FERC attempts to add timeline certainty to order on gas pipeline construction starts

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By Maya Weber


The Federal Energy Regulatory Commission sought to increase certainty around the timing of construction of natural gas pipelines by adjusting its recent rule that barred developers from starting work while rehearing of commission orders was pending.

In an order issued May 4 with a 3-1 vote, FERC sought to set a clearer limit around the time period in which the start of construction would be on hold. It said the prohibition on construction starts would last until the earlier of the date when a rehearing request is no longer pending, or 90 days after a request for rehearing may be denied by operation of law.

Pipeline companies had worried the earlier version of the regulation could allow for lengthy or uncertain delays and had sought a limit of 30 days after a rehearing request is deemed denied.

But, in a nod to landowner interests, the also commission adopted a general policy of staying its certificate orders during the rehearing period when the challenges are filed by landowners, applying the same 90-day limit.

"With this order, FERC is working to fulfill its commitment to protect landowners, communities, and the environment while also ensuring that the construction of needed pipelines is not unduly delayed," FERC Chairman Richard Glick said in a statement. "Today's order strikes a compromise that both protect the interests of the parties affected by a new pipeline while also providing developers with the certainty needed to invest in energy infrastructure."

The order (RM20-15-001, Order No. 871-B) also narrows the bar on construction starts to cases in which rehearing reflects opposition to project construction, operation, or need, therefore preventing delays when pipeline companies or customers may seek refinements to FERC's orders, or rehearing involves rate or tariff issues. But FERC declined to limit the rule to instances where landowner concerns are raised or to exclude decisions on LNG facilities from the construction limits.

The order suggested 150 days would be the outer limit on the pause prior to construction.

DANLY DISSENT

Commissioner James Danly dissented, saying he would prefer to repeal the rule outright. A federal appeals court had already imposed discipline on the commission, lifting the pressing need that drove FERC's decision to delay notices to proceed with construction, he argued.

With this order, he said, FERC has "for the third time in as many months, dramatically increased the uncertainty faced by the natural gas industry by changing its policies so as to make it harder to rationally deploy capital, accurately assess risk, or predict commission action."

In his view, the new "presumptive stay policy" goes beyond the commission's statutory authority and is "bad policy."

"Requiring the passage of four months before a certificate can go into effect is significant, especially since the time required for processing applications has already dramatically increased," he said.

CHRISTIE'S APPROACH

Republican Commissioner Mark Christie, in a concurring statement, said the new order was needed to address "the present unsustainable situation."

"While it may not be perfect nor exactly how I alone would resolve the uncertainties and threats created by Order No. 871, it does represent an acceptable compromise, consistent with the applicable law," he said. In his view, a prior US Court of Appeals for the District of Columbia Circuit ruling on FERC's rehearing practices, combined with FERC's order last year, "created deep uncertainty," as well as the threat that an approved project could have its permission to start construction withheld for an unlimited period while rehearing was pending.

Christie said he understood the desire to repeal the order, but "put bluntly, it is not going to happen."

Commissioner Neil Chatterjee did not participate in the order.

INGAA VIEW

Despite FERC's attempt to address some pipeline industry concerns, the Interstate Natural Gas Association of America still worried about delays and uncertainty. INGAA Senior Vice President and General Counsel Joan Dreskin, in a statement, said the order "exacerbates core challenges" of the initial order by unlawfully imposing a presumptive stay that would "effectively add up to five months of additional delay at FERC for needed infrastructure," driving up costs of infrastructure and postponing jobs.

Gary Kruse of Arbo suggested 150 days could be the minimum added time because parties could find a landowner to seek rehearing and secure a stay. Because no condemnation could begin during a stay, some environmental studies and other, once parallel work, might have to wait until after that 150-day period, he said.

At issue is a rule FERC released June 9 with the intent of adding fairness to landowners. At the time, the DC Circuit was readying to rule on whether to strike FERC's practice of tolling its decisions on the merits of rehearing orders or extending indefinitely the time period in which it could act on rehearing.

Since then, the DC Circuit has invalidated FERC's prior practice, and the commission has announced a new approach to the timing of its rehearing orders.

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