The following is a contributed article by Jessica Bell, Clean Energy Attorney in the State Energy & Environmental Impact Center at NYU School of Law.
The day of reckoning for new natural gas infrastructure is long overdue. As states and consumers turn towards cleaner sources of energy, we must ask what the place is for new pipelines.
While prior wisdom may have seen natural gas as a bridge to a lower-carbon future, the greenhouse gas (GHG) emissions from natural gas operations are substantial and increasingly unmitigated, as the current administration abandons regulations, such as those meant to reduce methane emissions from oil and gas operations. Pipelines risk becoming costly stranded assets if they are built without a serious look at how they fit with decarbonization goals.
The Federal Energy Regulatory Commission (FERC), the agency tasked with evaluating the public need for new interstate natural gas pipelines and permitting their construction, refuses to grapple with these issues, though. And although FERC has said it wants to be more landowner-friendly, the burden of this infrastructure — that may not even be needed to meet demand — is still severe. But there are several avenues right now that could potentially lead to widespread change for natural gas pipeline projects.
Greenhouse gas emissions
Current FERC commissioners disagree as to their responsibilities under the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) to consider GHG emissions as they evaluate a proposed pipeline. The Republican majority does not consider the impacts of GHG emissions in their analysis, professing an inability to assess a project’s contribution to climate change. The current lone Democrat, Commissioner Richard Glick, has called out his colleagues’ illogic on this issue: “The Commission is simultaneously stating that it cannot assess the significance of the Projects’ impact on climate change, while concluding that all environmental impacts are acceptable to the public interest." Glick has detailed the steps FERC could take to evaluate GHG emissions and the possibility of mitigation.
FERC has found itself walking an increasingly precipitous path as the D.C. Circuit Court of Appeals criticizes FERC’s wilful ignorance of GHG impacts. In a 2017 case, the court said that of course burning natural gas is a “reasonably foreseeable" effect of authorizing a pipeline to transport natural gas to power plants; “it is the project's entire purpose." And in a 2019 case, the court again expressed concern at “the Commission's attempt to justify its decision to discount downstream impacts based on its lack of information about the destination and end use of the gas in question." Yet Commissioner Bernard McNamee, who departed FERC in early September, has said in concurrences on pipeline orders that these cases were wrongly decided.
FERC uses a 1999 policy statement to evaluate proposed pipelines. In 2018, FERC issued a notice of inquiry to explore revising this policy statement (2018 inquiry) that included questions about whether and how to calculate the GHG emissions from a project and their impacts. FERC received no shortage of helpful feedback from stakeholders, including a multi-state attorney general coalition, but has not acted on the 2018 inquiry. Natural gas infrastructure expansion without analysis of the impacts of GHG emissions is no bridge to state emissions reductions goals.
The need for new pipelines
States are currently leading the way in examining how natural gas companies’ operations need to change to square with climate policy. For example, Massachusetts Attorney General Maura Healey requested an investigation into the continued business operations of local gas distribution utilities. And utilities are starting to see pipelines for the bad investments that they are. FERC’s deficient need analysis needs to catch up with reality.
Putting aside questions of the compatibility of new natural gas pipelines with state emissions reductions goals, FERC’s inquiry does not even seriously look at whether the gas is actually needed in a business-as-usual scenario. FERC currently will accept a precedent agreement between the pipeline developer and an affiliate of the developer as the sole evidence that a pipeline is needed. In a case that is currently in litigation, environmental groups highlighted FERC’s disregard for actual evidence of flat demand in the area to be served by the pipeline, the absence of market studies, and prior unsuccessful projects proposed by non-affiliates.
The 2018 inquiry also focused on how FERC should go about confirming the need for new pipelines. In that proceeding, FERC received numerous comments on how it should reform its practices and move away from its focus on agreements with affiliates. FERC has not acted upon these suggestions, either. Challenges also persist for landowners opposed to pipeline construction on their property.
Landowner objections to pipeline construction
Pipelines are built on miles and miles of land owned by a variety of types of entities, including individuals who may be wary of the potential hazards of a pipeline or reluctant to give up the environmental characteristics of their property. And when those landowners do not agree to give up their property or to accept the price offered, the pipeline company can exercise the power of eminent domain to take land once FERC grants it a certificate of public convenience and necessity to build the project. In many jurisdictions, “quick take" allows the company to start building before the parties have agreed on the terms of just compensation.
FERC has several practices that compound the procedural unfairness in these situations. The Natural Gas Act requires any party wishing to challenge a certificate order to first seek rehearing from FERC. Once FERC has acted on the rehearing request, the party can then proceed to court. The NGA gives FERC thirty days to act on rehearing, but, as a matter of common practice, FERC gives itself multiple extensions on a regular basis. Up until recently, FERC allowed pipeline companies to commence construction while rehearing was pending. The D.C. Circuit criticized this “Kafkaesque" practice and found that 30 days means 30 days. FERC asked for a pause to consider its options — including whether to seek Supreme Court review.
While the D.C. Circuit was considering the case, FERC committed by rule to not allow project construction to begin until it issues an order on rehearing in a case. Natural gas companies have asked for rehearing of this rule, which remains pending. FERC’s rule does not prevent a pipeline developer from taking land while rehearing is pending, though. And there may be some “pre-construction activities" not covered by FERC’s rule that a developer could undertake, like tree clearing, that could harm a landowner’s interest in the property. As a result, FERC’s process remains a difficult and expensive one for individual landowners who become reluctant participants (or parties, if they can figure out how to intervene) in agency proceedings to protect their interests.
Pipeline developers have become so emboldened that they are challenging state assertion of sovereign immunity as a defense in eminent domain actions as they seek to construct projects across state land, even after multiple appellate courts have agreed with Maryland Attorney General Brian Frosh and New Jersey Attorney General Gurbir Grewal in cases involving Columbia Gas and PennEast, respectively. Nonetheless, PennEast sought a declaratory order from FERC, which FERC granted, offering its opinion that the pipeline company’s authority was not bounded by the constitutional doctrine of sovereign immunity. Now PennEast has petitioned the Supreme Court to take up the issue, and is meanwhile asking FERC to re-approve its project in phases as it works to secure approvals and overcome state assertions of sovereign immunity.
FERC currently has two vacant seats. The White House wants to fill them with Allison Clements, whose experience includes over a decade at the Natural Resources Defense Council, and Mark Christie, who sits on the Virginia State Corporation Commission as a long-serving state regulator. If confirmed, these two experienced energy lawyers hopefully will bring fresh perspectives to these issues, as FERC moves forward on pivotal issues through potential action on the 2018 inquiry as well as FERC review of individual natural gas pipeline projects. And judicial review of these cases should shape FERC’s future moves.
The outcome of the November elections will also clearly be relevant to how FERC proceeds on pipelines. New legislation could direct FERC to amend its course on GHG emissions and engage in a more robust analysis of need. Chairman Chatterjee and Commissioner Glick jointly asked Congress for guidance on how to handle the timeline for acting on rehearing as well.
States, customers, other stakeholders and even utilities are seeing that the need to decarbonize requires moving away from natural gas. Right now, FERC is standing in the way of progress, and something needs to change.