FERC Solicits Feedback on Modernizing Natural Gas Certificate Policy

by White & Case LLP

White & Case LLP

On April 19, 2018, the Federal Energy Regulatory Commission ("FERC") initiated a proceeding to evaluate its policies—in place for nearly two decades—governing the review and certification of new interstate natural gas transportation facilities, including pipelines, storage, and liquefaction. FERC' current approach has been in place since the issuance of its 1999 Policy Statement ("Policy Statement") setting forth the factors it uses to determine whether a proposed project is required by the public convenience and necessity pursuant to the Natural Gas Act ("NGA"). In the nineteen years since, however, the US natural gas market has undergone dramatic transformation as a result of the explosive growth in production from shale formations and fracking advances. At the same time, interests opposed to prolific pipeline development—including affected landowners, environmental advocacy organizations, and state agencies promoting renewable energy and energy efficiency initiatives—have increased the pressure on FERC over the years regarding its approach to determining market need for pipeline development and analyzing adverse impacts under the National Environmental Policy Act of 1969 ("NEPA").

The issuance of the Notice of Inquiry ("NOI") on April 19 starts the process to modernize FERC’s certificate framework. Starting the overhaul process with an NOI keeps FERC’s options open regarding whether to issue an updated policy statement or open a formal rulemaking process to revise FERC’s regulations. As evidenced by the questions the NOI poses to the industry, FERC is considering some significant changes that will inevitably cause some stakeholders concern. Comments are due June 25, 2018.

Under the NGA, FERC has exclusive jurisdiction over the interstate transportation and sale of natural gas. Under Section 7 of the NGA, any person seeking to operate or construct an interstate gas pipeline must obtain a certificate of public convenience and necessity from FERC. To grant a certificate, FERC must assess whether the proposed project is in the public interest, which requires balancing the benefits of the proposed project against potential adverse consequences. FERC’s current Policy Statement enumerates the factors the Commission considers in evaluating whether a proposed project satisfies the public interest standard. Notably, Statement does not purport to address all factors FERC will consider in reviewing a certificate application. Instead, the Commission uses a "sliding scale approach" to holistically account for issues instead of a one-size-fits-all methodology. As such, if a proposed project will have substantial adverse impacts, it must have proportionate public benefits to be approved.

The NOI will evaluate and consider potential changes to the factors FERC considers in this balancing analysis. Comments have been requested in several broad areas: how FERC determines need for a project; landowner interests; FERC’s analysis of the environmental impacts of a project; and streamlining the certificate process.

Need Determination

Since 1999, the natural gas markets in the US have changed dramatically. The Policy Statement was issued at a time when the US markets for natural gas were just beginning the shift toward interstate competition and market-driven pricing. Developers wanted prompt Commission action to approve new projects, whereas local distribution companies ("LDCs") raised subsidization concerns over pipeline buildout. The Policy Statement furnished guidance relating to price dynamics now commonplace in the natural gas market. Now, discovery and production of domestic natural gas, bolstered by the economic viability of horizontal drilling and hydraulic fracturing in shale formations, has increased to the extent that the US is now a net exporter of gas. Natural gas demand for electric generation and export as a liquefied commodity soared in the last ten years.

Under the Policy Statement and subsequent precedent, FERC has principally relied on precedent agreements for long-term firm service as key indicia of demand for a greenfield project. FERC has applied equal weight to precedent agreements with third parties and with affiliates of the pipeline developer. This approach of accepting affiliate precedent agreements has facilitated investment in energy infrastructure by enhancing regulatory certainty that the pipeline will be built, which is often a predicate to investment in associated new gas-fired generating facilities or LNG export facilities. In several recent certificate decisions, however, a minority of FERC commissioners have questioned the reliance on affiliated precedent agreements to demonstrate demand.

FERC's insistence that signed precedent agreements be in place to receive a certificate can be a stumbling block for development, too. For example, obtaining signed precedent agreements can be challenging where multiple parties are involved in a series of connected projects (such as pipeline build-out to support an LNG export terminal), and each party is unwilling to take the risk of a firm commitment to the projects before a pipeline certificate is received. This chicken-and-egg problem could be alleviated if FERC relaxed its focus on precedent agreements and considered a broader scope of evidence for demand. In addition, many market participants have changed the way they conceptualize and contract for pipeline capacity. Historically, LDCs and other large end users were the predominant customers of interstate pipeline capacity. Now, natural gas producers are increasingly interested in building out more capacity, which can be achieved by developing pooling points on a pipeline system. This shift prioritizes available capacity to be distributed downstream (by other parties) instead of the traditional destination of a specific end-use customer or clearly defined market. While this trend shows the market adapting to economic interests (of producers, developers, and ratepayers), it also lacks the distinct customer contracted to receive firm capacity that has been the primary means by which FERC has assessed market need for a project. Moving from micro-level (contracted service) to macro-level arrangements (pooling capacity for sale by other entities) illustrates the changing environment of the US natural gas markets under FERC jurisdiction.

