2022 Came Close, But Yet So Far, To Improving US Gas Policy

Part of NRDC’s Year-End Series Reviewing 2022 Climate & Clean Energy Developments

The Federal Energy Regulatory Commission and the Department of Energy made critical progress this year on long overdue efforts to ensure that new gas projects are approved only if they are in the public interest and to listen to the public before making those decisions. While this was a start, FERC and DOE failed to complete the job to the detriment of both affected communities and project developers.  

Both FERC and DOE must redouble their efforts to overhaul outdated and incomplete frameworks for reviewing gas projects. It’s long past time to fully evaluate the public interest before approving new gas pipelines or liquefied natural export facilities. Not only does it follow common sense, but the law demands it.  

Under pressure, FERC continues its sub-standard reviews

Reforming FERC policy on gas pipeline reviews can be boiled down to a simple notion: the law matters.  

Under federal law, FERC can only approve gas pipelines that are “required” to serve the public interest and market demand. That’s why, in 1999, the last time the commission updated its Certificate Policy Statement, FERC stated explicitly that it would consider “all factors bearing on the public interest” before determining whether a pipeline should be approved.  

Unfortunately, FERC has failed this critical test.  

Since 1999, FERC has approved nearly every pipeline application it has received, often ignoring or marginalizing evidence that a project is unneeded and harmful to the public interest. Many FERC-approved projects have been canceled due to the foreseeable lack of market demand, but not before developers stripped private citizens of their land and caused permanent environmental and economic damage.  

FERC’s failure to meet its legal obligations is a matter of public record.  

• In the 2017 landmark Sabal Trail case, the D.C. Circuit vacated FERC’s approval of the Southeast Market Pipelines project because the agency failed to analyze the project’s downstream greenhouse gas emissions. 
• In 2018, FERC issued its controversial New Market decision, which excluded from FERC’s consideration almost all upstream and downstream greenhouse gas emissions associated with a pipeline project. The following year, the D.C. Circuit chastised the New Market policy as a “decidedly less-than-dogged” approach, and affirmed FERC’s core legal obligation to analyze the significance of reasonably foreseeable emissions of gas projects.
• In 2021, the D.C. Circuit ruled that FERC’s evaluation of the environmental justice effects of a LNG export terminal in Texas was arbitrary, capricious, and unexplained.
• Also in 2021, the D.C. Circuit characterized FERC’s evaluation of market demand as “ostrich-like” and illogical. 

In response to these clear signals, FERC attempted to make some changes. First, in 2021, it reversed the New Market decision, instead holding in Northern Natural that FERC is not only capable, but required, to consider all reasonably foreseeable greenhouse gas emissions caused by a pipeline project. Northern Natural marked the first time that FERC had ever determined the significance of a project’s greenhouse gas effects. That same year, FERC also hired its first ever Senior Council for Environmental Justice; in so doing, FERC Chairman Rich Glick vowed that the commission would be prioritizing its environmental justice reviews.

Then in February of this year, after more than four years of deliberation, FERC finally issued a new Certificate Policy Statement, promising an end to the era of rubber-stamp pipeline approvals. Under the new policy, FERC would have broadened its market need reviews and, when evaluating the public interest, would have “consider[ed] all relevant factors,” including climate and environmental justice impacts. Also in February, FERC issued an interim Greenhouse Gas Policy Statement, which attempted to build on Northern Natural and outline a framework for evaluating the climate impacts of future gas projects. Together, these policies were intended to ensure that FERC’s reviews comport with the law and that climate and environmental justice effects matter.

Unfortunately, after experiencing 20+ years of rubber-stamp approvals, the industry and its backers had a tantrum and began mischaracterizing the policy statements as extremist. In the face of this well-orchestrated opposition, in March, FERC reverted both policies to “draft” status, even as the need for them becomes clearer every day.  

