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New FERC commissioner Clements targets revamping 'outdated' pipeline policy

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New FERC commissioner Clements targets revamping 'outdated' pipeline policy

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Substantial pushback on gas pipeline projects

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New York — New Commissioner Allison Clements ranked revising the Federal Energy Regulatory Commission's 1999 policy for certifying natural gas pipeline projects as one of her top priorities, saying more attention to community concerns and climate issues will also make FERC orders less vulnerable to legal challenges.

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Clements has described the FERC pipeline permitting process as "broken" at a time when many market observers expect that FERC leadership under the Biden administration will move to modify the pipeline permitting policy to give more consideration to climate impacts of gas transportation infrastructure and less weight to precedent agreements between gas companies and affiliates as evidence of public need.

In Clements' view, expressed in a Feb. 2. interview, a modern policy that matches today's realities could contribute to the durability of the Natural Gas Act certificate orders issued by FERC, "so pipeline developers who get a certification approved don't then have to fight that certification over and over, at least in a FERC jurisdictional context."

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"The benefit is hopefully increased efficiency and dollars saved," and a less-litigious path forward for pipeline developers as individuals and communities have more "buy-in" in the process, the commissioner reasoned.

In the wide-ranging interview, Clements also called for power market designs to be revamped to accommodate state policies and said transmission planning needs to be examined now, especially considering the long lead time for developing these projects. She stressed the need for the FERC Office of Public Participation to improve access to commission business for non-expert individuals who may be affected by decisions.

Clements is one of two Democrats on the commission, joining Chairman Richard Glick. FERC currently has a 3-2 Republican majority, but President Joe Biden is expected to nominate another Democrat to replace Republican Commissioner Neil Chatterjee, whose term is set to expire at the end of June.

Cracked the code

Clements was sworn-in December 2020, at the tail end of a year that upended billions of dollars in project spending in the US midstream sector as attorneys for pipeline opponents demonstrated they have cracked the code for stopping major pipeline projects.

Major natural gas pipelines have faced substantial pushback and litigation in the US, particularly in the East. In a current example, the 303-mile, 2-Bcf/d Mountain Valley Pipeline, which is 92% complete, has suffered setbacks in court over permits from resource agencies outside of FERC's purview, but battles have also raged within the FERC docket over whether it should be able to resume construction.

"They are getting their permits revoked because people who may be upset with the way that the process went down at the commission are rightfully using the tools that they have to ensure that their concerns are raised around the development of these pipelines," said Clements. "That is the impact of having a broken policy."

In some states such as New Jersey, objections from landowners and localities have created headwinds for projects such as a gas pipeline proposed by PennEast Pipeline.

Clements called the FERC pipeline policy statement "outdated" and observed that it predates the shale revolution and the development of gas generation as a majority fuel source in many regions of the country. It "doesn't have buy-in from stakeholders from across the spectrum," she said.

"What we need to do is to modernize the policy in a manner that considers the reality of large infrastructure investment and considers the interests of individuals and communities affected by those investments, such that when it comes time to consider a new gas pipeline there, there's some credibility to the need determination," Clements said.

Weight of contracts

Some critics of FERC's pipeline permitting process have argued that the regulator gives too much weight to firm transportation contracts with potential customers when it analyzes whether projects are in the public interest. A think tank focused on sustainable finance, the Institute for Energy Economics and Financial Analysis, argued in a December 2020 report that the result is the approval of "wasteful, unwise pipeline projects."

The pipeline industry has long defended the use of firm transportation contracts as the best way to demonstrate the need for a project. The industry's top trade group, the Interstate Natural Gas Association of America, recently described these precedent agreements as "the most objective evidence of pipeline project need."

Clements declined to say whether precedent agreements should be used to determine public need. "The public need determination process is part of the policy that needs reform," Clements said. "I don't have set views on what those reforms look like. I just think that the record already demonstrates that the current parameters of the public need analysis are not sufficient."

Former FERC Chairman Kevin McIntyre started a review of the 1999 pipeline certificate policy statement after he joined the agency in December 2017. But that effort largely stalled after a public comment period ended in July 2018. McIntyre stepped down from the chairmanship in October 2018 before his death in January 2019.

"I think there is support across the commission for ensuring that the record in that proceeding is up to date to inform any actions that the commission might take," Clements said.