Pipeline Expansions With Expedited Approval and Why Rover is Different

Understandably, the focus of the natural gas industry is usually on the major expansion projects that FERC reviews and approves under section 7(c) of the Natural Gas Act. However, most pipelines have been granted authority to complete substantial modifications to their systems without any or with very little oversight by FERC. This type of work is done under a blanket certificate issued pursuant to section 7(c) of the Natural Gas Act, which FERC has typically granted to most pipeline operators. A key exception to this usual grant of a blanket certificate occurred when FERC denied Rover Pipeline’s request for such a certificate.

Now that the 2018 FERC fiscal year has concluded, we look back at some of the more significant projects that have used this blanket authority. Those interested in understanding how a company is growing its revenues or how a pipeline can quickly expand to provide new service, or who must monitor competitive opportunities should keep this blanket authority in mind. As explained below, this authority can lead to some fairly large increases in capacity in an accelerated fashion.

What is Allowed Under a Blanket Certificate

FERC describes the blanket certificate program as an administratively efficient means to enable a company to undertake “a restricted array of routine activities without the need to obtain a case-specific certificate for each individual project.” However, over the years, this authority has expanded, and includes “mainline projects that include compression and loop line facilities … and certain LNG and synthetic gas facilities and certain storage facilities.” To qualify for construction under the blanket certificate, the project must be within this “array” of activities, but the project’s cost must also be under certain thresholds.

2018 Blanket Construction Cost Limits

Certain qualified activities are granted automatic approval, and only require the pipeline operator to provide notice to landowners, while those of greater complexity require prior notice, or the filing of an application with the FERC to provide the public with the ability to protest. Prior notice projects inject uncertainty for developers, primarily because there is a 60-day period during which any protest that cannot be resolved amicably will result in the project being moved from the streamlined process to the more conventional Section 7(c) proceeding.

Examples of Significant Expansions Accomplished in Fiscal Year 2018

Each of these projects were approved within 70 days after the filing of their prior notice application with FERC. The cost per dth for the additional capacity compares favorably to traditional Section 7(c) projects, which according to our data, averages $775 per dth of additional capacity, with a median cost of $485/dth.

Rover Projects

Because of its lack of a blanket certificate, every improvement Rover makes to its system must be submitted under section 7(c) of the Natural Gas Act. As shown below, Rover submitted three such projects during fiscal year 2018. On average, it took FERC only 122 days to approve these projects. This may seem like record time, but if Rover had a blanket certificate, it could have built all of them without even notifying FERC. Rover’s only requirement would have been to report the construction at the end of the year in which the projects were put into service. So, in essence, each of these projects took a minimum of four months longer to permit than it would have if Rover had been given a blanket certificate

Insights Coming Soon