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US FERC adjusts gas pipeline review with deeper look at GHG emissions impact

23 March 2021 Kevin Adler

With the approval of a Northern Natural Gas Co. pipeline, the US Federal Energy Regulatory Commission (FERC) has, for the first time, incorporated analysis of a pipeline project's GHG emissions from construction and operation into its review.

The 5-0 decision to approve the project was announced at FERC's monthly meeting on 18 March, but the final order on the project (FERC Docket CP20-487) was not published until 22 March. In the application, Northern Natural Gas Co., owned by Berkshire Hathaway, sought to extend its South Sioux City to Sioux Falls A-Line with 87.3 miles of new pipe in Nebraska and South Dakota. The project will cost an estimated $173.8 million.

Commissioner Richard Glick, who was elevated to FERC chair in January by President Joe Biden, said the order represents a new era for pipeline reviews. "Going forward, we are committed to treating greenhouse gas emissions and their contribution to climate change the same as all other environmental impacts we con­sider," Glick said during the open meeting.

"A proposed pipeline's contribution to cli­mate change is one of its most consequential environmental impacts, and we must consider all evidence in the record—both qualitative and quantitative—to assess the significance of that impact," he continued. "I look forward to continuing to work with my colleagues as we refine our methods for doing so."

While Glick called the new policy a compromise among the five-member board of commissioners, two commissioners wrote dissents about the policy, while approving the pipeline project.

The Interstate Natural Gas Association of America (INGAA) acknowledged the rising attention paid to GHG emissions from the gas industry. "INGAA believes this order is consequential because it's the first time FERC has made a determination on whether reasonably foreseeable greenhouse gas emissions from natural gas infrastructure projects are significant," an INGAA spokesperson wrote in an email to IHS Markit on 22 March. "While the commission did not find GHG emissions significant in this instance, it noted that if it does find these emissions significant in other projects, it will consider them going forward, in addition to project benefits and other potential impacts, when determining whether the project is in the public convenience and necessity under Section 7 of the Natural Gas Act."

INGAA added that its members "take seriously our responsibility to reduce GHG emissions," and have committed to achieving net-zero emissions operations from gas transmission and storage by 2050.

Indirect GHG emissions

The issue of pipeline GHG emissions has been brewing at FERC for several years, with a 3-2 Republican majority under President Donald Trump approving projects with a calculation of pipeline GHG emissions but not analysis of the impact. Democrats Glick and former Commissioner Cheryl LaFleur dissented on more than 30 pipeline approvals over this omission, saying the commission's review was inadequate under the Natural Gas Act and National Environmental Policy Act (NEPA), and it violated a federal court order.

In a 2017 decision, the US District Court for the District of Columbia ruled FERC must consider "reasonably foreseeable" GHG emissions and their impacts for interstate gas pipelines (Sierra Club v. FERC, 867 F.3d 1357, 1373). Subsequent to that ruling, pipeline applications included a calculation of the emissions from construction and operation of pipelines.

Glick and LaFLeur argued that mere disclosure of those figures was insufficient environmental review and did not meet the requirements of the court or the statutes. But in dozens of approval orders, FERC's majority said that an emissions estimate could be made but the impact could not be predicted, given the lack of information about where the gas would be used and for what purpose.

In the Northern Natural order, FERC changed the review. It began with citing the estimated emissions of 19,655 mt of carbon dioxide equivalent (CO2e) during construction and 351 mt annually during operations. In previous orders, that's where the analysis ended. Not this time.

"In previous orders, the commission has concluded that it was unable to assess the significance of a project's greenhouse gas emissions or those emissions' contribution to climate change. Upon reconsideration, we no longer believe that to be the case," the order stated.

In supporting its new view, FERC cited US Supreme Court precedent that NEPA gives federal agencies the authority to determine "whether a project's reasonably foreseeable GHG emissions and contribution to climate change are significant …"

In the case of this particular project, FERC said its analysis concluded that the impacts of the GHG emissions "are not significant." Construction of the project represents an increase in CO2e levels in the US by 0.0003%, and annual operations add just 0.000006% more CO2e to the national inventory.

Compromise and dissent

While the review did not negatively affect approval of Northern Natural's permit, the significance of the new policy was not lost on FERC commissioners.

Chatterjee, the former chairman who was demoted in 2020 by President Trump in favor of newer appointee James Danly, said the new approach balances environmental concerns with the need to expand the nation's pipeline infrastructure. "This is a big, bipartisan step forward. It's a pragmatic compromise, and without a compromise, infrastructure projects won't get built," he said at the open meeting on 18 March. Chatterjee's support was critical, because Republicans hold a 3-2 edge at the commission, despite a Democrat being the current chair.

