The Federal Energy Regulatory Commission (FERC) has for the first time ruled on whether the greenhouse gases (GHG) emitted during the construction and operation of a proposed natural gas pipeline has a significant impact on climate change in determining whether to authorize a project as consistent with public convenience and necessity under Section 7 of the Natural Gas Act.  In earlier orders, FERC concluded that it was unable to assess the significance of a project’s GHG emissions or those emissions’ contribution to climate change.  In a recent order approving Northern Natural Gas Company’s proposal to replace a pipeline segment, FERC stated that is no longer the case and then assesses the significance of the project’s GHG emissions and their contribution to climate change.

In a press release on the order, FERC Chairman Glick said “(a) proposed pipeline’s contribution to climate change is one of its most consequential environmental impacts and we must consider all evidence in the record—both qualitative and quantitative—to assess the significance of that impact.  I look forward to continuing to work with my colleagues as we refine our methods for doing so.”

The Northern Natural order is significant because it reflects a willingness to consider the GHG impact of the construction and operation of a pipeline project on climate change and adopts a method for doing so.  This development must, however, be kept in perspective.  The GHG assessment in this case found no significant impacts and the GHG analysis drew dissents from two commissioners.  It remains to be seen how FERC will address projects with significant GHG impacts that may raise issues of mitigation or even rejection of a project and how FERC will address authorizations for LNG export terminals.

The Northern Natural order

The National Environmental Policy Act of 1969 (NEPA) requires FERC to consider whether a proposed natural gas pipeline project will have a significant impact on the environment.  In an apparent pushback to the prior claims of an inability to assess (GHG) emissions or those emissions’ contribution to climate change, the order notes that “NEPA does not require that the studies, metrics, and models—scientific and otherwise—on which an agency relies be universally accepted or otherwise uncontested” but instead “permits agencies to rely on the best available evidence, quantitative and qualitative, even where that evidence has certain limitations.”

For the Northern Natural project, FERC compared the project’s reasonably foreseeable GHG emissions to the total GHG emissions of the United States as a whole.  The order notes that this comparison  provides “a reasoned basis to consider the significance of the project’s GHG emissions and their potential impact on climate change.”  Based on the record, the order finds that the project’s contribution to climate change would not be significant.

Going forward, FERC says it will “consider all appropriate evidence regarding the significance of a project’s reasonably foreseeable GHG emissions and those emissions’ contribution to climate change.” If GHG emission impacts are significant, they “would be considered along with many other factors when determining whether a project is required by the public convenience and necessity.”

Dissents

Commissioners Danly and Christie  both concurred with the order’s approval of Northern Natural’s project but dissented on the application of the GHG impact analysis.

Commissioner Danly’s lengthy dissent argues that the order violates the Administrative Procedure Act by reversing FERC’s longstanding determination that it is unable to assess the significance of a project’s greenhouse gas (GHG) emissions or their contribution to climate change without sufficient reasoning.  The dissent says the reversal disregards a pending Notice of Inquiry (NOI) that seeks comments on the issue and the order announces a “fragmentary standard that provides no clarity because it fails to establish either a replacement framework or a threshold for when emissions will be deemed ‘significant.’”  Commissioner Danly also argues that the Natural Gas Act does not grant FERC the authority to be an environmental regulator.

Commissioner Christie issued a short dissent objecting to the analysis of “the purported impact on climate change” of the project’s GHG emissions.  His dissent also argues that the GHG impact analysis is a “major question of law” to be considered in a pending NOI and that it “is unfair and premature at best” to decide it “in this order with its limited participation.”

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.