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FERC hears concerns on costs, duplication as it weighs GHG mitigation for pipes

Highlights

New York PSC member urges collaboration with states

Gas sector points to ongoing reduction efforts

The US Federal Energy Regulatory Commission received some warnings about the risk of duplicating regulation and saddling consumers with added costs, as it weighed whether to require interstate natural gas project applicants to mitigate climate impacts tied to their facilities.

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Discussion of potential pitfalls in developing FERC's approach came as the commission Nov. 19 held a technical conference to examine methods gas companies may use to mitigate direct and indirect GHG emissions resulting from Natural Gas Act Section 3 and 7 authorizations Nov. 19. Under Chairman Richard Glick, FERC has been working to bolster its approach to considering climate impacts associated with projects, after several years of division on the topic.

Diane Burman, a member of the New York State Public Service Commission, urged FERC to better collaborate with states and other regulators to reach an approach that doesn't "create unnecessary barriers" to ongoing efforts to lower emissions and that "does not put pressure on the customer bills."

"A threshold question is why is it that we think FERC can do this better than the states are already doing it, [than] industry is already doing it" and than the US Environmental Protection Agency is already doing it, she said. Burman made reference to EPA's recently proposed regulation on oil and gas operations that aims to reduce 41 million tons of methane emissions from 2023 to 2035.

She also cautioned the five-member independent commission to try to get to 5-0 solutions on matters that have been "very contentious."

"I don't want us to be in litigation on these issues," she said.

Several gas industry industry representatives highlighted ongoing steps to report and reduce emissions, deploy new technologies or meet state or voluntary reduction goals. For example, Bill Donahue, manager of natural gas resources for Puget Sound Energy touted his company's goal of having nearly 10% renewable natural gas by 2030.

Assessing costs

Representing the American Public Gas Association, Stephen Mayfield, assistant general manager – gas operations for the City of Tallahassee, Florida, urged FERC to keep in mind the energy cost impacts to consumers that could flow from added mitigation requirements.

FERC should be diligent to ensure that cost increases due to mitigation result directly in consumer benefits through verifiable emission reductions, he said. In lieu of actual measurements, he said another method is to incentivize companies to participate in voluntary programs and to use best management practices.

Looking forward, part of FERC's challenge is that it does not necessarily "keep an active eye" on a pipeline it certificates over the facility's 40-year lifespan, Glick said.

"How do we monitor that, given the fact that we don't actually oversee the pipeline for all that time?" he asked. "Is that something that we should work with another agency [and] essentially hand over that responsibility? Should FERC keep it and continue to monitor it?"

Chris Humes, senior vice president of operations and projects for TC Energy, suggested FERC could reach a memorandum of understanding with the EPA for that purpose.

Burman added that along with the EPA, partners in such efforts could include US Department of Energy or the US Pipeline and Hazardous Safety Materials Administration.

Market-based mechanisms

Debate also ensued over the use of market-based mechanisms and various offsets.

Paul Pechman, director of the National Regulatory Research Institute, told FERC it would be very helpful, if relying on market based tools, "to have a standard and to have verification that what customers are paying for is actually real."

On that topic, Burman urged FERC to be careful to ensure that retail customers are not paying twice for the same mitigation measures.

Paula VanLaningham, global head of carbon at S&P Global Platts, offered that one lesson from the carbon compliance markets in Europe is that "the additional costs associated with market-based measures can have a significant impact on driving down overall emissions over time."

Raising concerns about environmental justice, or EJ, impacts, Nicky Sheats, director of the Center for Urban Environment at the John S. Watson Institute for Public Policy, was upfront about his opposition to market-based mechanisms.

"Under a pure market-based mechanism, you'll always be left to wonder, how many how many [environmental justice] communities will receive reductions," to what extent, and for what period of time, he said.