Week Ending May 11, 2018

McIntyre Highlights Infrastructure Development, Other Priorities for FERC

This Article Appears as Published in Foster Report No 3198
McIntyre Highlights Infrastructure Development, Other Priorities for FERC

Sometimes being lead agency for infrastructure development can be like herding cats, but FERC will carry out lead agency responsibilities to try and meet Trump administration goals for completing reviews of new projects under its jurisdiction within two years, FERC Chairman Kevin McIntyre said May 8 at the Energy Bar Association Annual Meeting.

He also commented on infrastructure issues during a May 10 event held by the Washington Post. McIntyre addressed LNG project reviews at the Commission, infrastructure protection in the face of cybersecurity concerns, and the Department of Energy’s consideration of requests for more compensation to coal and nuclear generation facilities.

With about 15 LNG projects pending at the Commission or in the pre-filing process, McIntyre said he does not believe there is a limit on the number of facilities or LNG export capacity that FERC could approve. The Office of Energy Projects (OEP) staff at FERC do a great job working through LNG project applications, and “these are highly complex, resource intensive projects” that are not simple to review, McIntyre said during an interview with Washington Post reporter Steve Mufson.

At the EBA meeting, McIntyre noted how he was one of several agency heads to sign a memorandum of understanding to try and meet the goals of President Donald Trump’s executive order 13807 to trim the permitting review process for big infrastructure projects to two years. Under the MOU, one federal agency will take the lead on permitting and environmental reviews, setting timelines for other agencies to try and improve the timeliness of infrastructure development. For energy projects subject to review under the National Environmental Policy Act, FERC is usually the lead agency. “Lucky us,” McIntyre quipped.

“We embrace the challenge” of trying to meet the goals of the MOU, McIntyre said, noting that if the two-year deadline is not met there is no punishment for lead agencies. It’s important to have an aspirational goal, McIntyre said, expressing hope that FERC’s actions will show progress on improving regulatory reviews.

He noted “an underappreciated fact” that FERC’s original mission focused on infrastructure through the Federal Water Power Act of 1920, with subsequent legislation passed in the 1930s to add reviews of natural gas pipeline projects.

McIntyre discussed several “front burner items” pending at the Commission, including review of comments being filed in the power grid resilience proceeding. That proceeding followed the Commission’s January decision denying Energy Secretary Rick Perry’s proposed rule to improve compensation for coal and nuclear power plants in organized markets, with the Commission extending the comment deadline for a host of questions on resilience issues.

“Tomorrow is the deadline for comments,” McIntyre said. He encouraged EBA attendees to give their views because FERC bases its decisions on the full record, and if the record does not reflect a thorough examination of the issues, it makes the Commission’s job harder.

Similarly, FERC is seeking comments on its notice of inquiry (NOI) for reviewing its natural gas pipeline certificate policy statement, which has not been changed since 1999. As he has in other speeches,

McIntyre said it is time for a fresh look at the policy statement and he encouraged parties to provide the Commission with a full record on which to act. “Please make your suggestions as to what you think should be done with our certificate policy cogent and concise and direct,” he said.

“We’ll be building that record” after the comment deadline, and hope to act on the NOI to improve the Commission’s policy based on the record, he said.

McIntyre commented that “there’s a whole basket of issues we grapple with that I put under the heading of interplay between state and federal law.” The issues were addressed at a FERC technical conference in 2017 on renewable portfolio standards and state preferences for generation resources. It is one of the toughest areas for the Commission to address because states have authority over retail markets while FERC is tasked with ensuring just and reasonable rates that are not unduly discriminatory at the wholesale level. “This gets very tricky” if a state authorizes subsidies for a particular generation resource prominent in that state that can affect wholesale market prices, McIntyre said.

The issues raise valid questions on the federal and state dynamic and FERC is striving to implement sensible policy measures in response to those questions. “I don’t have any pat answers to these questions,” but they present challenges that FERC is focusing on, he told reporters after his speech.

