VII. Gas

B. Rulemakings & Policy Statements

1. Limiting Authorization to Proceed With Construction Activities Pending Rehearing | RM20-15-001

On May 4, 2021, the Commission issued Order No. 871-B, an order on rehearing of a final rule precluding issuances of authorizations to proceed with construction of natural gas facilities. The preclusion continues until the Commission has acted on the merits of any timely filed requests for rehearing or until the deadline for filing a timely request for rehearing has passed with no such request being filed.¹ Previously, in Order No. 871, the Commission explained that, due to the complex nature of matters raised on rehearing of authorizations granted under NGA sections 3 and 7, the Commission has issued “tolling orders” by the thirtieth day following the filing of a rehearing request, allowing itself additional time to considered the merits of rehearing requests.² To balance its commitment to expeditiously respond to rehearing requests and the concerns posed by the possibility of construction proceeding prior to the completion of agency review, Order No. 871 adopted new final regulations precluding authorizations to proceed with construction during the period for filing requests for rehearing or while rehearing is pending.³

Order No. 871-B revises the Commission’s Order No. 871 rule to clarify that the prohibition on issuing authorizations to proceed with construction during the rehearing period will not apply to proceedings where no party files a request for rehearing raising issues reflecting opposition to the project construction, operation, or need (e.g., rehearing requests related to tariff, rates, or terms and conditions of service would not trigger the construction prohibition). The Commission also clarified that construction could be allowed to proceed where rehearing is sought not of the initial order but of subsequent orders that merely implement the original authorization (such as orders related to compliance with environmental conditions, requests for variances, notice to proceed with construction, or authorizations to place facilities into service). Likewise, the construction prohibition would only apply to facilities approved by an order on an amendment application for which rehearing is sought, but would not apply to facilities previously approved by the Commission in the initial authorizing order that remain unchanged by the amendment order.

Order No. 871-B also revises the Commission’s Order No. 871 rule to account for the post-Allegheny rehearing determination. The revised rule provides that the limitations on construction authorization will apply until the earlier of the date that (1) a qualifying rehearing request is no longer pending before the Commission, or (2) ninety days following the date that a qualifying request for rehearing may be deemed denied. The Commission clarified this rule by positing four scenarios:

1. The Commission issues an order addressing the merits of the rehearing request before the thirtieth day following the date of the request—rehearing is no longer pending and authorizations to proceed with construction can be issued.
2. The Commission might not act on the merits within thirty days, and such inaction means that the rehearing request may be deemed denied and construction could be allowed to proceed.
3. The Commission might not act on a rehearing request within thirty days but might issue a notice indicating that rehearing may be deemed denied but that the Commission intends to address the merits of rehearing requests in a future order, as provided in section 19(a) of the NGA;⁴ in such case, the rehearing is still pending and Order No. 871 would apply (i.e., construction will not be allowed to proceed until the Commission has issued the rehearing order on the merits, or the time to issue such an order ends by the filing of the record with the court of appeals. But, given the uncertainty of this date, Order No. 871-B provides that the construction ban will expire ninety days following the date that a request for rehearing may be deemed denied if that request is still pending before the Commission.
4. As described in Allegheny, the Commission could grant rehearing for the express purpose of revisiting and could substantively reconsider its prior decision where additional time is needed to allow for supplemental briefing or further hearing process, in which case the Commission could grant rehearing without issuing a final order. The original authorization would no longer be in effect, and therefore Order No. 871 would not apply since there is no final order pursuant to which a notice to proceed could be issued.

In Order No. 871-B, the Commission also announced that it was adopting a policy presumptively staying an NGA section 7(c) certificate order during the thirty-day period for seeking rehearing and pending the resolution of any timely requests for rehearing filed by a landowner. The Commission announced that the stay would last until the earlier of the date on which the Commission (1) issues a substantive order on rehearing or otherwise indicates that the Commission will not take further action, or (2) ninety days following the date that a request for rehearing may be deemed to have been denied under NGA section 19(a). This policy will not apply where the pipeline developer has already, at the time of the certificate order, acquired all necessary property interests or where no landowner protested the section 7 application.

