Five Faces of FERC Faceoff . . . Mostly Against Protestors and the D.C. Circuit

Five Faces of FERC Faceoff . . . Mostly Against Protestors and the D.C. Circuit
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Originally published for customers September 20, 2024.

 

What’s the issue?

Despite 14 disruptions by protestors, all five commissioners managed to cast votes at FERC’s open meeting yesterday for the first time since 2023. While several key projects were voted on, several others remain in the backlog. Notably, Chairman Phillips and Commissioner Rosner both expressed opinions that the D.C. Circuit was wrong to vacate the certificate for the Regional Energy Access Expansion (REAE) project.

Why does it matter?

A fully functioning FERC is critical to advancing project authorizations, and the degree to which it is functioning can generally be measured by the number of sitting commissioners from each party, how they vote, and the time it takes for orders to be voted on and ultimately authorized. But sometimes, commissioner commentary adds the most color.

What’s our view?

Regarding REAE, Commissioner Phillips’s statement that the court “did not properly consider how truly disruptive their decision would be” to customers in need of affordable and reliable gas supply this winter could indicate improved odds of REAE’s pending temporary emergency certificate being authorized. While several projects remain stuck in the backlog, the unanimous approval of all agenda items by the full five-member Commission is a promising sign of FERC’s renewed functionality.

 

 


 

Despite 14 disruptions by protestors, all five commissioners managed to cast votes at FERC’s open meeting yesterday for the first time since 2023. While several key projects were voted on, several others remain in the backlog. Notably, both Chairman Phillips and Commissioner Rosner expressed opinions that the D.C. Circuit was wrong to vacate the certificate for the Regional Energy Access Expansion (REAE) project.

A fully functioning FERC is critical to advancing project authorizations, and the degree to which it is functioning can generally be measured by the number of sitting commissioners from each party, how they vote, and the time it takes for orders to be voted on and ultimately authorized. But sometimes commissioner commentary adds the most color.

Regarding REAE, Commissioner Phillips’s statement that the court “did not properly consider how truly disruptive their decision would be” to customers in need of affordable and reliable gas supply this winter could indicate improved odds of REAE’s pending temporary emergency certificate being authorized. While several projects remain stuck in the backlog, the unanimous approval of all agenda items by the full five-member Commission is a promising sign of FERC’s renewed functionality.

 

Sympathy for REAE

Chairman Phillips and Commissioner Rosner both mentioned the D.C. Circuit’s vacatur of the Regional Energy Access Certificate and seemed determined to find a path forward for the project. While Chairman Phillips was careful not to “prejudge” the Commission’s actions, he stated that “Transco took steps to build out its system and begin serving customers based on the Commission authorization.” Commissioner Rosner echoed Phillips's remarks regarding the disruption caused by the DC Circuit’s vacatur of the certificate for the REAE project, and added that his approach to evaluating the certificate would be to assess the perspectives of all stakeholders while adhering to statutory requirements.

These comments are significant because Transco filed an application for a temporary emergency certificate on September 6. Despite no formal agenda item addressing the project, that two Democratically-appointed commissioners, including the chair, provided commentary focused on potential reliability risks in the winter if REAE were to shut down suggests a potential favorable outlook for the project's temporary emergency certificate application. The comments are also on brand with the pragmatic tone Commissioner Phillips has been setting, which stands in stark contrast to not-so-distant politically turbulent times. While the remarks from Chairman Phillips and Commissioner Rosner suggest a positive outlook for REAE, no official decision has been made, and only two of the five commissioners have weighed in so far.

As it stands, a petition for rehearing has also been filed at the D.C. Circuit, which delays the issuance of a mandate. But a temporary emergency certificate would blunt the impact of this mandate as it would allow gas to continue to flow while the Commission works to address the issues identified in litigation.

 

Some Are Better than None

Commissioners See and Chang cast their first votes yesterday, and two gas projects, the Port Arthur Pipeline and Calcasieu Pass, were among the notable decisions.

