Commissioner Bernard L. McNamee Statement Regarding Commission Votes on March 19, 2020

Commissioner Bernard L. McNamee Statement
March 19, 2020

Regarding Commission Votes on March 19, 2020

As the nation and the world struggle with the effects of COVID-19, the work of
the Federal Energy Regulatory Commission continues. This is a great testament to
Chairman Chatterjee and to the talented and dedicated employees at the Commission. In
particular, I thank my personal staff for their hard work. A special thanks goes out to the
Executive Director, Anton Porter and his staff, the Office of the Secretary, and the IT
professionals at FERC who have kept us up and running through remote connections. I
also think it is important to acknowledge all of the energy providers across the nation that
are keeping hospitals and essential businesses operating, transportation moving, and
providing our homes with the comfort of heat and light—not to mention energy to charge
our cell phones and power our internet connections. We have also seen families,
neighbors and strangers coming together to help and support each other. It is in times of
formidable challenges that we see the greatness of the American spirit.

Though the Commission cancelled its open meeting, a number of important orders
were issued today. I remark on a few.

Jordan Cove

Today the Commission authorizes the siting, construction and operation of Jordan
Cove Energy Project L.P.’s (Jordan Cove) new liquefied natural gas (LNG) export
terminal, and issues a certificate of public convenience and necessity to construct and
operate Pacific Connector Gas Pipeline, L.P.’s pipeline facilities (Pacific Connector)
(together, the Project).

Based in the record and the law, I support the Commission’s order that the LNG Project is not inconsistent with the public interest and that the pipeline is required by the public convenience and necessity. I am also issuing a concurrence to discuss the letter issued by the Oregon Department of Land Conservation and Development’s (Oregon DLCD) on February 19, 2020, just prior to last month’s scheduled vote by the Commission, as well as the Commission’s statutory limitations to consider greenhouse gas issues.

As in other cases, I have carefully considered the facts, record and the law. The views of the State of Oregon are particularly important and I have considered Oregon DLCD’s letter. As discussed in the order, the issues raised were already considered in the Commission’s Environmental Impact Statement or are specifically addressed in the order.

As discussed in my concurrence, under the Natural Gas Act (NGA), the Commission considers local and state interests, but ultimately is required to consider the national interest when making its final determination. Congress enacted the NGA to provide access to natural gas and to direct the Commission to fill in the regulatory void left open by the courts and the Dormant Commerce Clause.1 Furthermore, Congress provided the Commission the exclusive authority to regulate the sale and transportation of natural gas in interstate commerce, while reserving to the States various authorities under the Coastal Zone Management Act, Clean Air Act, and Clean Water Act.2

Thus, today’s authorizations in no way negate Oregon Department of Environmental Quality’s
(Oregon DEQ) denial without prejudice of the applicants’ Clean Water Act section 401 water quality certification application or Oregon DLCD’s objection to the federal consistency determination. Indeed, the Commission’s conditional authorizations do not permit the applicants to begin construction until they show evidence of obtaining the other federal authorizations or waiver thereof.3

However, Oregon DEQ and Oregon DLCD’s determinations do not control the Commission’s NGA sections 3 and 7 authorizations for the Project. NGA section 3 requires the Commission to authorize the siting, construction, and operation of an export and import facility unless the facility is not consistent with the public interest.4 NGA section 7 requires the Commission to issue a certificate of public convenience and necessity for the construction and operation of interstate natural gas pipeline facilities when the Commission finds those facilities are required by the present or future public convenience and necessity.5 By placing the authority to make these determinations with the Commission, Congress requires the Commission to consider national interests.6

While States’ interests may inform the Commission’s determinations, at times, the
national interest may conflict with a State’s interest, and in those cases, the Commission may find that the national interest outweighs the State’s interest. The Commission exercises its authority under the NGA, which Congress enacted pursuant to its power under the Commerce Clause. The Commerce Clause emerged as the Founders’ response to the ruinous effects resulting from state regulation, tariffs, and protectionism occurring under the Articles of Confederation and giving rise to the Constitution itself.7 In Federalist No. 42, Publius explained the necessity of the Constitution and the Commerce
Clause, stating “[t]he defect of power in the existing Confederacy to regulate the commerce between its several members [has] been clearly pointed out by experience.”8 Similarly, Congress recognized this tension when amending the NGA to provide certificate holders eminent domain authority.9

