Strategery, Strategy and Statistics -- FERC Releases Its Four-Year Plan

Here in Washington, D.C., especially during midterm madness, you can find equal parts strategery, strategy and use of statistics to support candidates and viewpoints. Trade associations representing organizations such as natural gas pipelines (INGAA), utility companies and customers (AGA), and major producers and suppliers (NGSA) are critical advocates for legislative and regulatory policy positions for their respective members. At LawIQ, we are grateful to work with these groups and continually appreciate the opportunity to inform their strategy by leveraging our data, statistics and expertise.

During the past month, at an AGA committee meeting and an INGAA Board meeting, our CEO was honored to speak on the topic of leveraging data analytics to inform permitting policy. With the number of recent legislative and regulatory changes, including the FERC’s recent Strategic Plan, as a backdrop, we were asked to discuss one component of the permitting debate: what can be learned from data and statistics about the pipeline, excluding LNG terminal, certificate process at FERC. (We did not dive into data related to delegated permits and cooperating agency review or the impacts on capital costs.)

In short, pipeline permitting timelines have lengthened in select stages and for various reasons, including correlations tied to the volume and timing of comments and data requests, which is ultimately impacting producers, shippers, and pipelines. Below is a synopsis of takeaways from these recent presentations.
FERC’s Strategic Plan Last month, FERC released its strategic plan for the next four years. While this plan covers FERC’s broad mandate, permitting is a major focus area. For example, one objective, titled “Permitting Challenges,” notes that “[i]t is increasingly difficult for the Commission to complete its permitting process for needed energy infrastructure on a schedule that is timely and predictable.” Relatedly, FERC explained that it “will implement a combination of internal and external processes,” which include many that are ongoing, such as the Certificate Policy Statement, the Fixing America’s Surface Transportation Act, and the One Federal Decision initiative. In support of this objective, the performance measure involves the Commission seeking to “review proposals within an average of two years from complete application to decision."

To help inform the dialogue around this objective, we provided data for NGA Section 7(c) pipeline projects, excluding blanket projects, over the past ten years to determine the projects that this measure, if implemented retrospectively, would have impacted. As detailed below, only nine projects fall outside of the two-year objective, with two pipeline projects tied to LNG terminal development, and one caught up in the lack of a quorum. What does this mean? The data suggests that such a measure may not impact meaningful change.

Pinpointing Permitting Phase Changes

Our discussion with INGAA and AGA centered around trying to pinpoint the areas associated with the FERC certificate permitting process that may need to change. The data analysis addressed the overall changes to the permitting process -- e.g., the median duration from certificate application to certificate decision has changed from around 250 days in 2008 to around 450 days in 2016, but has been decreasing since. Nonetheless, this data poses the question: are specific phases changing more than others, such that stakeholders should focus on changes to those phases over others?

The answer to that question is yes. The following visualization illustrates that the median environmental review phase has doubled in the past four years. So, too, has the time from the completion of that phase to an order being issued on the certificate. Nonetheless, the median time for construction has remained constant and the time from certificate order to the first notice to proceed with construction has actually been reduced. One explanation for the latter may be the increased time that companies are provided after the environmental review phase to prepare their implementation plan.

Data Request Impact

The FERC OEP Staff devote a significant amount of time, attention and consideration to reviewing applicant filings and correspondence. Oftentimes, this leads the Staff to issue data requests, to which the applicant devotes a significant amount of time to prepare its response. Our team has closely examined FERC’s archive of data requests relating to timing, type, category, responsiveness and issuing office.

The following plot shows a correlation between the following two areas, and an increase in the time required to review a certificate: (1) early data requests (when normalized based on the percentage review time); and (2) the number of data requests, with six being, historically, a threshold. One plausible explanation for this result may be that data requests are, in a way, a proxy for the completeness of an application at any point in time.

Protests for Greenfield Projects

Similar to data requests, protests/comments on projects is a source of significant consternation for project outreach and execution teams, as well as the regulatory agencies, such as FERC, that review and consider the filings. Our team has studied comments relating to timing, type, and category, such as major opposition group, individual or local government.
As shown in the following visualization, not all projects have experienced the same opposition in each category. And, while individual protests are a significant number, when they are filtered out, the volume of other opposition activity is still significant. This visualization led to questions about: the percentage of comments filed within the allowed comment period; the type and form of comments raised; and whether the groups raised similar concerns during pre-filing.

Tying it Together

In the midterm elections, you can employ all the best strategy and statistics -- even some strategery -- but the proof will be whether you can get your candidate into a seat on Capitol Hill. Executing energy infrastructure projects is less binary and more temporal; that is, when do you get your gas to market compared to expectation?
The following chart, which rolls up takeaway projects in the Marcellus and Utica basins when compared to LawIQ’s modeling, illustrates the impact. In fact, the difference could be between 12 and greater than 18 months, depending upon whether our median and high percentage is used. As we have discussed with the INGAA Board, as well as many others, a number of factors, including late stage litigation and the use of delegated permits, are impacting these expectations in a big way.
It is unlikely that there will ever be a “smoking gun” answer, but data and statistical analysis can certainly help inform high stakes regulatory policy decisions by communicating an objective viewpoint.

Insights Coming Soon