Development or Disruption? FERC Begins Review of Project Approval Process

Is the energy infrastructure industry's most dependable permitting process about to be disrupted? FERC's notice of inquiry (NOI) regarding its Pipeline Certificate Policy Statement, which may rival its March 15 tax allowance and MLP policy changes that roiled markets, may also impact pipelines and LNG developers, as well as the upstream and downstream value chain. Stakes are high and time is of the essence. Responding within the tight 60-day comment period will require rapid research, in-depth analysis and strategic responses informed by data to ensure that the voice of the industry is clearly understood and articulated as FERC balances competing stakeholder interests. In this report we offer some suggestions for how to highlight the real-world impact of concerns to more effectively inform the Commission's decision making.

Despite the Commission's cautionary note that it has not come to any conclusions about whether it will make changes to the Certificate Policy Statement, given the breadth of questions being asked and the current highly contentious stakeholder environment, the industry is (rightly) concerned about the outcome, and the time that it will take to achieve certainty. As a result, we fully expect that, if the 1999 Certificate Policy Statement NOI is a guide, the Commission will receive many hundreds, or even thousands of comments (already, industry stakeholders, such as ConEd, and environmental participants, such as the Natural Resource Defense Council, are involved) and may even convene a conference to consider technical issues, all of which could take over a year to resolve.

On What Topics Does FERC Want Comments?

The NOI notes the substantial changes in the marketplace that have occurred since 1999, driven primarily by the exponential growth of gas production in the Marcellus/Utica formations. FERC seeks input on four key topics which capture the lifecycle of interstate pipeline, LNG, and storage field development: (1) project need; (2) eminent domain; (3) environmental impacts; and (4) process improvements. The NOI encourages commenters "to identify, with specificity, any perceived issues with the Commission's current analytical and procedural approaches and to provide detailed recommendations to address these issues." Below, we discuss these four topics and describe how data can help you provide the most impactful comments to FERC.

Project Need -

Currently, FERC practice is to not look "behind" or "beyond" precedent agreements when making a determination about the need for new projects. However, the NOI requests input on the following issues concerning the need determination:

FERC Topic	Questions Supported by LawIQ Data
How should it view precedent agreements that are executed by affiliates of the pipeline?	Does the data support the perception that this type of contract has become increasingly more common? If so, why is this an issue?
In determining the public need, should FERC look beyond the precedent agreements to determine the end use of the gas? Should FERC consider local distribution company demand as equally important as enhancing resilience or reliability, promoting competition, enhancing gas markets, fueling electric generators, and facilitating LNG exports?	What have the uses been for recent projects? For example, what's the breakdown of demand push versus supply pull projects? Are certain uses long term versus short term? Can one tell?
Should the term of the contracts matter?	What is the average term for contracts in recent projects? Should the credit rating of counterparties be examined? Does the term vary by type of shipper?
Should the Commission assess need differently if multiple pipeline applications to provide service in the same geographic area are pending before the Commission?	How often has this occurred? How do you define the same region -- by source of supply or end market, or both?

Long term project need determinations are evolving, so assessing supply driven projects versus demand driven ones and credit rating stability is vital:

Eminent Domain -

FERC's issuance of a certificate conveys the right of eminent domain to the pipeline. FERC's questions on this topic include:

FERC Topic	Questions Supported by LawIQ Data
Should the Commission consider adjusting its consideration of the potential exercise of eminent domain in reviewing project applications?	How many condemnation actions have been filed in recent projects? Is this number increasing? Can we tell why?
Should the Commission reconsider how it addresses applications where the applicant is unable to access portions of the right-of-way?	What percentages of project areas have been surveyed for environmental needs at the time FERC issues its environmental review?

Environ mental Impacts -

A key concern raised recently is how FERC should address greenhouse gas (GHG) emissions in particular, and climate change in general. A FERC question on this topic relates to calculating GHG emissions:

FERC Topic	Questions Supported by LawIQ Data
In conducting an analysis of a project, should the Commission consider calculating the potential GHG emissions from upstream and downstream activities?	Can you tell what potential GHG emissions may be based on the shippers subscribed to a project? What have the recent activities been?

Process Improvements -

FERC asserts it is always seeking to improve the transparency, timing, and predictability of the certification process. FERC wants the industry's input on the following questions:

FERC Topic	Questions Supported by LawIQ Data
Should certain aspects of the Commission's application review process (i.e., pre-filing, post-filing, and post-order-issuance) be shortened?	How long have these phases been taking in recent years? (See example Chart below) What is a reasonable period, given FERC's historic performance?
Should the Commission consider changes to the pre-filing process?	Has pre-filing lengthened or shortened the overall review period?
Are there classes of projects that should appropriately be subject to a shortened process?	What does past history about the type and size of projects show would be appropriate categories for consideration of such a shortened process?

Time periods for the various phases of a project can vary tremendously as seen in the following chart: