LaFleur is Leaving FERC -- What Does That Mean for the Pipeline Project Queue?
After last week’s open meeting, Commissioner LaFleur announced her impending departure via Twitter. She indicated that she would be leaving FERC at the end of August and that the July open meeting will be her last. Today, we look at what her departure may mean for a number of projects that have had their environmental review completed but which are waiting for the Commission’s approval of their project. We believe Williams’s Transco’s Southeastern Trail Project may be able to be approved before her departure. But, due primarily to the Commission’s current disagreement on how to analyze downstream greenhouse gas (GHG) impacts, the remaining seven projects may get stuck in limbo, much like when FERC lost a quorum. We see at least two scenarios in which the fight over the GHG analysis could lead to the Commission being unable to establish a quorum until a fourth commissioner is appointed, which will likely not occur until the fall, at the earliest.
Projects Awaiting a FERC Decision
As shown in the chart below, there are eight projects that have completed environmental review, but have yet to receive a FERC certificate. Based on a comparison of these projects to ones with similar estimated costs, all but TC Energy’s Buckeye Xpress will be well beyond the mean post-environmental decision review time when Commissioner LaFleur leaves in August. If these eight projects are not approved by then, they are at risk of becoming outliers in our data set, as are Dominion Energy’s Sweden Valley and Kinder Morgan’s South Mainline Expansion, as depicted below.
Pipeline Project Queue
Why No Approval for These Projects?
FERC has only approved five pipeline projects in 2019 that are not tied to an LNG export terminal and one of those was a pipeline replacement project that created no incremental capacity. The last such project approved, Transco’s Northeast Supply Enhancement Project, was approved on May 3, 2019, fewer than 100 days after its environmental report was issued, consistent with the historical norm we identify in the chart above. However, that project will provide gas to a local distribution company, and both the applicant, Transco, and the end user, National Grid, provided FERC with detailed information on the downstream end use of the gas. This voluntary provision of information was noted and appreciated by Commissioner LaFleur because it allowed her to consider the downstream GHG emissions as part of her public interest determination.
Transco’s Southeastern Trail Project
Transcontinental volunteered similar information regarding its Southeastern Trail project. In a response to a data request submitted in July 2018, Transco stated that the 296,000 dth/day of gas was expected to be combusted by the five shippers whose contracts supported the project and all of whom were end use natural gas customers, principally municipalities or local distribution companies. The project is already past the median in the chart above and so we would expect that, like Northeast Supply Enhancement Project, it should be able to garner three votes before Commissioner LaFleur’s departure.
The Other Seven Projects
We are not optimistic about the remaining projects because they all seem to be caught in FERC’s current disagreement on how to analyze downstream GHG impacts. All of them have either undefined end uses for the gas transported or unique end uses that led FERC staff to ignore the downstream GHG impacts from the project in the environmental report that the staff prepared. This combination of issues may be causing Commissioner LaFleur’s refusal to vote in favor of the projects, which means the Commission may be stuck at a 2-2 vote.
Kinder Morgan Projects
The two Kinder Morgan projects, South Mainline Expansion and Sabine Pass Compression, are mainly supported by contracts for the export market. The Environmental Assessment (EA) for the South Mainline Expansion noted that most, if not all, of the 271,000 Dth per day of natural gas delivered by the project to Comision Federal de Electricidad would be used to fuel natural gas-fired power plants in Mexico. It further staked out Chairman Chatterjee’s position that there was no need to conduct a “downstream emissions calculation for the quantities of natural gas that would be transported by the project either having an indeterminate end use or intended for end users in Mexico,” because FERC’s policy is “that downstream GHG emissions, unless used for a known domestic end use, provides no additional information to inform the NEPA analysis or the determination of Public Convenience and Necessity.”
Similarly, in the Sabine Pass Compression project, the end user of the gas is the Sabine Pass Liquefaction facility, which is an export facility. In neither case did the applicant voluntarily provide information as Transco did in its cases, most likely in an effort to avoid being pulled into the fight between the commissioners over the very issue that may delay them from getting their certificates approved.
Tallgrass Projects
The Cheyenne Hub Enhancement and Cheyenne Connector Pipeline projects are supported by contracts with the same end users and in a July 2018 data response, the applicants both stated that the projects are fully subscribed by Anadarko Energy Services Company and DCP Midstream Marketing, LLC. The applicants indicated that they had “no direct knowledge regarding the ultimate end use of the natural gas” and did not provide any information similar to that provided by Transco. The EA for the projects restated the Commission’s new policy is to estimate downstream GHG emissions only if the end use is known, because otherwise such an estimate “provides no additional information to inform the NEPA analysis or [FERC’s] determination of Public Convenience and Necessity.”
Dominion Energy and New Jersey Resources
The Sweden Valley and Adelphia Gateway projects follow a very similar pattern. Both responded in July 2018 to data requests asking for an identification of the end use of the gas with an answer that stated the end use was essentially not knowable. However, in a supplement filed in August, Adelphia did provide a “worst-case” GHG emissions quantity by assuming that all of the “incremental natural gas transported by the Project would be combusted for use as a fuel source.” The EA for Adelphia did not include a downstream GHG calculation because “the end use of the natural gas is not identified by Adelphia,” whereas, the EA for Sweden Valley was simply silent on the topic.
TC Energy
The Buckeye Xpress project, which is the project with the most recently completed environmental review, followed a slightly different pattern. FERC issued no data request about the end use of the gas, and the applicant did not volunteer such information. As in Sweden Valley, the EA was simply silent on the entire issue of downstream GHG impacts. Whether not volunteering information not specifically requested by FERC Staff remains advisable for projects like Buckeye Xpress will probably turn on how quickly a new commissioner can be appointed to break the logjam, as we discuss below.
Will LaFleur’s Departure Break the Logjam
If we are correct in assessing that Commissioner LaFleur’s vote is causing a 2-2 split among the current four commissioners, many of these projects may be looking forward to her departure so that the vote becomes 2-1 in their favor. However, three commissioners must participate in a meeting or a vote for there to be a quorum and for the Commission to act.
We see at least two scenarios where there could be a lack of quorum on certain projects following Commissioner LaFluer’s departure. First, Commissioner Glick could recuse himself on all votes that he does not agree with to simply deny the majority a quorum. Second, Commissioner McNamee has already been recusing himself on a number of projects and his continued recusal following Commissioner LaFleur’s departure would likely mean most of these projects would only have a 1-1 vote and thus remain in limbo.
A review of the primary participants in Commission orders that Commissioner McNamee has not participated in shows that at least two of these projects, Dominion’s Sweden Valley and TC Energy’s Buckeye Xpress, appear to be at risk for a recusal by Commissioner McNamee.
McNamee Recusal History
As shown in the chart above, Commissioner McNamee has not participated in a number of cases involving Dominion Energy, TC Energy and Williams pipelines. However, he did participate in the approval of Williams’s Northeast Supply Enhancement Project, so he may be able to participate in the approval of the Southeastern Project. Also, if that project can be voted on before Commissioner LaFleur’s departure, as discussed above, his vote probably isn’t even needed. Once Commissioner LaFleur departs, his recusal on projects related to TC Energy and Dominion could mean that the projects sponsored by them could not move forward until a fourth commissioner is appointed. Given that the summer recess for Congress is quickly approaching and that the president has yet to formally nominate a candidate to replace Chairman McIntyre or Commissioner LaFleur, we do not see that occurring until the end of the year.
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Insights Coming Soon
- Focus on key shipper and protestor positions related to Emera Maine
- An update on GHG rulings