FERC Updates Natural Gas Auditing Policies

On 17 February, the Federal Energy Regulatory Commission issued two policy proposals—a certificate policy statement and an interim greenhouse gas (GHG) policy statement—ushering in significant changes to how natural gas pipelines will be approved in the United States. FERC, established in 1977, is the federal agency that regulates the country’s wholesale natural gas and electricity markets; as such, the commission wields a heavy hand in guiding national energy policy, and is finding itself in controversy as the country pivots towards carbon abatement. Under the Natural Gas Act (1938), FERC evaluates natural gas pipeline proposals, and ascertains the extent to which they serve “the public interest.” The Commission has increasingly come under scrutiny as a “rubber stamp” agency that hinges its decisions on economic concerns. FERC’s new guidance, however,—the first revision to the Act in over 20 years—signals that environmental justice and climate change deliberations will now enter the certificate approval process. The twin interim GHG Policy statement, moreover, elicits FERC’s heightened efforts to mitigate GHG emissions for proposed pipeline and liquid natural gas projects. Under this new policy, FERC renders a project that emits 100,000 metric tons of annual carbon dioxide as one with “a significant impact on climate,” thereby requiring a robust Environmental Impact Statement (EIS) under the National Environmental Policy Act (NEPA). These two decisions are unprecedented, not only because of their climate and justice considerations, but also in light of the fact that the two Conservative Commissioners believe that the agency has unrightfully rewritten the Natural Gas Act and the National Environmental Policy Act. This conflict illuminates FERC’s struggle to balance the economic and supply considerations that underpin its mandate with the recent pushes towards a clean energy economy, inviting key stakeholders to the forefront of the debate.

Democratic Lawmakers relish in FERC’s decision, especially in light of the fact that their most recent climate legislation has stalled in the Senate. FERC’s decision could push energy developers to deploy more renewable sources of energy instead of natural gas pipelines, supporting their greener political agenda. Democrats also see that these policy changes will provide clarity and legal durability to stakeholders, as they will elucidate the current mosaic of conflicting state energy policies. It is in the party’s interest that these rules stay on the books.

Environmental interest groups have long criticized FERC’s record of rubber-stamping projects without affording proper consideration to social or environmental factors. For example, Native American tribes have had to confront energy projects that cross tribal lands, and environmental justice advocates have long crusaded against noxious air pollution, risks of explosion, pipeline leaks and oil spills. The burdens of energy infrastructure projects fall disproportionately on underserved communities that lack the wherewithal to go toe-to-toe with industries. As part of the new evaluation under the Natural Gas Act, the commission will consider how projects contribute to climate change and affect low-income and minority communities. As such, FERC’s policies constitute a historic victory for these groups, who will certainly fight to keep them in play.

Landowners also have a stake in the issue. Since the proliferation of oil fracking, landowners have filed lawsuits against the pipelines that traverse their privately-held land. For these stakeholders, the issue is personal; they may have had this land for generations, or it might be the source of their income. Landowners, like environmental justice communities, have expressed that their expertise and resources pale in comparison to that of the natural gas industry. The measures to incorporate environmental justice and climate concerns to project auditing will alleviate said concerns, as FERC can leverage their position against industrial interests.

On the other hand, natural gas groups and their allies vociferously reproach this decision, arguing that these changes could raise energy costs, obstruct the market’s ability to meet demand, and threaten America’s energy security. They also argue that subjecting energy infrastructure proposals to the new policies creates uncertainty and delays, both of which will discourage investments in critical infrastructure. Lastly, and perhaps most importantly, the industry might accuse FERC of abjectly contradicting their mandate under federal law.

“I believe today’s long overdue policy statements are essential to ensuring the Commission’s natural gas siting decisions are reflective of all stakeholder concerns and interests...We have witnessed the impact on pipeline projects when federal agencies, including the Commission, fail to fulfill their statutory responsibilities assessing the potential effects of a project on the environment, landowners and communities. If we are going to ensure legal durability of our orders, it is essential that the Commission satisfy its statutory obligations the first time. I’m proud of these policy statements because they provide a forward-looking declaration on how the Commission intends to execute its authority to consider proposed infrastructure projects in a manner that is responsive both to all the interests at stake and to the direction of the courts.”

- Chairman Rich Glick

The final stakeholders in this decision are natural gas consumers. IHS Markit, a research and consulting firm, warns that the dwindling diversity in power sources may increase energy costs—and diminish grid reliability—for American households and businesses. Whether or not consumers will prioritize these concerns over climate change hangs in the balance, and will make itself clear in the coming months.

The new guidelines will take effect immediately, though the Commission will solicit public opinion and may modify its proposals. At this inflection point in our nation’s energy policy, it is clear that different groups will jockey for precedence in the decision. Due to the natural gas industry’s political and economic prowess, coupled with their customary involvement in FERC proceedings, there is little doubt that they will fight against these policies. Energy advocates will argue that the policies are partisan, uncalculated, and costly. With that said, the industry’s protests will be matched by climate advocates’ and landowners’ unwavering support for these new provisions. Because of FERC’s increasing interest in public discourse, as demonstrated by its opening of the Office of Public Opinion, it is not yet clear which group will wield more power in the decision-making process.

The Federal Energy Regulatory Commission is underpinned by a regulatory mandate to ensure that electricity and transmission rates are reasonable, and that new energy infrastructure projects adhere to the public interest. The bottom line, then, is that each group of stakeholders has—and disseminates—a disparate conception of “the public interest.” While some argue that FERC should be protecting landowners and communities directly impacted by pipelines, or abetting the green energy transition, others argue that the Commission should focus solely on affordability and reliability. As FERC navigates the uncharted territory at the interface of the energy transition and the environmental justice movements, two powerful economic and social trends, time will only tell whose policy prescriptions emerge triumphant.