Pipeline Regulator Feels the Heat on Climate Change
Courts, advocates push federal commission to consider broad environmental impact of natural gas infrastructure
To what extent should the federal agency that approves the construction of natural gas pipelines consider their impact on climate change?
The Federal Energy Regulatory Commission has long argued that its job is to assess only the most direct effects of those projects, saying it would be too speculative to consider how producing the natural gas carried by the pipelines and then burned by customers will affect global warming.
But it’s under growing pressure from environmental groups and the courts to change course as the five-member commission decides whether to approve new pipelines and other facilities to deliver more gas to more power producers.
The outcome of that debate could determine how big a role natural gas will play in the business of generating electricity. Gas advocates note that while gas is a fossil fuel, it produces fewer greenhouse gas emissions and costs less than coal. Groups like the Sierra Club say the expansion of natural gas as a power source still locks the United States into higher emissions.
“We’re talking about a massive buildout of gas infrastructure that will impact climate change for decades to come,” said Kelly Martin, director of the Sierra Club’s Beyond Dirty Fuels Campaign, which opposes new fossil-fuel infrastructure.
FERC’s reviews of natural gas infrastructure proposals are guided by the National Environmental Policy Act and the Natural Gas Act.
While NEPA is a “process” statute that simply requires federal agencies to take a “hard look” at the environmental effects of federal actions, FERC’s greenhouse gas reviews have real-world implications for pipeline development, according to former FERC Commissioner Tony Clark.
The large volume of data that goes into an environmental impact statement, he said, “becomes an avenue for litigation and creates opportunities to drag out the timeline. It’s a big part of the keep-it-in-the-ground strategy, challenging every step in the approval process.”
Depending on the makeup of its commissioners, in the future FERC could also use the greenhouse gas analysis to justify rejecting proposed pipelines and liquefied natural gas facilities, he said.
The stakes are high for investors, consumers and the environment.
In the last five years, about 2,100 miles of FERC-approved transmission pipelines capable of delivering 38.1 billion cubic feet a day of natural gas started operating, according to the commission.
In the same period, the commission approved additional pipelines totaling 5,375 miles with a capacity of 84.4 billion cubic feet per day to link areas that produce natural gas to major markets around the United States.
The Interstate Natural Gas Association of America expects companies to spend about $172 billion to build roughly 26,000 miles of natural gas transmission pipelines in North America by 2035, according to a mid-June report from the trade group. The group forecasts that another $86 billion will be spent on liquefied natural gas and natural gas liquids export facilities.
As required by NEPA, when FERC reviews natural gas projects, it estimates greenhouse gas emissions directly related to infrastructure construction.
In the final years of the Obama administration, the Environmental Protection Agency and environmental groups pressed FERC to estimate how pipelines could spur upstream emissions by encouraging natural gas production as well as downstream emissions from burning of the fuel delivered by the pipelines. FERC had generally argued that it couldn’t accurately estimate upstream and downstream emissions.
FERC lags behind other federal agencies in the depth of its greenhouse gas reviews, according to Jessica Wentz, an attorney with Columbia Law School’s Sabin Center for Climate Change Law. “FERC has been pretty consistent in their unwillingness to do upstream and downstream analysis,” Wentz said, pointing to more rigorous reviews when agencies examine coal mine and coal railway proposals.
Courts have also found FERC’s greenhouse gas reviews lacking. The U.S. Court of Appeals for the District of Columbia last year vacated a FERC decision approving the $4.2 billion Southwest Market Pipelines project in Alabama, Florida and Georgia, saying the commission violated NEPA by not estimating the greenhouse gas emissions from power plants that would be supplied by a part of the project called Sabal Trail.
In a 2-1 decision, the court said FERC must consider downstream greenhouse gas effects that are “reasonably foreseeable,” such as burning the pipeline’s natural gas in power plants. FERC had argued that Florida regulators are responsible for considering the power plants’ greenhouse gas emissions, not the federal agency.
After FERC revised its environmental impact statement for the pipeline project to include downstream greenhouse gas emissions, the commission approved the project in mid-March. However, FERC’s Democratic members — Cheryl LaFleur and Richard Glick — said the new analysis should have gone further.
For example, LaFleur and Glick said, FERC should have used a “social cost of carbon” tool to help assess the effects of the pipelines.
