Originally published for customers April 22, 2022
What’s the issue?
At its open meeting yesterday, FERC approved all of the remaining projects that had been held in limbo as it required FERC staff to prepare an Environmental Impact Statement (EIS) for projects that had already been determined through the issuance of an Environmental Assessment (EA) to have no significant environmental impacts.
Why does it matter?
Yesterday’s decisions, however, do nothing to resolve the backlog of pending cases that in the past would have only required an EA but which now require a full EIS.
What’s our view?
FERC staff has issued its draft EIS in two of those pending cases, and FERC determined that, aside from climate change impacts, neither of those projects would have a significant impact on the environment. Thus, FERC staff’s finding essentially confirms that the preparation of an EIS was a needless exercise, other than to comply with FERC’s draft GHG policy, which is, supposedly, not currently in force. With the continuing requirement for the preparation of an EIS and the retention of third-party contractors to assist FERC staff, we expect there to be not only a shortage of FERC staff but also third-party contractors, which will likely lead to even longer timelines than those currently projected by FERC in these projects.
At its open meeting yesterday, FERC approved all of the remaining projects that had been held in limbo as it required FERC staff to prepare an Environmental Impact Statement (EIS) for projects that had already been determined through the issuance of an Environmental Assessment (EA) to have no significant environmental impacts. Yesterday’s decisions, however, do not resolve the growing backlog of pending cases that in the past would have only required an EA but which now require a full EIS.
FERC staff has issued its draft EIS in two of those pending cases, and FERC determined that, aside from climate change impacts, neither of those projects would have a significant impact on the environment. Thus, FERC staff’s finding essentially confirms that the preparation of an EIS was a needless exercise, other than to comply with FERC’s draft GHG policy, which is, supposedly, not currently in force. With the continuing requirement for the preparation of an EIS and the retention of third-party contractors to assist FERC staff, we expect there to be not only a shortage of FERC staff but also third-party contractors, which will likely lead to even longer timelines than those currently projected by FERC in these projects.
The North Baja Xpress project has been pending since December 2019 and the company had requested approval by the end of 2020 so that it could place the project into service by November of this year. The project is designed to create 495,000 Dth/day of incremental firm delivery to the United States-Mexico border and ultimately provide feed gas for the Energia Costa Azul LNG export facility. The EA was issued in September 2020, but then in May 2021 FERC determined that it would prepare an EIS, which was finally issued in October 2021. The Final EIS estimated that the annual operational and downstream GHG emissions from the project would be almost ten million metric tons of CO2e per year. However, the FERC decision issued yesterday refused to even consider the downstream GHG impacts of the project, because the shipper on the project, Sempra LNG International, has Department of Energy (DOE) authorization to export these volumes of gas. Thus, the decision makes clear that the entire delay resulting from the preparation of an EIS was unnecessary.
The Alberta Xpress project has been pending since June 2020 and the company had requested approval by May 2021 so that it could place the project into service by November of this year. The project is designed to create 165,000 Dth/day of incremental capacity on ANR Pipeline’s Southeast Mainline. The EA was issued in December 2020, but then in July 2021 FERC determined that it would prepare an EIS, which was finally issued in October 2021.
The capacity was to be used by Tourmaline Oil Marketing to supply 140,000 Dth/d to Cheniere Energy for export outside the United States and to sell the remaining 10,000 Dth/d of gas to domestic markets along ANR’s system. Tennessee Valley Authority (TVA) would use its 15,000 Dth/d to generate electricity at existing generation facilities connected to the ANR system. The Final EIS estimated that the annual operational and downstream GHG emissions from the project would be over 3.3 million metric tons of CO2e per year. Interestingly, the decision considered the downstream GHG emissions from only the 15,000 Dth/day that would be used by TVA. Eliminating the 140,000 Dth/day for Cheniere may be consistent with the decision in North Baja to not consider export volumes, although there is no mention of a DOE approval held by the shipper Tourmaline, but there is no explanation for why the GHG emissions from the remaining 10,000 Dth/day held by Tourmaline was not considered. Perhaps most troubling, though, for other projects is the determination by Chairman Glick that the “project’s estimated total GHG emissions of over 410,000 metric tons per year are arguably significant.”