Addressing FERC enforcement actions, McIntyre referenced a 2013 settlement because it gave him the ability to talk about baseball and FERC market oversight in one case. The proceeding involved the Maryland Stadium Authority, which owns the Camden Yards baseball stadium of the Baltimore Orioles, and demand response payments from PJM Interconnection. A FERC staff investigation indicated that in setting the baseline power usage, the Stadium Authority had every possible electricity-using device on to set a high baseline for usage and increase payments during demand response events in PJM.

The settlement resulted in payments of almost $1 million, and McIntyre said he mentioned it to show “there are very creative industry players out there” who may try to take advantage of power market rules. FERC has strong policies looking out for market manipulation and “we will punish it when we find it,” he said.

Another area of FERC authority gaining attention is oversight of power grid reliability and cybersecurity protections, which is seeing the Commission work with federal entities in the national security realm. It is a constantly changing role because “there are a lot of bad dudes out there” who aim to bring harm to the nation’s power grid and energy infrastructure, McIntyre said.

He elaborated on cybersecurity issues and other matters during the interview with Mufson, which followed comments by Sens. John Hoeven (R-N.D.) and Martin Heinrich (D-N.M.). Heinrich asserted that the Trump administration could do a better job giving guidance on cyber command components and establishing lines of ownership on different issues, while Hoeven commented that the industry and government need to work together on such issues because government can’t address the challenges by itself.

McIntyre picked up on that theme and said cybersecurity is not something that will allow the industry or the government to declare victory, because it requires continuous vigilance. “We at FERC are constantly vigilant on the matter,” and working with government counterparts “we monitor this stuff all the time because the threats are real and involve highly sophisticated players, state actors, and other entities that mean us harm as a nation.”

He agreed with a sentiment expressed by Heinrich that digital technology could be making the power grid more susceptible to intrusions through smart grid uses and applications. “There might be certain areas where we need to dumb down our grid a little bit for cyber protection reasons,” he said.

When asked about DOE’s consideration of grid resilience issues, including a request from FirstEnergy Solutions that asks Perry to use his authority to improve compensation for coal and nuclear plants due to a fuel security emergency, McIntyre said extreme weather events are providing data for policymakers to examine, and he trusts DOE to do their own analysis on the FirstEnergy petition. “I don’t think we have an emergency on our hands right now” in the sense of the power grid’s ability to perform, but “that’s not my call,” he said.

He also commented that during and after FERC’s consideration of Perry’s proposed rule, nobody from the Trump administration pressured him to address the matter in a way that would please the White House. McIntyre said he believes strongly in FERC’s role as an independent agency “and as long as I am there that will continue”.

Mufson asked about the Commission’s review of LNG export facilities, and how some have criticized the agency for being too slow in that process compared with the Obama administration. “There are today a lot more proposals before us awaiting action than was the case some years ago,” McIntyre said. He commended OEP staff for working with project sponsors and obtaining information needed for the reviews.

He also was asked whether there is a limit to the number of LNG export projects that should be approved given the domestic demand for natural gas. “Not necessarily,” given the enormous resource base in the U.S. due to gains in shale gas production and the move toward a global market for LNG. “I don’t naturally find myself thinking that there is a limit on the number of LNG facilities or LNG export capacity that would be an issue for us,” McIntyre said.

In April, during a House of Representatives oversight hearing on FERC, McIntyre told Rep. Pete Olson (R-Texas) that he hopes the Commission can increase staffing in OEP to review LNG project applications.

LNG project developers are becoming increasingly concerned that the Commission may need to take steps to address the pending applications in a timely manner, said Fred Hutchison, executive director of LNG Allies Inc. A particular concern is applications that are substantially complete but have not received a scheduling order from FERC or have a scheduling order but are in jeopardy of delay, Hutchison said when asked to comment on McIntyre’s remarks.

“Mostly this comes down to an issue of agency staffing and we are extremely interested in working with FERC to address that matter,” Hutchison said.

By Tom Tiernan TTiernan@fosterreport.com

Want to try it out? Sign up for a free trial!
Subscribe Here