applications to fall in 2019 and 2020, even as demand for LNG export capacity and gas-fired electric power generation stays high.

Over the past decade, FERC has certificated hundreds of pipelines covering thousands of miles to keep up with natural gas production that has grown by more than 35 Bcf/d over that same time. In 2017, for example, the commission approved 49 projects with a combined capacity of 30.8 Bcf/d covering 2,739 miles of pipeline.

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FERC Chairman Neil Chatterjee and the other commissioners set the agenda for the commission's monthly meeting.

Source: Federal Energy Regulatory Commission

FERC has continued to approve gas infrastructure even with a partisan split among its commissioners. The FERC meeting agenda is set by Chairman Neil Chatterjee and the other commissioners. At a major oil and gas industry conference in Houston, Chatterjee said: "I'm confident the current complement of us, the four of us, can get things done."

Commissioner Cheryl LaFleur, a Democrat, has joined Republican colleagues Chatterjee and Commissioner Bernard McNamee to approve gas infrastructure projects in most cases, even as she pushed the commission to go into more detail on the impact of greenhouse gas emissions. LaFleur's fellow Democrat, Commissioner Richard Glick, has often dissented from these orders, saying the commission's current analysis does not accurately reflect climate change impacts, other environmental impacts and public need for such projects.

The Trump administration, Republican lawmakers and the natural gas industry would like to fill the fifth seat at the commission, left vacant by the death of former Chairman Kevin McIntyre, and cement the Republican majority. Commissioner LaFleur has announced she will leave the commission around the time her second term ends in June. The White House and the U.S. Senate have launched efforts to select and advance candidates, but Bays said politics and a number of high-priority issues such as trade have made it difficult to make progress on these efforts.

Regardless of what is on the meeting agenda, the staff of the FERC Office of Energy Projects is busy. Chatterjee has asked for more engineers and other employees to process LNG project applications. Lawmakers have listened, proposing legislation that would help the commission spend more on specialists.

On Feb. 21, FERC approved Venture Global LNG's Calcasieu Pass LNG export terminal, the first authorization of such a project in more than two years. In one of the more recent gas pipeline approvals, the commission issued a certificate for a 205,000-Dth/d compression-based expansion of National Fuel Gas Co.'s Empire Pipeline Inc. system.