The East 300 Upgrade project has been pending since June 2020 and the company had requested approval by September 2021 so that it could place the project into service by November of this year. The project was designed to provide 115,000 Dth/day of firm transportation capacity on Tennessee Gas Pipeline’s 300 Line to provide service to Consolidated Edison Company of New York. The EA was issued in February 2021, but then in May 2021 FERC determined that it would prepare an EIS, which was finally issued in September 2021. The Final EIS estimated that the annual operational and downstream GHG emissions from the project would be almost 2.5 million metric tons of CO2e per year. The decision reduced this amount to 1.8 million metric tons by considering the utilization rate of the pipeline to be only 85% rather than assuming the typical 100% rate, but also refused to consider any offsetting reductions arising from the intended use of the gas to enable conversion of buildings from higher emitting sources of fuel. Again most troubling for future projects is the chairman’s declaration in his concurrence that the project would result in downstream emissions of over 1.7 million metric tons per year and would “balloon” to 2.2 million metric tons per year without that assumption. Therefore, he would have found the “project’s GHG emissions to be significant.”
As has been the recent pattern, these decisions were the subject of individual concurring opinions written by all five commissioners, with Chairman Glick and Commissioners Clements and Danley writing their own opinions, and Commissioners Christie and Phillips jointly issuing a statement. As we discussed in Surprise MVP Decision May Indicate Formation of a Pragmatic Core at FERC, this appears to support our view that Commissioners Christie and Phillips are forming a pragmatic core. It also calls into serious question, however, why these projects took so long to approve if all four commissioners that were present before Commissioner Phillips took office agreed on the outcome.
In FERC Reverses Course, But Some Celebrate Prematurely, we discussed how FERC had reversed course on the policies it had issued at its February meeting, but how that reversal came too late for a number of projects that are being subjected to an EIS, when an EA would have probably been sufficient.
As seen above, there are a number of non-LNG projects for which FERC is undertaking to prepare an EIS, and that process will greatly delay the review of those projects, when compared to historical norms. FERC has issued the draft EIS for two of those projects, the Henderson County Expansion project and the Regional Energy Access Expansion project. In both of those drafts, FERC staff essentially determined that the entire EIS process was not needed for any environmental impacts not related to climate change. For both projects, FERC staff determined that “approval of the proposed Project, with the mitigation measures recommended in the EIS, would result in some adverse environmental impacts.” However, for the Henderson County project, staff determined that, “with the exception of potential impacts on climate change, we conclude that impacts would be reduced to less than significant levels.” Similarly for the Regional Energy Access project, staff concluded that, “with the exception of climate change impacts, those impacts would not be significant.”
Thus the only possible significant impact is one on the climate, and for purposes of making that assessment for the Regional Energy Access Expansion project, FERC staff simply applied the Commission’s Interim GHG Policy, before it was revoked, and found that the “annual operation and downstream emissions would exceed the Commission’s presumptive significance threshold based on 100 percent utilization.” Given the extremely low threshold in that policy, this determination could have been made on the day each of the projects was filed and needed no detailed analysis. With respect to the Henderson County Expansion project, staff refused to even characterize the significance of the potential impacts because “the Commission is conducting a generic proceeding to determine whether and how the Commission will conduct significance determinations going forward.” Thus, there simply was no need for an EIS for either project.
The time it takes to prepare an EIS not only delays the process for the applicant but puts additional stress on FERC staff and even third-party contractors that applicants are required to hire to assist staff. Comparing the projected environmental review time periods for the current projects pending at FERC to the historic time periods for environmental reviews shows that the projects currently undergoing this more extensive review will be some of the longer ones for projects of similar size over the last decade.
Using cost as an indicator of the complexity of a project, it is possible to compare the environmental review timeline for projects as compared to the expected costs of those projects. As seen above, the projects currently pending are experiencing some of the lengthiest review periods for comparable projects over the last decade.
In most cases involving the preparation of an EIS, FERC requires the applicant to retain a third-party contractor to assist FERC in preparing the more extensive document. In almost every one of these projects, FERC has taken this step. While that can reduce the burden on staff, it increases the burden on the third-party contractor community, which due to the conflict rules at FERC must limit the professionals working on such matters. Already, in one case, the Virginia Electrification project, FERC decided to proceed without such assistance after it determined that the third-party contractor it had ordered the applicant to retain had “an organizational conflict of interest.” If FERC continues to insist on an EIS for every project and continues to retain a third-party contractor for most, if not all, of them, these conflicts are likely to increase as the pool of eligible contractor staff is quickly depleted.
The real test of whether this backlog is creating additional timing delays will be determined by whether FERC can meet its own timelines for issuing the environmental documents in all of these pending cases. FERC has indicated it will issue five more draft EIS by the end of August and we will be watching to see if there is any slippage in those dates.
If you would like more information on any of the recent decisions or the pending cases, please contact us.