Week Ending February 19, 2016

FERC’s Draft Guidance Manual Gets Negative Attention from Some Commenters; Environmentalists Argue the Proposal Does Not Go Far Enough

This Article Appears as Published in Foster Report No 3087
FERC’s Draft Guidance Manual Gets Negative Attention from Some Commenters; Environmentalists Argue the Proposal Does Not Go Far Enough

Environmentalists are not pleased with FERC’s Draft Guidance Manual for Environmental Report Preparation (AD16-3).  The Delaware Riverkeeper Network (DRN) insists the document will not prevent substantial “ecological and public harms” or curb the “multitude of bad practices used by pipeline companies.”  Even the U.S. Environmental Protection Agency (EPA) asserts that FERC’s manual should have pipeline/infrastructure proponents include information/analysis on the cumulative impacts of their projects, including the potential for increased gas production and associated environmental impacts.  EPA also wants to see information on lifecycle greenhouse gas emissions (GHGs) not only from the construction and operation of a pipeline or facility, but also tracking all stages from the production, transportation, storage, and combustion of natural gas.

Other industry comments raised other concerns about the draft manual’s new requirements, some seeing them as “redundant” or going beyond what is required by current statutes, FERC regulations or state regulations.  The “additive, prescriptive requirements” will delay pipeline/infrastructure projects and not add value to the Commission’s analysis, argue some commenters.  These parties suggest that if FERC wants to change or add policies, the Commission should appropriately promulgate new regulations through its notice and comment rulemaking procedures, as mandated by federal law that reflect input from industry and interested stakeholders — not through a draft manual intended as “guidance.”

Last week, FR covered comments from the pipeline industry (FR No. 3086, pp1-8).  Here FR reviews comments from a joint filing of the Natural Gas Supply Association (NGSA) and Center for Liquefied Natural Gas (CLNG), and comments of the American Petroleum Institute (API)), of an environmental organization, and of the prime federal environmental regulator – DRN and EPA, respectively.

NGSA and CLNG (which filed joint comments) and API (in separate comments) argue that FERC should not use the draft guidance as a means to impose additional requirements on project developers beyond those already contained in the regulations.  Their mutual position is that FERC should maintain its “appropriately-scoped approach” to considering direct, indirect, and cumulative impacts under the National Environmental Policy Act (NEPA), and not create “additional prescriptive requirements” that limit project developers’ ability to comply with FERC’s regulatory requirements “efficiently and cost effectively.”  For the producers, the draft guidance appears to require a level of specificity that would not be available at the time of submission of certificate applications prepared under sections 3 and 7 of the NGA.

FERC should provide flexibility to the applicant and only request information that is consistent with the current state of design at the time of the application, API asserted.  The manual’s “considerable expansion” of provisions at least should not retroactively apply to projects that have been submitted for approval under the prior guidance.  “Retroactive application” of the new guidelines would introduce potentially harmful inefficiencies, costs, delays, and ongoing uncertainties, thereby impeding critical U.S. energy infrastructure projects.  And FERC’s finalized guidance document should specify that projects engaged with the resource report review process prior to adoption of new guidelines are “grandfathered” under the existing guidelines.

Regarding landowner notification and stakeholder outreach, API requested that FERC provide clearer guidance on applicant expectations regarding stakeholder outreach.  Public involvement is at the center of NEPA; “ensuring clearly understood outcomes as required by FERC is essential to applicants supporting this essential part of the NEPA process,” API said.

Given its role as a cooperating agency for reviewing LNG project applications and Environmental Impact Statements (EIS) under NEPA, the Pipeline and Hazardous Materials Safety Administration (PHMSA) also reviewed the Commission’s draft manual document and provided mostly technical comments.  Engineering firms also weighed in on the manual, suggesting in some instances that provisions called for in the draft are not technically feasible.

The Associations.  As noted above, NGSA and CLNG, and API, maintain that the draft guidance should not be used as a mechanism to impose requirements beyond FERC’s current regulations.  Those regulations implement Congressional mandates under NEPA and CEQ’s NEPA rules promulgated through notice and comment rulemaking procedures and reflect input from industry and interested stakeholders.  “It would be impermissible for the Commission to indirectly amend these regulations through the instant proceeding,” NGSA and CLNG believe.

