Docket No. CP22-495-000
I dissent from the Order[1] for two reasons. First, the administrative record is insufficient to support the Order’s conclusion that the Texas to Louisiana Project is required by the public convenience and necessity. Second, the majority’s insistence that there are no acceptable tools for determining the significance of greenhouse gas (GHG) emissions is unsupported and arbitrary.
The Natural Gas Act (NGA) provides that, before issuing a certificate authorizing a proposed natural gas project, the Commission must find that the project “is or will be required by the present or future public convenience and necessity.”[2] As the Supreme Court has explained, the Commission must consider “all factors bearing on the public interest” in determining the public convenience and necessity.[3] According to the Court, the statutory standard “connotes a flexible balancing process.”[4] In 1999, the Commission adopted its Certificate Policy Statement establishing how it will balance a project’s public benefits against its potential adverse effects, including environmental impacts.[5] For the reasons explained below, the majority’s public interest determination contravenes the Certificate Policy Statement.
According to the Certificate Policy Statement, to demonstrate that a proposed project is in the public interest, “an applicant must show public benefits that would be achieved by the project that are proportional to the project’s adverse impacts.”[6] Transco has failed to meet that evidentiary burden. Transco’s precedent agreement with gas producer EOG Resources, Inc. (EOG) is the sole evidence in the record supporting the need for, and benefit of, the Texas to Louisiana Project. To be sure, the precedent agreement is evidence of EOG’s need (or at least desire) for service from Transco, but it is not sufficient evidence of the public’s potential benefit from the project.
The Certificate Policy Statement calls for the submission of “relevant evidence” of public benefits, and states “[v]ague assertions of public benefits will not be sufficient.”[7] Transco submitted no evidence substantiating the public benefits claimed in its certificate application.[8] Indeed, there is scant evidence that new construction is actually necessary to serve EOG.[9] Unlike the more typical certificate proceedings in which I voted to approve a certificate, where project shippers submitted supporting statements explaining their need for the project,[10] EOG has filed nothing. For its part, Transco makes only “vague assertions” of public benefits, none of which can be credited under the Certificate Policy Statement.
The Certificate Policy Statement further provides that “the evidence necessary to establish the need for the project will usually include a market study.”[11] None was submitted in this proceeding. The majority’s ipse dixit finding that the project will “enhance[] the efficiency of the domestic natural gas market in general”[12] is drawn from thin air.
The Commission’s ability to assess the public convenience and necessity in this case is severely undermined by EOG’s failure to identify “specific end-use markets that could be indirectly served by the project-transported gas.”[13] As the Supreme Court has found, the Commission may consider the end use of gas in its public interest determinations under section 7 of the NGA.[14] And it behooves project applicants to provide that information to us. For example, the Commission can readily understand the public benefit of building new pipeline capacity to serve a local distribution company or a gas-fueled electric power plant. Here, we have no information on how the gas will be used, making the paucity of record evidence on public benefits all the more damaging to Transco’s cause.[15]
It is well-established that a precedent agreement for 100% of a project’s capacity provides “significant evidence of the need for [a] proposed project,” as the Order finds here.[16] However, as the D.C. Circuit has observed, that does not mean that a precedent agreement is “always sufficient to show that construction of a proposed new pipeline ‘is or will be required by the present or future public convenience and necessity.’”[17] Most cases holding that the Commission could rely on precedent agreements to establish need or public benefit are distinguishable from this case because the Commission in those instances either had information concerning the end use of the gas to be transported or had additional evidence supporting its need finding or both.[18] What makes this case exceptional is the combination of no information on actual end use and the lack of any additional supporting evidence of public benefits beyond the precedent agreement. On this threadbare record, it is arbitrary and capricious for the Commission to conclude that the Texas to Louisiana Project is required by the public convenience and necessity.
