At its February meeting, the Federal Energy Regulatory Commission (FERC) released a long-awaited Updated Policy Statement on Certification of New Interstate Natural Gas Facilities, which provides guidance as to how the FERC will consider applications for projects seeking certificates of public convenience and necessity (CPCN) under Section 7 of the Natural Gas Act.
The new Updated Policy Statement is the first revision of FERC's CPCN policy since 1999, and it comprehensively revises the FERC's approach. The new Updated Policy Statement adds consideration of a number of new factors to the CPCN process, and it substantially revises FERC's approach to considering the need for a new pipeline.
Most notably, this marks the first time FERC has formally incorporated environmental justice considerations into one of its policies, making environmental justice a matter to be considered systematically in FERC CPCN proceedings. Together with FERC's new Interim Greenhouse Gas Emissions Policy Statement, also adopted at its February meeting, FERC has fundamentally reshaped the legal landscape for approval of natural gas pipelines.
Key Takeaways
Impacts on Environmental Justice Communities. For the first time, FERC will, as a matter of policy, undertake robust consideration of impacts to environmental justice communities. FERC will encourage project developers to "evaluate and incorporate, as appropriate, any subsequently issued guidance by other authoritative sources when considering how to identify environmental justice communities affected by a proposed project." In addition, FERC will require close consultation and collaboration between the project developer, the communities in question, and FERC to tailor mitigation options in line with the needs of environmental justice communities.
Project Need. The policy statement broadens the commission's consideration of factors bearing on the need for a project. The commission's consideration of need will include precedent agreements between the project sponsor and unaffiliated entities, including circumstances surrounding the precedent agreements, as well as other evidence of need, such as demand projections underlying the capacity subscribed, estimated capacity utilization rates, potential cost savings to customers, regional assessments, and statements from state regulatory commissions or local distribution companies. The commission will also consider information about the intended end use of gas.
Impacts on Existing Pipelines and Their Customers. The commission will consider a proposed project's impacts on existing pipelines, including whether the captive customers of existing pipelines will end up paying for unsubscribed capacity on existing pipelines that result from overbuilding of new lines.
Environmental Impacts. The commission will consider environmental impacts and the extent to which those impacts can be mitigated. In particular, the commission will consider pipeline greenhouse-gas emissions in accordance with the interim policy also adopted on 17 February.