He added that FERC did not draw a hard line that a pipeline with significant GHG emissions would be rejected. The written language in the Northern Natural order makes that clear: "In addition, we note that should we determine that a project's reasonably foreseeable GHG emissions are significant, those GHG-related impacts would be considered along with many other factors when determining whether a project is required by the public convenience and necessity."

But while Chatterjee called the policy a compromise, two Trump appointees, the Republicans Danly and Mark Christie, wrote dissents that were attached to the order. "Northern Natural marks a drastic change, a dramatic departure from the commission's long-standing practice," Danly wrote.

Danly wrote that FERC violated the Administrative Procedures Act by making a major policy change without full public input, giving those opposed to the agency's new approach an opportunity for mounting a challenge. "This is textbook arbitrary and capricious agency action. The commission cannot reverse its own precedent, purport to create a new methodology, fail to articulate that methodology, and then decree that the project in question has emissions so low that its new methodology, whatever it is, does not matter," he stated in his written dissent.

The impact of the new policy could be devastating, Danly continued. "This order represents regulatory malfeasance at its most arbitrary and capricious," he wrote. "We leave the public and the regulated community—including investors upon whom we rely to provide billions of dollars for critical infrastructure—with no discernible principles by which the commission intends to consider proposed projects."

And he added: "The majority's action is like posting a speed limit sign with a question mark instead of a number, leaving it to the police officer to decide arbitrarily whether you were speeding."

But during the open meeting, Glick had argued that the new policy actually provides pipeline developers with greater protection; from his perspective, the refusal to consider GHG impacts left all approvals on shaky legal ground. "We actively considered a project's impacts on climate change … considerably reducing the commission's legal risk," he said at the open meeting.

Speaking during the 18 March open meeting and reiterating his points in his written dissent, Danly said development of a new FERC GHG policy should wait until a policy review process that Glick started on 18 February was completed. Glick reopened a Notice of Inquiry (NOI) on FERC's Policy Statement on the Certification of New Interstate Natural Gas Facilities, which has not been updated since 1999. FERC originally started the NOI in April 2018, but the effort languished until Glick set a new 60-day comment period.

The NOI is critical to answering the question of GHG impact, according to Danly. He listed the questions in the NOI on which stakeholders can provide input on how the commission can assess the impact of a pipeline's emissions on climate change and whether it can incorporate the related issue of the Social Cost of Carbon into its cost-benefit analysis of new projects.

Commissioner Christie, in a much shorter and dispassionate dissent, said that he, too, would prefer to have the former policy remain unchanged until the new policy statement is completed.

On the issue of whether sufficient information is available today for FERC to conduct climate review, FERC's order acknowledged that the science continues to evolve; FERC said its review process will adjust as well. "NEPA does not require that the studies, metrics, and models—scientific and otherwise—on which an agency relies be universally accepted or otherwise uncontested. Instead, NEPA permits agencies to rely on the best available evidence, quantitative and qualitative, even where that evidence has certain limitations," the order stated.

"Intervene now"

In both his written remarks and his comments at the open meeting, Danly exhorted pipeline developers to protect their interests by filing intervention letters to protest the review of GHG emissions. "I reiterate the advice I have given to everyone who would listen since the commission's issuance in Algonquin last month: every single natural gas pipeline company, LNG company, and shipper should intervene in every single certificate item. Start now," he wrote in his dissent.

The industry seems to be responding to that call to action. Enbridge Pipeline has already filed a request for late intervention in the Northern Natural project. In its request, Enbridge said it is "concerned about the possibility of industry-wide policy changes occurring in individual certificate dockets at the commission. Such policy changes have the potential to apply generally to all natural gas industry participants, and affect the natural gas industry as a whole and each of the Enbridge Gas Pipelines individually in a manner not contemplated in discrete proceedings."

During the open meeting, however, Glick challenged Danly's implication that pipelines are the only parties harmed by FERC's review process. He said that intervention in the process should be a priority for everyone who "has been screwed by the commission," and referenced landowners whose property has been taken by eminent domain and communities that oppose projects on safety grounds. Intervention should not just be "for those who can afford high-priced Washington lawyers," Glick said.

Danly said he agreed that landowners and communities should intervene to protect their interests.

Includes reporting by Jim Day, "The Energy Daily."

Posted 23 March 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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