In addition, where no landowner files a timely request for rehearing, the stay will automatically lift following the close of the thirty-day period for seeking rehearing. The Commission claimed that it lacks authority to deny or restrict the power of eminent domain in a section 7 certificate or to oversee the acquisition of property rights through eminent domain, but the Commission argued that it “unquestionably” has the right to determine the effective date of, and stay, its own orders. In light of the balance of interests identified in the record, the Commission adopted this policy of presumptively staying the certificate order because the Commission found it unfair for the pipeline developer to use the certificate to begin the exercise of eminent domain before the Commission has completed review of the certificate order on its merits. The Commission explained further that the new policy is only presumptive and that the question of whether to impose a stay will be decided on circumstances presented in each proceeding—a pipeline developer may move to preclude or lift a stay based on a showing of hardship.

Commissioner Danly issued a dissent “in full” and stated that he would grant rehearing and repeal the rule.⁵ Given that Allegheny prohibits the Commission from indefinitely tolling requests for rehearing and parties are entitled to petition for review once rehearing has been denied by operation of law, Commission Danly argued it was unnecessary for the Commission to go any further; it is unlikely that construction will commence before a party has an opportunity to petition for review. Commission Danly argued that the Commission has dramatically increased the uncertainty faced by the natural gas industry by making it harder to rationally deploy capital, accurately assess risk, or predict Commission action. As to the presumptive stay, Commissioner Danly argued that the Commission has no authority to presumptively stay certificate orders. Commissioner Danly argued that the Administrative Procedure Act provides that a stay may be issued pending judicial review, which means that a stay must be tied to litigation. The Commission’s presumptive stay, however, is not even tied to an application for rehearing, let alone any litigation. The assumption that a mere existence of landowner protest automatically requires a stay, in the interest of justice, is, according to Commissioner Danly, questionable and raises a host of unanswered questions about the nature of protests warranting the stay. He claimed that the new policy elevates the stay from being the exception to being the rule itself.

2. Certification of New Interstate Natural Gas FacilitiesPL18-1-000

On February 18, 2021, the Commission issued a Notice of Inquiry (NOI) seeking additional stakeholder input to help the Commission explore whether it should revise its approach under its currently effective policy statement on the certification of new natural gas facilities,⁶ consistent with the standard is established in section 7 of the Natural Gas Act (NGA).⁷ The 2021 NOI adds new and modified questions to a prior NOI, issued on April 19, 2018, which sought input on (1) whether, and if so how, the Commission should adjust its methodology for determining whether there is a need for a proposed project, including the Commission’s consideration of precedent agreements and contracts for service as evidence of such need; (2) the consideration of potential exercise of eminent domain and of landowner interests; (3) evaluation of environmental impact of a proposed project; and (4) how the Commission can improve the efficiency and effectiveness of its certificate process, including pre-filing, post-filing, and post-order issuance.⁸ The 2021 NOI also identifies a new area of examination: disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on environmental justice communities and the mitigation of those adverse impacts.⁹

For the first area of inquiry—determination of need—the Commission asked questions regarding whether the Commission should adjust how it determines a need for the project, what benefits the Commission should consider, whether and to what extent to consider precedent agreements, whether to distinguish precedent agreements between affiliates, whether the Commission should consider a project’s end use, how to account for end uses that may change over time, and whether the Commission should assess need differently when two or more projects are proposed in the same geographic region. The Commission also added additional questions in the 2021 NOI that were not in the 2018 NOI, including whether to further adjust its needs assessment under certain circumstances, like whether existing infrastructure could accommodate the project, if projected demand will materialize, or if new electricity sources will impact demand for natural gas. Additionally, the Commission asked whether it should consider the natural gas-related employment and tax revenue as a project benefit.

