FERC Issues an Interim Policy Statement on Greenhouse Gas Emissions from Natural Gas Pipelines | Practical Law

FERC Issues an Interim Policy Statement on Greenhouse Gas Emissions from Natural Gas Pipelines | Practical Law

FERC issued an interim policy statement to explain how it will assess the impact of natural gas infrastructure projects on climate change in FERC reviews under the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) and seeks comment on the interim policy statement.

FERC Issues an Interim Policy Statement on Greenhouse Gas Emissions from Natural Gas Pipelines

by Practical Law Finance
Published on 23 Feb 2022 • USA (National/Federal)
FERC issued an interim policy statement to explain how it will assess the impact of natural gas infrastructure projects on climate change in FERC reviews under the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) and seeks comment on the interim policy statement.
On February 18, 2022, the Federal Energy Regulatory Commission (FERC) issued two new policy statements that will significantly affect how it reviews natural gas infrastructure projects:
FERC also released its staff presentation (GHG staff presentation) on the interim policy and a related fact sheet with additional information (GHG fact sheet).
The Interim GHG Policy Statement seeks to explain how FERC will assess the impacts of natural gas infrastructure projects on climate change in its reviews of these projects under NEPA and the NGA. According to FERC, this interim guidance will be subject to further revision based on the record developed in the comment proceedings for the Interim GHG Policy Statement.
However, FERC will begin applying the framework established in the Interim GHG Policy Statement immediately to allow FERC to evaluate and act on pending applications under Section 3 and Section 7 of the NGA without undue delay and with an eye toward greater certainty and predictability for all stakeholders.
The Interim GHG Policy Statement does not establish binding rules and will apply only to pending and new projects. Applicants with projects now pending before FERC will have the opportunity to supplement their records.
Comments on the Interim GHG Policy Statement are due by April 4, 2022.
Both Republican Commissioners James Danly and Mark C. Christie dissented from the policy statements.

Background

FERC previously had concluded that it was unable to assess the significance of a project's GHG emissions or those emissions contribution to climate change, a policy that current FERC Chairman Richard Glick had long opposed, claiming that it violated NEPA. On March 18, 2021, when FERC approved Northern Natural Gas Company's (Northern Natural) request to build and operate 87.3 miles of pipeline in South Dakota and Nebraska, FERC also, for the first time, assessed the significance of a natural gas pipeline project's potential GHG emissions and their contribution to climate change. In considering these effects, FERC concluded that NEPA does not require the studies, metrics, and models on which they rely to be universally accepted, just that they are the best available evidence (see Legal Update, FERC Assesses for the First Time a Natural Gas Pipeline's Greenhouse Gas Emissions).
For more information on FERC's consideration of GHG emissions when reviewing natural gas pipeline projects, see Articles, FERC's Consideration and Quantification of Greenhouse Gas Emissions in Its Review of Natural Gas Pipeline Projects and Natural Gas Pipelines: 2019 In Review: Scope of GHG Review.

Interim GHG Policy Statement

In quantifying GHG emissions, FERC will consider emissions that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action. This consideration will include GHG emissions from construction and operation of the project. FERC stated that it may also include GHG emissions resulting from the upstream production and downstream combustion of transported gas.
The Interim GHG Policy Statement lays out the types of information that FERC would find helpful to have in the record for its evaluation of a proposed project's potential impact on climate change as well as FERC's balancing of a project's adverse impacts and benefits in determining if the project is in the public convenience and necessity.

Quantification of GHG Emissions

The Interim GHG Policy Statement outlines the process for quantifying a proposed project's GHG emissions and determining whether the project's emissions are significant. In each NGA Section 3 or Section 7 project proceeding, the NEPA document will quantify GHG emissions that are reasonably foreseeable and have a close causal relationship to the proposed project.
The Interim GHG Policy Statement sets a GHG emissions threshold of 100,000 metric tons per year of carbon dioxide equivalent (CO2e) so that projects under FERC consideration with emissions at or above that level will require the preparation of Environmental Impact Statements (EIS). FERC will presume, unless refuted by record evidence, that projects with estimated GHG emissions of 100,000 metric tons per year of CO2e will have a significant impact on the environment. For projects having GHG emissions below that threshold FERC will require an Environmental Assessment (EA).
For purposes of assessing the appropriate level of NEPA review under the Interim GHC Policy Statement, FERC staff will apply the 100% utilization rate or "full burn" for the proposed project's emissions. A 100% utilization rate would reflect the project's maximum potential amount of GHG emissions. Using the full burn as a screen to determine whether to proceed with an EA or an EIS is intended under the interim policy to avoid regulatory delays that could occur if an EA is initially prepared, and then, through further development of the record, an EIS proves to be necessary.

Foreseeable GHG Emissions

The Interim GHG Policy Statement describes how FERC will quantify a project's reasonably foreseeable GHG emissions based on a projection of the amount of capacity that will be actually used and any other factors impacting the quantification of project emissions. The type of information that would assist FERC in developing the best estimate of a project's GHG emissions include:
  • The project's projected utilization rate and supporting information.
  • An estimate of reasonably foreseeable project GHG emissions.
  • If upstream and downstream emissions are not quantified, evidence to support why those emissions are not reasonably foreseeable project emissions.
  • Evidence, if any, that impacts the quantification of the project's reasonably foreseeable GHG emissions.
  • A description of its proposed GHG mitigation measures, including the percent of the project's direct and indirect GHG emissions that will be mitigated and, if applicable, a tracking mechanism for tracking mitigation of GHG emissions.
  • A detailed cost estimate of its proposed GHG mitigation and a proposal for recovering those costs.
According to the Interim GHG Policy Statement, FERC plans to evaluate proposed mitigation plans on a case-by-case basis and is not mandating a standard level of mitigation. However, FERC may condition its approval of a project on further mitigation of those stated impacts.

Practical Implications

The GHG emissions policy, together with the Updated Policy Statement, will have a significant impact on natural gas project development. It may require developers to rethink project routes, engage more closely withs stakeholders, and increase the time it takes to review these projects.
Industry groups including the Interstate Natural Gas Association of America (INGAA) and the American Petroleum Institute (API), have already raised concerns about the potential effect of these policies on project costs, create regulatory uncertainty, and jeopardize the reliability and affordability of the US energy supplies.