Item C-4: Commissioner James Danly Dissent Regarding Algonquin Gas Transmission, LLC

Commissioner James Danly Statement
February 18, 2021
Docket No. CP16-9-012
Order:  C-4

I dissent in full from the majority’s “Order Establishing Briefing” in Algonquin Gas Transmission, LLC Docket No. CP16-9-012.  This order is both contrary to law and bad policy.  Before I explain my reasoning, a complete recitation of the background facts is necessary.

Background

Over four years ago, on January 25, 2017, the Commission issued Algonquin Gas Transmission, LLC (Algonquin) a certificate authorizing the construction and operation of the Weymouth Compressor Station as part of the Atlantic Bridge Project.[1]  The Commission found the project to be in the public convenience and necessity after considering the project need and the environmental effects of the project, including the effects that constructing and operating the Weymouth Compressor Station would have on safety, air quality, and environmental justice communities.[2]  The Certificate Order found that the Weymouth Compressor Station would not result in a significant increase in risk to the nearby public “[b]ased on Algonquin’s commitment to comply with [Pipeline and Hazardous Materials Safety Administration (PHMSA)] requirements.”[3]  In addition, the Commission’s Environmental Assessment (EA) estimated the fugitive emissions (including blowdowns) at the Weymouth Compressor Station, compared the emissions to a past health risk assessment performed on a similar facility, and found that the health risks from operating the compressor station would not be significant.[4]     

In December 2018, the U.S. Court of Appeals for the D.C. Circuit upheld the Certificate Order, including the Commission’s assessment of impacts on public safety and environmental justice.[5]

On November 27, 2019, Commission staff authorized Algonquin to commence construction of the Weymouth Compressor Station after confirming that Algonquin had received all federal authorizations relevant to the approved activities.  Those federal authorizations included its Air Quality Plan approved by the Massachusetts Department of Environmental Protection (Massachusetts DEP). 

Late summer last year, Algonquin began testing its compressor station facilities as required by PHMSA.[6]  Section 192.503 of PHMSA’s regulations prohibits any person from operating a new segment of pipeline until “(1) [i]t has been tested in accordance with this subpart and § 192.619 to substantiate the maximum allowable operating pressure; and (2) [e]ach potentially hazardous leak has been located and eliminated.”[7]  Further, section 192.503 requires the test medium to be “liquid, air, natural gas, or inert gas.”[8]      

On September 11, 2020, during Algonquin’s testing of equipment, a gasket failed, triggering the manual activation of its emergency shutdown system.  Section 192.167 of the PHMSA’s regulations requires compressor stations to have emergency shutdown systems that blow down the station piping.[9]  Consequently, Algonquin’s emergency shutdown system blew down natural gas, releasing 169,000 standard cubic feet (scf) of natural gas and 35 pounds (lbs) (or 0.0175 tons[10]) of Volatile Organic Compounds (VOCs), which is approximately 0.19 percent of the estimated 9.0 tons of annual fugitive VOCs evaluated by the EA.[11]  Thereafter, Algonquin continued testing and calibrating activities.[12]  The record does not show Massachusetts DEP initiating a compliance action. 

On September 16, 2020, Algonquin requested authorization to place the Weymouth Compressor Station into service pursuant to Environmental Condition 10 of the Certificate Order.  Environmental Condition 10 requires Algonquin to “receive written authorization from the Director of OEP before commencing service on each discrete facility of the Project” and provided that “[s]uch authorization will only be granted following a determination that rehabilitation and restoration of the right-of-way and other areas affected by the Project are proceeding satisfactorily.”[13]

On September 24, 2020, Commission staff authorized Algonquin to place its Weymouth Compressor Station into service, finding that “Algonquin and Maritimes [had] adequately stabilized areas disturbed by construction and that restoration is proceeding satisfactorily.”[14]

On September 30, 2020, the Weymouth Compressor Station experienced an unplanned emergency shutdown, releasing approximately 195,000 scf of natural gas, including 27 lbs (or 0.0135 tons) of VOCs, which is approximately 0.15 percent of the estimated 9.0 tons of annual fugitive VOCs evaluated by the EA.  The cause of the unplanned shutdown was unknown.  That same day, Algonquin voluntarily shut in its system.[15]  The record does not show Massachusetts DEP initiating a compliance action. 

