Week Ending October 25, 2019

Policy Grievances on Pipelines, Power Plants Aired at Kentucky Forum

This Article Appears as Published in Foster Report No 3271
Policy Grievances on Pipelines, Power Plants Aired at Kentucky Forum

Federal and state decisions on natural gas pipelines and power plants were key topics at the EnVision Forum in Lexington, Kentucky, with coal firm executive Bob Murray berating FERC for not doing more to support coal-fired generation and pipeline advocates lamenting delays in the permitting process that have increased costs.

As the head of Murray Energy Corp. and someone who tried to have Energy Secretary Rick Perry craft a rule to improve compensation for coal and nuclear power plants, Murray blasted FERC as “feckless” for rejecting Perry’s proposed rule in 2018. Fuel security and resilience is the focus of an ongoing proceeding at FERC, but the Commission has not acted on it and Murray criticized the Commission for inaction.

FERC Chairman Neil Chatterjee, who orchestrated the event that was co-hosted by the University of Kentucky’s Center for Applied Energy Research, said he appreciated the candor of Murray and encouraged participants to speak freely. “Don’t be restrained” or afraid to be critical, Chatterjee said, expressing his desire for candid and frank talks among the panelists.

Chatterjee said he is trying to achieve consensus on the resilience proceeding among the commissioners, including a clear definition of resilience. Unlike the gas pipeline certificate policy statement notice of inquiry, which he has said would wait for a full complement of five commissioners, Chatterjee said any consensus in the resilience proceeding would be sufficient for further action. If that is among three, four or five commissioners it does not matter, he told reporters during a press briefing.

Murray was sharply critical of FERC and the time it has taken for any decision in the resilience proceeding. Although it has been well over one year since that docket was opened, “something of this significance should not be rushed,” Chatterjee said. “It’s much more important that we get it right,” instead of having something that is not legally sustainable, he told reporters.

The panels on the meeting agenda included several topics touching on energy issues, with speakers sometimes on opposite ends of the debate over natural gas, electricity generation and transmission, climate change and energy workforce issues. Establishing connections and meeting stakeholders outside of Washington, D.C., could prove valuable for reaching agreement or simply appreciating other points of view, Chatterjee said.

His goal was to solicit input and honest sharing of views to see if more collaboration or cooperation is possible to tackle tough energy issues, and the initial feedback he heard was positive in that regard, Chatterjee said.

Addressing the conference as a morning keynote speaker, Murray said without action by FERC on its resilience proceeding, state regulators should set a floor on the number of coal plant retirements, and independent system operators should adhere to those limits. The loss of coal-fired generation will make America’s power grid less reliable, and policymakers have not done enough to stem coal plant retirements, he said. Sixty-two coal companies have filed bankruptcy since 2015, he said, asking “when is America going to wake up” and find a way to stop coal-fired power plant retirements.

Murray also blasted the natural gas industry and political leaders for focusing on short-term energy policies that favor renewable resources and move America away from low-cost generation resources. Natural gas production wells are depleted in 10 years, and producers in the Marcellus and Utica shales have not made money, he claimed, referring to a Murray Energy subsidiary American Natural Gas.

The frank discussion continued on a pipeline panel, where a landowner from Nelson County, Virginia, chastised pipelines for their dealing with landowners through eminent domain proceedings, where landowners are at a disadvantage due to FERC’s approval of certificates under the Natural Gas Act. The notion that eminent domain is only used by pipelines as a last resort is a false narrative, said Richard Averitt, the landowner on a panel about the outlook for the pipeline sector.

The first letter he received from Atlantic Coast Pipeline to go through Nelson County was for a “precondemnation survey,” Averitt said. It is clear that pipeline developers are not following the principles espoused by the Interstate Natural Gas Association of America (INGAA) in working with landowners, Averitt said.

INGAA President and CEO Don Santa, who moderated the panel, said INGAA members agree to follow the principles that were adopted, but perhaps the message is not carried down to the land agents and others that work with landowners.

Pipeline compensation for landowners can vary drastically, even within Nelson County, where ACP has paid between five cents/foot and $139/foot, calling into question what is considered fair and just compensation, Averitt said.

Santa noted that pipelines are being developed in areas of the country that are not used to pipeline infrastructure, facing increased opposition. The judicial appeals of federal approvals, state opposition through rejection of applications under Section 401 of the Clean Water Act, proposed bans on fracking from presidential candidates, and other measures have made it harder and more costly to build pipelines, said Stan Horton, president and CEO of Boardwalk Pipeline Partners. Some large pipeline projects have seen costs go from $3 million/mile to $15 million/mile. “There is a political wind against us that we need to overcome,” Horton said.

Mike Catanzaro of CGCN Group and Alex Herrgott of the Federal Permitting Improvement Steering Council said pipelines are needed infrastructure that bring benefits to the country. FPISC is trying to improve the predictability of the pipeline review process, to bring clarity for pipeline developers and landowners, Herrgott said.

State opposition to pipelines in New York has resulted in moratoriums for new gas customers in parts of the state, and that is not what cooperative federalism was designed to accomplish, said Catanzaro, who served as special assistant for domestic energy and environmental policy in the White House under President Donald Trump. Courts are remanding permits back to federal agencies and the policy trend is in favor of those who oppose new pipelines, Catanzaro said. “If Congress doesn’t step up and fix the permitting process, I think we’re in trouble,” he said.

Both Catanzaro and Herrgott agreed that more pipelines will be approved to move the increased gas production to markets, but at what level of pain and at what cost for developers is the big question.

The moves among states favoring cleaner energy resources can be aided by gas-fired generation, several speakers said. Natural gas can be a bridge fuel to a lower or no-carbon future, but how long that bridge turns out to be is a topic of debate. Some states are pushing for 100% renewable resources by 2050, which is not realistic without pushing electricity prices to exorbitant levels, a panel of state regulators said.

Ellen Nowak of the Wisconsin Public Service Commission said states should favor an “all of the above” approach for generation fuels and not the promises of the Green New Deal. Wisconsin Governor Tony Evers signed an executive order in August aimed at achieving 100% carbon-free energy in the state by 2050. Nowak’s advice on the state regulatory panel was to be wary of politicians that set goals to be achieved well after they’re out of office.

Other speakers, including coal industry advocates, asserted that the U.S. is moving too fast toward a heavy reliance on renewable resources. Political leaders touting 100% renewable energy for the U.S. is not realistic, and they’re proposing time frames that are not feasible, said Joe Craft, president and CEO of coal firm Alliance Resource Partners L.P.

Kentucky obtains about 75% of its power from coal-fired generation, using more natural gas and renewables than it has in the past, Craft said. The low electricity rates from coal-fired power plants have benefitted industrial customers and provided economic development for the state. But many states are moving too fast to emphasize wind and solar projects “on a scale that is not ready for prime time,” Craft said.

At the event’s conclusion, Chatterjee said the gathering exceeded his expectations. The insights gained could help shape a stronger energy policy landscape for the U.S. in the coming years. “I hope that the relationships formed and the conversations started here can continue into the future,” he said.

By Tom Tiernan ttiernan@fosterreport.com

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