Special Report - MOU Unlikely to Speed Up FERC Projects

In a recent LawIQ customer note, The Infrastructure Plan - Third Time's a Charm, we explained that President Trump has issued a number of directives in an effort to streamline the permitting process for infrastructure projects. Last week, more details were released in a Memorandum of Understanding (MOU) signed by the heads of twelve various federal departments, agencies and councils. The stated purpose of the MOU is to establish a cooperative relationship for the timely processing of environmental reviews under the One Federal Decision policy established in a prior Executive Order (EO). FERC signed the MOU and, like the others, it issued a public announcement trumpeting the MOU as a benefit to the industry. An analysis of the MOU and our historical data shows that the MOU will likely have limited impact on reducing FERC pipeline and LNG project permitting timeframes.

What you need to know about the MOU

For each major infrastructure project, agencies will work together to develop a single permitting timetable for the necessary environmental review and authorization decisions; prepare a single environmental impact statement (EIS); sign a single record of decision (ROD); and issue all necessary authorization decisions within 90 days of the issuance of the ROD, subject to limited exceptions. Under the MOU, the agencies have agreed to "undertake to meet the goal set forth in the EO of reducing the time to two years" for each agency to complete all environmental reviews and authorization decisions for major infrastructure projects. The timeframe will be measured from the date the lead agency publishes the notice of intent to prepare an EIS, and will end on the date the lead agency issues its ROD. Consequently, the two-year timeframe is not mandatory, but is merely a "goal for agencies."

To analyze how the MOU may impact LNG and pipeline projects, one must understand key terms, milestones and certain FERC-specific provisions found in the MOU and related documents on which it relies. First and foremost, the MOU applies only to "major infrastructure projects," which are projects that FERC determines will require the preparation of an EIS.

In our data for the last ten years of LNG and pipeline projects, projects that required the issuance of an EIS account for less than 16% of all projects. The goal established for the review of such major projects requires FERC, as the lead agency, to commit to complete its review within two years -- but understanding when that time period starts and ends is important. For FERC, the starting point is the later of the date it issues its notice of intent to prepare an EIS or the date the formal application is filed with FERC. The period ends on the date FERC issues its certificate order.

Impact on FERC Project Timelines

With regard to the effect of the MOU on the approval of future projects, only nine of the 43 relevant historic projects took longer than two years to move through the time period specified in the MOU, as seen in the following graphic. Therefore, the new goal is likely to impact a limited number of FERC projects.

What the MOU Doesn't Do

As we noted most recently in Gazing into the Crystal Ball - PennEast's future, opposition groups' involvement, which is one of the drivers of a lengthier permitting process, appears to have shifted focus away from permits issued by federal agencies, to those required by federal law but delegated to the states. As a result, the issuance of a water quality certificate under Section 401 of the Clean Water Act has become hotly contested. In response, apparently, the MOU directs the lead agency, FERC, to invite any relevant state, local or tribal agency with federal authorization decision responsibilities to be a cooperating agency. FERC is then expected to secure from such agencies a commitment to comply with FERC's permitting timetable, but there is no requirement that they actually comply.

A recognition of the limited impact the MOU would have on these delegated permits is evidenced by a letter to President Trump from the Natural Gas Council (NGC), sent the day after the signing of the MOU. In its letter, the NGC, a consortium of five trade groups across the natural gas industry, encouraged the president to restore predictability and balance to the permitting of natural gas infrastructure. In particular, the NGC asked the president to provide clear instructions to lead agencies which recognizes their authority and obligation to define and implement the Section 401 process. Such instructions would include ensuring that a state is not manipulating the process through enforcement of the statutory time period, and confirming that state actions are limited to applicable water quality standards. In situations where states do not follow this process, the NGC stated that it was the lead agency's duty and obligation to find that the requirement for a water quality certificate is waived, and that all other federal agencies should be required to accept the lead agency's determination of a valid waiver.