February 2021, Vol. 248, No. 2


Pipelines Sail into Political Winds in Washington in 2021

By Stephen Barlas, Contributing Editor, Washington, D.C.

With the ascension of President Joe Biden and environmentally friendly Democratic agency heads taking over U.S. regulatory and independent agencies, interstate gas pipelines face a host of newly emboldened, top-level appointees – many of them gas pipeline skeptics – who will make their political weight felt across federal permitting and safety requirements. 

In that regard, the biggest impact is likely to be at the Federal Energy Regulatory Commission (FERC), which is apt to give greater consideration to prospective emissions of greenhouse gases when considering applications for construction of new gas transmission pipelines.  

Biden will appoint one of the two current Democratic FERC commissioners as chairman. For pipelines, neither is a particularly appetizing choice. Richard Glick has repeatedly opposed approval of new pipelines because of their impact on greenhouse gas emissions and for other reasons. 

Allison Clements, a Democrat confirmed by the Senate in November, was previously in charge of the Sustainable FERC Project at the Natural Resources Defense Fund (NRDC). Clements’ successor at the NRDC FERC Project is Gillian Giannetti, who wrote a blog in November 2019 headlined “Reform Is Long Overdue for FERC’s Gas Pipeline Reviews.” 

FERC will continue to have a 3-2 Republican-to-Democrat advantage until July 2021 when Biden will have a chance to appoint a Democrat to a Republican seat, allowing Glick, who is likely to be appointed the chairman soon after Biden ascends, to take FERC pipeline approval policy in a potentially radical new direction.  

But the winds of change will probably blow before the FERC majority shifts to 3-2 Democratic. Gillian Giannetti thinks Glick or Clements will immediately begin to develop a climate test that FERC can use when considering applications for new pipeline construction. 

In the past, FERC has been unsure of the extent to which greenhouse gas emissions can be considered, in part because federal court case rulings had left a lot to be interpreted clearly.  

But Giannetti believes the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) make a clear case for FERC considering “direct” GHG emissions, those created by the construction of a project and emissions from operation of the pipeline.  

“Those are the lowest hanging fruits,” she said. Even though she admits those direct emissions are a small part – though not de minimus – of GHG emissions from a project, calculating those would be a good first step, she said.  

Giannetti thinks many in the pipeline industry would agree with factoring direct emissions into the FERC’s consideration of pipeline applications. “I would be shocked if Joan Dreskin disagreed with me,” she said, referring to the senior vice president, secretary and general counsel of the Interstate Natural Gas Association of America (INGAA).  

But Giannetti and other environmentalists believe that ultimately FERC needs to come up with an assessment tool that measures the lion’s share of GHG emissions created by new pipelines, those from upstream and downstream operations. 

Dreskin said FERC already considers direct emissions.  

“Pipeline project developers provide FERC with information regarding the direct GHG emissions from their proposed projects, which include emissions from pipeline construction and operation,” Dreskin responded. “FERC has historically analyzed and reported these emissions. Current NEPA regulations, however, no longer subdivide effects in this manner. We anticipate FERC will continue to consider what were previously referred to as ‘direct effects’ in its analysis.” 

The question is, however, how far does current law allow FERC to go to block new pipeline projects? 

“Were FERC to find that a project is not in the public interest because of GHG emissions, this in my view would be a seismic shift for the agency, and it would have difficulty surviving judicial review,” offered Emily Mallen, who closely follows FERC activities as a partner in Washington with the law firm Sidley Austin LLP. “That said, FERC could deny a pipeline project under the NGA if it found lack of public need, and Commissioner Glick’s dissents have also centered on whether a particular project is really needed.” 

Mallen believes FERC’s consideration of public necessity will become more onerous and affiliate agreements likely will be subject to greater scrutiny going forward. 

“That said, I can foresee no scenario in which FERC will stop allowing affiliate agreements to serve as a basis for project need,” she added. “But the project sponsors may need to put more data into the record to bolster that needs assessment.” 

Mallen points out one other presumably anti-pipeline factor that may rear its head under a Democratic-controlled FERC: environmental justice (EJ), which has the potential to affect a proposed project on communities of color.  

“When it comes to EJ concerns raised in pipeline and LNG certificate matters, FERC has applied its own methodology to the review that is based on the EPA’s Environmental Justice Mapping and Screening (EJSCREEN) tool,” Mallen explained. “If modifications are made to the EJSCREEN tool to strengthen it, this is certain to impact future FERC analyses. Moreover, we’ve seen dissents by Commissioner Glick on FERC’s approach to EJ review that suggests the agency’s approach could shift under a Democratic-led Commission.” 

Almost as certain as tougher reviews for pipelines at FERC is the likelihood that the Environmental Protection Agency (EPA) will withdraw the Trump final rule issued in September 2020, called Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review and referred to as the “Methane Repeal Rule.”  

It did two favorable things for interstate pipelines: 1) canceled the 2012 Obama rule that make transmission pipelines subject to Clean Air rules on volatile organic chemical emissions and 2) canceled a 2016 Obama rule that made transmission pipelines and all other sectors of the oil industry subject to methane restrictions on air emissions. 

Environmental groups such as NRDC, Environmental Defense Fund and Sierra Club are challenging that Trump final rule in federal court, said David Doniger, senior strategic director, climate and clean energy program at the NRDC who oversees the case. 

“In short, we are very confident the court will reject EPA’s methane rollbacks if the case is seen through to decision. The incoming Biden administration is near certain,” he said. “However, to reverse course administratively, reissue the rules and proceed to regulate existing equipment, the case may not actually proceed to decision.”  

What will also be affected by the incoming Biden administration are Trump administration proposed rules that were not finalized by the time Biden was inaugurated. If these were finalized prior to Biden taking office, the Senate with its Democratic majority could potentially cancel those rules via the Congressional Review Act, since they would have been finalized within 60 days of a new administration taking office.

This is being written prior to Biden’s inauguration, so it isn’t known whether two key proposed rules will be finalized or whether they won’t, leaving the Biden administration to make changes or simply cancel the rulemakings outright. 

The first one is the Army Corps of Engineers proposed revisions to nationwide permits that industries use when digging around wetlands with very little environmental damage. Gas pipelines use NWP12 to which the Corps proposed a number of changes, all of them opposed by the INGAA.  

Interestingly, environmental groups opposed the changes, too, though for different reasons. The Corps is likely to hold off issuing a final rule because of numerous controversies about many aspects of its proposal. However, the law says the Corps must reissue NWPs every five years, meaning in this case by 2022. Among changes environmental groups are seeking is one totally eliminating NWP12.  

Another “hanging chad” is the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) proposed rule giving pipelines a new alternative to replacing old pipe when the population density around that pipe increases from a Category 1 to a Category 3 location.  

Instead of having to replace old pipe, which the pipelines prefer not to do because of cost, the Trump PHMSA wants to allow pipelines to use integrity management procedures to assure the safety of that pipe in the now higher density area. This proposed rule has a somewhat lower visibility but still faces opposition from state safety officials represented by National Association of Pipeline Safety Representatives (NAPSR).  

That proposed rule will probably be carried over to the Biden administration. The fiscal 2021 appropriations bill passed by Congress at the end of December included the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020.  

That bill has minimal impact on gas transmission pipelines, but, more importantly, establishes new safety programs for both distribution pipelines and liquefied natural gas (LNG) facilities. So those two gas sectors will likely see the PHMSA begin to roll out new regulatory programs for them in 2021.

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