The second reason for my dissent is the Order’s unsatisfactory treatment of the project’s GHG emissions. In my concurrence in the 2023 Transco order[19], I explained the history of the language in Paragraph 104 of the Order, which is the so-called “Driftwood compromise.”[20] In Driftwood, the majority suddenly adopted new language declaring that there are no methods for assessing the significance of GHG emissions, and particularly criticizing the Social Cost of GHGs protocol.[21] I have dissented from this language in Driftwood and subsequent orders because (1) it reflects a final Commission decision that it cannot determine the significance of GHG emissions, despite the fact the Commission has never responded to comments in the GHG Policy Statement docket[22] addressing methods for doing so; and (2) the language departs from previous Commission precedent without reasoned explanation, thereby violating the Administrative Procedure Act.[23] I dissent from Paragraph 104 of this Order for the same reasons.
As I have said before, the Commission has not seriously studied whether the Social Cost of GHGs protocol or another tool can or should be used to determine significance. Rather, the majority simply decided there is no acceptable method, with no explanation of why the Commission departed from the approach taken in earlier certificate orders.[24] I cannot countenance the Commission’s continued refusal to objectively consider potential methods for assessing the impacts of GHG emissions and transparently incorporate GHG impacts in its balancing of factors bearing on the public convenience and necessity under the Natural Gas Act.
Since joining the Commission, I have supported updating and revising the Certificate Policy Statement because the circumstances impacting the need for new pipeline capacity are far more complex than they were in 1999 and the Commission’s policies and practices have not evolved to address that complexity.[25] As the U.S. energy system transition accelerates and new factors come into play (such as the increased demand for liquefied natural gas abroad), it is more important than ever that the Commission have a full understanding of each proposed project’s potential benefits and costs, including environmental costs. While working to modernize the Certificate Policy Statement, the Commission must at least insist on adherence to the existing policy if it is serious about ensuring the orderly development of natural gas supplies.[26]
For these reasons, I respectfully dissent.
[2] NGA § 7(e), 15 U.S.C. § 717f(e).
[3] Atl. Refin. Co. v. Pub. Serv. Comm’n of N.Y., 360 U.S. 378, 391 (1959).
[4] FPC v. Transcon. Gas Pipe Line Corp., 365 U.S. 1, 23 (1961).
[5] See Certification of New Interstate Nat. Gas Pipeline Facilities, 88 FERC ¶ 61,227 (1999), clarified, 90 FERC ¶ 61,128, further clarified, 92 FERC ¶ 61,094 (2000) (Certificate Policy Statement).
[6] Certificate Policy Statement, 88 FERC ¶ 61,227, at 61,748 (emphasis added).
[7] Id. (emphasis added).
[8] Transco’s certificate application states that the project will enable EOG “to supply a wide range of customers (which may include LNG terminals and industrial customers) along the Texas and Louisiana Gulf Coast and to gas and power utilities. In providing access to incremental natural gas supply, the Project will increase supply competition to existing and developing markets as well as increase resiliency and reliability in the markets the Project Shipper will serve.” Transco Application at 7-8.
[9] In its certificate application, Transco states that “[a]ccess to markets from Project Shipper’s production basins is currently constrained by limited pipeline infrastructure, and the low scheduling priority and potential intermittency or unavailability of interruptible transportation renders it inadequate for Project Shipper to reliably serve its customers.” Transco Application at 11. Transco submitted no evidence substantiating this statement. Staff’s environmental assessment (EA) for the project stated that staff reviewed other pipeline systems in the vicinity of Transco’s proposed project and concluded they would be unable to serve the same supply points without construction of additional facilities. EA at 87-88. According to the EA, “[i]t is anticipated that these pipelines are at capacity, but none of these entities have offered any information for the record to demonstrate their feasibility to meet the Project’s objectives.” Id. at 87. (emphasis added). The EA does not cite to any source material, making it impossible to fully understand and confirm the accuracy of the EA’s analysis. Apparently to bolster the EA after the fact, the Order explains that the electronic bulletin boards (EBBs) of other interstate pipelines in the area do not indicate they have capacity available. See Order, 186 FERC ¶ 61,047 at P 52 n.91. However, the Order fails to mention that EBBs show only next day capacity availability and reveal nothing about long-term availability. Neither the EA nor the Order reflects whether there has been any consideration of EOG’s ability to enter into a package of transportation agreements on two or more pipeline systems as an alternative to the agreement with Transco. Simply put, the unsupported statements in Transco’s application, the EA, and the Order do not constitute substantial evidence of a capacity constraint preventing EOG from reaching whatever markets it plans to serve (which is itself unknown).