On October 1, 2020, as amended on October 30, 2020, PHMSA issued a Corrective Action Order directing Algonquin to not operate the compressor station until authorized to do so, develop a Restart Plan for approval, and complete a root cause failure analysis.[16]

On October 23, 2020, Petitioners[17] filed a timely request for rehearing of Commission staff’s September 24, 2020 Letter.  First, they argued that the Commission “failed to complete a situational assessment and strategic responses for public safety and environmental impacts associated with incidents involving natural gas infrastructure.”[18]  Second, they argued “[t]he unplanned emergency shutdowns and COVID-19 pandemic . . . rise to the level of a change in core circumstances” requiring the Commission to reopen the record under Rule 716 of the Commission’s Rules of Practice and Procedure.[19]  Petitioners did not challenge Commission staff’s finding that restoration and rehabilitation was proceeding satisfactorily.

On November 23, 2020, the Commission issued a notice denying Petitioners’ rehearing request by operation of law.

On November 25, 2020, PHMSA approved Algonquin’s Restart Plan and authorized Algonquin to return the compressor station facilities to a pressure not exceeding 80 percent of full operating pressure.[20]

On January 22, 2021, PHMSA approved the temporary operation of the Weymouth Compressor Station at full pressure, stating “PHMSA has reviewed the [root cause failure analysis] and the data submitted on [Algonquin’s] preventative and mitigative measures performed and based on our technical review, it is our determination to allow the temporary removal of the pressure restriction.”[21]

On January 25, 2021, Algonquin placed the Weymouth Compressor Station into service.[22]

Now on February 18, 2021—over four years after the Commission issued the Certificate Order authorizing the operation of the Weymouth Compressor Station, nearly four months after Petitioners’ timely rehearing request, after PHMSA has authorized Algonquin to resume operating the Weymouth Compressor Station at full pressure, and without any indication that Algonquin is out of compliance with its air permit—the Commission is issuing this “Order Establishing Briefing.”  

The Order is an Attempt to Revisit the Certificate Proceeding and is Contrary to Law

This Order is an Attempt to Revisit the Certificate Order

It is somewhat difficult to make sense of this order.  On its face, it bears the benign-sounding title “Order Establishing Briefing.”  Those sorts of orders are issued now and again; they are procedural and, one would think, warrant little scrutiny.  But briefing for what?  The Certificate Order and the Authorization Order are both final—the Certificate Order was issued more than four years ago, and as for the Authorization Order, rehearing was denied by operation of law and the opportunity to appeal lapsed without a petition for review.  Both of those proceedings appear to be irretrievably final.  And, in fact, this order is neither of those proceedings.  The Commission has assigned a new sub-docket number, -012, to distinguish it from the rehearing proceeding.[23]  Confusion is justified as to what exactly is at issue since the Order Establishing Briefing cites to pleadings filed in the rehearing sub-docket.

Procedural oddities aside, this order does not look like other orders, by which I mean that those few people who spend a large amount of their time reading Commission orders will enjoy the familiarity of the caption and paragraph format but will be left with vague unease as they notice that the order is missing some fairly standard contents.  It has no background section.  It offers no basis in law for the Commission’s action.  It provides no explanation as to what it is trying to achieve other than a vague promise of the “further consideration” of something.[24]  In fact, in the last 10 years, the Commission has never issued an order captioned “Order Establishing Briefing” and to the extent that free-standing briefing orders have issued during that time, they have issued following remand from appellate courts, or to address issues not resolved in settlement, motions for interlocutory appeal, and investigations into the justness and reasonableness of rates.[25]

