FERC Dysfunction Still Slowing Project Approvals

Originally published for customers October 20, 2023

FERC held another open meeting yesterday and finally took action on three pipeline cases that have been awaiting a Commission decision for an inordinate period of time. While Chairman Phillips has taken some key steps that have helped move projects through the review process, it appears that the Office of General Counsel and the Commission itself are not functioning efficiently, which is thwarting the ability of the Commission to act in a timely manner on the pending cases, even though the number of pending matters is at an almost historic low.

It is unclear from yesterday’s orders exactly what caused them to be delayed for as long as they were, but we suspect it is a combination of priorities and a fractured Commission that has slowed down the process for issuing orders. Perhaps things will speed up once Commissioner Danly leaves and Chairman Phillips and Commissioner Christie can work together to clear the pending backlog.

FERC Review Timeline

When FERC is operating efficiently, a pipeline expansion project should take no more than a year to review and approve from the time it is first filed. Typically, that one-year period would be split into two pieces. The first period runs from the filing through the date the environmental review document is issued and has typically taken about nine of the twelve months. The second period consumes about three months and allows time for the Office of General Counsel to prepare an order and the Commission to act on that order. Assuming things are going smoothly, therefore, you would expect the percentage of cases awaiting an order from the Commission to be about twenty-five percent of all the pending cases.

As seen above, this 25% ratio held for much of the early part of the last decade even as the number of pending cases grew to historic highs. One of the best periods for this measure was right before FERC lost a quorum in early 2017 as the three Democrats worked to clear the backlog of cases before the quorum was lost. The backlog grew again while FERC operated without a quorum, but during the period between Chairman McIntyre’s appointment in December 2017 until he had to depart because of health issues in October 2018, FERC worked to reduce the backlog from about one third of all pending cases to just about twelve percent.

At most times during the tenure of Chairman Chatterjee the backlog grew to be one half of all pending cases, even though the total number of pending cases had fallen dramatically from the highs in the middle of the last decade. While it was reduced to a low of just 12% right before Chairman Glick assumed control in early 2021, it has remained stubbornly high since then, even though the total number of cases has remained historically low.

Yesterday’s Open Meeting

The three projects approved at yesterday’s open meeting were GTN Xpress, Wahpeton Expansion Project and Appalachia To Market II. All three are fairly small projects, designed to provide just 150,000 dth/day, 20,600 dth/day and 55,000 dth/day of new capacity, respectively. All three also have firm shippers that have agreed to contract for most, if not all, of the new capacity. In O Chairman! My Chairman!, we discussed the travails of the GTN Xpress project and how it was on the July open meeting agenda, but was pulled from that agenda, then not even listed on the September agenda. While it finally got a vote yesterday, it still holds the record for taking the longest time to work through the FERC process for a project of its size, with its projected cost being just $75 million.

The Wait Is Finally Over

All three of the projects approved yesterday waited far longer than the typical three months we would expect for such small projects. GTN Xpress’s final environmental document was issued more than a year ago. Wahpeton’s final environmental document was issued on April 7 and Appalachia To Market II’s environmental document was issued on February 10. There are now five projects that have completed their environmental review and all five of them will have taken more than three months to issue the order, assuming that FERC does not act on them until next month’s open meeting.

Priorities and Dysfunction

As seen in the visual above, it appears that even when there is a high number of projects pending at FERC or the possibility of losing a quorum, the backlog of cases awaiting a FERC decision can be kept manageable if that is a priority for the Commission. We suspect that with all of the other priorities being given to the Office of General Counsel, clearing the backlog of pipeline projects is simply not high on the list. This lack of prioritization, however, may also include the commissioners themselves.

At the end of September’s open meeting, Commissioner Danly appeared to ambush all of his fellow commissioners with a motion to hold another open meeting the following Friday. The purpose of that meeting would have been to vote on two rehearing orders concerning two LNG projects, Rio Grande LNG and Texas LNG, that had been removed from the September agenda after it was issued the week before the meeting. In support of his motion, Commissioner Danly explained that scheduling an open meeting can act as a “forcing function” and “sharpen [the] resolve” of the Commission to act.

His motion never received a vote because it failed to get a second by any of his fellow commissioners, including by his fellow Republican, Commissioner Christie. Commissioner Christie properly noted that no Commission meeting is necessary and suggested that the orders be issued by the notational voting process, which allows orders to be issued in between meetings. In fact, prior to Chairman Chatterjee’s tenure, the notational voting process was the most common method for issuing all certificate orders.

Chairman Phillips accepted Commissioner Christie's suggestion and committed to “put both items that were struck up for notational votes within the week.” Neither of those orders have been issued, however. Presuming Chairman Phillips upheld his commitment, that likely means that the orders cannot get a majority to vote them through, which leads us to our other working theory for the current backlog, dysfunction.

Following the September open meeting, we noted in Another Baffling FERC Meeting – But There Was Progress, that part of the problem in getting orders out appears to be the “dissents” that are being filed regularly by Commissioners Danly and Clements. We noted there that while often titled as “dissents” all of the certificates issued by these four commissioners have actually been unanimous decisions. Once again, on the three orders issued yesterday, Commissioner Clements and Danly issued “dissents in part,” but we suspect that all three certificate decisions were unanimous. We wish we could confirm that speculation, but perhaps as another indicator of the dysfunction, none of the certificate orders were issued by the time we wrote this early Friday morning. This need to write separately about every disagreement with the reasoning of an order may be delaying the issuance of those orders as the Office of General Counsel tries to accommodate all of the commissioners’ views in the orders that are circulated. With Danly on the right and Clements on the left, that may be slowing the entire order writing process to a crawl, which may be relieved somewhat once Commissioner Danly exits the Commission, which he must do by early next year.