In certain instances, the manual appears to NGSA/CLNG to impose “a uniform burden on every project to provide an extensive checklist of information” whether it is relevant to a specific project or not.  Such approach doesn’t support NEPA’s goal of providing decision-makers and the public with “truly meaningful information” that will be “of the greatest relevance to the agency’s decision.”  As courts have pointed out, the NGSA/CLNG filing stressed, “NEPA is not a paper tiger, but neither is it a straightjacket.”  Additionally, mandating information through the draft manual that exceeds FERC’s regulations presents a serious risk of delaying the development of the natural gas infrastructure.[1]

NGSA/CLNG encouraged FERC to use the draft guidance “only as prospective tool” for projects that have not filed any resource reports yet, either as part of the pre-filing process or as part of a formal project application.  Also, retroactive application of the guidance potentially could inject confusion, uncertainty, and substantial delays into any review of infrastructure projects already underway “that are critical to U.S. energy security and promotion of more diverse sources of energy for strategic allies abroad.”

Furthermore, NGSA/CLNG requested a clarification that the manual’s language “was not intended in any way” to expand FERC’s review to include alleged upstream impacts in its indirect effects analysis under NEPA.  Interpreting this language to expand FERC’s review to encompass potential effects of hypothetical upstream activities as indirect effects under CEQ’s regulations would contradict existing precedent and the intended definition of “indirect effects” under CEQ’s regulations implementing NEPA, the gas associations maintained.

Environmental reports that project developers prepare for natural gas projects already are part of the Commission’s NEPA compliance program and do consider potential direct and indirect effects.  FERC repeatedly has held in each case that it is not consistent with legal precedent to determine that the alleged impacts of gas production automatically are direct or indirect effects of the permitting of FERC-regulated infrastructure projects.  FERC recently explained that proposed pipelines do not cause the environmental effects of production and those effects are not reasonably foreseeable.  FERC appropriately has embraced a market reality whereby economic conditions dictate that it is most likely that pipelines will follow natural gas production, rather than pipelines “inducing production.”  FERC also does not have sufficient information to determine the origin of natural gas that a pipeline might transport due to the robust and highly integrated nature of the U.S. interstate pipeline system and the fungibility of natural gas, rendering any environmental impacts from producing such gas not reasonably foreseeable; FERC has held similarly in recent LNG proceedings.

It follows, NGSA/CLNG reasoned, that it is not possible for FERC to provide a meaningful analysis of alleged upstream impacts in a way that would generate information and discussion that would be of the greatest relevance to the agency’s decision.  Moreover, attempting to determine the impacts from development of entire natural gas producing areas “would render the Commission’s review both imprecise, because we can do no better than speculate on the path that development may take, and impractical because data is unavailable to determine with any clarity the locations and possible resources that may be impacted.”

Therefore, NGSA and CLNG support only a “reasonable and legally sound approach” to analyzing upstream production activities in the context of natural gas or LNG infrastructure projects.

Turning to the provisions in Volume I of the draft on air quality, NGSA and CLNG – as well as API in its comments – view the suggested requirement that projects evaluate sources within 50 kilometers as unnecessarily appropriating EPA’s most stringent modeling requirement and applying it to any source and every pollutant.  Such requirement would exceed the scope of the NEPA regulations that require applicants to “identify significant environmental effects expected to occur as a result of the project.”  The section instead appears to impose a default “one-size-fits-all” modeling requirement regardless of the project size, which would again be “burdensome and overreaching.”

The associations want FERC to eliminate the default 50-kilometer sources requirement and instead require an air quality analysis that is “commensurate with the complexity of the proposal and its potential for environmental impact,” including the potential to rely on a permit application’s air quality analysis.  FERC should recognize as a given that EPA’s modeling requirements and guidance have evolved and became more stringent as air modeling techniques have improved.

API insisted it is unreasonable to require analysis of cumulative construction emissions because construction emissions “are fleeting and periodic emissions” and are not “significant” for the purposes of FERC’s NEPA review.  Construction emissions are unpredictable; there is no valid method to quantify any significant environmental effect as required by FERC’s regulations.  “In fact, the challenges necessary to actually quantify construction emissions far outweigh the benefit, if any, in calculating any cumulative emissions,” API opined.

