FERC’s Push to the Forefront on GHG Reduction Efforts

The Federal Energy Regulatory Commission (FERC), once an agency known primarily by those deeply steeped in the energy world, is now emerging into the limelight by taking a leading position on the question of how climate change impacts will be considered in the process of infrastructure approvals under the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA). FERC’s recent Interim Policy Statement, for example, details how it will consider the greenhouse gas (GHG) emissions of facilities that will transport natural gas in interstate commerce, or import or export natural gas internationally. The interim policy, which was approved by its three Democratic nominees and voted against by its two Republican nominees, has implications for new natural gas infrastructure, electricity generation facilities fueled by natural gas, and beyond.

FERC is soliciting comments that will be due in April of 2022, 60 days from the upcoming publication of the Interim Policy in the Federal Register. In the meantime, however, FERC is putting its interim policy into effect to provide all interested entities with guidance on how it will consider new and pending applications for authorization to construct and operate relevant infrastructure known as “certificates of public convenience and necessity.” Despite the two dissenting votes, FERC’s action is buoyed by numerous court decisions it cites as providing a mandate for it to act in this area.

Here are some of the specifics:

First, FERC announced that in deciding whether a natural gas infrastructure project undergoing NEPA review will require a full-blown Environmental Impact Statement (EIS) or may be reviewed solely using the less intensive environmental assessment (EA) process, it will assume the project will operate at is maximum production level. An EIS will be required if it determines the proposed project may meet or exceed producing 100,000 metric tons of carbon dioxide equivalent annually considering both the GHG emissions of the construction and operation of the project and, in appropriate circumstances, the downstream combustion of transported gas. Using project data from the last four years, approximately 72% of projects would have required an EIS had the interim policy been in effect during that timeframe.

In considering mitigation measures, FERC will, however, estimate the percentage of the project’s capacity that actually will be used. FERC understood that “the installation of emission-reduction technology or purchase of offsets by downstream users would reduce the impacts” and urged developers to provide evidence of net emissions. FERC pointed out that on a case-by-case basis, it may find a project may proceed to construction and operation even if the project’s GHG emissions are not mitigated to insignificant levels. 

In his dissent, Commissioner Danly characterized the Interim Policy Statement as “irredeemably flawed.” He noted, for example, that the policy would apply to pending projects and not just new ones. Commissioner Danly further accused the majority of crafting its issuance to avoid judicial review by characterizing it as non-binding. He argues that despite the majority’s wordsmithing, the interim policy is a binding rule that is subject to judicial review. Finally, he argued that the proposal raises more questions than it answers, given its failure to flesh out specific standards or explaining how a project sponsor might mitigate impacts, among other things. Commissioner Christie piled onto the opposition by asserting that the new policy “threatens to do fundamental damage to the nation’s energy security by making it even more costly and difficult to build the infrastructure that will be critically needed to maintain reliable power service to consumers as the generation mix changes to incorporate lower carbon-emitting resources such as wind and solar.”

Whether any entities will test the judicial review question will be known by March 21, as any requests for rehearing of the interim policy must be filed within 30 days of its issuance.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.