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The Supreme Court ruling could lead to more limited FERC climate reviews for pipelines

The Supreme Court ruling could lead to more limited FERC climate reviews for pipelines

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A ruling by the US Supreme Court on June 30 can ensure that natural gas pipeline projects receive more limited climate assessments from federal regulators.
Source: David Tejada / Getty Creative via Getty Images

The U.S. Supreme Court’s recent decision limiting the U.S. Environmental Protection Agency’s authority to regulate global warming emissions may limit the efforts of the majority in the Federal Energy Regulatory Commission to raise climate change considerations in the agency’s decisions.

Republican FERC Commissioner Mark Christie and veterans of the commission told S&P Global Commodity Insights that the ruling could be read to support arguments that the FERC is limited in how much weight it can give to climate change concerns when deciding whether to grant permits. for natural gas infrastructure under the Natural Gas Act – a key issue in the FERC’s ongoing review of its decade-old licensing policy.

The decision in the case, West Virginia v. EPA (Nos. 20-1530), may prompt the FERC to take a less aggressive approach to regulating greenhouse gas emissions from natural gas plants than what the FERC’s majority originally proposed, according to legal experts. However, the decision may not prevent the regulator from assessing direct greenhouse gas emissions from the plants it regulates or require developers to reduce emissions.

And athough The Supreme Court decision can have far-reaching implications for federal rule-making, it is not expected to change the FERC’s approach in the power sector’s case processing significantly, experts said.

The Supreme Court’s decision was based on a reasoning known as the “main issue” doctrine to find that the EPA exceeded its authority under the Clean Air Act when it issued its Clean Power Plan under former President Barack Obama. The doctrine, invoked for the first time by a majority of judges, argues that courts should not adjudicate agencies in cases of “great economic or political importance” unless the US Congress has explicitly given the agencies the authority to act in such situations.

Christie quoted the main issue doctrine in a dissent in February, saying that the FERC “clearly exceeded the commission’s legal authority” when the Democratic majority voted to update FERC’s declaration on natural gas pipelines from 1999 and issue a temporary policy describing how it will assess greenhouse gas emissions in its project reviews. One month later, the FERC decided to withdraw the guidelines, convert them into drafts and seek further public comment after intense setbacks by industry and some lawmakers.

“We have no authority to reject a pipeline application based on a global estimate [greenhouse gas] impacts, nor do we have the authority to require an applicant for pipeline certificates to reduce indirectly [greenhouse gas] “Effects from activities outside our jurisdiction, such as an end user,” Christie told Commodity Insights. West Virginia. v. EPA make crystal clear. ”

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The court’s decision, Christie said, should not have come as a surprise.

“The practical impact is on all federal agencies – including the FERC, of ​​course – that try to claim legal authority over a major political issue where there is no clear allocation of authority from Congress,” Christie said.

Former FERC chairman Neil Chatterjee, a Republican, said the ruling “clearly shows the risk to the FERC if it tries to use its pipeline certification guidelines to regulate [greenhouse gas] assignments without clear authorization from Congress. ” The risk of a court overturning the FERC’s permit policy will be “particularly high” if the guidelines indirectly regulate emissions beyond the facility the FERC allows, Chatterjee said.

“This is a serious card that the pipeline industry now has to play to challenge the agency’s broad guidelines that will hinder infrastructure,” Chatterjee said.

The court’s ruling “strongly supports the parties who argue that the current majority at the FERC should not raise their concerns about climate change over the obligations under the Natural Gas Act,” analysts at ClearView Energy Partners said in a note to customers. The decision probably does not exclude the commission from assessing emissions from a project’s construction and operation, but it did suggest that the FERC would be on “thin legal grounds” if it were to condition or deny a permit for a project on upstream or downstream emissions, analysts said.

Other FERC-focused attorneys said the FERC Natural Gas Act Directive to determine whether a pipeline is required by “public convenience and necessity” gives the commission the authority to assess greenhouse gas emissions along with other environmental factors.

“It would be nonsense to claim that the climate effects of a project are not part of the general public,” said Gillian Giannetti, a lawyer with the Natural Resources Defense Council. “Federal courts have repeatedly ruled that the FERC must assess these emissions, and there is no reason for that to change.”