“All parties, including project developers, are far better served when permitting agencies, such as the Commission, cross their t’s and dot their i’s than when they cut corners or fail to follow court guidance,” Chairman Glick told the Senate Energy and Natural Resources Committee in March. This is because an agency that routinely issues legally faulty orders undermines regulatory certainty and can stall otherwise needed infrastructure projects.

In other words, while the gas industry won the Battle of 2022, it’s clearly losing the war. The industry would be better served to work with environmental and community advocates to support a robust FERC review process.

It’s not just FERC, it’s also DOE

Over the past 10 years, the U.S. has become one of the world’s largest exporters of LNG. For the first half of 2022, the U.S. was the largest, averaging 11.2 billion cubic feet per day in exports—a 12 percent increase over the second half of 2021. According to the U.S. Energy Information Administration, “U.S. LNG exports continued to grow for three reasons—increased LNG export capacity, increased international natural gas and LNG prices, and increased global demand, particularly in Europe,” due to Russia’s invasion of Ukraine.

This increased capacity also means that the need to ensure that DOE thoroughly reviews LNG export applications is greater than ever. As with FERC, under federal law, DOE must determine that all LNG exports are not inconsistent with the public interest.

But sadly, DOE’s policies on LNG export make FERC’s 23-year-old Certificate Policy Statement look fresh. DOE hasn’t updated its LNG policies since 1984—when, under the Reagan administration, the goal was to increased LNG imports.

As the English rock band, The Smiths, said back in 1984: “I've already waited too long.”  

In an Oct. 27 letter to DOE Secretary Jennifer Granholm, NRDC and other public interest groups urged DOE to open a comment period on its LNG export policy guidelines and to ultimately produce guidance that accounts for climate change, environmental justice and equity, and safety and market pricing issues.  

“The nearly 40-year-old guidance is not merely outdated; it is also ill-suited to ensure that DOE adequately considers the serious climate, equity, safety, and market pricing issues resulting from large-scale LNG exports,” we wrote. “The guidelines entirely fail to lay out any factors, mode of analysis, or weight with which DOE can ensure the exports it authorizes are consistent with the public interest and the Natural Gas Act.” 

As with FERC, DOE has signaled some interest in reform, such as its reticence to apply a Trump-era regulation that excludes most LNG exports from environmental review. But more can, and must, be done, to align DOE’s policies with federal law.

Importantly, some in the gas industry have tried to leverage Russia’s invasion of Ukraine to make the case for greater reliance on gas (and more profits in the industry’s pockets) while the market itself is making the opposite case. Gas shortages in Europe and high gas prices in the U.S. driving up winter heating and electricity costs demonstrate that we urgently need a global transition—away from over-dependence on gas and towards clean, reliable energy.  

Facilitating Public Participation: A Bright Spot

It is impossible to fully assess a project’s consistency with the public interest without enabling the public to participate in the process. In 2021, more than four decades after Congress expressly mandated FERC to open a public participation office, the commission finally did so and established the Office of Public Participation. The move promised an end to the days when landowners could be surprised when developers appeared on their property with surveyors, or when customers were left unaware of obscure plans to bail out fossil fuel plants, or when disadvantaged communities had to face down deep-pocketed developers of misguided projects with scant resources at hand. 

Throughout this year, FERC has taken productive steps to build up the office, notably by adding staff in regions where they are most needed, such as the U.S. Gulf Coast and New England. The office website offers guidance on how to intervene in proceedings, file comments, and request hearings. We congratulate FERC for this commitment to public transparency and participation and look forward to even better things ahead.

To help guide its priorities, FERC can look to the comments it received in its own solicited comment periods, where the public clearly identified key areas of focus. Meanwhile, we encourage DOE to similarly consider how it can better facilitate public participation in its reviews.

Looking Ahead

This year, FERC took a step toward finally bringing its gas reviews into compliance with the law. We have been advocating for this update for years and will continue in 2023. After decades of rubber-stamping applications, FERC and DOE need to finish the job and update the way gas projects are reviewed to fully account for the public interest and potential environmental damage. It’s clear that updates are long overdue; now, let’s get to work.