NGSA/CLNG added that information related to the construction equipment to be used and the number of hours and time of day that the equipment will be used cannot be estimated in way that is not speculative.  External intervening elements, like weather, third parties’ business plans, and changing emissions standards, factor into the cumulative analysis but cannot be predicted.

An estimate derived from the available information would be no more “than speculative guesses” that fail to provide for a meaningful discussion and so FERC should remove the language to consider other foreseeable construction emissions, asserted the petroleum group.

EPA.  With regard to the “purpose and need” descriptive for proposed natural gas infrastructure projects, EPA recommended that FERC’s manual direct applicants to provide information about their projects in the context “of the broader natural gas supply market.”  In the general project description, the “purpose and need” statement should provide sufficient detail to support the analysis of alternatives to the proposed project.  The information presented by pipelines should reflect not only FERC’s purpose, but also “the broader public interest and need,” EPA said.

Regarding cumulative impacts, EPA urged FERC to have pipeline/project applicants provide information addressing “the potential for increased natural gas production and the potential for environmental impacts” associated with the potential increase.  Applicants should utilize a recently published DOE study[2] “or the most recent available information, to inform their analysis” and then submit to FERC a summary of the indirect impacts of their project.

EPA acknowledged FERC’s conclusions in previous NEPA analyses that the nature of the gas supply and the pipeline system “make it difficult” to predict accurately where additional gas will develop and that it is not feasible to specifically evaluate the localized environmental impacts in a project-level NEPA document.  However, “both FERC and the Department of Energy (DOE)” have recognized that “an increase in natural gas exports will result in increased production.”  And many of the potential impacts will vary considerably by location where the production occurs due to differences in hydrology, geology, ecology, air quality, regulatory structure and other factors.  However, EPA supports “the kind of conceptual level analysis” about the types of impacts “that are likely to occur from increased production,” and suggests that FERC’s discussion extend to non-jurisdictional facilities and include “a more detailed discussion for determining connected actions under NEPA.”

Because the draft manual does not include a separate discussion under Resource Report 9 (Air and Noise Quality) regarding greenhouse gas emissions (GHGs) and climate change – and, rather, incorporates these concepts into the broader discussion on air quality impacts – EPA requested that FERC “bring the draft manual up to date” to include a discussion — separate from the existing air quality section, but within Resource Report 9 — “regarding GHGs and climate change.”  There, it could include requirements for project proponents’ information on GHG and climate change analyses and associated mitigation.

In addition to GHG emissions from construction and operations, the discussion should include emissions associated with the production, transport, and combustion of gas.  It could provide the applicant with guidance for assessing “the cumulative impacts of climate change for the project,” EPA said.  “The draft includes, in our view, an incorrect determination that no methodology exists to determine how an individual project’s incremental contribution to GHG would translate into physical effects on the global environment and a recommendation to address the contribution of the project emissions as a percentage of total estimated GHG emissions worldwide.”

For LNG facilities, EPA recommended that applicants describe measures to reduce GHG emissions associated with that kind of project, including reasonable alternatives or other practicable mitigation opportunities, along with disclosing the estimated GHG reductions associated with such measures.  EPA again cited DOE studies that will help in assessing GHG emissions implications of a project – the previously mentioned Addendum and the NETL report, Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the U.S.  These reports, EPA said, “provide a helpful overview of GHG emissions from all stages of a project,” from production through transmission and combustion and “may be helpful” to applicants and decision makers in reviewing the foreseeable emissions associated with the increased production of natural gas and the export of LNG and how they compare to other possible fuels.  FERC may want to consider requesting applicants to adapt those reports’ methodology to more specifically consider the GHG implications of their projects.

EPA recommended that the manual also steer applicants to commit to implementation of reasonable mitigation measures that would reduce or eliminate project-related emissions and include a list of the applicant-committed mitigation measures in their resource report submitted to FERC.

And as part of the alternatives analysis, applicants should, as appropriate, consider practicable changes to their proposal to make the project more “resilient” to anticipated climate change.  That analysis should include a review of the projected climate changes in the area of the project, and evaluate whether those changes are likely to affect the environmental impacts.

