United States: FERC Releases New Policy for Natural Gas Project Certifications and Formalizes Consideration of Environmental Justice Issues for the First Time
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At its February meeting, the Federal Energy Regulatory Commission (FERC or Commission) issued a long-awaited updated policy statement on the certification of new interstate natural gas facilities (Updated Policy Statement). day), which provides guidance on how FERC will consider project applications for Certificates of Public Convenience and Convenience (CPCN) under Section 7 of the Natural Gas Act. The new, updated Policy Statement is the first revision to FERC’s CPCN policy since 1999, and it significantly revises FERC’s approach. The new updated policy statement adds consideration of a number of new factors to the CPCN process, and it significantly revises FERC’s approach to considering the need for a new pipeline. Most notably, this is the first time that FERC has formally incorporated environmental justice considerations into one of its policies, making environmental justice an issue to be systematically considered in FERC CPCN proceedings. With FERC’s new draft Greenhouse Gas (GHG) Emissions Policy Statement, discussed here, also adopted at its February meeting, FERC has fundamentally reshaped the legal landscape for gas pipeline approvals.
Key points to remember
- Impacts on Environmental Justice Communities: For the first time, FERC will undertake, as a policy, an in-depth review of impacts on environmental justice communities. FERC will encourage project proponents to “evaluate and incorporate, as appropriate, any subsequently published guidance from other authoritative sources when considering how to identify environmental justice communities affected by a proposed project.” In addition, FERC will require close consultation and collaboration between the project proponent, the communities in question, and FERC to tailor mitigation options to the needs of environmental justice communities.
- Need of the project: The policy statement expands the Panel’s consideration of factors affecting the need for a project. The Commission’s review of need will include previous agreements between the project proponent and unaffiliated entities, including the circumstances surrounding previous agreements, as well as other evidence of need, such as projections of sub-project demand. underlying contracted capacity, estimated capacity utilization rates, potential customer cost savings, regional assessments, and statements from state regulatory commissions or local distribution companies. The Commission will also examine information on the intended end use of the gas.
- Impacts on existing pipelines and their customers: The Commission will consider the impacts of a proposed project on existing pipelines, including whether captive customers of existing pipelines will end up paying for uncommitted capacity on existing pipelines resulting from the excessive construction of new lines.
- Environmental impacts: The Commission will examine the environmental impacts and the extent to which these impacts can be mitigated. In particular, the Commission will review GHG emissions from pipelines in accordance with the interim policy also adopted on February 17.
- Impacts on Landowners: The Commission will consider a wider range of impacts on landowners and will require “robust early engagement” with all interested landowners, as well as ongoing assessment of landowner feedback in any given proceeding. The Panel will consider whether a pipeline applicant has engaged in good faith negotiation to acquire land that might otherwise be condemned using the authority conferred by an NGA Section 7 certification, as well as an applicant’s plans to minimize use of eminent domain after receiving certification.
- Assessment of public benefits and adverse effects: The Commission will consider all benefits including, but not limited to, whether a need is met by the project, whether the project will displace more highly polluting generation sources, whether the project will facilitate the integration of renewable energy or whether the project will result in a significant source of employment or tax revenue. FERC will deny applications where the total negative impacts outweigh the benefits of the project, especially negative impacts that cannot be mitigated or minimized.
- Immediate controversy: The new updated policy statement has already proven controversial. It drew heavy criticism from members of the Senate Energy and Natural Resources Committee at a hearing last week, as well as from business groups who argued that the new update to the policy statement would result in regulatory delays and increased consumer prices.
The updated policy statement has been under consideration since FERC issued a Notice of Inquiry seeking comment on its previous policy in 2018, followed by a second Notice of Inquiry in 2021. Although it depends Much of how the new, updated policy statement is applied in practice, it appears to represent a sea change in how FERC considers pipeline NCIC applications. As FERC Chairman Richard Glick said, the updated policy statement, along with the accompanying GHG policy statement, is intended to ensure that “Commission decisions regarding ‘location of natural gas reflect the concerns and interests of all stakeholders’.
In particular, the updated policy statement is a major step toward formalizing the consideration of environmental justice issues in FERC’s decision-making process, and represents FERC’s strongest response yet to the President Biden’s executive orders and related actions making environmental justice a top priority for the federal government. . Last year, FERC created a new senior position at FERC to coordinate the integration of environmental justice and equity concerns into all of FERC’s decision-making processes. In creating the position, Chairman Glick said he intended to “do whatever it takes to empower this new position to ensure that concerns of environmental justice and equity are given finally the attention they deserve”, because he believed that the Commission should be more aggressive in carrying out its mission. responsibility to ensure that its decisions “do not unfairly affect historically marginalized communities”. Therefore, there is little doubt that the new, updated policy statement is only the first foray at the policy level into environmental justice issues for FERC.
The new, updated policy statement also addresses several legal controversies that have plagued FERC’s CPCN processes over the past several years. The new emphasis on landowner rights, for example, responds to the DC Circuit’s pointed criticism of FERC’s treatment of landowners whose lands could be affected by pipeline construction. Similarly, FERC’s change in treatment of previous agreements between a pipeline and its affiliates responds to another DC Circuit decision that overturned the CPCN for the Spire Pipeline on the grounds that previous agreements with pipeline affiliates did not not established a real market need for the pipeline. This decision required FERC to issue a series of temporary certificates to ensure natural gas supply during the winter heating season while the Commission conducts proceedings in response to the DC circuit dismissal.
The first indication of how FERC may implement the new updated policy statement came on March 2, 2022, when FERC released a draft Environmental Impact Statement (EIS) for the proposed Regional Energy Access Expansion (REAE Project) proposed by Transcontinental Gas Pipe Line Company. The REAE project involves the construction of approximately 35 miles of new gas pipelines and related facilities in Pennsylvania, New Jersey and Maryland, which could impact several poor and minority communities, raising justice concerns environmental.
In the draft EIS, FERC concluded that, while “individual impacts associated with the construction of some project components may be primarily borne by environmental justice communities, impacts on environmental justice communities of project as a whole would not be disproportionately high and negative; ” and that “[w]with [the] implementation of Transco’s impact avoidance, minimization and mitigation measures, as well as their adherence to FERC staff recommendations. . .the effects of the REAE project would be reduced to less than significant levels. FERC’s analysis suggests that applicants can be successful in obtaining CPCNs if they carefully consider environmental justice impacts and propose meaningful measures to mitigate or avoid those impacts.
With respect to GHG impacts, the draft EIS concluded that the Project’s annual operation and downstream emissions (16.62 million metric tonnes of carbon dioxide equivalent) would exceed the threshold. importance of the Commission based on 100% utilization. Therefore, FERC has concluded that a full EIA must consider the impacts of these emissions.
The Board has launched a 60-day comment period on the updated policy statement, with comments expected no later than April 26, 2022. While FERC may amend the policy in response to comments, it is clear that FERC has launched a new era in consideration of CPCN’s requests and it behooves everyone involved in the pipeline certification process to pay close attention to the new, updated policy statement.
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