On March 19, 2020, FERC authorized Jordan Cove Energy Project L.P.’s (“Jordan Cove”) Natural Gas Act (“NGA”) section 3 proposal to site, construct, and operate a liquefied natural gas (“LNG”) export terminal in Coos County, Oregon (“Terminal”) and Pacific Connector Gas Pipeline, LP’s (“Pacific Connector”) application under section 7(c) of the NGA and Parts 157 and 284 of FERC’s regulations that would allow it to construct and operate an interstate natural gas pipeline system connected to the Terminal (“Pacific Connector Pipeline”). The decision prompted a dissent from Commissioner Richard Glick, who argued that the majority’s decision did not adequately consider the impacts that the Terminal and Pacific Connector Pipeline will have on climate change and other environmental concerns.
On March 11, 2016, FERC denied a previous application by Pacific Connector that would have authorized Pacific Connector to construct and operate the Pacific Connector Pipeline, stating that Pacific Connector had presented little or no evidence of need for the proposed pipeline that outweighed the potential adverse impacts of its construction (see March 15, 2016 edition of the WER). In the same order, FERC denied Jordan Cove’s application to construct the Terminal, holding that, without a pipeline providing it a source of gas, the Terminal would not provide sufficient benefits to counterbalance the impacts of its construction. FERC however did allow that, should a market need for the Pacific Connector Pipeline or Terminal arise in the future, Jordan Cove or Pacific Connector may submit new applications, which they each did on September 21, 2017.
In its application, Jordan Cove sought authorization to construct and operate the Terminal and associated facilities on the North Spit of Coos Bay in Oregon, with the capability of exporting up to 7.8 million metric tonnes per annum of LNG. The proposed Pacific Connector Pipeline will be made up of a 229-mile-long, 36-inch diameter pipeline and related facilities extending from Klamath County, Oregon to the Terminal, with a total estimated cost of approximately $3.184 billion. In its proposal, Pacific Connector requested (i) approval of its NGA section 7(c) proposal to construct and operate the Pacific Connector Pipeline; (ii) approval of its pro forma tariff allowing it to offer firm transportation service and interruptible transportation service; and (iii) blanket certificates of public convenience and necessity allowing it to provide transportation service under its proposed tariff and authorizing future facility construction, operation, and abandonment (“Blanket Certificates”).
After Commissioners Glick and Bernard McNamee initially declined to authorize the projects at FERC’s February 2020 open meeting, FERC granted Jordan Cove’s proposal in the March 19 order, finding that it was not inconsistent with the public interest. While some commenters raised issues of economic harm associated with Jordan Cove’s proposal, including the potential increase of domestic natural gas prices and that the export of LNG may harm U.S. trade, FERC found that it does not have the authority to approve the export of LNG and that it is not authorized to consider certain economic issues in its analysis of the public interest determination. FERC also found that issues regarding global market support were beyond its purview and that the arguments raised by commenters did not reach the level of an “affirmative showing of inconsistency with the public interest” that would overcome the section 3 standard presumption that proposals should be authorized.
With regard to the Pacific Connector Pipeline, FERC found that Pacific Connector would be able to financially support the project without relying on subsidization from existing customers. With respect to project need, FERC found that Pacific Connector’s precedent agreements with Jordan Cove—which is affiliated with Pacific Connector—for almost all of the capacity on the Pacific Connector Pipeline were sufficient to establish need for the pipeline. FERC further granted Pacific Connector’s requests for the Blanket Certificates and approved Pacific Connector’s pro forma tariff, with the caveat that Pacific Connector revise the tariff provisions relating to parking and lending services, index price point, and negotiated rates in a compliance filing. In addition, FERC concluded that if the Terminal and Pacific Connector Pipeline are constructed and operated in accordance with the Environmental Impact Statement and certain environmental conditions, the environmental impacts associated with the projects will be acceptable considering public benefits provided by the projects. In its environmental analysis, FERC measured the greenhouse gas emissions directly resulting from the construction and operation of the projects but did not conclude whether such emissions amounted to a “significant” impact. Furthermore, FERC did not estimate the greenhouse gas emissions resulting from potential upstream production or downstream combustion of natural gas.
In his dissent, Commissioner Glick argued that FERC’s order violated both the NGA and the National Environmental Policy Act (“NEPA”), and instead aimed to achieve an “outcome-oriented desire” to approve the projects. Commissioner Glick stated that FERC’s order was not “reasoned decisionmaking” because it failed to consider the significance of the projects’ climate change impacts, the potential upstream and downstream greenhouse gas emissions associated with the project, and the adverse impacts that the project will have on threatened and endangered species, historic properties, and housing near the projects.
Separately, Commissioner McNamee concurred with the order, agreeing that the Terminal is not inconsistent with the public interest and the Pacific Connector Pipeline is required by the public convenience and necessity, and that the order complies with NEPA. Commissioner McNamee explained that he was writing separately to explain that the text of the NGA demonstrates that FERC does not have authority under the NGA or NEPA to deny a pipeline certificate application based on upstream greenhouse gas impacts associated with production or establish measures to mitigate greenhouse gas emissions by LNG or pipeline facilities. Moreover, Commissioner McNamee argued that FERC has no objective basis to determine whether greenhouse gases emitted by LNG or pipeline facilities result in a significant impact.
A copy of FERC’s order, including Commissioner Glick’s dissent and Commissioner McNamee’s concurrence, can be found here.