FERC Enters the Polarized Vortex - Washington Policy and Court Update

The big news this week is that a new commissioner, Commissioner Bernard L. McNamee, assumed his office at FERC on Tuesday, just five days after he was confirmed. The U.S. Senate confirmed Commissioner McNamee by the slimmest of possible votes, 50-49, with every Democrat, including the recently appointed top Democrat on the Senate Energy Committee in the next Congress, Senator Joe Manchin of West Virginia, voting against him. 

Today, we examine the vortex of Washington, D.C. energy policy and courtroom battles, specifically: (1) what Commissioner McNamee taking office may mean for the pipeline and LNG projects pending before FERC; (2) a key appellate court case pending before the U.S. Court of Appeals for the D.C. Circuit, which may breathe life back into FERC’s review of the Certificate Policy Statement; and (3) the current status and likelihood of passage of legislation pending before Congress that could impact the natural gas industry.

Baby, It’s Cold In Here

Commissioners LaFleur, McIntyre, Glick, and Chatterjee were so non-controversial that Commissioner LaFleur was confirmed by a vote of 90-7 and the other three commissioners were confirmed in 2017 by a voice vote. With Commissioner McNamee having been approved by a single vote, it would appear that FERC is now officially part of the polarized environment in Washington.

Commissioner McNamee’s nomination was opposed from the start by a number of Democrats, almost all of whom were concerned about his role in preparing President Trump’s plan to provide subsidies for nuclear and coal-fired electric generation plants, the Department of Energy’s Notice of Proposed Rule (DOE NOPR). The DOE NOPR was unanimously rejected by FERC back in January, but there is concern that the president has not given up on providing subsidies to the coal and nuclear industry to the detriment of natural gas and renewables. 

Despite repeated questioning by Democrats during his confirmation hearing, Commissioner McNamee refused to assure Senate Democrats that he would recuse himself from participating in any matter regarding coal and nuclear subsidies that might come before FERC while he is on the Commission. On the same day the Senate confirmed him to his position, an independent policy organization based at Harvard Law School’s Environmental & Energy Law Program filed a brief in the two dockets related to energy resilience initiated following FERC’s rejection of the DOE NOPR. The organization asserted that Commissioner McNamee’s service as the lawyer for the DOE during the development and filing of the NOPR disqualifies him, asserting that, by signing the NOPR, he is a party to the proceedings. In addition, the organization asserted that by serving as DOE’s lawyer, he has prejudged the ultimate issue in the FERC proceedings. The organization also contends that his recusal should extend to future proceedings about the “same facts, issues, and parties,” and, in particular, any continuing efforts by FirstEnergy Corp. to receive payments for the fuel security provided by their coal-fired plants. 

Commissioner McNamee’s nomination was further imperiled when a video surfaced of him speaking at an energy industry event. In fact, Senator Manchin specifically referenced the video in a statement he issued that explained why he voted for Commissioner McNamee as a member of the Senate Energy Committee, but voted against him on the floor of the Senate. Senator Manchin stated that, after viewing the video “where Bernard McNamee outright denies the impact that humans are having on our climate, I can no longer support his nomination to be a FERC commissioner." The support of Senator Manchin for FERC will be key in the coming years, because earlier this week, the Senate leadership confirmed that Senator Manchin will be the Ranking Member of the Senate Committee on Energy and Natural Resources for the 116th Congress, when it convenes in January 2019.

As we discussed in Back to the Future – FERC Chairman Chatterjee and the Risks of a Four-Member Commission , the appointment of Commissioner McNamee, while officially restoring the Commission to its full complement of five commissioners, will not necessarily result in a fully operational Commission. This is because of Commissioner McIntyre’s health issues. Since October 17, the Commission has taken formal action 194 times, but Commissioner McIntyre has not voted on a single one of those decisions. This means - at least for pipeline projects such as the Risberg Line , which was approved late last week - the key vote following Commissioner Powelson’s departure continues to be Commissioner LaFleur’s. Even if one assumes there will be four voting members now that Commissioner McNamee has taken office, those four votes will likely be split 2-2 unless Commissioner LaFleur votes with the two Republicans in favor of a project as she did to approve the Risberg Line.

D.C. Circuit May Reinvigorate Review of FERC’s Certificate Policy

About one year ago, Chairman McIntyre announced a review of FERC’s Certificate Policy Statement. As we discussed in Powelson Leaves and LaFleur Blooms - FERC Policy and Projects Stalled? , we believed the absence of a Republican majority on the Commission meant that any action on the Certificate Policy Statement would be delayed. In fact, this has been the case. Presuming Commissioner McIntyre resumes an active role in the coming year, FERC could move forward on its review of the Certificate Policy Statement. 

Before that occurs, a case pending before the D.C. Circuit regarding Mountain Valley Pipeline (MVP) and scheduled for oral argument on January 28, 2019 could force FERC to move more quickly. The case is a typical challenge of FERC’s certificate orders that approved the MVP project. But, depending on how the court rules on four key issues in that case, the decision could limit FERC’s latitude to make changes to its Certificate Policy Statement in four key areas: (1) use of affiliate contracts as evidence of a project’s need; (2) assessment of the impacts from downstream greenhouse gases (GHG); (3) use of the Social Cost of Carbon; and (4) use of eminent domain before all permits are in hand. 

Not surprisingly, substantial briefing with wide-ranging viewpoints were presented in the MVP case by the environmental and landowner groups that filed the appeal, FERC, MVP, a consortium of national trade groups, and the Interstate Natural Gas Association of America. The court could rule that FERC’s order in MVP was clearly within its discretion. If it did so, the decision would have little impact on FERC’s flexibility as it considers revisions to its policy. However, there are a number of rulings that the D.C. Circuit could make that would substantially limit FERC’s choices when it considers making changes to its policy.

Congressional Action (An Oxymoron?) 

The 115th Congress is quickly running out of time to enact any new legislation. Any bill that is not enacted into law prior to the end of the session must be reintroduced in the 116th Congress that convenes on January 3, 2019. The change to a Democrat-controlled House means that, generally, any legislative initiative will need Democratic support in the House, as well as in the Senate, to be enacted into law during the next two-year Congressional session. There are a number of bills pending that could impact the energy industry. None of them are likely to pass according to the website Govtrack.us, a politically independent organization that tracks the status of federal legislation. Here is a breakdown of GovTrack’s predictions:

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