Reducing Backlogs and Approving Certificates … FERC Is Back

Yesterday’s FERC Open Meeting resulted in the unanimous issuance of certificates to three natural gas expansion projects, marking the first votes for certificate issuances from Commissioners See and Chang. The unanimous approvals of these projects by a full Commission signals a welcome departure from the uncertainty that arose during Chairman Glick’s tenure.

There are still many unknown obstacles for planned interstate gas projects, but it appears that obtaining a Certificate of Public Convenience and Necessity in a timely manner is not only possible, but likely. The average time to receive a certificate has fallen to just under a year for projects that have submitted applications since the beginning of 2023.

Three Certificates, Five Ayes

In New Faces and a Return to FERC’s Old Ways, we highlighted several pending projects awaiting approval from FERC. The Commission made significant strides in reducing this backlog by unanimously approving three of the six projects pending certificate issuance. The Bison Xpress and Holbrook Expansion projects both received a certificate after receiving final environmental reviews in April. The Westbound Compression Expansion project was also approved, less than four months after being issued a final environmental review. These three projects are relatively small in scope, representing less than a combined 2 million dekatherms (dth) per day of additional capacity created primarily through compression expansion.

The Commission’s authorization of Bison XPress was part of three interdependent projects approved in tandem yesterday, all aimed at addressing limited takeaway capacity in the Bakken Shale region. The projects work in concert to create a new pathway for the transportation of 300,000 dth/day of natural gas from North Dakota to Colorado by leveraging existing infrastructure and additional compression.

In the first project Northern Border Pipeline Company (Northern Border) sought authorization to upgrade compressor stations in North Dakota as part of its Bison XPress Project and subsequently abandon by lease the additional 300,000 dth/day of capacity created by the project to Wyoming Interstate Company (WIC). Complementing this, the Bison Pipeline LLC (Bison) sought authorization to abandon by lease 300,000 dth/day of unsubscribed capacity to WIC. The final piece is the Bakken xPress Project, jointly proposed by WIC and Fort Union Gas Gathering (FUGG) to lease 300,000 dth/day of capacity from the Northern Border, Bison, and FUGG pipeline systems. FUGG requested FERC’s authorization to permit WIC to transport natural gas on FUGG’s gathering system, which falls outside the Commission’s jurisdiction.

This project's approval improves pipeline access to demand centers that have historically relied on Bakken shale production mostly by creating a new transportation route across three different systems. This effort reflects the broader nationwide trend where developers are pivoting towards optimizing and expanding existing infrastructure with smaller-scale projects.

Not All Projects Are Opposed Equally

In REAE Rehearing: A Turning Point in FERC's Market Need Analysis?, we discussed the possibility that FERC may need to consider altering its longstanding approach of relying primarily on precedent agreements to show market need after the DC Circuit found flaws in its market need analysis for Transco’s Regional Energy Access (REA) project. For context, about three-quarters of the project’s capacity was subscribed to by six different local distribution companies and the other quarter was contracted by two gas marketers. This project was heavily opposed and many of the official protests cited lack of market need. It is no secret that not all projects are opposed equally, but examining the three projects approved yesterday reveals that FERC’s market need analysis must vary in response to the unique characteristics of each project, region, shipper type, and subscription level as seen in the chart below.

All of the capacity created by the Bison XPress project is contracted by ONEOK Rockies Midstream and Hess Trading Corporation via the capacity leased to WIC. There were no protests related to market need and in the final order FERC stated that "precedent agreements, particularly when they are for 100% of the project’s capacity, are significant evidence of the need for the proposed project.”

It is interesting to note that the capacity created in the Westbound Compression Expansion project was also 100% subscribed, though solely by Ruby Pipeline. There were no protests filed against this project at all, but FERC did issue a data request asking about the intended end use of the gas. MountainWest Overthrust responded that while the company did not have specific information regarding the exact end-use of the gas, its general understanding was that the gas is expected to serve new power generation and industrial end-users in Wyoming, and existing or new utility demand on the West Coast. FERC determined that this explanation in combination with the project capacity being fully subscribed was adequate evidence demonstrating need for the project.

The Holbook Expansion project, on the other hand, had a single precedent agreement with SI LNG Optimization Services for just over half of the capacity that the project will create on the existing Cameron Interstate pipeline system. This is the only pipeline serving the Cameron LNG Terminal and therefore the only option for the shipper to deliver gas to the terminal for export. No comments were filed questioning the need for the project, so FERC felt that adequate need was demonstrated for the project.

All three of these projects are relatively small, received little opposition, and are located in states that have not historically been hostile to natural gas. We will be following closely to see if FERC enacts any broad policies related to market need considerations, or if it will continue making determinations on a case-by-case basis.

Next Up…

As seen in the chart below, there are seven projects in various stages of review before FERC, three of which have been issued a completed environmental review and may receive a certificate as early as next month.

We are closely watching the status of the Ridgeline Expansion project, which is the largest pipeline project application that has been submitted since the beginning of 2021 and the only project to undergo a full environmental impact statement since Chairman Phillips took over as acting chairman at the beginning of 2023.

If you would like an analysis of recent Commission timing trends, please contact us.