Originally published for customers October 4, 2024.
As the regulatory landscape continues to evolve, developers and stakeholders in the natural gas industry will need to closely monitor state climate laws and their potential impact on FERC's market need analysis. This shifting terrain underscores the importance of comprehensive, state-specific analysis in project planning and development, considering not only the presence of climate initiatives but also their scope, enforceability, and potential impact on natural gas demand.
What’s the issue?
The D.C. Circuit's vacatur of FERC's certificate for the Regional Energy Access Project (REAE) highlights the growing importance of state climate laws in FERC's market need analysis for natural gas projects. The court's emphasis on New Jersey's "mandatory and enforceable" energy efficiency resource standards (EERS) raises questions about how similar laws in other states might impact natural gas project approvals.
Why does it matter?
The Commission’s approach to adjusting its public interest analysis to account for state-specific climate laws and energy efficiency standards could impact the traditional reliance primarily on precedent agreements to demonstrate market need. Developers, originators, and other stakeholders need to understand how state climate initiatives and varied state emission profiles interact, at least until the litigation resolves and potentially to a greater extent even after the litigation.
What’s our view?
The Commission may still be able to rely on its traditional approach because there is no guarantee that even mandatory and enforceable climate initiatives like New Jersey’s will succeed in reducing natural gas demand, given how challenging modern demand forecasting is. If FERC decides to conduct a more detailed analysis, it will likely vary significantly based on each state's unique emissions profile and climate initiative structure.
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