Pipelines Awaiting Approval Pile Up at Federal Energy Regulator

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By Rebecca Kern

The backlog of natural gas pipelines awaiting Federal Energy Regulatory Commission approval is piling up as the agency enters its sixth month without enough members to approve $14 billion worth of infrastructure projects, and gas suppliers and pipeline companies could face longer-term impacts.

Those awaiting approval include the proposed $5.5 billion Atlantic Coast Pipeline, owned by Dominion Energy and other partners, and the $2.1 billion Nexus pipeline, a joint project from DTE Energy Co. and an Enbridge subsidiary.

“The situation is manageable for the time being, but just barely, because we are a few months away from major delays, which would be disruptive to the construction of pipelines and gas producers,” James Lucier, managing director of Capital Alpha Partners LLC, a policy research firm that follows energy investments, told Bloomberg BNA.

“If we don’t have a quorum by September, we definitely need to worry,” he said.

Pipeline companies are calling on the Senate to act quickly to confirm two Republican FERC nominees—Robert Powelson and Neil Chatterjee—who can return the agency to a quorum to address the pending pipelines. When fully staffed, the independent agency has five commissioners, but it is among the agencies with a long list of appointed officials that Congress has yet to confirm.

Down to One Commissioner

FERC has been without a voting quorum of three commissioners since February, and is now down to one commissioner—Acting Chairman Cheryl LaFleur. Without a quorum, it can’t issue certificates authorizing construction and operation of natural gas pipelines, approve liquefied natural gas terminals or vote on contested rate hearings.

If the quorum isn’t returned and the pipelines are delayed, down-the-line impacts are possible on construction jobs, and natural gas producers and shippers, pipelines companies say. This is the first time FERC has been without a voting quorum in its 40-year history.The latest pipeline awaiting a FERC vote is the proposed Atlantic Coast Pipeline, spanning 600 miles from West Virginia to North Carolina, which received a favorable final environmental impact statement (EIS) from FERC staff July 21. It joins other high-profile pipelines including the proposed Nexus pipeline, owned by DTE Energy and Spectra Energy Partners LP (acquired by Enbridge), which received its environmental impact statement—the last step before a FERC vote—in November 2016.

“Quick action by the U.S. Senate on the FERC nominees will have an immediate impact on the nation’s economy and Infrastructure,” Jerry Norcia, president and chief operating officer at DTE Energy, told Bloomberg BNA.

Recently environmental groups opposing fracking and the development of natural gas pipelines have increased their efforts to put pressure on FERC.

The Sierra Club said it has opposed the nominations of Chatterjee and Powelson.

“Unfortunately, Donald Trump’s nomination of Neil Chatterjee and Rob Powelson will continue FERC’s status quo of approving unneeded fracked gas pipelines that take private land for corporate gain and lock Americans into higher electricity rates while increasing our dependency on fossil fuels for decades to come,” Lena Moffitt, Sierra Club’s director of the Our Wild America campaign aimed at protecting public land, told Bloomberg BNA.

Also, the Natural Resources Defense Council is an intervenor in the natural gas certificate cases at FERC for the Atlantic Coast and Mountain Valley pipelines. John Moore, director of the NRDC’s Sustainable FERC Project, told Bloomberg BNA that his group believes these projects aren’t necessary because there isn’t enough demand for the fuel and other clean energy alternatives are available.

Senate Impasse

Chatterjee and Powelson were reported favorably out of a Senate committee in a 20-3 vote and are awaiting a Senate floor vote. Senators Ron Wyden (D-Ore.), Bernie Sanders (I-Vt.) and Mazie Hirano (D-Hawaii) were the three members who voted against them.

Two more nominees, Richard Glick (a Democrat) and Kevin McIntyre (a Republican)—have been named by President Donald Trump, but their nominations haven’t been formally sent to the Senate to begin their hearing and confirmation process. Without agreements on vote timing between Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Minority Leader Charles Schumer (D-N.Y.), FERC’s quorum may not be restored until after Labor Day, Christi Tezak, managing director of research at ClearView Energy Partners LLC, told Bloomberg BNA. And the value of backlogged pipeline projects could reach $17 billion by October, she projected.

Sen. Lisa Murkowski (R-Alaska), chairman of the Senate Energy and Natural Resources Committee, which favorably reported out Powelson and Chatterjee, has said it is “critical to restore a working quorum at FERC as soon as possible.” Sen. Maria Cantwell (D-Wash.), the committee’s ranking member, also voted in favor of both nominees and has supported FERC returning to a quorum.

Impacts on Jobs, Suppliers, Consumers

The lack of FERC quorum “has implications that go pretty far beyond the pipeline companies,” Don Santa, president of the Interstate Natural Gas Association of America, told Bloomberg BNA.

DTE Energy’s Norcia said that if FERC approves the proposed Nexus pipeline, it would provide more than 7,000 construction jobs to Ohio and Michigan. Atlantic Coast Pipeline says it will employ more than 17,000 construction workers West Virginia, Virginia and North Carolina.

Smaller pipelines such as the $1 billion proposed Penn East pipeline, owned by a group of companies including Spectra Energy and NJR Pipeline Co., would run through New Jersey and Pennsylvania and provide up to 3,000 construction jobs.

Santa, whose trade group represents the major U.S. pipeline companies, said uncertainty of the FERC approval timeline could lead to potential construction delays.

In addition, pipeline companies could be subject to paying penalties to shippers if contracts aren’t met due to delayed approval, and the companies’ shareholders may not get the returns on their investments if there are delayed in-service dates.

Dena Wiggins, president and CEO of the Natural Gas Supply Association, which represents natural gas producers such as ExxonMobil Corp. and Chevron Corp., said the backlog directly impacts them.

“Natural gas producers have to have pipelines to get their gas to market and we’ve got an abundant supply, but we’ve got to have the pipelines,” she told Bloomberg BNA.

If there are further delays, consumers may see higher prices.

“When you build new pipeline infrastructure, particularly if you relieve a bottleneck in the pipeline system, that lowers delivered gas prices,” Santa said. He said this could lower heating and electricity bills.

‘Not a Practice I’d Recommend’

“We are literally driving right up to the end of the cliff. And the good news is that as long as you stay on this side of the edge, you can still be fine. It’s just not a practice I’d recommend,” Capital Alpha’s Lucier said.

One the first pipelines to come online, if approved after a FERC quorum is restored, would likely be the Nexus pipeline. The pipeline will likely be completed some time in 2018, Gerry Anderson, DTE Energy’s president and CEO, said in the company’s second quarter earnings call July 26.

Other pipelines still project a late 2018 start-date, including the $3.5 billion Mountain Valley pipeline primarily owned by EQT Midstream Partners that would span through Virginia and West Virginia; and Penn East.

TransCanda Corp.'s $2 billion Mountaineer Xpress in West Virginia could be added to the list of potentially delayed projects if FERC doesn’t have a quorum until later this year. The company is projecting for the pipeline be operational in late 2018 as well.

The owners of the Atlantic Coast Pipeline—Dominion Energy, Duke Energy, Piedmont Natural Gas and Southern Co.—say that they are confident they will receive FERC approval by the fall, and for the pipeline to be operational by late 2019.

To contact the reporter on this story: Rebecca Kern in Washington at rkern@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

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