After the Quorum - What Gives?
In early August, the Federal Energy Regulatory Commission (FERC) regained its quorum following the swearing in of its two new commissioners, Neil Chatterjee and Robert Powelson. Since then, Kevin McIntyre and Richard Glick have testified before the Senate Energy and Natural Resources Committee on their nominations to join the FERC. However, neither nominee has yet to be confirmed. But the FERC does not necessarily need these commissioners in order to proceed with business -- or does it? In the past two months, what has the Commission ruled on? And what does the past two months pretell about future decisions?
Since regaining its quorum, the FERC has held one Commission Meeting, which was notably short. At the meeting, the commissioners included hydropower, electric, and natural gas ratemaking proceedings on the agenda, leaving liquids pipeline rate cases and natural gas pipeline project proceedings unaddressed. The Commission ruled upon cases largely administrative in nature, such as rehearing requests, waivers and extensions. For projects, at the monthly meeting, the Commission has ruled on a major project just once in recent memory -- in January, on TransCanada's Leach/Rayne Projects. So barring this recent example, ruling on the major projects at the meeting would be a break from historical precedent.
Projects Approved since FERC Quorum Restoration
Pipelines - Rate Cases & Projects
Earlier in the year, the FERC initiated both Section 4 and Section 5 rate cases under the Natural Gas Act. Section 4 cases are initiated by pipelines themselves to recover increases in their cost of service and, generally, result in an increase in rates, while Section 5 cases are initiated by the FERC based on an annual analysis of their return on equity and, generally, result in a decrease in rates. Historically, these proceedings are settled out of court, but must be approved by way of an order. This year, three companies have been engaged in Section 4 cases: Chesapeake Utilities subsidiary Eastern Shore Natural Gas, TransCanada's Great Lakes Gas Transmission and Dominion Cove Point.
Eastern Shore is still in settlement talks, but Dominion's Cove Point and Great Lakes are ripe for commission approval this fall. The two Section 5 investigations began last January (Kinder Morgan's Natural Gas Pipeline Company of America and Wyoming Interstate Company) have settled with their shippers, have had their settlements certified as uncontested by the ALJ, but have yet to be approved by the new Commissioners. These two pipelines walked away with relatively small increases in their mainline rates.
This suggests that approving these settlements should be straightforward, uncontroversial wins for the commission. However, the commissioners only ruled on two administrative rate proceedings at the latest open Commission Meeting. Usually settlements are approved about one-month after they are certified as uncontested by the ALJ. While the FERC delegated approving rate case settlements to staff during the non-quorum period, now that the quorum has been restored, the commissioners will have to rule on these cases.
Natural gas pipeline developers have been met with equal disappointment, especially those whose projects had completed environmental review prior to the lack of quorum. FERC Staff only issued environmental impact statements (EISs) for two major projects during the lack of quorum, TransCanada's Mountaineer Xpress and EQT/NextEra's Mountain Valley Pipeline Projects, while other projects waited for the issuance of Certificates, a duty not delegated to FERC staff. As a result, these projects may have already incurred up to six months of delay during their Certificate review. What does this mean for in-service dates?
Many of the major projects awaiting approval estimated that they would be in-service by November 2017, while others, such as Atlantic Sunrise, have already blown by their estimated in-service dates. With so much on the line, why have the FERC commissioners not yet acted? With the Trump administration's support of not only the natural gas industry but also America's pipeline manufacturers, it seems like little should stand in the way of approving these projects. But perhaps that's just it. With such a transparent agenda, the administration is likely to be the subject of protest and its actions subject to appeal. Perhaps the weight of two additional nominees is just what these major projects need.
Another potential hold up, which we've discussed in customer notes, involves the recent D.C. Circuit Sabal Trail ruling on greenhouse gas emissions. But now that the Office of Energy Projects has appeared to have settled on language it views as responsive to the D.C. Circuit, OEP should be able to replicate that language for backlogged projects whose orders have been delayed by the lack of a quorum. As such, one proxy for determining the order in which the projects may come out of the backlog is based on the time since the project received its final environmental document (EIS or EA). The below visualization highlights the time from issuance of a final EIS or EA to certificate approval, with the spheres representing projects awaiting a certificate.