The NOI proffers a number of questions aimed at the evaluation of project need, emphasizing a more cohesive strategy for broadening its analytical scope. The NOI asks commenters to explain what types of alternative evidence might be necessary in lieu of the information typically conveyed in a precedent agreement. FERC may also receive comments on various topics, including whether to: use different classifications of public benefit; distinguish between affiliate and non-affiliate precedent agreements; require additional or alternative evidence of need; and change its analysis if multiple pipeline applications are pending in the same geographic area.

If FERC implements new criteria to look beyond precedent agreements, natural gas producers, exporters and pipeline developers could reap benefits from an expanded array of possible bases to demonstrate project need, even where a precedent agreement is not yet in place. On the other hand, walking away from the "bright line" of reliance on affiliated and unaffiliated precedent agreements to demonstrate need may undermine regulatory certainty and thus slow investment.Landowner Interests.

Landowner Interests

While FERC's regulations include significant public participation measures, including landowner notification of potential proximate impacts, some community stakeholders find the process inadequate. The NOI explores how to better accommodate the interests of local parties, particularly in the environmental portion of the review. Although incorporated into this component of a certificate proceeding, landowners' rights issues—most frequently right-of-way ("ROW") negotiations—are disparate than those under the purview of NEPA. Applicants can only use eminent domain after the certificate for the project has been issued. FERC considers the likelihood of an applicant invoking eminent domain into its appraisal of a project by weighing the impact on landowners relative to the expected benefits. Striking a balance between fruitful ROW negotiations with landowners and outstanding parcels that must be integrated by invoking eminent domain is an imprecise art.

The NOI asks commenters if its current approach to eminent domain should be adjusted, particularly if the overarching priority is to enhance landowner engagement. One question raises the prospect of encouraging alternative routes in order to minimize eminent domain. However, the NOI also seeks comments on how pursuing alternative routes may affect the costs of a project, and to what extent an applicant should be required to take such an action.

Consideration of Environmental Impacts

An important component of the review process is the appraisal of the potential environmental effects of a proposed project required under NEPA. NEPA allows FERC to consider site-specific environmental factors in addition to cumulative impacts (in terms of both time and geography). Recently, many stakeholders adverse to pipeline development have focused on the amount of greenhouse gas emissions released by natural gas projects. Intervenors in FERC certificate proceedings—such as environmental advocacy groups and federally recognized tribes—have asked FERC to pursue a distinct analysis of climate change impacts. However, as there is no universal standard upon which to measure project-specific impacts, FERC has resisted adopting a significance threshold to determine if a project would exceed reasonable emissions levels. Moving beyond its obligations under NEPA, FERC has provided additional information on production-related greenhouse gas emissions for certain projects. The causal relationship between incremental projects and global climate change impacts remains tenuous.

Intervenors have often asserted that the cumulative impacts of proposed projects have not been adequately measured or reviewed in FERC proceedings to date. The NOI aims to gather information on larger scale approaches, such as regional sizing and boundaries for cumulative impact analyses. Further, if upstream and/or downstream emissions information is made available, FERC is considering how to integrate such criteria into decision-making. Certain stakeholders believe that a Social Cost of Carbon tool is required in the public interest determination for natural gas projects. To this point, FERC has resisted implementing any such model—and there is no established industry standard. The NOI takes up the question of whether to implement a Social Cost of Carbon tool also.

Application Process

Finally, like any large agency, FERC recognizes existing inefficiencies in its application review process. While it may never be possible to optimize the entire timeline, project proponents have brought forward concerns regarding the long lead time on the FERC process and regulatory uncertainty caused by FERC’s limited ability to require cooperating state and federal agencies to toe the line on timely approval of necessary permits. If the project is mired in a protracted review, the overall costs can increase exponentially and therefore negatively affect all parties involved (including eventual customers). To that end, Executive Order 13807, recently issued by President Donald Trump, instructed federal agencies to complete their respective review processes within two years.

If FERC hastens its timetable for review, a shortened application process could yield benefits to applicants. This would be especially true if the applicant had completed the pre-filing process at FERC. Pre-filing can preemptively root out any potential issues prior to filing the full application; notably, the applicant can engage with relevant FERC staff in devising ways to lessen or mitigate environmental impacts. Still, some stakeholders find that pre-filing leads to biased (favorable) outcomes — FERC maintains that applications are more likely be approved following pre-filing because potential obstacles were resolved prior to the application. On the other hand, there may be cause to lengthen certain parts of the process. Extending the deadline for intervening parties to file comments has been raised by affected stakeholders and may have support among some commissioners at FERC.

The NOI is a wide ranging collection of requests for comment that signal FERC is considering changes to nearly every aspect of its Policy Statement. Whether those changes are beneficial for pipeline development will depend on the nature of comments received and how FERC expects to balance encouraging continued investment in energy infrastructure against concerns of overbuild, landowner rights and environmental impacts. At this stage of FERC’s review, it is unclear how significant any changes FERC actually decides to make will be to the US natural gas industry.

Click here to download PDF.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.