December 16, 2021
This morning I will speak to E-2 and the C and G items, and I will provide some comments on E-1 and H-1 following Staff presentations on these items.
E-2 (Accounting Notice of Inquiry)
I support issuing this notice of inquiry relating to the rate recovery and accounting treatment of industry association dues and related civic and political expenses. Regulated utilities have every right to engage in outreach to influence public opinion on political issues. Presumptively, however, they do not have the right to pass through the costs of this outreach to their customers’ bills. Regulated utilities also, of course, have the right to pay trade associations to engage in these activities on their behalf, again so long as those costs are not passed through to customers. This inquiry in no way impinges on regulated utilities’ ability to advocate for any issue of interest. At a minimum it is a good housekeeping exercise to ensure that customers are not inappropriately left footing the bill for their utility providers’ political aims simply because they were taken on by a trade association instead of the regulated entities themselves. I encourage stakeholders to participate in this docket to inform whether current rules and guidance are sufficient or whether changes are merited.
C and G items
I am voting in favor of six orders on today’s Agenda that, taken together, illustrate the profound challenges facing this Commission, the gas industry, states, and the public as the Commission carries out its responsibilities in evaluating natural gas infrastructure proposals.
C-4 and C-5 mark the demise of the PennEast Pipeline and the Jordan Cove LNG and Pacific Connector pipeline facilities. In the certification proceedings for these proposed projects, affected states, landowners, tribes, and environmental groups contended that the projects’ significant adverse impacts would outweigh their benefits. Following Commission approval of these projects, continuing opposition resulted in extended battles before state agencies and the courts. In the end, neither project obtained necessary state environmental permits to move forward. These failed projects underscore the serious skepticism that states and members of the public have toward proposed new natural gas pipelines and LNG facilities.
The circumstances described in Items C-1, C-2, C-3, and G-1 can only deepen that skepticism. The Commission orders address Midship Pipeline Company’s possible failure to comply with its certificate conditions and properly restore landowners’ property. They follow on the heels of the Commission’s March environmental compliance order against Midship and despite notable progress that FERC’s Office of Energy Projects and Dispute Resolution Service have made in addressing restoration problems. I support these orders with the hope they will finally resolve the remaining restoration issues that have festered for too long.
G-1 is an order to show cause issued to Rover Pipeline. Our Office of Enforcement alleges that Rover violated its certificate when its contractor deliberately used diesel fuel and other unauthorized substances in its drilling mud to hasten the construction process. The order also alleges that a subsequent inadvertent release caused 2 million gallons of contaminated drilling mud to flow into sensitive wetlands. I do not prejudge the outcome of this proceeding. For now, I simply observe that these serious allegations may reinforce public misgivings about the gas industry’s environmental stewardship.
Of course, it would be incorrect and unfair to suggest that the examples in today’s orders represent standard industry behavior. But they do accentuate the challenges involved and place a spotlight on the certification process in a way that should motivate industry to help identify reforms that would build public confidence in the Commission’s decision-making and compliance oversight.
To address the challenges ahead, we need to stop debating whether change is necessary and take the forward-looking steps required to meet our statutory obligations.
As we head into the New Year as a full commission, I call on my colleagues to join me in accomplishing three goals:
First, we should expeditiously issue a revised Pipeline Certification Policy Statement that provides for an updated, more searching evaluation of project need. In revising the Policy Statement, we should contemplate whether a need determination should consider how future demand for the project could be affected by policy change or private industry initiatives to reduce greenhouse gas emissions.
Second, we should complete our review of the potential for greenhouse gas mitigation measures as part of the Commission’s authorization of gas and LNG projects. 2021 brought too many tragic examples of the human, environmental, and economic consequences of climate change. In cases where need is established, we must assess how to factor into our decision-making the emissions contributing to those consequences, and how such emissions could be minimized.
Third, we should commence a systematic review of the lessons learned from today’s natural gas agenda items and others like them. Engaging in a critical assessment can inform the Commission whether there are specific additional certificate conditions or other actions needed to assure good stewardship of the public and private resources affected by gas infrastructure, and to protect environmental justice communities.
Now, I am not so naïve as to believe that taking these three steps will resolve all the concerns that states, landowners, Tribes, environmental justice communities, and other stakeholders have with the authorization of new gas infrastructure. However, they will enable the Commission to better identify and address those concerns as part of our decision-making and compliance oversight processes. Doing so will result in more durable decisions in which all stakeholders can have greater confidence.
All ships should rise thanks to the recently established Office of Public Participation, now under Director Elin Katz’s leadership, and our program to address environmental justice and equity under Senior Counsel Montina Cole’s leadership. I again commend Chairman Glick for initiating these efforts. Our decision-making will be strengthened as Elin, Montina, and their staff help us assure that the voices of all affected stakeholders are fully heard.
Discussion Item: E-1 | Line Ratings
First, thank you to Dillon Kolkmann and the rest of the staff who have worked so hard on this project over the past year.
Today’s final rule may not be as flashy or headline-grabbing as other Commission efforts, but it is nevertheless a very important effort. I’ve stated in the past that the challenges posed by extreme weather and the energy transition require will require both investments in new transmission infrastructure and more efficient use of our existing transmission system. Today’s final rule marks an important first step forward towards the latter.
By mandating the use of line ratings that more accurately reflect the true capacity of transmission lines, the final rule will result in significant reliability and economic benefits to customers through the reduction of congestion, curtailments, and re-dispatch. It may also lead to more accurate signals about where investments in new transmission facilities are actually needed.
I stress that this Rule does not finalize efforts to improve existing system efficiency but instead represents an important first step. As was noted in the presentation, the rule stops short of mandating dynamic line rating (DLR) implementation. The record in this proceeding demonstrates that DLRs may provide even more accurate line ratings than ambient adjusted ratings, and therefore even greater reliability and economic benefits to consumers. These are benefits that we can’t afford to leave on the table.
I am encouraged that today’s rule is being issued with unanimous support, and I was impressed with how the Commission offices and staff were able to work together to reach this outcome.
Looking forward to the new AD docket to address DLRs, I have one question: Will you say a bit more about the issues that you hope stakeholders will address in the AD docket, specifically as it relates to the benefits and cost/barriers to DLR implementation?
Discussion Item: H-1 | Dam Safety Rule Presentation
Thank you to Dave Capka, Tara DiJohn and all the staff who worked so hard on this rulemaking. These revisions to the requirements for Part 12 inspections are the culmination of a great deal of work and are an important step forward in the Commission’s oversight of dam safety.
- Strengthening our dam safety regulations inherently requires balancing the benefits of more stringent requirements with the cost burden to the regulated community, including to smaller entities that may have fewer resources. Can you explain how today’s revisions seek to strike an appropriate balance, including by limiting the applicability of the core reforms to projects with one or more element that has a high hazard potential?
- In its assessment of the Oroville Spillway Incident, the FERC After Action Panel stated that some dam safety incidents are of “a systematic or cultural nature that needs to be somehow overcome through direction by FERC to motivate dam owners to dig deeper for a better understanding of their structures and operational risks.” One element of this rule is codifying a requirement that hydro projects with a high hazard potential undergo periodic Potential Failure Mode Analyses and semi-quantitative risk analyses. Can you speak a bit to the value of those analyses in helping project owners identify operational risks and prioritize safety efforts?