Dancing in the Dark - PennEast and the FERC's Certificate Policy Statement

In a recent customer note following the Federal Energy Regulatory Commission's (FERC) approval of the PennEast pipeline, we discussed the Commissioners first indication that, in a forthcoming proceeding, they would examine changes to the Certificate Policy Statement. The PennEast project, managed by UGI Energy Services, LLC and owned in equal parts by Spectra Energy Partners, LP and four affiliated companies, offers a near textbook example of the issues that FERC plans to examine as part of that process. Today, through the lens of PennEast, we'll profile the key Certificate Policy issues that will likely be at play as the Commission considers  whether project developers should offer additional evidence so the Commission can better assess the public benefits and adverse consequences of a project.
There has been limited guidance as to what changes, if any, will actually be made to the Certificate Policy. But given the significance of the issue, those in the energy value chain are reading the tea leaves. On Tuesday, Chairman McIntyre, at a presentation before the National Association of Regulatory Utility Commissioners, explained that FERC has not yet determined the process it will follow to review and potentially revise the Certificate Policy. Nonetheless, he emphasized that the primary goal is to better determine which projects should be approved, and to do so more efficiently, while remaining cognizant of the need for stakeholder input. In response to a question, Chairman McIntyre also indicated that FERC will be looking at two key issues:

1. How best to determine the need for a project, and whether contracts for the capacity, even those held by affiliates, is sufficient to make the determination; and,
   
2. Whether there needs to be a more robust environmental analysis, particularly with regard to downstream greenhouse gas impacts.  

Another expected focus of that review will be landowner engagement, which Commissioner Chatterjee highlighted in his concurrence to the FERC's Order granting PennEast's Certificate, where he noted that the "rights of landowners are important" and that, with respect to condemnation proceedings, pipeline companies and landowners should work to "maximize engagement and minimize the impacts on landowners." He went on to suggest that the Commission should "have as much data as possible on which to base a determination."
Many of these issues are front and center with the PennEast project. In a request for rehearing and stay of the PennEast certificate order, the New Jersey Conservation Foundation and Stony Brook-Millstone Watershed Association picked up on both of Chairman McIntyre's key issues, and argued that affiliate contracts are not sufficient to demonstrate a need for the project and that environmental considerations were not properly weighed.
The issue identified by Commissioner Chatterjee is also impacting PennEast in that both the state of New Jersey, in its role as a landowner, and private landowners are resisting PennEast's efforts to acquire the needed rights of way. For example, in a letter dated February 2, New Jersey's Attorney General abruptly rejected PennEast's request for easements across a number of state lands. According to New Jersey's response, PennEast's initial easement proposal seems to have run afoul of  FERC's stated position on how landowners should be treated in condemnation proceedings. In this regard, it appears that PennEast may want to carefully consider its follow-up with New Jersey's Office of the Attorney General.  
More troubling for PennEast, New Jersey's response stated that the state "cannot accept PennEast's offers ... because the Certificate of Public Convenience and Necessity is still subject to legal challenge." This suggests that New Jersey may opt to delay its consideration of PennEast's requests for easements until legal challenges to the pipeline are exhausted. In addition, between February 6 and February 14, PennEast filed 130 condemnation actions in New Jersey federal court. The court has scheduled a hearing for April 5. This timeline will likely  substantially delay PennEast's completion of the environmental surveys needed to file a complete application with the New Jersey Department of Environmental Protection for a Section 404 permit and 401 water quality certificate.
Natural Gas Pipeline Projects in New Jersey

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