Considering the constitutional structure of our government, the NGA and other acts of Congress, as well as the facts in this case, I agree with today’s order that the LNG Project is not inconsistent with the public interest and the pipeline is required by the public convenience and necessity.10 These determinations, consistent with the NGA, are based on the national interest, but with serious and heavy consideration of the potential impacts of the Project on affected local communities, States, and environmental resources. I also agree that today’s order complies with the National Environmental Policy Act (NEPA). After taking the necessary hard look at the Project’s impacts on environmental and socioeconomic resources, the order finds that the Project’s environmental impacts are acceptable considering the public benefits that will be provided by the Project.11 Further, the Commission quantified and considered greenhouse gas (GHG) emissions that are directly associated with the construction and operation of the Project, 12  consistent with the holding in Sierra Club v. FERC (Sabal Trail).13

Although I support this order, I also wrote separately to address what I perceive to be a misinterpretation of the Commission’s authority under the NGA and NEPA. There have been contentions that the NGA authorizes the Commission to deny a certificate application based on the environmental effects that result from upstream gas production,14 that the NGA authorizes the Commission to establish measures to mitigate GHG emissions, and that the Commission violates the NGA and NEPA by not determining whether GHG emissions significantly affect the environment. I disagree.

A close examination of the statutory text and foundation of the NGA demonstrates that the Commission does not have the authority under the NGA or NEPA to deny a pipeline certificate application based on the environmental effects of the upstream production of natural gas nor does the Commission have the authority to unilaterally establish measures to mitigate GHGs emitted by LNG or pipeline facilities. Further, the Commission has no objective basis to determine whether GHG emitted by LNG or pipeline facilities will have a significant effect on climate change nor the authority to establish its own basis for making such a determination.

Furthermore, Courts would treat with skepticism any attempt by the Commission to mitigate GHG emissions. Congress has introduced climate change bills since at least 1977,15 over four decades ago. Over the last 15 years, Congress has introduced and failed to pass 70 legislative bills to reduce GHG emissions—29 of those were carbon emission fees or taxes.16 For the Commission to suddenly declare such climate mitigation power resides in the long-extant NGA and that Congress’s efforts were superfluous strains credibility. Establishing a carbon emissions fee or tax, or GHG mitigation out of whole cloth would be a major rule, and Congress has made no indication that the Commission has such authority.

As discussed in the order, the Commission has fully complied with its NGA and NEPA obligations as required by the statutes and the courts.17 Because, there are disagreements as to what the statutes or the courts require, my concurrence is intended to
assist the Commission, courts, and other parties in their

Additional Natural Gas Project Concurrences

The Commission also issued orders approving a number of other NGA section 7 certificate orders (PennEast Pipeline Co., LLC, 170 FERC ¶ 61,198 (2020); Gulfstream Natural Gas System, L.L.C., 170 FERC ¶ 61,199 (2020); Florida Gas Transmission Co., LLC, 170 FERC ¶ 61,200; and Gulf South Pipeline Co., LP, 170 FERC ¶ 61,201 (2020)) . In each of these proceedings, I am issuing concurrences addressing the Commission’s authority under the NGA and NEPA similar to the discussion of related issues in my concurrence for Jordan Cove and my concurrences in previous proceedings.

ROE Incentives

Today, the Commission issues a notice of proposed rulemaking (NOPR) to update the transmission incentives that Congress directed be provided to utilities that join RTOs or ISOs. Among the proposed changes is moving from a risks and challenges-based incentive program to one focused on the benefits to customers through efficiency and reliability. We also propose to enhance the return on equity (ROE) incentive for utilities to join and participate in RTOs/ISOs in recognition that the benefits they provide customers come at a cost of time, money and complexity to the participating utilities.
The NOPR proposes incentives to promote technologies that can enhance the reliability,
efficiency, capacity, and operations of new and existing transmission facilities. These incentives, along with others discussed in the NOPR, have the potential to further enhance the development, reliability, and efficient operation of the electric transmission system. Through this NOPR, the Commission seeks comments about these proposals and will use this information to develop a final rule.

