On November 22, 2013, FERC issued a rulemaking order (Order No. 790) clarifying and modifying the Commission's regulations applicable to interstate natural gas pipelines' minor construction and maintenance activities.
Interstate natural gas pipelines are subject to FERC regulation under the Natural Gas Act. Section 7 of the Natural Gas Act provides that no one shall construct interstate natural gas pipeline facilities unless FERC has first granted a certificate of public convenience and necessity authorizing such construction. Section 2.55 of FERC's regulations (18 C.F.R. § 2.55) has historically allowed a pipeline to engage in certain minor construction activities on its previously-certificated facilities without the need to seek further Commission certificate authorization. Section 2.55(a) addresses construction of "auxiliary installations" and Section 2.55(b) addresses construction of "replacement" facilities.
Section 2.55(b) "replacements" are limited to replacing facilities that are or will soon become physically deteriorated or obsolete, that will not result in a reduction or abandonment of service, and that will have substantially equivalent design capacity. "Auxiliary installations" under Section 2.55(a) are defined as:
Installations (excluding gas compressors) which are merely auxiliary or appurtenant to an authorized or proposed transmission pipeline system and which are installations only for the purpose of obtaining more efficient or more economical operation of the authorized or proposed transmission facilities, such as: Valves; drips; pig launchers/receivers; yard and station piping; cathodic protection equipment; gas cleaning, cooling and dehydration equipment; residual refining equipment; water pumping, treatment and cooling equipment; electrical and communication equipment; and buildings.
Section 2.55(a) grants interstate natural gas pipelines significant flexibility to engage in minor construction projects at existing compressor stations, measurement sites and along the pipeline right-of-way.
In Order No. 790, FERC made it clear that "auxiliary installations" are limited to construction activities within previously authorized rights-of-way, facility sites and temporary construction areas. FERC's rationale for this limitation is that environmental impacts in areas outside those previously authorized have not been subjected to the Commission's environmental review. The Commission modified Section 2.55(b) in 1999 to require that replacement activities must be conducted within the previously certificated rights-of-way, project site or temporary construction areas used to construct the original facility. Order No. 790 extends the same locational provision to Section 2.55(a) auxiliary installations.
FERC asserts that Section 2.55(a) construction activities have always been restricted to previously authorized areas, noting that it did not envision minor construction extending beyond existing, previously authorized sites. The Commission states that it will grandfather construction performed in the past that may not have qualified for treatment as "auxiliary installations," given its clarification of Section 2.55(a); provided that the construction outside previously approved areas did not result in significant adverse environmental impacts. FERC also clarified its blanket certificate regulations to state that auxiliary installations that cannot be constructed within previously authorized project bounds may be constructed under a pipeline's blanket certificate, if they meet the blanket certificate definitions and cost parameters.
Even with the locational limits, Section 2.55(a) will continue to allow interstate natural gas pipelines to engage in a wide variety of minor construction activities at previously developed sites, such as compressor stations. The locational limits, however, may be more problematic for activities on the pipeline rights-of-way, such as cathodic protection or valve installations, which often require construction activities beyond the width of the right-of-way. The practical effect of the rulemaking is that some construction projects, previously performed under Section 2.55(a), will now need to be performed under a pipeline's blanket certificate or require a project-specific certificate application.
FERC also adopted a new landowner notification requirement applicable to Section 2.55 auxiliary installations and replacements and to Section 380.15 maintenance activities. Under the new requirement, a pipeline must provide written notice to landowners upon whose property the pipeline will conduct construction or maintenance activities that involve ground disturbance. The notification must include (i) a brief description of the activity and the effect the activity may have on the landowner's property; (ii) the name and phone number of a company representative who is knowledgeable about the project; and (iii) a description of the Commission's Dispute Resolution Division Helpline including the Helpline telephone number.
The notices must be provided at least five days before the pipeline begins the activity. In response to pipelines' comments, FERC added an exception that advance notice is not required for emergency activities. FERC also scaled back the notice requirement from its original proposal, which would have required 10 days advance notice and included notice to certain parties owning property adjacent to the property upon which construction or maintenance activities were planned. FERC noted its position that the new landowner notification requirement generally conforms to commonly employed pipeline practices.
The changes to FERC's rules under Order No. 790 will take effect on February 3, 2014.