On February 18, 2022, FERC issued two new, significant policies governing how FERC will review proposals for new natural gas pipeline projects (see February 18, 2022, Troutman Pepper Insight). Headlining these policies is FERC’s new interim greenhouse gas (“GHG”) policy statement (“Interim GHG Policy Statement”), pursuant to which FERC will presume any gas project with 100,000 metric tons per year of carbon dioxide equivalents (“CO2e”) emissions to have a significant impact on climate change, and thus any such project will trigger the preparation of an Environmental Impact Statement (“EIS”). Notwithstanding the interim nature of FERC’s new Interim GHG Policy Statement – where FERC is accepting comments by April 4, 2022 – FERC clarified that it will apply both policies to all pending and new project applications, effective immediately. Both commissioners James Danly and Mark Christie issued lengthy dissents to both policy statements.
FERC’s new policies address, add, or update several other items related to its review of natural gas pipeline projects that FERC previously announced it was revisiting over the last several years. Those changes include:
- Project Need: FERC’s Updated Pipeline Certificate Policy Statement (“Updated Policy Statement”) reaffirms its commitment to consider all relevant factors bearing on the need for a project. Of note, FERC announced that precedent agreements between non-affiliates will remain important evidence of project need but will not be the only factor FERC considers. Further, FERC will consider information about the intended end use of gas associated with the proposed project to help explain why it is needed.
- Landowner Issues/Eminent Domain: With respect to landowners, the Updated Policy Statement provides that FERC will consider a wider range of impacts to landowners beyond just the economic impacts associated with siting the right-of-way, though it did not provide a set list of examples of the additional types of impacts it would consider. Rather, FERC stated that its evaluation will be based upon “robust early engagement” with landowners that will continue throughout the proceeding. FERC also explained that it will consider the steps a pipeline applicant has taken to acquire lands through good-faith negotiations and its efforts to minimize the use of eminent domain after receipt of a certificate.
- GHGs/Climate Change: In the Interim GHG Policy Statement, FERC establishes a rebuttable presumption that proposed projects with 100,000 metric tons of CO2e emissions will be deemed to have a significant impact on climate change, thereby triggering the preparation of an EIS. In quantifying GHG emissions, FERC said it will consider “reasonably foreseeable” GHG emissions (which can be based on project utilization rates and other factors) that also have a “reasonably close causal relationship” to the proposed project. FERC confirmed that these include direct GHG emissions resulting from the construction and operation of the project, and that FERC will consider whether upstream or downstream emissions are reasonably foreseeable on a case-by-case basis for Natural Gas Act (“NGA”) section 7 projects; FERC will not consider upstream or downstream emissions associated with NGA section 3 export facility projects. FERC also announced that while it will consider proposals to mitigate all or part of a project’s climate change impacts, FERC may condition its approval of the project based on the project sponsor further mitigating those impacts.
- Environmental Justice: The Updated Policy Statement provides that FERC will now formally include a significant consideration of potential project-related impacts to environmental justice communities. As part of that consideration, FERC stated that a project proponent will be required, as part of the early outreach discussed above, to identify any potential environmental justice communities that may be affected by a proposed project and would require close ongoing consultation between the project proponent, the environmental justice communities, and FERC staff. Additionally, FERC stated that it will not use a “one-size-fits-all” approach with respect to environmental justice communities but will tailor its evaluation—including any potential mitigation measures—to meet the specific needs of different communities. However, FERC did not provide specific guidance on how environmental justice communities will be identified, what the ongoing consultation with the project proponent and FERC staff must entail, or what mitigation measures might be required.
- Applicability of the Policy Statements: FERC reiterated that the Updated Policy Statement does not establish binding rules but is intended to explain how FERC will consider applications to build new interstate natural gas facilities. The Updated Policy Statement will not only apply to pending and new projects, but stakeholders will have the opportunity to comment on any additional or supplemental information filed in such proceedings.
Commissioners Danly and Christie separately dissented from the policy statements. Among other issues, Commissioner Danly criticized the policies as contradicting the goals of the NGA, which Commissioner Danly stated presumes the production and use of natural gas to be in the public interest. Commissioner Danly argued that FERC does not need to look behind executed precedent agreements for proposed projects in every instance and that FERC should not weigh end-use in its determination of need. Further, Commissioner Danly concluded that “the majority’s presumption that project emissions exceeding 100,000 tpy of CO2e will have a significant effect on the human environment is illogical and inconsistent with [Council on Environmental Quality] and Commission regulations.”
Meanwhile, Commissioner Christie argued that the policies effectively rewrite the NGA and National Environmental Policy Act—which is a task for Congress, not FERC—and that the new policies would increase costs for project sponsors, rather than provide “legal durability.” Furthermore, Commissioner Christie stated, “This Commission was not given certification authority in order to advance environmental goals; it was given certification authority to ensure the development of natural gas resources and their availability – this includes pipeline infrastructure – at just and reasonable rates. To construe the Commission’s analysis of the public convenience and necessity as a license to prohibit the development of needed natural gas resources using the public interest language in the NGA would be to negate the very legislative purpose of the statute.”
Comments on the Interim GHG Policy Statement are due April 4, 2022.