Project applicants should not compare GHG emissions to total state, U.S. or global emissions.  “Climate change is a global problem resulting from the emissions of many individual sources whose impacts are cumulative, so such comparisons don’t provide meaningful information and reflect a misunderstanding of the climate problem,” EPA suggested.

In the agency’s view, the environmental impacts are best described by using “emissions as a proxy” when comparing the project, alternatives and potential mitigation.  Project applicants can provide “an existing frame of reference in their resource report” — such as an applicable Federal, state, tribal or local goal for GHG emission reductions — and then discuss whether the emission levels are consistent with such goals.

Moreover, FERC ought to put more emphasis on evaluation of “the no action alternative” (i.e., not building the proposed pipeline project).  According to EPA, that alternative is the baseline for decision-makers to compare the environmental effects of action alternatives.  The guidance manual should have applicants provide information on the additional potential outcomes and associated impacts resulting from the no action alternative and discuss the likelihood of those outcomes for multiple scenarios.

Among its other recommendations, EPA suggested that FERC consider referring to EPA’s environmental justice screening and mapping tool (EJSCREEN) that uses data to highlight places that may have higher environmental burdens on vulnerable populations.  Then, applicants could consider potential project-specific impacts on minority and low-income populations.  FERC should request documentation that supports the description of all efforts made by the applicant to identify and communicate with EJ communities, EPA said.

DRN.  In its 410-page comment filing, DRN included “field and technical documentation and monitoring reports of direct observations and field compliance issues” for certain pipelines in the Upper Delaware River Basin, “to help inform FERC” of the “much needed improvements” to the guidance document.

Apparently, DRN’s technical documents and reports were generated during field monitoring along sections of Tennessee Gas Pipeline’s (TGP’s) 300 Line upgrade, TGP Northeast Upgrade Project (NEUP), and Columbia’s 1278 Pipeline project, where the group “had access to monitor limited areas of the projects during limited periods of time.”  DRN is using the information to support its critical conclusion that FERC “is failing to properly regulate and oversee the compliance of pipeline construction projects.”

In DRN’s opinion, FERC-approved pipeline projects result “in a multitude of environmental impacts that inflict high levels of unnecessary ecological damage,” and that damage is not avoided or properly mitigated despite the resource reports that are drafted or the guidance provided by the agency.  Violations of environmental laws “are commonplace” and “an accepted part of FERC pipeline construction, “DRN charged.  Construction problems and potential violations are not properly responded to by pipeline companies or by FERC and any mitigation “does not undo the harms inflicted.” Pipelines inflict enduring and/or repetitive harms on natural resources, the group charged.

DRN is documenting additional findings in a case study currently under development.  But even with the documentation in hand, FERC’s proposed guidance “will not prevent, avoid, or otherwise mitigate these ecological and public harms or the multitude of bad practices used by the pipeline companies. “
The draft manual does not “adequately” require pipelines to avoid, eliminate, or mitigate harm, “even with pipelines that cut through some of the most pristine streams, wetlands and forested habitats of the Delaware basin.”

Furthermore, according to the group, FERC’s guidance documents ignore NEPA and CEQ requirements, and the Commission “continues to ignore the legal mandate to eliminate segmentation and consider cumulative harms.”

The draft overlooks “perhaps the most significant legal decision impacting the Commission’s review of resource reports that has been issued since 2002” Delaware Riverkeeper Network, et al. v. Federal Energy Regulatory Commission, 2014).  According to DRN, the court clarified the scope, depth, and breadth of what the Commission is required to review pursuant to cumulative project impacts.  “Yet, somehow an analysis and incorporation of the lessons learned from the Delaware Riverkeeper Network case is entirely missing from the Commission’s revisions to the guidance manual,” DRN stated.

FERC’s draft is also ignoring the impacts of climate change and “the necessary actions” that should be taken to limit GHG emissions included in CEQ guidance documents.  FERC is not abiding to its obligation as an “Energy Regulatory Commission” in ensuring that there is minimal or no environmental impacts involved when a proposed energy project is approved, summed the environmentalist/landowner association.

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[1]   Any delays could impact the ability of states to comply with the Obama Administration’s Clean Power Plan.

[2]   Addendum to Environmental Review Documents Concerning Exports of Natural Gas from the U.S.

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Copyright © 2016 by Concentric Energy Publications, Inc.  All rights reserved.

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