So what exactly does this order purport to do?  It states that staff authorized Algonquin to place the Weymouth Compressor Station into service and it mentions that a timely rehearing request and other pleadings were filed.  Then it states that the Commission “believe[s] that the concerns raised regarding the operation of the project warrant further consideration by the Commission and set[s] the matter for paper briefing to address” a series of appended questions.[26]  By its plain language, the order requests information on a set of discrete topics for the Commission’s “further consideration.”  To what end?  Among other things, the questions ask, rather ominously, (1) whether the Commission “should allow the Weymouth Compressor Station to enter and remain in service”; (2) whether the Commission should “reconsider” the current operation of the compression station; (3) whether the Commission “should consider” changes in air emissions or public safety impacts; (4) whether there are any “additional mitigation measures” the Commission should “impose” (presumably by means of revising Environmental Condition 10 of the Certificate Order); and (5) what would happen if the Commission were to “stay or reverse” the Authorization Order.

It would appear that the Commission is collecting comments in order to determine whether it should re-litigate the Certificate Order absent a breach or violation of the certificate terms and conditions.  Though the majority may be laboring under the impression that this Order Establishing Briefing is no more than a late attempt to grant a (now denied and final, non-appealable) rehearing request sought following the Authorization Order, the Order asks questions that go directly the Certificate Order only.  Only by re-litigating the Certificate Order and modifying Environmental Condition 10 of the Certificate Order can the Commission “reconsider the current operation of the Weymouth Compressor Station,” consider “changes in . . . projected air emissions or public safety impacts,” “impose” “additional mitigation measures,” or “stay or reverse the Authorization Order.”  Moreover, none of the questions address the basis for the Authorization Order—whether the rehabilitation and restoration of lands affected by project construction were proceeding satisfactorily.

The Order Establishing Briefing is Contrary to Law

This Order is legally infirm because the action is simply beyond the Commission’s authority.  Even if it were not ultra vires, the Commission has fallen short of its Administrative Procedure Act (APA) obligations by failing to explain why it departs from the Commission’s rules and policies.

There is a good reason for why the Commission fails to cite legal authority for today’s order—“[t]he Commission has already approved the [c]ertificate, and there is nothing in the law that allows us to revisit that decision.”[27]  Just so.  The current Commission may believe that the Commission, voting unanimously, acted improvidently in early 2017.  They may believe that circumstances have changed.[28]  They may believe that the parties seeking rehearing were completely correct and that rehearing should have been granted.  They may be right.[29]  Regardless, there is no basis in law to re-examine final orders.

The Commission, as a mere creature of statute, can only act pursuant to law by which Congress had delegated its authority.[30]   Although courts afford agencies great discretion to establish the procedures by which they conduct their business, that business, however fashioned, must be conducted within the bounds of that delegation.[31]

Nowhere does NGA section 7 authorize the Commission to unilaterally revisit final certificate orders or establish briefing schedules to inform such actions.  Quite the contrary.  NGA section 7(e) states:  “a certificate shall be issued . . . if it is found that the applicant is able and willing properly to do the acts . . .”[32] and “[t]he Commission shall have the power to attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions . . . .”[33]  So conditioned, the Commission’s regulations require the pipeline to then accept the certificate order.[34]  In sum, the Commission’s power is to grant, with conditions, a certificate of public convenience and necessity and to enforce the certificate.  Absent a violation of those conditions, once the certificate issues and becomes final, the Commission has never revisited a certificate order and has in fact always doubted its ability to do so.[35] 

Many are quick to turn to NGA section 16 when all else has failed, but it is often freighted with more weight than it can bear.  Section 16 does not represent an independent grant of authority: “[t]he Commission shall have power to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as it may find necessary or appropriate to carry out the provisions of this chapter.”[36]  This does not create new powers under the NGA or obviate NGA section 7(e), which limits the Commission’s authority over a certificate to the certificate’s conditions.[37]  Moreover, like its counterpart in FPA section 309, the use of NGA section 16 must be “consistent with the authority delegated to it by Congress.”[38]  But the order here does not do so because it flies in the face of the statutory process for rendering final orders subject to judicial review.

