Energy Regulator to Weigh Contracts, Climate Impacts of Pipelines (2)

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By Rebecca Kern

The Federal Energy Regulatory Commission is looking at contracts that pipeline companies sign with their affiliates as part of a broad gas pipeline approval process review, the agency’s chairman said Feb. 13.

The commission also will assess whether it is adequately considering the impact of natural gas pipeline projects’ downstream greenhouse gas emissions, FERC Chairman Kevin McIntyre said. He discussed the agency’s broad assessment of its 1999 policy for how it certifies new interstate pipelines during the National Association of Regulatory Utility Commissioners’ Winter Policy Summit in Washington.

FERC requires pipeline applicants to demonstrate a need for the projects, based in part on “precedent agreements” signed between pipeline owners and customers, who sometimes are affiliates of the owners.

Democratic FERC Commissioners Cheryl LaFleur and Richard Glick and environmental groups have criticized this process. LaFleur, for example, has argued that environmental concerns raised by pipeline opponents aren’t being weighed as heavily as they should be in the certificate review process.

LaFleur called for the review of the pipeline approval process last fall.

“This is a very high priority for me, and I’m really glad we’re going to be doing it,” she told Bloomberg Environment Feb. 13.

McIntyre first announced the review in December and said it is warranted because of major changes in the shale gas market in the U.S. and an increase in gas pipeline construction.

Directed by Courts

“We have an obligation to ensure appropriate consideration of the impact of gases that are presented by a given pipeline,” McIntyre said.

He said the commission has been directed by federal courts to account for greenhouse gas emissions from pipelines.

“Are we talking about simply greenhouse gas issues raised by the flow of gas through the specific stretch of pipe that’s proposed to be constructed, or should we be looking downstream to what is intended to happen or may happen to the natural gas when it reaches its market?” he asked.

He said the commission will be looking all of these environmental factors as part of the review as well.

Concerns About Certification

Glick also raised concerns about FERC granting a pipeline certificate, and thus eminent domain, to companies to obtain land for their pipelines when state-level concerns exist about the impacts from using the land for that purpose.

“I’m particularly troubled by the notion when the commission in the past has issued a certificate, and did so in some respects to grant a pipeline company eminent domain so that it can go back and acquire land they weren’t able to get under state statute to begin with,” he said at the meeting.

“That seems to be backwards,” he said. “I think it’s very important that we be as deferential as possible to the states’ interests.”

Open Questions

McIntyre posed a series of questions at the meeting about the relationship between pipeline applicants selling their gas to affiliated companies they own or in which they have a major stake.

“Should it matter whether some of the entities signing up for precedent agreements are affiliated with firms that own the pipeline?”

“Should the regulator look askance at that situation and say, ‘That doesn’t seem like a valid arm’s length measure of pipeline need in the affiliated relationship?’”

“That’s something we need to take into account,” he said.

While McIntyre stopped short of detailing when the agency would decide on the updates to the approval process, he said it would be a process that will be transparent and include opportunities for public comment.

Reviews Working Well, Industry Says

The current policy statement works well, Dena Wiggins, president of the Natural Gas Supply Association, which represents suppliers that produce and market natural gas, told Bloomberg Environment Feb. 13. But she said they are open the statement being reviewed.

“The fact that FERC wants to take a new look at it and see if it’s working, that’s part of good governance,” she said. “In concept, I don’t think that anyone can criticize the efforts because it has been there for a while.”

But she said she is concerned about efforts to expand the scope of the environmental reviews to include both upstream and downstream greenhouse gas impacts.

Downstream emissions are those occurring closer to the the gas supply’s end user. Raw material extraction or production are elements of the supply chain considered to be upstream.

“Although obviously we support a robust environmental review, I’m not quite sure how you look at upstream and far downstream impacts,” she said. “I think FERC has struggled with at on the downstream side when they’ve been asked to do that.”

(Updates first paragraph to mention review of pipeline contracts)

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