FERC granted Port Arthur Pipeline's request to partially vacate its certificate for the Louisiana Connector Project, which has yet to start construction. Initially approved at 130.9 miles, Port Arthur now plans to construct only 76.9 miles of pipeline. The company explained in its request that this shortened segment and existing interconnecting systems can still meet the project's intended demand. This reduction will likely accelerate the project’s timeline and reduce the infrastructure and construction costs.

The saga of Calcasieu Pass’s customers being upset about the project’s prolonged commissioning period continues, with the latest Commission order not addressing the substantive issue, while clarifying procedural matters. As we previously explained in LNG Outliers: Saguaro, Driftwood, and Calcasieu, the prolonged commissioning period upset customers due to its resulting delay in the activation of long-term foundational contracts, and Venture Global's February 2024 request for a one-year extension to place the terminal in service would further extend the commissioning phase.

In response to this extension request, customers sought access to non-public documents, arguing they needed this information to adequately comment on the extension request. Venture Global resisted releasing these documents without a direct order from the Commission. This resulted in the appointment of an Administrative Law Judge (ALJ) and a protective order, but the parties disagreed about the scope of the ALJ’s authority, particularly as it relates to the ability to compel Venture Global to produce documents. This most recent order clarifies that the ALJ has the authority to “address or resolve any disputes arising from the interpretation of the Order Establishing Hearing Procedures and the Protective Order, including but not limited to the scope of materials to be produced by Venture Global.”

Practically, this means that customers may finally get access to the documents they need to comment on the extension of time request, but the facility will remain in commissioning and the contracts still on ice.

 

Storage Projects

In other actions, FERC approved two storage projects — The LA Storage Pipeline and the Leaf River Energy Center project. The former, a natural gas storage pipeline, was approved to reduce its diameter from 42 inches to 36 inches, with the amendment noting that this change will not affect the project’s storage or withdrawal capacity.

As demand for natural gas storage continues to grow, the industry faces increasing pressure to expand capacity. Additional storage is vital for managing price volatility, meeting peak demand, and compensating for low wind and solar output periods. Expanding storage capacity can play a key role in stabilizing energy costs and ensuring reliable, affordable energy as consumption and generation patterns evolve.

The second project, the Leaf River Energy Center in southeastern Mississippi, is a natural gas storage hub that plans to convert existing leaching facilities into five hydrogen storage caverns.

Development of hydrogen, and by extension hydrogen storage, has rapidly accelerated in recent years, driven by incentives from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. These laws have created a favorable environment for hydrogen infrastructure projects, likely contributing to Leaf River’s decision to convert its leaching facilities to salt dome hydrogen storage caverns.

The development of salt dome caverns, used for storing both natural gas and hydrogen, involves injecting water to dissolve underground salt formations – a method Leaf River previously employed for gas storage. While Leaf River’s shift to hydrogen storage highlights growing opportunities in that sector, it does not signal reduced demand for natural gas storage. Rather, it reflects the developer's strategy to avoid duplicative gas storage projects. With no immediate plans to expand its current gas storage, the facility is shifting toward hydrogen, having already secured approval from the Mississippi State Oil and Gas Board.

 

The Clock Is Ticking

During the meeting and between the many protests, most commissioners expressed their excitement about working with one another, echoing sentiments expressed in July’s open meeting. While the project approvals and consensus among the Commission at FERC’s September meeting are positive signs, the backlog of pending projects continues to loom. Some projects have been awaiting action for extended periods, raising uncertainty about further delays, and the absence of certificate approvals from Thursday’s docket was a missed opportunity to begin addressing this backlog.

There are six projects that have received a final environmental review and are pending final certificate issuance. As seen in the chart below, three of these projects have already been waiting for a final decision for longer than the historic average.

 

Chart

 

If FERC doesn’t begin addressing the backlog soon, longer approval timelines could start impacting projects, particularly larger ones that require significant capital investment.

If you would like more information on the Regional Energy Access Expansion, the other projects mentioned above, or the existing project backlog, please contact us.

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