Just one month after issuing two policy statements expected to seriously impact the processing of applications for gas infrastructure projects, the Federal Energy Regulatory Commission (FERC) has made a midcourse correction in response to substantial concerns about applying the new policies to gas projects pending before the agency.
FERC's previously issued Updated Certificate Policy Statement and Interim Greenhouse Gas (GHG) Emissions Policy Statement revised the Commission's approach to the certification of new interstate natural gas projects under Section 7 of the Natural Gas Act (NGA) to give more weight to environmental impacts and provided a framework for assessing the climate change impacts of gas infrastructure projects under the National Environmental Policy Act (NEPA) and the NGA. FERC initially stated that the new policies would apply to all pending and future project applications.
In a decision at its March 2022 meeting supported by all Commissioners (but with one partial dissent), FERC walked back the previously announced changes and instead designated the two policy statements as "drafts." Additionally, FERC opened both policy statement dockets to further comment.
Importantly, the two draft policy statements will not apply to pending applications until the Commission issues final guidance in each docket. In the meantime, FERC is expected to revert back to its long-standing method for reviewing natural gas pipeline applications under its 1999 Policy Statement, which primarily focuses on economic considerations. However, as highlighted in Commissioner Danly's partial dissent to the decision issued at FERC's March 2022 meeting, the Commission has not yet explicitly stated how it will process certificate applications in the absence of the policy statements.
FERC's decision to roll back the pipeline policy statements follows sharp criticism from the natural gas industry and lawmakers. Our prior post noted the contentious hearing before the Senate Committee on Energy and Natural Resources on March 3, 2022, where Senator Joe Manchin (D-WV) and Republican committee members accused the Commission of prioritizing environmental concerns at the expense of energy security and affordability.
Since then, a large number of requests for rehearing and clarification were filed by industry trade associations and pipelines, which were almost uniformly critical of the policies, particularly the unaddressed questions about how the policies would be applied to pending project applications. Commissioner Danly's partial dissent to the decision issued at FERC's March 2022 meeting also highlighted the uncertainties as to how the policies would actually be implemented.
A significant additional factor has emerged in the month since FERC first issued the policy statements: The need for new gas infrastructure to support liquefied natural gas exports to Europe is now important to U.S. foreign policy in response to the ongoing war in Ukraine. Nevertheless, at the Commission's March 2022 meeting, Chairman Glick continued to stress that revised policy statements are necessary to provide a more legally durable framework for the Commission's review of proposed natural gas projects.
Comments on the two draft policy statements are due by April 25, 2022, with reply comments due on May 25, 2022.