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EPA urges FERC to consider 'carbon lock-in' of gas pipelines, stranded assets

Highlights

Comments flow in on FERC's 1999 gas pipeline policy

Industry cautions against creating delays, overstepping authority

The US Environmental Protection Agency staked out a new position on interstate natural gas pipeline reviews, advising the Federal Energy Regulatory Commission to weigh the potential for "carbon lock-in" and the "costly irreversibility" of building the gas infrastructure.

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The broad expansion of FERC's climate considerations backed by the EPA would mark a sharp departure from the commission's approach. The comment was included among a flood of filings from energy companies, environmental nonprofits, and others responding to the commission's updated notice of inquiry on how it might alter its 1999 natural gas pipeline certificate policy (PL18-1).

The administration comments have the potential to shake up debate on the key policy for reviewing midstream infrastructure, as multiple entities have urged FERC to defer to EPA and the White House Council on Environmental Quality on climate considerations. Many natural gas companies, in their comments, argued that FERC's existing pipeline policy framework is sufficient.

"The commission should be reticent to implement significant changes to a process that is working as Congress intended," the Interstate Natural Gas Association of America (INGAA) told the regulator.

But an EPA letter signed by Associate Administrator Victoria Arroyo echoed a sentiment long expressed by environmental groups that FERC should be careful about locking in long-lived infrastructure that entails greenhouse gas emissions or creates the potential for stranded assets.

Climate mitigation

The agency backed the idea that FERC could seek mitigation of a project's climate and environmental justice impacts, and offered possible options, such as considering compressor stations with electric turbines.

EPA also recommended FERC prioritize climate adaptation and resilience concerns, potentially helping avoid investments in vulnerable locations. The agency said FERC should "consider requiring applicants to incorporate climate resilient design considerations and develop climate adaptation plans."

And in assessing whether a project is needed, EPA urged FERC to examine whether existing infrastructure of other energy sources could meet future demand.

Along with CEQ, EPA encouraged FERC to consider climate impacts of upstream production and downstream end-use emissions. EPA said FERC could deny a pipeline on grounds that the total of upstream, downstream and direct impacts would be too harmful to the environment, and suggested FERC "routinely" include a quantitative estimate of downstream GHG emissions.

Both EPA and CEQ suggested the social cost of greenhouse gases could be a useful tool. The social cost of carbon is an estimate in dollars of the long-term economic damage caused by GHG emissions for use in cost-benefit analyses.

Industry views

Most pipelines and other energy companies took a more constrained view of the scope of FERC's legal authority to examine indirect emissions or require mitigation.

INGAA argued that the commission should not rely on the social-cost-of-carbon tool in certificate proceedings because it is "an expansive tool that incorporates factors beyond the authority of the commission to consider" under the Natural Gas Act. The trade group supported a previous finding by FERC that it is also "inadequately accurate" to use in reviews under the National Environmental Policy Act.

That view was not universal among pipeline developers, however.

Kinder Morgan said the social cost of carbon could be useful in some cases as a "screening tool" in an environmental impact statement to help FERC gauge whether emissions associated with a project are "uncharacteristically high" and for comparing certain projects against alternatives. But Kinder Morgan said it would be inappropriate to use the tool for quantifying project benefits and impacts or for determining mitigation measures.

Environmental justice views

Environmental justice also got ample attention in the comments landing at FERC.

A coalition of conservation groups led by the Natural Resources Defense Council said FERC should look back at prior certificate orders to see whether existing conditions adequately protect environmental justice communities -- and weigh possible changes to those conditions. FERC should make it a regular practice to require certificate holders to mitigate or avoid impacts to environmental justice communities, they said.

INGAA urged FERC to set clear, consistent standards for identifying and promoting engagement with environmental justice communities, saying clearer definitions could help avoid such communities at the planning stage.

The pipeline trade group said applicants should be able to propose alternatives or minimize impacts if disproportionate impacts were identified. But FERC should not push pipeline companies to mitigate for past environmental justice impacts associated with industrial impacts unrelated to the gas projects, INGAA said.

Some other industry groups emphasized that FERC should consider positive economic impacts for low-income communities in addition to negative impacts associated with gas projects.

EPA, however, recommended that when FERC identifies disproportionate impacts on environmental justice communities, it consider developing a new alternative, modifying design or including mitigation.

EPA's recommendations followed sweeping executive orders signed by President Joe Biden that called for a "whole of government" to tackling climate change. Biden also reestablished an interagency working group to calculate the social cost of carbon. FERC was exempt from the orders as an independent agency.

Selected comments on FERC gas pipeline certificate policy

Industry
Natural Gas Supply Association and Center for Liquefied Natural Gas
Support keeping current policy statement; implore FERC to state that overly broad NEPA reviews can add significant and unreasonable costs and delays to projects and challenge their viability.
Interstate Natural Gas Association of America
Discourages major changes to NEPA review; says FERC should not assess upstream or downstream GHG emissions or consider those emissions in evaluation of public convenience and necessity.
Kinder Morgan
Social cost of carbon could be used as a comparison tool to provide insight into whether action is associated with uncharacteristically high GHG footprint; seeks timing certainty on certificate decisions.
Energy Transfer
Sees no reason to change how FERC currently determines public need for a project; notes prior assessment by region resulted in protracted litigation.
American Forest & Paper Association, Industrial Energy Consumers of America, Process Gas Consumers Group, The Fertilizer Institute
FERC should consider benefits of projects to energy-intensive, trade-exposed manufacturers and manufacturing sector at large, and should consider that gas-fired generation is the primary baseload dispatchable source of power for intermediate and peaking services.
Driftwood Pipeline
FERC should disclose threshold at which it will consider project's impacts to be significant, otherwise "project proponents will be left to guess at the commission's requirements."
Landowner interests
Carolyn Elefant, attorney who represents landowners impacted by gas pipelines
"Any landowner forced to choose between selling their property to a pipeline or having it taken in eminent domain is aggrieved - so the commission must balance the need for the project against the number of landowners impacted and tracts crossed."
Environmentalists, nonprofits
Coalition of 54 groups, including Natural Resources Defense Council
FERC should require certificate holders to mitigate or avoid impacts to environmental justice communities, and re-examine previously issued certificates to consider modifying permit conditions to protect such communities.
Environmental Defense Fund, Food & Water Watch, The Institute for Policy Integrity at NYU School of Law and others
FERC should use the social cost of greenhouse gases as the best approach to assessing impacts of a proposed project's emissions.
New Jersey Conservation Foundation and others
In context of energy transition, climate goals, FERC should presume there is no need to increase reliance on new gas infrastructure, should require applicants to overcome this presumption with data and analysis.
Governments
State attorneys general
AGs from eight states and the District of Columbia led by Massachusetts made series of recommendations, including that FERC should consider national and state GHG emissions reduction targets, use social cost of carbon, expand and improve environmental justice considerations, and more heavily weigh harm to landowners from eminent domain takings.
State-recognized tribal leaders in North Carolina and Virginia
Raise concerns about how FERC methods for identifying environmental justice communities affects American Indians, which often make up small fractions of populations examined.
Unions
United Association of Journeymen and Apprentices of the Plumbing, Pipe Fitting and Sprinkler Fitting Industry of the US and Canada, AFL-CIO
With limited exceptions, current policy statement should not be substantially revised; notes policy was designed to foster competition, protect captive customers, avoid impacts while serving increasing demands for gas.