Under the Policy Statement, the Commission considers the impacts to landowners and the extent to which an applicant expects to acquire property rights relying on eminent domain. The 2021 NOI invited new or revised comments on whether and how the Commission adjusts its consideration of the potential exercise of eminent domain; whether and how applicants take measures to minimize use of eminent domain; whether the Commission should consider changing how it balances the potential use of eminent domain against the showing of need for the project; whether the current process adequately take landowner interests into account; whether the Commission should reconsider how it addresses applications where the applicant is unable to access portions of the right-of-way; and whether the Commission should consider changes to how it considers environmental information gathered after an order authorizing a project is issued. They also added new questions in the 2021 NOI addressing whether Commission has authority under the NGA to condition a certificate holder’s exercise of eminent domain; whether the Commission should defer issuing a certificate until an applicant has all other authorizations needed to commence construction; and whether there are circumstances when an applicant may need a certificate prior to receiving certain permits.

For its environmental review of a project, particularly under the requirements of the National Environmental Policy Act (NEPA), the 2021 NOI requested comments regarding the following issues: whether and how the Commission should consider broadening its alternatives analysis; whether there are environmental impacts that the Commission does not currently consider in its cumulative impacts analysis that could be captured by a broader regional evaluation; whether and how the Commission could consider upstream impacts (e.g., drilling of wells) and downstream end-use impacts, including greenhouse gas emissions (GHG); how the Commission could determine the significance of a project’s GHG emission on contribution to climate change; whether the NGA, NEPA, or other federal statutes authorize or mandate the use of Social Cost of Carbon (SCC) analysis and, if so, how does the statute direct or authorize the Commission to use SCC; whether and how the Commission could use the SCC tool in determining the public convenience and necessity; whether there are alternatives to the SCC tool that the Commission should consider; how the Commission could determine whether the project’s GHG emissions are offset by reduced GHG emissions resulting from project operations; how the Commission could impose GHG emission limits or mitigation to reduce impacts from a proposed project; whether the Commission is permitted to mitigate GHG emissions under NGA section 7(e); and whether there are categorical exclusions to NEPA established by other agencies should the Commission consider adopting.

As to possible improvements to the efficiency of the Commission’s review process, the 2021 NOI requested feedback on the following topics, which were identical to the questions asked in the 2018 NOI: whether certain aspects of the review process (i.e., pre-fling, post-filing, and post-order-issuance) be condensed, performed concurrently with other activities, or eliminated and what specific changes should the Commission implement; how the Commission can ensure most effective participation by stakeholders; whether and how the Commission can work more efficiently with other agencies that have a role in the certificate review process; and whether classes of projects should appropriately be subject to a more efficient process.

Finally, the 2021 NOI opened up a line of inquiry into a new topic: environmental justice. The Commission noted that Executive Order 14008, issued by President Biden on January 27, 2021, directed federal agencies to develop “programs, policies, and activities to address disproportionately high and adverse human health, environmental, climate-related and other cumulative impacts on disadvantaged communities, as well as the accompanying economic challenges of such impacts.”¹⁰ While the Commission is not technically subject to the executive order, the 2021 NOI requested stakeholders address the following issues: whether and how the Commission should change how it identifies potentially affected environmental justice communities; whether there are concerns regarding environmental justice communities’ participation in past Commission proceedings; what measures the Commission could take to ensure effective participation by environmental justice communities in the review process; whether the Commission should change how it considers the location or distribution of a project’s impacts; whether the Commission should change how it considers multiple or cumulative adverse exposures and historic patterns of exposure to pollution or other environmental hazards; whether the NGA, NEPA, or other federal statutes set specific duties for the Commission to fulfill regarding environmental justice; whether and how the Commission should establish a method for evaluating mitigation of environmental justice impacts; and whether the NGA, NEPA, or other federal statutes set forth specific remedies with respect to environmental justice.

Comments on the 2021 NOI were due April 26, 2021. The Commission has not yet acted on the 2021 NOI.

