Evaluating Project Need for Natural Gas Pipelines in an Age of Climate Change: A Spotlight on FERC and the Courts
As the Biden administration attempts to make climate change the focus of many aspects of its domestic and international agenda, an independent federal regulatory agency—the Federal Energy Regulatory Commission (FERC)—finds itself at the center of debates over the nation’s energy policies and greenhouse gas (GHG) emissions. Under Sections 4 and 5 of the Natural Gas Act of 1938, FERC has the authority and obligation to ensure that rates, charges, and rules relating to interstate natural gas sales and transportation are just, reasonable, and nondiscriminatory. Under Section 7 of the Natural Gas Act, FERC also has the authority to grant certificates for construction and operation of interstate natural gas pipelines that are needed for the “present or future public convenience and necessity.” FERC’s longstanding practice under its 1999 “Policy Statement on Certification of New Natural Gas Facilities” for pipelines is to assess whether there is a “market need” for the proposed pipeline project before addressing other considerations such as adverse impacts on existing pipeline company customers, other pipelines in the market and their customers, and landowners and communities.
Changes in the availability and price of U.S. energy resources, growing concerns over increased climate impacts of building new natural gas pipeline infrastructure, and a series of adverse court decisions for FERC on its assessment of pipeline need and environmental impacts prompted FERC to reconsider and ultimately revise its 1999 pipeline policy for the first time in over twenty years in February 2022. While this policy change has the potential to expand FERC’s ability to address concerns associated with new pipeline infrastructure from the courts and the public, the policy was subject to strong dissents from two FERC commissioners and vocal opposition from industry and members of Congress, prompting FERC to reconsider its new policy. This means that any real reforms will be likely be contested and difficult in both the short term and the long term.
As FERC considers new pipeline projects in the wake of this policy transition, this Article urges FERC to give real weight to the growing number of state and federal policies focusing on climate change and mandating a clean energy transition. This is in part because such policies directly impact whether new fossil fuel pipelines can establish the project need required to obtain a certificate under the Section 7 of the Natural Gas Act. FERC’s longstanding failure to consider climate impacts and the state of the nation’s energy transition as an integral part of its project need analysis under Section 7 of the Natural Gas Act is a failure to fulfill its statutory obligation to both ratepayers and landowners, burdening them with stranded costs associated with expensive and potentially soon-to-be-obsolete fossil fuel infrastructure. Moreover, FERC’s failure to adequately address project need for pipelines implicates not only Section 7 of the Natural Gas Act, but arguably also violates Sections 4 and 5 of the Natural Gas Act, which require FERC to ensure that rates, charges, practices, and rules governing natural gas sales and transportation are “just and reasonable.”
Klass, Alexandra B. "Evaluating Project Need for Natural Gas Pipelines in an Age of Climate Change: A Spotlight on FERC and the Courts." Yale Journal on Regulation 39, no. 2 (2022): 658-698. (Work published when author not on Michigan Law faculty