• 11 See also Weaver’s Cove Energy, LLC, 589 F.3d at 461 (“The NGA was originally passed in the 1930s to facilitate the growth of the energy-transportation industry . . . .”).
• 2215 U.S.C. § 717(b); id. § 717b(d); Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n of Ind., 332 U.S. 507, 520 (1947) (“The Natural Gas Act created an articulate legislative program based on a clear recognition of the respective responsibilities of the federal and state regulatory agencies. It does not contemplate ineffective regulation at either level. We have emphasized repeatedly that Congress meant to create a comprehensive and effective regulatory scheme, complementary in its operation to those of the states and in no manner usurping their authority.”).
• 33Jordan Cove Energy Project L.P., 170 FERC ¶ 61,202 at Environmental Conditions 11 and 27.
• 4415 U.S.C. § 717b(a) (2018); see also West Virginia Pub. Serv. Comm’n v. U.S. Dep’t of Energy, 681 F.2d 847, 856 (“[S]ection 3 sets out a general presumption favoring such authorization, by language which requires approval of an application unless there is an express finding that the proposed activity would not be consistent with the public interest.”).
• 55 15 U.S.C. § 717f(e) (2018).
• 66Kansas v. Fed. Power Comm’n, 206 F. 690, 705 (8th Cir. 1953) (“. . . . Congress has vested the power in the Federal Commission to regulate in the national interest the charges natural gas companies may make for the gas they sell in interstate commerce for resale . . . .”); Kern River Gas Transmission Co. v. Clark Cnty, Nev., 747 F. Supp. 1110 (Dec. 3, 1990) (“The very fact that Congress saw fit to provide a statutory scheme for authorizing ‘Certificates of Public Convenience and Necessity’ through the FERC pursuant to the Natural Gas Act indicates that there are substantial national interests at stake.”).
• 777 Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 599-600 (2012) (“The Commerce Clause, it is widely acknowledged, ‘was the Framer’s response to the central problem that gave rise to the Constitution itself.’ Under the Articles of Confederation, the Constitution’s precursor, the regulation of commerce was left to the States. This scheme proved unworkable, because the individual States, understandably focused on their own economic interests, often failed to take actions critical to the success of the Nation as a whole.”); Gonzalez v. Raich, 545 U.S. 1, 16 (2005) (“The Commerce Clause emerged as the Framers’ response to the central problem giving rise to the Constitution itself: the absence of any federal commerce power under the Articles of Confederation.”).
• 88 James Madison, The Federalist No. 42 in The Federalist Papers, 267 (C. Rossiter ed. 1961).
• 99Thatcher v. Tennessee Gas Transmission Co., 180 F.2d 644, 647 (5th Cir. 1950) (“Implicit in the provisions of the statute are the facts, among others, that vast reserves of natural gas are located in States of our nation distant from other States which have no similar supply, but do have a vital need of the product; and that the only way this natural gas can be feasibly transported from one State to another is by means of a pipe line. None of the means of transportation by water, land or air, to which mankind has successively become accustomed, suffices for the movement of natural gas. Consideration of the facts, and the legislative history, plan and scope of the Natural Gas Act, and the judicial consideration and application the Act has received, leaves us in no doubt that the grant by Congress of the power of eminent domain to a natural gas company, within the terms of the Act, and which in all of its operations is subject to the conditions and restrictions of the statute, is clearly within the constitutional power of Congress to regulate interstate Commerce.”).
• 1010Jordan Cove Energy Project L.P., 170 FERC ¶ 61,202 at PP 296-97.
• 1111Id. P 294.
• 12Jordan Cove Energy Project L.P., 170 FERC ¶ 61,202 at PP 258-62.
• 1313 867 F.3d 1357 (D.C. Cir. 2017). This case is commonly referred to as “Sabal Trail” because the Sabal Trail Pipeline is one of the three pipelines making up the Southeast Market Pipelines Project.
• 1414 Parties previously raised this argument for NGA section 3 applications. The courts, however, have found that the Commission cannot act on information related to the natural gas commodity in considering NGA section 3 permits. See Earthreports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016) (holding that the Commission reasonably declined to consider upstream domestic natural gas production as an indirect effect of the project); Sierra Club v. FERC, 827 F.3d 36, 47 (D.C. Cir. 2016) (“[T]he Commission’s NEPA analysis did not have to address the indirect effects of the anticipated export of natural gas.”).
• 1515 National Climate Program Act, S. 1980, 95th Cong. (1977).
• 1616 CONGRESSIONAL RESEARCH SERVICE, MARKET-BASED GREENHOUSE GAS EMISSION REDUCTION LEGISLATION: 108TH THROUGH 116TH CONGRESSES at 3 (Oct. 23, 2019), https://fas.org/sgp/crs/misc/R45472.pdfhttps://fas.org/sgp/crs/misc/R45472.pdf. Likewise, the CEQ issued guidance on the consideration of GHG emissions in 2010, 2014, 2016, and 2019. None of those documents require, let alone recommend, that an agency establish a carbon emissions fee or tax. oject.
• 1717 As I stated in my concurrence in Adelphia Gateway, LLC and which I repeat in my various concurrences today, “[t]hough the D.C. Circuit’s holding in Sabal Trail is binding on the Commission, it is not appropriate to expand that holding through the dicta in Birckhead so as to establish new authorities under the NGA and NEPA. The Commission is still bound by the NGA and NEPA as enacted by Congress, and interpreted by the U.S. Supreme Court and the D.C. Circuit. Our obligation is to read the statutes and case law in harmony.” Adelphia, 169 FERC ¶ 61,220 at P 12 n.29 (2019) (McNamee, Comm’r, concurring) (McNamee Adelphia Concurrence).