C. Certificate Orders

1. Algonquin Gas Transmission, LLCCP16-9-014Maritimes & Northeast Pipeline, L.L.C.

On February 18, 2021, the Commission issued an “Order Establishing Briefing” concerning the certification and continued operation of the Weymouth Compressor Station, located in Weymouth, Massachusetts, built by Algonquin as part of the Atlantic Bridge Project.¹¹ The Commission issued Algonquin a certificate to construct the Atlantic Bridge Project on January 25, 2017, and, on September 24, 2020, Commission staff authorized Algonquin to place the Weymouth Compressor Station into service.¹² On September 30, 2020, the Weymouth Compressor Station experienced an emergency shutdown that also resulted in a release of gas. The Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a corrective action order that directed Algonquin to not operate the compressor station and subsequently approved the restarting of the compressor station. The Commission, noting that it has received numerous pleadings expressing safety concerns regarding the operation of the project, stated that these concerns warrant “further consideration” and set for briefing the following questions: (1) In light of concerns expressed regarding public safety, is it consistent with the Commission’s responsibilities under the Natural Gas Act (NGA) to allow the Weymouth Compressor Station to enter and remain in service? (2) Should the Commission reconsider the current operation of the station in light of changed circumstances (e.g., are there changes to projected air emissions impacts or public safety that should be considered, including changes affecting surrounding communities)? (3) Should additional mitigation measures be imposed? and (4) What would the consequences be if the Commission were to stay or reverse its authorization?

In a dissenting opinion, Commission Danly stated that this order is an impermissible attempt to revisit the certificate order while offering no basis in law for the Commission’s action. According to Commissioner Danly, the order appears to be collecting comments to determine whether the Commission should relitigate the certificate order absent a breach or violation of the certificate terms and conditions; but the NGA gives the Commission power to grant, with conditions, a certificate and to enforce the certificate, and, absent a violation of those conditions, once the certificate becomes final, the Commission never revisits the certificate order. On top of this order being unlawful, Commissioner Danly claimed that it is “bad policy” because revisiting final, unappealable certificate orders impairs regulatory certainty, and, without the sanctity of the certificate, there would be no private financing, and hence, no project. Commissioner Danly noted that PHMSA has authorized the resumption of operation and the Massachusetts Department of Environmental Protection (DEP) has approved the air quality plan for the Weymouth Compressor Station, and that it is longstanding Commission practice to rely on PHMSA to regulate pipeline safety and the EPA (or its state delegated agency) to regulate emissions. Danly questioned what the basis would be for modifying the certificate order and what measures could be imposed that PHMSA or the Massachusetts DEP have not considered and would not interfere with their approvals.

Commissioner Christie also dissented because, by retroactively changing the rules long after construction began and investors committed funds, this order capriciously violates the basic standards of regulatory due process and finality. Commissioner Christie stated that this order is apparently based on an alleged safety issue with a compressor station that is no longer under the Commission’s jurisdiction but, rather, is under the jurisdiction of PHMSA, an agency that has already investigated the facility and has given it a green light to operate following the shutdown. Commissioner Christie claimed that this order leaves only uncertainty in its wake and impacts investment in all infrastructure projects—making them less appealing, harder to finance, or, at the very least, more expensive to finance due to increased risk.

On May 19, 2021, the Commission dismissed the petitions for rehearing of its February 18, 2021, “Order Establishing Briefing.”¹³ The Commission held that dismissal was appropriate because the NGA permits “aggrieved” parties to file for rehearing, but courts have long held that parties are not aggrieved by an agency’s interlocutory order establishing a hearing, investigation, or other fact-filing proceeding. The Order Establishing Briefing is, according to the Commission, a procedural step that does not impose an obligation, deny a right, or fix some legal relationship as a consummation of the administrative process, and, rehearing does not lie unless irreparable injury would be sustained. The Commission claimed that courts have found that the burden of further litigation and uncertainty do not rise to the level of aggrievement and that the courts have also rejected claims that an agency lacks jurisdiction to conduct the proceeding is a sufficient basis to render a party aggrieved under the NGA. Finally, the Commission stated that the claimed harms are based on speculation regarding potential Commission action, rather than any action it has taken—noting that it is a faulty premise that the Order Establishing Briefing “reopens” the certificate order; rather, the order merely initiates a fact-finding proceeding as “an exercise of the Commission’s continuing oversight of the Project.”

