The Times They Are A-Changin' - The Bottom Percentage of Pipeline Permitting
The time it takes the FERC to approve a pipeline project has been a longstanding point of contention, and it has recently become a hot-button topic on Capitol Hill. The time frame for the approval of a project is critical to the project applicant, financial backers, and the engineering and construction ecosystem. But the President and Republican Party have also deemed it critical to to their efforts to build the infrastructure needed to harness the country's natural gas resources. Legislators on both sides of the aisle are applying data to support their positions that only 10% of projects take longer than 12 months for FERC to issue a certificate, which poses the question: Is the FERC permitting process the issue? Are the percentages symptomatic of the problem?
Beginning in 2013, then Representative Mike Pompeo (R-Kan.), who is currently the Director of the CIA, introduced a bill during each Congress that would require FERC to make a decision on all pipeline applications within one year after the application is first filed. During a Congressional hearing in 2013, FERC Commissioner Moeller testified that approximately 10% of all FERC pipeline applications were taking longer than one year to reach a decision. This led Representative Gene Green, Democrat of Texas, to comment that the Pompeo bill was a "solution in search of a problem." Our data for applications that were completed by the end of 2012 support Commissioner Moeller's testimony. Times have changed.
Distribution of Project Duration
The most recent legislation that addresses time frames for FERC proceedings, Senator Murkowski's bill, which we discussed in Can You Teach An Old Dog New Tricks? A(nother) Major Energy Infrastructure Bill, no longer contains the one-year time limit for a FERC decision. Why? Perhaps because the Congress believes that at least 90% of FERC projects are decided within one year. But that is only true if you consider all of the pipeline cases for which FERC is responsible, which is a much broader sample set than many expect. In addition to greenfield and expansion pipeline projects, and liquefied natural gas terminals, this 90% also includes numerous far less notable projects, such as those involving storage fields, abandonments, and facilities work conducted under blanket certificates.
A blanket certificate is routinely issued in conjunction with a Certificate of Public Convenience and Necessity to allow pipeline operators to perform modifications to their systems with limited oversight. As such, FERC's denial of Rover's blanket certificate was unprecedented, and it became a point of contention yesterday when the Office of Enforcement issued a notice of alleged violations against Rover that could threaten its ability to successfully obtain the blanket. Activities conducted under a blanket certificate are divided into two categories, automatic and prior notice. For prior notice blanket certificates, estimated project costs must fall below $33.2M, while project costs for automatic approval blanket certificates must be less than $11.8M. This is done in an effort to allow low cost and, therefore, low risk, activities to be conducted more easily and to prevent unnecessary regulatory processes.
By including blanket, storage and abandonment projects in the sample set, the data as well as the resulting statistics are arguably skewed, and fails to allow decision makers to focus on the more substantive projects that the regulatory improvement legislation is seeking to address. Interestingly, if you look at the same type of projects that were referenced by Commissioner Moeller in 2013, there has been a substantial reduction in the percentage completed in under one year. Our statistics show that, currently, only about 50% of such projects make it through the FERC process in less than one year. One can only hope that the proposed legislation offers a solution for something that appears to have become a problem or that, even without legislation, FERC will be able to return to a more traditional norm of completing reviews within one year.
Duration from Application to Certificate Issuance