The rule “really limits” the consideration of pipeline emissions

Commissioner Christie said the FERC could consider direct greenhouse gas emissions from a specific facility that the FERC is considering allowing, and it could add “reasonable and feasible” conditions to reduce those emissions.

But Christie also claimed that the FERC could not reject a certificate application for a plant that would otherwise be found in the public interest under the Natural Gas Act due to concerns about estimated greenhouse gas emissions that may arise during a review required by the National Energy Policy Act. Christie refused to speculate on what measures to reduce direct emissions would be considered reasonable because it would depend on the facts of a specific procedure.

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FERC Chairman Richard Glick’s office declined to comment. FERC spokeswoman Mary O’Driscoll said in an email that the agency is still considering the Supreme Court decision.

The question of how the FERC should deal with climate change has been a source of division along party lines in the commission in recent years. Glick said in May that the commission would continue to try to develop a policy statement that is “legally valid” and supported by all or “a majority” of the five commissioners.

Glick has long argued for a more expansive interpretation of the FERC’s authorities in light of lower court decisions. The chairman of the board has quoted the U.S. Court of Appeals for the District of Columbia Circuits’ main point Sierra Club v. FERC decisions involving the Sabal Trail Transmission project which sets the standard that the FERC can refuse a pipeline permit if it determines that a project’s climate impact outweighs the benefits to the public.

Former Republican Commissioner Bernard McNamee, who had a more limited view of FERC authority during his tenure in the commission, said the FERC may lack the authority to demand a reduction in even direct greenhouse gas emissions if the agency also lacks authority to refuse a project on emissions. concerns.

“At the end of the day, this ruling really limits the FERC’s ability to assess greenhouse gas emissions at all in its assessment of pipeline projects or [liquefied natural gas] projects, “said McNamee.

Experts said it would be important to see how lower courts interpret the Supreme Court decision.

“The Federal Power Act and the Natural Gas Act are statutes that deal with direct economic regulation, and they do so in a very broad way,” fDemocratic FERC Commissioner Suedeen Kelly said in an interview.

Federal Power Act “is much different”

The Supreme Court delivered its decision as the FERC promotes a number of processes aimed at increasing the speed of development of electrical transmission and ensuring that the rules in the wholesale market account for the country’s transition to clean energy. But the decision is not expected to have a dramatic effect on the FERC’s power-related efforts, according to legal experts.

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IN West Virginia v. EPAThe Supreme Court ruled that the Clean Air Act does not authorize the EPA to limit greenhouse gas emissions from existing power plants at a level that will force a broad transition away from coal power.

But “the Federal Power Act is a lot different,” Jeff Dennis, a former FERC lawyer who is now CEO of Advanced Energy Economy, a clean energy trading group, said in an interview. Dennis explained that Congress explicitly passed the Federal Power Act to give the FERC expansive authority over wholesale electricity markets and intergovernmental transmission.

Ari Peskoe, director of Harvard University’s Electricity Law Initiative, added that the Supreme Court “may have missed the boat” by applying the main question doctrine to the FERC. Peskoe noted in an interview that about 30 years ago, the FERC approved market-based prices and mandated open access for natural gas pipelines and electrical transmission.

“These moves really made it easier to create today’s intergovernmental markets,” Peskoe said. “At this point, they are so entrenched in the industry that I do not think anyone really wants the Supreme Court to say that the FERC cannot approve market-based pricing, and that we need to go back to pricing for service costs for everything.”

More recently, the Supreme Court also confirmed FERC orders that establish bid-based market mechanisms and free participation of demand response resources on the supply side, said Commissioner Kelly, who is now a partner in the law firm Jenner & Block. “It is clear that none of these things were thought of in the 1930s when the statute was announced by Congress,” Kelly said.

In terms of practical consequences, Dennis predicted that the Supreme Court ruling would motivate states to take even bolder climate measures.

“I think you’re going to see states that are already leaning forward on climate issues and stepping up to face the climate crisis, make it even more aggressive,” Dennis said. “It will really put a continued premium on the FERC’s efforts to ensure that wholesale markets are better in line with government guidelines, and to ensure that transfer, planning and cost allocation policies truly reflect government needs.”

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