2. Northern Natural Gas Co.CP20-487-000

On March 27, 2021, the Commission approved the abandonment of pipeline facilities and the construction of 87.3 miles of replacement facilities.¹⁴ In the Commission’s review of the environmental impacts of the project, the Commission announced a new policy concerning its review of greenhouse gas emissions (GHG) and climate change, holding for the first time that it could determine whether emissions attributable to a pipeline project were “significant” for NEPA purposes, concluding, in this case, that the emissions were not significant. The Commission noted that the Environmental Assessment disclosed the emissions of GHG from construction activity and annual operation. The Commission stated that, in previous orders, it concluded that its inability to assess the significance of a project’s GHG emissions or its contribution to climate change. But, in the instant order, the Commission stated that, “[u]pon reconsideration, we no longer believe that to be the case.” The Commission added that “[a] rigorous review of a project’s reasonably foreseeable GHG emissions is also an essential part of the Commission’s responsibility under NEPA to take a ‘hard look’ at a project’s environmental impacts” and that “[d]etermining the significance of the impacts from a proposed project’s GHG informs the Commission’s review in a number of important respects, including its decision whether to prepare an environmental impact statement.” The Commission claimed that “nothing about GHG emissions or the resulting contribution to climate change . . . prevents us from making the same type of significance determination [as with other environmental impacts]” and “NEPA does not require that the studies, metrics, and models—scientific and otherwise—on which an agency relies be universally accepted or otherwise uncontested.” The Commission also noted that, in future proceedings, evidence upon which the Commission relies may “evolve” as the Commission becomes more familiar with the exercise.

For the analysis of this particular project, the Commission compared the total projected emissions to national levels of GHG’s emitted in 2018 and found that the project could increase emission by .0003%, with operations in subsequent years increasing emissions by .000006%. For additional context, the Commission stated that, when states have GHG emissions reduction targets, it would consider the GHG emissions impact on those state goals, and that, where, as here, there are no state targets, the operations-related emission will be compared with state inventories to determine the percentage increase. Based on this analysis, the Commission concluded that the project’s contribution to climate change would not be significant. In future proceedings, the Commission claimed, it will consider all appropriate evidence regarding significance of reasonably foreseeable GHG emissions and the contribution of such emissions to climate change. Critically, the Commission explained that if such emissions are found to be significant, the GHG-related impacts would be considered along with many other factors when determining whether a project is required by the public convenience and necessity.

Commissioner Danly concurred with the granting of the authorization but dissented in part because, in his view, the Commission violated the Administrative Procedure Act by reversing its longstanding determination that it is unable to assess the significance of a project’s GHG emissions and the emission’s contribution to climate change without sufficient reasoning. According to Commissioner Danly, the Commission—in deciding to compare raw emission numbers to national totals and to determine significance on that basis alone—disregards the pending Notice of Inquiry¹⁵ that seeks directly relevant additional public comments and, instead, announces the Commission’s “own fragmentary standard that provides no clarity because it fails to establish either a replacement framework or a threshold for when emissions will be deemed ‘significant.’” He further claimed that the Commission’s repeated prior findings that it is unable to assess the significance of a project’s GHG emissions is based on an acknowledgment that there exists no accepted methodology by which to make such assessment, and the pending Notice of Inquiry addresses this precise issue. But rather than waiting for answers and record evidence, the Commission now answers the question by comparing the project’s total GHG emissions to total U.S. emissions with no further analysis offered. Commissioner Danly claimed that the majority simply asserts that this comparison enables the Commission to assess the project’s contribution to GHG emissions and climate change without any analytical framework or even an established threshold above which it will consider emissions to be “significant.” This assessment is, according to Commissioner Danly, no standard at all, merely a black box comparison of numbers that the Commission can apply however it sees fit on a case-by-case basis; in this case, Northern Natural luckily passes.

