Opportunities and Risks for Incumbent Pipelines on Display at FERC’s Open Meeting

Originally published for customers November 17, 2023

At the November FERC meeting, three pending pipeline projects demonstrated the benefit incumbent pipelines have at the Commission, but they are still exposed to continuing delays.


 

What’s the issue?

FERC held its open meeting yesterday and approved three pending pipeline projects that demonstrate the benefit that incumbent pipelines have when new sources of supply hit a system like Williams’s Transcontinental Gas Pipe Line (Transco), but also expose the continuing delays that projects face from the apparent dysfunction at FERC.

Why does it matter?

As the Mountain Valley Pipeline project moves from the “If” to the “When” phase for its in-service, the three projects approved at yesterday’s open meeting are all designed to take gas from Transco, which is where MVP ends, and deliver it to end users. However, regulatory certainty is a key to private investments being made in large infrastructure projects like natural gas pipelines. Since the end of the Obama administration, there has been very little certainty in FERC’s processes for reviewing pipeline expansion projects.

What’s our view?

The three projects approved yesterday show how the incumbent pipelines have an advantage in the market place and even likely at FERC as they all involve basically looping of existing facilities and compression to create the needed additional capacity. But the timing of the projects approved and those that were not also show that Chairman Phillips has much work to do to return regulatory certainty to FERC’s processes. He appears to have returned some certainty to the environmental review process, which he generally controls as Chairman. The time period for issuing decisions following the environmental review has grown under his tenure to the worst that has ever been in the last 15 years. This month’s open meeting offers a reason to hope that he will soon make progress, but also a reason for worry.

Pipeline Expansion Projects Approved

There were three pipeline expansion projects approved at yesterday’s meeting, Southeast Energy Connector, Commonwealth Energy Connector and Virginia Reliability. We have written extensively about the travails of the MVP project, but following an act of Congress, that project appears to be almost certain to finally go into service; the only question is when. MVP, while connected to the critical supply sources in the Marcellus region, ends with a connection to the existing Transco pipeline and there seems to be limited capacity on that line for this new supply. However, all three projects approved at this month’s open meeting are by incumbent pipelines, Transco itself and Columbia Gas Transmission, to move gas further south on and then off of the Transco line to end users in southeastern Virginia and Alabama. These projects, which include looping of existing lines and compression, show how the incumbent pipelines can benefit from the addition of new supply like that provided by MVP.

However, the timelines for these projects, and more importantly those not approved at this month’s open meeting, also show the continuing regulatory uncertainty facing pipeline projects under Chairman Phillips. Chairman Phillips assumed the role earlier this year after his predecessor, Chairman Glick, failed to get reappointed. As we wrote in FERC Chairman’s Actions Confirm that All Pipeline Expansions Require an EIS, Chairman Glick had ordered FERC staff to prepare a full environmental impact statement (EIS) for almost every pipeline expansion project simply because of the purported climate change impacts of those projects. Following his elevation to the post, however, Chairman Phillips returned the authority to staff to determine the appropriate level of environmental review for each project. He even allowed staff to change the proposed level of review for certain projects. One of those projects was the Southeast Energy Connector. Staff decided to prepare an Environmental Assessment (EA) for that project rather than the previously mandated EIS. That allowed the project to complete its environmental review almost six months faster than the other two projects. However, the fact that all three projects were approved at yesterday’s meeting reflects a problem that we have noted before, which is that the time to issue an order following the completion of the environmental reviews has seemed to extend.

 

Order Preparation Used to Be Efficient

During the Obama administration, the time it took for FERC’s Office of the General Counsel to prepare an order following completion of the environmental review and for the Commission to vote on that order was typically about ninety days. That time period has been growing ever since the end of the Obama administration.

 

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As seen above, even if we exclude the decisions that were impacted by the loss of a quorum at the beginning of the Trump era, the typical length of this time period grew to five months when Republicans controlled the Commission. Under the two most recent chairmen, this time period has continued to lengthen such that it is now more than double what it was under chairs during the Obama administration.

 

Chairman Phillips May Be Able to Improve His Record Once Commissioner Danly Leaves

Of the three projects approved at this month’s open meeting, two of them, Commonwealth Energy Connector and Virginia Reliability, were only pending for 62 days following the issuance of their environmental reports, but the third one, Southeast Energy Connector, was pending for 237 days, which completely eliminated the calendar advantage it received by staff changing its environmental review from an EIS to an EA. Similarly, reflecting the challenges projects are facing in getting a final approval from the Commission, there are six projects pending that completed their environmental review before two that were approved this month. If we assume all six of those projects are approved at December’s meeting, the average time for issuance of their orders would be 153 days, an improvement over the current rate for Chairman Phillips, but still about double the time during the Obama administration.

In FERC Dysfunction Still Slowing Project Approvals, we noted that at the September meeting, Commissioner Danly proposed that FERC hold another open meeting the following week to act on two rehearing orders concerning two LNG projects, Rio Grande LNG and Texas LNG, that had been removed from the September agenda. 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. That motion never received a second, but Chairman Phillips did agree to a suggestion by Commissioner Christie and committed to “put both items that were struck up for notational votes within the week.” Those orders were not issued, though, until October 27 and all four commissioners issued separate statements, three concurring in the result and one, by Commissioner Clements, dissenting. Interestingly, even though he had urged the convening of an open meeting as a “forcing function,” Commissioner Danly’s separate statement was apparently not ready and so the order simply said that he would issue his statement at a later date. Three weeks later, we are still waiting for that separate statement.

Following the September open meeting, in Another Baffling FERC Meeting – But There Was Progress, we noted that Commissioners Danly and Clements had been issuing dissents that were really concurrences in certificate cases. In fact, neither of them had ever yet disagreed with a decision to issue a certificate, but had often filed dissents. Apparently, this same dispute was brewing at FERC at the same time, and broke into the open in Chairman Phillips’s separate statement in the rehearing orders, where he referenced a prior testy exchange that occurred in an electric matter order issued at the September open meeting. In that electric order, he and Commissioner Danly disagreed on what the word “dissent” actually means. Chairman Phillips went so far as to write a separate statement to “respond in part to Commissioner Danly’s statement concurring in the result of today’s order, in which he argues that any vote ‘concurring in the result’ of an order should be deemed a dissent.” Chairman Phillips noted that there was simply no Commission precedent supporting that conclusion and that it would be somewhat anomalous to “characterize a concurrence as its opposite (a dissent).”

It is unclear exactly how this dispute between these two commissioners is impacting FERC’s ability to act quickly, but the fact that Commissioner Danly views some of his concurrences as dissents could, in fact, be causing tie votes whenever he asserts such a view if Commissioner Clements is also dissenting. Commissioner Danly has not been renominated and he will not be able to serve after the new Congress reconvenes in January, so any issues being created by divergent views of the word “dissent” may cease by the end of this year.

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