Spire, Columbia Gas and Transco Face Market Need Challenges
Three interstate projects have experienced market need challenges filed by incumbent pipelines, major customers, and state regulators. All three challenges are based on the alleged shortcomings of the projects involved, Spire's Spire STL Pipeline Project, TransCanada's Buckeye Xpress Project and Williams' Southeastern Trail Project, to fully satisfy the requirements of FERC's current Certificate Policy Statement. The FERC is in the early stages of reviewing its policy statement, but the varying views of the commissioners have created uncertainty for all stakeholders.
This Insights reviews various issues raised by individual commissioners to anticipate how, and more importantly, if, these projects can successfully resolve these challenges. Those with an interest in these projects and in individual Commissioner's stances on issues raised in FERC's pending review of the Certificate Policy Statement should watch how these three projects are resolved.
Voting on Certificate Orders
As shown in the charts below, since December 7, 2017, when Chairman McIntyre was sworn in, FERC has issued 19 initial orders in certificate proceedings for gas pipelines. The data shows that more than 75% of those decisions were unanimous, but a review of the instances where a commissioner did not participate in a decision, or concurred or dissented is instructive in gaining insight to the commissioners' participation and likely votes in pending cases.
Voting Record Since December 7, 2017
Where the Commissioners Stand
Chairman McIntyre - Chairman McIntyre has joined the majority in every case in which he has participated. The interesting aspect of his voting record is understanding the cases in which he did not participate. While Chairman McIntyre has not explained his reasons to not participate, the first two instances occurred during his first month on the Commission, when he may have simply chosen to wait until he had fully integrated into the review process. It is not uncommon, in fact, for new commissioners to wait a period of time before they begin participating in cases. The other three cases, however, in which he did not participate are ones in which his former law firm, Jones Day, represented an intervenor. This likely explains his decision not to participate in those decisions.
Commissioner Glick - When Commissioner Glick has not joined the majority, he has consistently dissented, rather than concurred. Two themes are prevalent in these dissents. First, he believes FERC should be assessing the impacts of its decisions on climate change, including using the social cost of carbon tool to assess that impact. Second, he appears highly skeptical of FERC's reliance exclusively on precedent agreements when the majority of the project's capacity is subscribed by affiliates.
Commissioner LaFleur - While Commissioner LaFleur shares Commissioner Glick's concerns about the Commission's refusal to consider the social cost of carbon, she seems more willing to concur rather than dissent if she can conclude that a project "is in the public interest after carefully balancing the need for the project and its environmental impacts." Her concurrence, rather than dissent, in the PennEast project shows that she also seems to be less concerned about affiliate contracts if there are other indicators of the need for a project that she can assess.
Understanding the Commissioners Informs Strategy
As Commissioner LaFleur has noted, under the current Certificate Policy Statement, a pipeline needs to demonstrate that it is in the public interest when balanced against the environmental impacts. The current policy provides that the "more interests adversely affected or the more adverse impact a project would have on a particular interest, the greater the showing of public benefits from the project required to balance the adverse impact." This is essentially the portion of the policy statement that the opponents to Spire and Buckeye Xpress pipelines claim the projects fail to meet.
Spire STL Pipeline
For Spire, less than one month after it filed its application, Enable Mississippi River Transmission (Enable MRT) filed a request that FERC deny Spire's application. The pleadings have become so numerous that both parties usually start their pleadings with an acknowledgement that the back-and-forth is essentially out of control. Enable MRT is arguing that there is no need for the capacity and that Spire has not adequately demonstrated that the pipeline has "made efforts to eliminate or minimize any adverse effects the project might have on ... existing pipelines in the market and their captive customers." The dispute led FERC in February to issue data requests to Spire and Enable MRT that essentially addressed the benefits of the project and its impact on the pipelines in the region.
FERC issued the Environmental Assessment for the project last September, which means that the time it has taken FERC to issue the order following the issuance of the environmental report puts this case in the top ten longest of the over 300 projects in our analytics platform and if the order is not issued by the end of this month, the project will have moved into the top three. Given Commissioner Glick's skepticism about affiliate contracts, this project, which is supported entirely by a single affiliate agreement, is unlikely to receive his vote. Chairman McIntyre's participation in this decision could be in doubt, as his financial disclosure form filed as part of his confirmation process shows that he represented Enable Midstream Partners, the parent company of the opponent to the project.
This could mean that the project's future is dependent upon Commissioner LaFleur's judgment on whether the project is in the public interest. Her concurrence in PennEast makes it clear that she is willing to consider more than the precedent agreements to reach that decision, and this case could turn on how she viewed the responses to the data requests issued back in February.
Columbia's Buckeye Xpress
Buckeye Xpress filed its application just this March. But, like Spire, it drew opposition almost immediately from one of its existing customers, Range Resources. Range is arguing that the "BXP Project lacks market support" and will harm the existing customers of the pipeline. Columbia has filed a response to the objection and argues that Range has misconstrued "the primary purpose of the BXP Project, which is to modernize Columbia's R-System."
There does not appear to be any reason for Chairman McIntyre to recuse himself from this case, but Columbia is still taking this challenge seriously and is appropriately focusing its response on the public benefit from modernizing its system with a pipeline sized consistent with the rest of its system. The fact that this project is primarily a modernization project that incidentally creates unsubscribed capacity makes it hard to project how each commissioner is likely to view this project, but a persistent focus by Columbia on the public benefit will certainly help when it comes to persuading Commissioner LaFleur.
Transco's Southeastern Trail
Williams' Transco Pipeline filed its application for the Southeastern Trail project in April and drew a joint protest from the state public service commissions in North Carolina and New York. The primary objection focuses on the proper method for calculating the recourse rate for the project and whether the supposed improper method used may have influenced shippers' decisions to sign on for negotiated rates. However, there is also a challenge to the allocation of the costs of the project between the pipeline's current shippers and the shippers to be served by the expansion capacity. While Williams has yet to respond to the protest, we expect Williams to focus on how its proposal does not harm existing shippers and therefore is in the public interest.
Spire is clearly way ahead of the others and should be resolved first. If Commissioner LaFleur finds the project to be in the public interest, her decision may provide substantial insight into how she will view the public interest issues that are being debated within the review of the Certificate Policy Statement. The other two projects may resolve the issues through negotiation with the objectors, but the industry should continue to watch them as well to see what they may reveal about the other commissioners' views.
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