Commissioner Danly asserted that the Commission’s actions are arbitrary and capricious because it failed to offer any reason as to why it changed its position and further failed to supply any explanation of how it arrived at its new conclusion. Rather, the Commission merely stated the numbers, offered what it called “context” and concluded that, based on this record, the project’s contribution to climate change would not be significant. Commissioner Danly argued that the Commission is not an environmental regulator and that it is up to the EPA, acting under the Clean Air Act, to establish the appropriate standards. While the Commission must comply with NEPA, that does not mean, according to Commissioner Danly, that the Commission can, or is equipped to, come up with its own framework for determining significance of project emissions on climate change, and, because of such lack of expertise, the Commission is “effectively wetting a finger and putting it in the air.” He also declared that the Commission’s drastic departure from long-standing policies constitutes “bad governance” because it offers nothing that would provide certainty that financial markets require to deploy capital and leaves pipeline companies guessing as to what projects will pass muster, not just now, but in the future as the Commission’s analysis “evolves.” He further suggested that the issuance of this order is a “cynical exercise” because this sweeping policy change was done in an “inconsequential” proceeding for which few parties intervened, and the pipeline applicant, Northern Natural, is unlikely to seek rehearing because it is not aggrieved by the order. He suggested that every pipeline company, LNG company, and shippers should intervene in every single certificate and LNG proceeding given how consequential any order can become, and he expressed “fear” that this order marks the beginning of a series of decisions that will have profound effects on the industry, on its customers, and on NGA section 3 and 7 approvals going forward.

Endnotes

1. Order No. 871-B, 175 FERC ¶ 61,098 (2021). Rehearing of Order No. 871, 171 FERC ¶ 61,201 (2020).

2. Under the NGA, a party to the proceeding that objects to the order must seek rehearing from the Commission within 30 days of the order. The Commission can, within 30 days of the rehearing deadline, grant rehearing, deny rehearing or abrogate or modify its order, and if the Commission does not act at all, rehearing is deemed denied. Once rehearing is denied, the party may petition a Federal Court of Appeals to review the Commission’s decision. The Commission has, adopted a practice of issuing a “tolling order” that grants rehearing (within the 30-day time limit) for the purpose of further consideration that does not act on the merit of the rehearing request, but tolls the time limit to issue such order on rehearing for an unlimited period of time. During that time, the party seeking rehearing cannot seek review by the courts. Also, once the certificate is issued, the project sponsors can seek authorization to proceed with construction once all necessary permits have been obtained and can proceed with eminent domain condemnation.

3. Three weeks after the issuance of Order No. 871, the D.C. Circuit issued a decision holding that the Commission’s use of tolling orders does not preclude the NGA’s deemed denial provision and the Commission must act on the rehearing petition within 30 days of the filing of a rehearing petition or that petition will be deemed denied and the petitioner can seek court review. Allegheny Defense Project v. FERC, 964 F.3d 1 (D.C. Cir. 2020) (Allegheny).

4. Under this section, even after a petition for review has been filed at a federal court of appeals, the Commission may modify or set aside its findings and order until the record shall have been filed at the court of appeals.

5. Commissioner Danly, a Republican, is the immediate past Chairman of the Commission. He was replaced as Chairman by Commissioner Glick following the change in administrations when President Biden took office in January.

6. Certification of New Interstate Natural Gas Facilities, 88 FERC ¶ 61,227 (1999), clarified, 90 FERC ¶ 61,128, further clarified, 92 FERC ¶ 61,094 (2000) (Policy Statement).

7. 174 FERC ¶ 61,125 (2021) (2021 NOI).

8. Certification of New Interstate Natural Gas Facilities, 163 FERC ¶ 61,042 (2018) (2018 NOI).

9. The following listing of questions is a summary of the NOI questions and not the actual questions in the NOI.

10. Exec. Order No. 12008, § 219, 86 F.R. 7619 (Jan. 27, 2021).

11. 174 FERC ¶ 61,126 (2021).

12. Algonquin Gas Transmission, LLC, 158 FERC ¶ 61, 061 (2017), order denying rehearing, 161 FERC ¶ 61, 255 (2017), certificate order affirmed, Town of Weymouth Mass., No. 17-1135, 2018 WL 6921213 (D.C. Cir. Dec. 27, 2018).

13. 175 FERC ¶ 61,150 (2021).

14. 174 FERC ¶ 61,189 (2021).

15. See supra Section B.2.