[10] For example, in Equitrans, L.P., 183 FERC ¶ 61,200, at PP 10, 15 (2023), the project’s anchor shipper, EQT, filed a supporting statement explaining its need for the project. Moreover, Equitrans, the project sponsor, submitted information from the U.S. Energy Information Administration (EIA) showing increasing demand for natural gas in the target market. Id. at P 15 n.13. The Certificate Policy Statement specifically cites EIA market growth projections as acceptable evidence of need. Certificate Policy Statement, 88 FERC ¶ 61,227, at 61,748.
[11] Id.
[12] Order, 186 FERC ¶ 61,047 at P 16.
[13] See id. at P 98.
[14] See FPC v. Transcon. Gas Pipe Line Corp., 365 U.S. at 31 (holding that the Commission did not abuse its discretion in considering end use among other factors in determining the public convenience and necessity). Subsequent legislation deregulating natural gas prices did not alter the Commission’s authority under section 7 of the NGA. Neither the Natural Gas Policy Act of 1978 (NGPA) nor the Natural Gas Wellhead Decontrol Act of 1989 (Decontrol Act) affected the Commission’s jurisdiction over interstate natural gas pipelines, including its authority to consider end use in section 7 certificate decisions. See NGPA, 15 U.S.C. §§ 3301-3432; Decontrol Act, Pub. L. No. 101-60, 103 Stat. 157 (1989). Both the Senate and House Reports for the latter statute stated that the legislation “does not deregulate natural gas pipelines.” S. Rep. No. 101-38, at 8 (1989); H.R. Rep. No. 101-29, at 4 (1989).
[15] The record in this case raises more questions for me than it answers. For example, the Order finds there is too little information available about the sources of EOG’s gas and the customers for that gas to find either the upstream or downstream greenhouse gas emissions associated with the project to be foreseeable. See Order, 186 FERC ¶ 61,047 at PP 98-99. How, then, for purposes of showing “market support” and “public benefits” in its certificate application, does Transco know that EOG’s “gas volumes are produced at a relatively uniform rate, are sold to its customers accordingly, and require reliable, consistent access to markets”? See Transco Application at 11, 21.
[16] Order, 186 FERC ¶ 61,047 at P 16.
[17] Envt’l Def. Fund v. FERC, 2 F.4th 953, 972 (D.C. Cir. 2021) (emphasis in original) (finding that the Commission acted arbitrarily in failing to “look behind” affiliate precedent in particular circumstances presented).
[18] See, e.g., Township of Bordentown v. FERC, 903 F.3d 234, 263 (3d Cir. 2018) (precedent agreement was with a natural gas distribution company, which stated it entered into the agreement to enhance reliability and resiliency in a specific area of its service territory); Meyersville Citizens for a Rural Cmty. v. FERC, 783 F.3d 1301, 1307 (D.C. Cir. 2015) (precedent agreements were with two municipal utilities and a natural gas distribution company); City of Oberlin v. FERC, 937 F.3d 599, 606 (D.C. Cir. 2019) (pipeline sponsor entered precedent agreements with eight shippers, including natural gas distribution companies and an electric utility company; the Commission described the shippers in Nexus Gas Transmission, LLC, 160 FERC ¶ 61,022, at P 41 (2017)).
[19] See Transcon. Gas Pipe Line Co., 184 FERC ¶ 61,066 (2023) (Clements, Comm’r, concurring at PP 2-3) (Transco).
[20] See id. (Phillips, Chairman, and Christie, Comm’r, concurring at PP 1-2).