No other law, regulation, or policy can be relied upon to revisit a certificate.  Rule 716, which allows the Commission to reopen the record in certain proceedings,[39] explicitly applies only to initial or revised initial decisions and, moreover, does not apply to final, unappealable orders.[40]  And even if there were another source of authority, the Commission has failed to explain how the exercise of that authority in this proceeding can be squared with the Commission’s longstanding practice of leaving final, unappealable orders undisturbed.  Failure to set forth that explanation, in the face of so long a practice, is necessarily a violation of the APA.[41] 

The Order is Bad Policy

On top of being unlawful, the Order is bad policy.  Issuing an order that appears to revisit final, unappealable certificate orders impairs regulatory certainty and arrogates to the Commission authority it does not have.

Regulatory certainty, of which finality is a large part, is absolutely critical to achieving the goals of the NGA.  “[W]ithout the sanctity of certificates granted under Sections 3 and 7 of the Natural Gas Act, there would be no private financing, and without private financing, there would be no projects.”[42]  Further, “the revocation or adverse modification of a certificate or authorization . . . when the certificate or authorization forms the basis of project financing would be a clear violation of the basic constitutional principles of due process.”[43]

Worse still, the Order Establishing Briefing impairs the finality normally enjoyed by certificate holders, based on issues well outside our jurisdiction.  The Order asks: whether the Commission should revisit the Certificate Order on the basis of pipeline operational safety and air emissions.  Reading this, one would presume that Algonquin is not in compliance with pipeline safety and air emission requirements and the Commission has the authority and expertise to address the non-compliance.  Neither of those presumptions, however, is correct. 

First, as I note above, PHMSA and Massachusetts DEP appear satisfied that Algonquin is complying with their regulations and requirements.  Nearly one month ago, PHMSA authorized Algonquin to resume operating the Weymouth Compressor Station at full pressure.[44]  Massachusetts DEP approved the Air Quality Plan for the Weymouth Compressor Station, finding it is in compliance with the Air Pollution Control regulations and current air pollution control engineering practice.[45]  The record does not show Massachusetts DEP initiating a compliance action. 

Second, Congress expressly delegated to the Secretary of the Department of Transportation the authority to regulate pipeline safety[46] and to the U.S. Environmental Protection Agency (EPA) the authority to regulate air emissions.[47]  The Commission’s long-standing practice is to rely on PHMSA to regulate pipeline safety and the EPA, or its state delegated agency, to regulate air emissions.[48]  It is baffling on what factual basis the Commission could modify the Certificate Order and what additional measures the Commission could impose that PHMSA and Massachusetts DEP have not considered and would not interfere with their approvals.

Intended or not, the message from this order is clear:  even if a pipeline has its certificate, a court upholds that certificate, and that pipeline is in compliance, the Commission can now find a way to modify, or even possibly revoke, the certificate.  This order requires Algonquin to relitigate the Certificate Order affirmed over three years ago.  Algonquin has now been aggrieved.[49]  This order threatens the certainty of the certificate upon which the pipeline’s business is founded, disregards the principles of final judgement upon which all litigants rely, and violates the specific statutory procedures devised by Congress to render and challenge final orders.  The order manufactures what is essentially an end-run around the statutory process for rehearing and judicial review that is far more dangerous and disruptive than the Commission’s past abuse of tolling orders,[50] because tolling orders only delayed the final resolution of cases, but did not constitute surprise attacks on long-final orders.  Algonquin should appeal immediately. 

For these reasons, I respectfully dissent.