“I believe we could better account for changes in greenhouse gas emissions resulting from the end-use of the transported gas, and calculate a social cost of carbon that accurately reflects the climate change impacts of a particular project,” LaFleur said.
FERC’s Republican majority defended its stance, saying the social cost of carbon tool — which considers costs related to health and climate effects — is more appropriately used by regulators that oversee fossil fuel production or use than for the assessment of infrastructure projects.
The Sierra Club, which led the litigation over the Southeast pipeline project, has asked FERC to reconsider its decision re-approving the project, saying the agency’s greenhouse gas analysis didn’t fully respond to the court order. After FERC issues its response, the Sierra Club is free to return to the appeals court to challenge the commission’s decision approving the partly built project.
FERC itself will likely ask the Supreme Court to overturn the appeals court’s Sabal Trail decision, according to ClearView Energy Partners, an energy policy consultant.
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Taking the ‘narrow view’
In another decision that triggered dissent among commissioners, FERC in mid-May narrowed the scope of its greenhouse gas reviews by generally not considering upstream and downstream emissions when they can’t clearly be quantified. In its decision on a small New York natural gas project built by Dominion Energy Transmission, FERC said the analysis wasn’t required under NEPA.
“Providing a broad analysis based on generalized assumptions rather than reasonably specific information does not meaningfully inform the commission’s project-specific review,” the majority said.
The information “muddles the scope” of FERC’s obligations under NEPA and the Natural Gas Act, according to the decision.
Based on the appeals court’s Sabal Trail decision, FERC should be doing more, not less, greenhouse gas analysis in its environmental reviews, according to LaFleur. FERC has the broad authority to perform the analysis, she said.
Glick said FERC is taking a narrow view of its responsibilities under NEPA and the NGA. “As a result of the commission’s new policy, we frequently will not know whether [a project’s] benefits outweigh the costs because the commission is not asking enough questions or doing enough analysis,” Glick said.
Clark, the former commissioner who is now an attorney at the Wilkinson Barker Knauer law firm, said he views FERC’s narrowing of its greenhouse gas reviews as a “tweak” that returns the commission to its previous practice.
In the last two years, FERC had been adding “color commentary” in its greenhouse gas reviews that went beyond what was required under NEPA, making it harder to defend the decisions in court, according to Clark.
“FERC wants to write fairly tight orders … to make them more legally defensible on appeal,” Clark said.
Glick, however, said the failure to extend the greenhouse gas analysis increases regulatory risks for pipeline developers by making it more likely FERC’s decisions will be challenged in court.
The Sabin Center’s Wentz said the decision was an attempt by FERC to draw a line on what “reasonably foreseeable” means.
In a June pipeline decision, LaFleur said that even if the commission refuses to assess downstream natural gas emissions, she will perform the analysis herself in her pipeline decisions.
In the rehearing decision for Tennessee Gas pipeline’s Broadrun expansion project, LaFleur used an EPA methodology to estimate how the new infrastructure would affect downstream greenhouse gas emissions. Despite her dissent over the lack of downstream and upstream analysis, LaFleur supported the expansion project.
Groups will likely challenge in court FERC’s decisions in cases where it isn’t clear how natural gas from a pipeline will be used as well as how to determine the point at which emissions are deemed “significant,” Wentz said.
So far, courts have upheld FERC’s decisions not to review upstream emissions, although the plaintiffs’ cases have been weak, according to Wentz.
The Sierra Club’s Martin contends that pipelines clearly have upstream impacts by facilitating natural gas production, which releases methane — a particularly powerful greenhouse gas — into the atmosphere.
The dissents by Glick and LaFleur signal the direction the commissioners want FERC to take in a just started, broad review of how the commission handles natural gas pipeline proposals under a policy set in 1999, according to Clark.
Through a “notice of inquiry” issued in mid-April, FERC is seeking comments covering four areas, including how it weighs emissions from pipelines and whether it should use a social cost of carbon calculation in its assessment.
In the review, FERC plans to explore how the commission determines if a proposed pipeline is needed. Currently, if a pipeline developer has agreements with shippers for capacity on a pipeline, FERC concludes the pipeline is needed.
However, pipeline developers and shippers who use the pipeline are increasingly owned by the same company. Glick, the Sierra Club and others argue that FERC needs to give those situations increased scrutiny when deciding whether a pipeline is needed.