The pace of Federal Energy Regulatory Commission (FERC) permitting was the center of attention on Capitol Hill last week. All FERC Commissioners testified in an oversight hearing before the House Subcommittee on Energy and Power. FERC, an independent agency charged with regulating key aspects of the U.S. interstate electric transmission system, interstate natural gas pipeline network, liquefied natural gas (LNG) facilities, oil pipeline rates, and non-federal hydropower projects, was questioned on a variety of topics, including EPA’s Clean Power Plan, the pace of permitting natural gas and liquefied natural gas projects, reliability, and cybersecurity. Later in the week, the Republican-controlled House passed H.R. 8, the North American Energy Security and Infrastructure Act – a bill intended to increase the pace of permitting of U.S. energy infrastructure projects, including pending FERC natural gas pipeline and liquefied natural gas export projects.

Chairman Whitfield (R-KY) opened the oversight hearing by commenting that “America's energy policy is changing rapidly, changing not only from the dramatic increases in domestic energy supplies, but also from the unprecedented Federal regulatory burdens, and a number of other emerging threats. And FERC's responsibility places it right at the very center of these changes.”  Both the substance and the timeline of FERC's review process have, justifiably, come under review, he said.

FERC Commissioner Tony Clark spoke at length regarding FERC’s infrastructure permitting responsibilities. He defended FERC’s record of permitting prudent infrastructure development, noting that “in the last 10 years, 92% of all applications have been processed and completed within 12 months.” But the number of pending natural gas-related applications has doubled in just one year, he said, now representing 4,600 miles of pipeline. “I think it is going to be very difficult to maintain that high average when you have this volume of pipelines.” And environmental opposition has shifted away from traditional consideration of impacts to affected parties, to “Just Say No” approaches designed to block entire classes of infrastructure, he said. “The irony is that much of this infrastructure is being necessitated by the very regulations that are being promulgated in the name of reducing carbon intensity in the electric generating sector.” Commissioner Clark explained that Congress could help by “encourag[ing] other agencies that inform the FERC siting process …[] to the degree that they can do their work in a timely manner to inform our process, that would be helpful from a timing standpoint.” 

Among his primary goals, FERC Chairman Norman Bay noted the “need to focus on human capital at the Commission.” “Thirty percent of the Commission’s work force is eligible to retire within the next few years,” he said.  When asked about whether FERC has the necessary resources to process LNG export applications, Chairman Bay responded “I think the main thing about those projects is that that they are complex projects … [] we understand the importance of these projects and doing a thorough and timely review, and we are certainly very committed to doing that. But clearly, there is a high volume of work now than in the past, which is why we are trying to address that by adding more resources.”

With this as a backdrop, the House passed H.R. 8, a broad energy bill designed to facilitate, among many other things, expeditious processing of applications for interstate natural gas pipelines and liquefied natural gas facilities. The bill seeks to streamline federal permitting of FERC-regulated interstate natural gas pipeline and LNG projects by requiring the U.S. Department of Energy (DOE) to act on any related, pending application to export LNG thirty-days after conclusion of the environmental review process pursuant to the National Environmental Policy Act (NEPA). The DOE deadlines in the bill vary depending on whether the project requires an Environmental Impact Statement (EIS), Environmental Assessment (EA), or a categorical exclusion. Where an EIS is prepared by FERC, DOE must act within sixty days after FERC’s publication of the Final EIS (FEIS) for the project. If an EA is prepared, DOE must act within sixty days of publishing its own Finding of No Significant Impact (FONSI). For projects involving a categorical exclusion, DOE must act within thirty days of FERC’s determination. 
 
The bill also seeks to streamline the permitting process for cross-border energy projects to Canada and Mexico, while other provisions would lift a long-standing ban on exports of crude oil from the U.S.  H.R. 8 passed largely on a party-line vote, with some bipartisan support.  The text of the bill may be found here. H.R. 8 joins two other energy bills pending for votes by the full Senate, both of which contain provisions designed to expedite permitting for LNG export projects and repeal the ban on exporting U.S. crude oil.

Implications

Given the impact of the EPA’s Clean Power Plan, which has incentivized shifting away from coal to natural gas as a fuel for power generation, a bulk of upcoming renewals for hydropower licenses, and an existing full docket at FERC, FERC is expected to continue to experience resources issues. 

Passage of H.R. 8 into law is unlikely, as the White House has threatened a veto on grounds that the expedited approval process could harm the environment. H.R. 8 will be a baseline for the next Congress and the next Administration, with some provisions as candidates to be dropped into must pass legislation in the coming year. DOE deadline provisions are likely candidates for proposal in future legislation. Although H.R. 8 clarifies ambiguity in the existing statute regarding the ordering of FERC and DOE proceedings, it leaves open as a legal matter the question of whether DOE could require supplemental proceedings or analysis post-FERC FEIS issuance. Also, export projects involving an EA (such as future expansions of existing facilities) do not appear to benefit from the bill, as DOE could effectively avoid triggering its statutory deadline by withholding its own FONSI. 

In the current environment, FERC applicants, particularly those seeking LNG and natural gas project-related authorizations, may need to build in longer than usual lead-times into their project development and permitting schedules, which could further impact key dates in related contracts and financial documents.