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New FERC Policy Politicizes Pipeline Approvals

The Federal Energy Regulatory Commission (FERC) has adopted new rules that require the Commission to consider a project's greenhouse gas impacts during construction, when in operations, and (much worse) when the natural gas it delivers is used or burned. That cost-benefit calculus will now be added to the Commission's traditional criteria of determining the market's need for the project, when it decides whether it is in the public interest and should be granted the certificate necessary for construction.

The new policy effectively gives FERC's majority a blank check to deny a project's certificate on subjective, ideological or political grounds even if there is a clear market need for the natural gas it would deliver.

FERC is composed of five Commissioners, each serving five-year terms, three of whom are appointed by the party occupying the White House, with the President appointing the Chairman. Today, three of the five are Democrats, including its Chairman Richard Glick. Glick is in the final year of his term and can be (and probably will be in our view) reappointed for an additional five-year term.

While serving as a minority Commissioner during the Trump Administration, Glick became famous for voting against nearly every pipeline project that came before FERC, with his dissents always based on his objection that the project's greenhouse gas impacts were not considered. So while the new policy is of great concern to the pipeline construction industry, it comes as no surprise.

Now Glick has two more Commissioners who can be counted on to join him in a majority vote against project approvals. Making matters worse, application of the policy will necessarily be completely subjective, since for most projects the destination and use of its natural gas over its lifetime is completely unknowable. It could be used in petrochemical manufacturing, fertilizer, LNG, power generation, hydrogen production, or industrial heat  all of which have different GHG emission profiles. Nor can it be known if its CO2 emissions will be captured and sequestered. This totally subjective guesswork component renders the policy ripe for application as a political tool.

Senator Joe Manchin (D)  the Chairman of the Senate Committee on Energy and Natural Resources, said it best: "Today's reckless decision by FERCs Democratic Commissioners puts the security of our nation at risk. The Commission went too far by prioritizing a political agenda over their main mission - ensuring our nation's energy reliability and security. The only thing they accomplished today was constructing additional road blocks that further delay building out the energy infrastructure our country desperately needs. Energy independence is our greatest geopolitical and economic tool and we cannot lose sight of that as instability rises around the globe."

So while EEIA cannot help change this new FERC policy for the moment, what we can and will do is parse every pipeline certificate decision FERC makes under this policy, and "throw the flag" - calling out for all to hear, in no uncertain terms, when it is misused for political ends.

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