Originally published for customers April 3, 2024.
What’s the issue?
According to a recent opinion by the DC Circuit, when assessing the validity of a pipeline's request for an extension of time to complete construction, FERC possesses significant discretion under the Natural Gas Act (NGA) to determine whether the pipeline is just “ticking away the moments that make up a dull day,” to quote the famous Pink Floyd track “Time.”
Why does it matter?
Any time there is a decision affirming FERC’s discretion, it is worth noting, especially when it relates specifically to project timelines where pipelines and interested stakeholders are often “hanging on in quiet desperation,” searching for more certainty, “waiting for someone or something to show them the way.”
What’s our view?
The case was notable because the DC Circuit’s decision unanimously found in favor of FERC on all underlying arguments, including by rejecting an assertion that a New York climate law was a significant new circumstance requiring reconsideration under that National Environmental Policy Act (NEPA) and the NGA. While this is not a bright line rule because factually, the pipeline’s service to New York is limited, the argument will likely surface again. When analyzing extension requests, we found that extensions usually relate to permitting and pandemic related supply chain issues, market conditions, and general construction delays.
According to a recent opinion by the DC Circuit, when assessing the validity of a pipeline's request for an extension of time to complete construction, FERC possesses significant discretion under the Natural Gas Act (NGA) to determine whether the pipeline is just “ticking away the moments that make up a dull day,” to quote the famous Pink Floyd track “Time.”
Any time there is a decision affirming FERC’s discretion, it is worth noting, especially when it relates specifically to project timelines where pipelines and interested stakeholders are often “hanging on in quiet desperation,” searching for more certainty “waiting for someone or something to show them the way.”
The case was notable because the DC Circuit’s decision unanimously found in favor of FERC on all underlying arguments, including rejecting an assertion that a New York climate law was a significant new circumstance requiring reconsideration under the National Environmental Policy Act (NEPA) and the NGA. While this is not a bright line rule because, factually, the pipeline’s service to New York is limited, the argument will likely surface again. When analyzing extension requests, we found that extensions usually relate to permitting and pandemic-related supply chain issues, market conditions, and general construction delays.
The Natural Gas Act and “Good Cause”
The authority granted to the Commission under the Natural Gas Act (NGA) is extensive, empowering it to take any actions it deems “necessary or appropriate” to fulfill the NGA's objectives. Consistent with this discretion, the NGA does not mandate FERC to establish construction completion deadlines. Recognizing the value of deadlines, FERC enacted regulations requiring that any authorized construction or extension must be finalized and ready for operation within a timeframe specified in each individual order. Two conditions must be fulfilled for an extension of such a deadline to be granted: 1) the developer requesting the extension must show "good cause" and 2) FERC must ensure that the request is made before the environmental and public interest findings underlying the Commission’s authorization become stale.
At issue in this case were two orders requiring extensions, one due to permitting litigation and the other related to the pandemic. In the first, National Fuel Gas Supply Corporation (National Fuel) requested two extensions for its Northern Access Pipeline project since its initial approval in 2017 — one resulting from prolonged litigation in the Second Circuit concerning its Clean Water Act permit, and a second after prevailing in this litigation to update environmental permits. Sierra Club intervened during this second extension request, questioning its clarity and necessity. In response to FERC's request, National Fuel provided additional details and FERC subsequently granted a 35-month extension, citing the critical importance of permit procurement as good cause. Despite Sierra Club's objections, FERC denied a rehearing, prompting Sierra Club to seek judicial review.
The second case involved enhancements to Cheniere’s Corpus Christi Liquefaction facility. FERC granted approval in 2019, mandating completion by November 22, 2024. In 2021, Cheniere requested a 31-month extension, citing the pandemic's adverse economic and logistical effects as good cause. Despite Sierra Club and Public Citizen's protest, FERC granted the extension, attributing it to the unforeseeable impacts of the pandemic and Cheniere's sustained project interest. FERC automatically denied Sierra Club and Public Citizen’s rehearing request, which they then petitioned for review. FERC affirmed its finding for good cause in the rehearing order, and elaborated on its rationale by addressing public interest considerations and NEPA arguments. Sierra Club and Public Citizen filed a petition challenging the rehearing Order.
Sierra Club and Public Citizen (petitioners) advanced four main arguments in this case. First, petitioners argued that FERC's "good cause" inquiry is too lax, asserting that FERC routinely rubber-stamps all requests for extensions of time without proper scrutiny. They note that FERC has rarely denied extension requests in the past three decades, suggesting a lack of meaningful evaluation. The court disagreed, finding none of this surprising given the amount of time and resources project sponsors invest in their projects and that, therefore, the percentage of approvals are not necessarily indicative of faulty decision-making.
Next, Sierra Club argued that FERC must reevaluate the findings underlying the original certificate order any time that it considers an extension request to ensure that its decision is “appropriate” under the NGA. The court disagreed, finding that “[t]he plain language of the statute allows FERC to determine, in its discretion, what is ‘appropriate’ to be considered.”
Sierra Club also argued that “good faith” invariably requires a project sponsor to actively pursue all needed permits, and because National Fuel did not do so for certain permits, FERC must explain why it nevertheless found good cause to grant the extension. The court again sided with FERC’s discretion, finding that the Commission could determine other types of reasonable efforts, other than “active pursuit” of all permits to be sufficient.
Finally, Sierra Club also argued that FERC should have denied National Fuel’s extension request because the passage of New York’s 2019 Climate Act — which requires the state to reduce its natural-gas usage — amounts to a changed circumstance indicating that the project is no longer needed. Sierra Club asserted that this change required FERC to reconsider its NGA and NEPA public interest and market need findings. The court found FERC’s decision not to revisit its market need finding reasonable and supported by the record. Notably, the court also found that FERC’s determination that the Climate Act will not significantly affect market need also indicates that the Act is not a “significant new circumstance” under NEPA. The court found no additional changes to the proposed project that would trigger a supplemental NEPA analysis.
Extension Data
After analyzing FERC's responses to extension requests for LNG, pipeline, and compression projects over the past decade, we observed a notable variation in both the grounds cited for "good cause" by applicants and the duration of the extension requests. This diversity stems from the subjective nature of each project and the wide array of circumstances they may face, which could potentially lead to delays. The reasons applicants have applied for the extensions do have some common themes, however. As shown below, applicants requested extensions for four main reasons: the pandemic and issues related to financing, permitting, and construction generally. The majority of these extensions were granted for two years. It is also worth noting that some extension requests cited more than one of these reasons.
There are a few instructive cases that offer additional valuable insights for applicants seeking extensions. For example, the Commission rejected one request, deeming it premature, and advised the applicants to submit extension requests within 120 days before the construction deadline. The Commission considered filing 475 days prior excessively early, and lacking relevant information for assessing the necessity of a 34-month extension and the validity of its prior findings.
In another order, when granting Midship Pipeline Company, LLC's (Midship) extension request, the Commission clarified the criteria justifying such extensions, particularly when citing market conditions as the cause for delay. It contrasted a prior denial of Chestnut Ridge Storage LLC’s extension request — where the applicant failed to proceed with necessary construction activities after having concluded that the project was not financially viable at the time — with Midship’s demonstration of progress, including the construction and deployment of all but three compressor units.