Dive Brief:
- Concerned that federal regulators may wind up authorizing construction of more gas pipeline capacity than is needed, Analysis Group has released a white paper proposing changes to how projects are considered and approved, particularly in light of how the industry is evolving and the tight links between gas transportation and power generation.
- Among the suggestions, the Federal Energy Regulatory Commission should consider changes to its review criteria, including possibly taking into account "uncertain forecasts of the need for incremental pipeline capacity."
- FERC last clarified its certification process in 1999, but since then, the agency has approved approximately 400 pipeline applications for an additional 180 billion cubic feet per day (Bcf/d) of pipeline capacity.
Dive Insight:
It's been almost two decades since FERC reconsidered its certification requirements for natural gas pipelines, and given the rapid changes to the power industry, Analysis Group says it may be time for the commission to look at some changes. The group's concern is that the market could develop excess capacity, in turn stranding investments.
Given the 180 Bcf/d of additional capacity that's been added since 1999, it may be a valid consideration. According to Analysis Group, average daily consumption is lower than the additional capacity that has been added. Consumption of natural gas in the United States during January 2017 was 93.1 Bcf/d, and the all-time peak-day consumption was 137 Bcf/d during the 2014 Polar Vortex.
"Some industry observers are increasingly concerned about the potential to overbuild capacity on the interstate system in light of anticipated transitions in the nation’s energy system in the future," the firm wrote. "And there are growing questions about FERC’s balancing of public benefits versus adverse consequences in the context of case-by-case review of applications."
The paper, commissioned by the Natural Resources Defense Council, concludes that a generic proceeding on the issues would be a more efficient method than a piecemeal debate. A broad review of policy "will allow diverse parties to comment on these issues generically, rather than taking them up in the context of individual pipeline dockets (which are technical and procedurally challenging for meaningful input by non-technical people)," Analysis Group concluded.
"The many changes underway in the natural gas and electric industries warrant a close evaluation of how need is demonstrated in pipeline certification cases."
Similar ideas have bubbled up from the legal system. Over the summer, the U.S. Court of Appeals for the District of Columbia Circuit ruled that federal regulators should have considered the impacts of climate change when considering whether to approve the Southeast Market Pipelines Project last year.
Analysis Group's paper suggests FERC take a hard look at the balancing of the benefits of additional pipelines "against adverse impacts in an era of debate over power system reliability implications and accelerating evidence of and concern over GHG emissions and climate-change risks resulting from current and future combustion of natural gas."