[21] See Driftwood Pipeline LLC, 183 FERC ¶ 61,049, at PP 61, 63 (2023) (Driftwood).
[22] Docket No. PL21-3.
[23] See Driftwood, 183 FERC ¶ 61,049 (Clements, Comm’r, dissenting at PP 2-3 & n.161); see also ANR Pipeline Co., 185 FERC ¶ 61,191 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Transcon. Gas Pipe Line Co., 185 FERC ¶ 61,133 (2023) (Clements, Comm’r, dissenting in part at PP 35, 44); Transcon. Gas Pipe Line Co., 185 FERC ¶ 61,130 (2023) (Clements, Comm’r, dissenting in part at PP 100-101); Texas LNG Brownsville LLC, 185 FERC ¶ 61,079 (2023) (Clements, Comm’r, dissenting at PP 9-10); Rio Grande LNG, LLC, 185 FERC ¶ 61,080 (2023) (Clements, Comm’r, dissenting at PP 9-10); Gas Transmission Northwest, LLC, 185 FERC ¶ 61,035 (2023) (Clements, Comm’r, concurring in part and dissenting in part at PP 7-8); WBI Energy Transmission, Inc., 185 FERC ¶ 61,036 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Venture Global Plaquemines LNG, LLC, 185 FERC ¶ 61,037 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Texas Eastern Transmission, LP, 185 FERC ¶ 61,038 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Trailblazer Pipeline Company LLC, 185 FERC ¶ 61,039 (2023) (Clements, Comm’r, dissenting in part at PP 2-4); Equitrans, L.P., 185 FERC ¶ 61,040 (2023) (Clements, Comm’r, dissenting in part at PP 2-4); Port Arthur LNG Phase II, LLC, 184 FERC ¶ 61,184 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Venture Global Calcasieu Pass, LLC, 184 FERC ¶ 61,185 (2023) (Clements, Comm’r, dissenting in part at PP 2-4); Northern Natural Gas Company, 184 FERC ¶ 61,186 (2023) (Clements, Comm’r, dissenting in part at PP 2-3); Texas Eastern Transmission, LP, 184 FERC ¶ 61,187 (2023) (Clements, Comm’r, dissenting in part at PP 2-4); Equitrans, L.P., 183 FERC ¶ 61,200 (2023) (Clements, Comm’r dissenting at PP 2-3); Commonwealth LNG, LLC, 183 FERC ¶ 61,173 (2023) (Clements, Comm’r, dissenting at PP 5-8); Rio Grande LNG, LLC, 183 FERC ¶ 61,046 (2023) (Clements, Comm’r, dissenting at PP 14-15); Texas LNG Brownsville LLC, 183 FERC ¶ 61,047 (2023) (Clements, Comm’r, dissenting at PP 14-15).
[24] Before its decision in Driftwood, the Commission had explained that it was not determining the significance of GHG emissions because the issue of how to do so was under consideration in the GHG Policy Statement docket. See, e.g., Transcon. Gas Pipe Line Co., 182 FERC ¶ 61,006, at P 73 & n.174 (2023); Columbia Gas Transmission, LLC, 182 FERC ¶ 61,171, at P 46 & n.93 (2023). To depart from prior precedent without explanation violates the Administrative Procedure Act. See, e.g., West Deptford Energy, LLC v. FERC, 766 F.3d 10, 17 (D.C. Cir. 2014) (“[T]he Commission cannot depart from [prior] rulings without providing a reasoned analysis. . . .”) (citations omitted).
[25] See Transcon. Gas Pipe Line Co., 182 FERC ¶ 61,006 (2023) (Clements, Comm’r, concurring at P 1) (order granting certificate to Transco’s Regional Energy Access Expansion project).
[26] See NAACP v. Fed. Power Comm’n, 425 U.S. 662, 669-70, 670 n.6 (1976) (a principal aim of the NGA is to encourage the “orderly development of plentiful supplies of . . . natural gas at reasonable prices,” and subsidiary purposes include environmental protection).