September 2017, Vol. 244, No. 9

Government

Government

Appeals Court Decision May Trump House Pipeline Bill

The House passed two pipeline bills – which could run into trouble in the Senate for lack of Democratic support – amid continuing industry unhappiness with federal and state regulatory agency foot-dragging on permit approvals.

The U.S. Court of Appeals for the District of Columbia Circuit, which has authority to clarify federal regulations, made decisions on two separate pipeline cases in June. In one of them, the court clarified that the Federal Energy Regulatory Commission (FERC) has the right to grant a pipeline an exemption from state law in the event a state drags its feet on permitting new construction.

The court’s actions – and one of the House bills – are particularly germane with regard to Transco’s 200-mile Atlantic Sunrise pipeline, meant to deliver Pennsylvania shale gas south. FERC approved the project in February. However, the state of Pennsylvania has yet to grant the three permits necessary for the $3 billion project to break ground.

However, the D.C. court, while clarifying FERC’s exemption authority, a victory for the pipeline industry, also made it clear that deadlines for issuance of  permits under the Clean Water Act (12 months) and Clean Air Acts (18 months) take precedence over timeframes FERC typically establishes under its Natural Gas Act authority. FERC normally gives state and federal agencies 90 days to issue permits after it approves an environmental impact statement.

“We are still working with the Pennsylvania Department of Environmental Protection and are awaiting clearances from the state before we can begin pipeline construction in Pennsylvania,” said Transco spokesman Chris Stockton. The project includes 183 miles of greenfield pipeline to gas from Pennsylvania and move it south to Maryland, Virginia, North Caroline and South Carolina.

“After nearly three years of intense regulatory scrutiny, it is time for our own state government to complete its review of this important infrastructure project so that Pennsylvanians can immediately benefit from the economic growth and jobs it promises to deliver,” said Rep. Mike Turzai, speaker of the Pennsylvania House of Representatives, in a June statement.

The failure of states to participate in a timely manner in the FERC completion of an environmental impact statement and their ability to withhold permits after FERC project approval were the rationales for the Promoting Interagency Coordination for Review of Natural Gas Pipelines Act (H.R. 2910) passed by the House on July 19 on a mostly party-line vote. The legislation requires that federal and state agencies conduct their respective permit reviews concurrently with FERC as it develops its environmental impact statement.

The second bill that passed the House was the Promoting Cross-Border Energy Infrastructure Act (H.R. 2883). It replaces the presidential permitting approval needed before constructing an oil and gas pipeline or electric transmission line that crosses a border with Canada or Mexico with a more transparent, efficient and effective review process.

Because H.R. 2910, strongly supported by the Interstate Natural Gas Association of America (INGAA), may get hung up in the Senate, the bigger impact on pipeline construction approvals may come from the two cases decided by the D.C. appeals court. One case involved Millennium Pipeline Company, LLC which asked the court to force New York state to certify Millennium’s request for a water quality certification, required under Section 401 of the Clean Water Act, that would allow Millennium to construct its Valley Lateral Project. Millennium submitted its application with the state agency in November 2015, but almost 19 months later, the agency has still failed to act on Millennium’s application.

In the other case, Tennessee Gas Pipeline Co., LLC, a subsidiary of Kinder Morgan, argued that a local government was refusing to issue a permit under the Clean Air Act for additional compressor capacity.

FERC approved Millennium’s 7.8-mile Valley Lateral in November 2016 after completing an environmental impact statement earlier that year. Millennium applied for a water quality certificate from the New York Department of Environmental Conservation in November 2015. The NYDEC did not participate in that FERC EIC because it argued Millennium had not submitted a completed permit application until August 2016.

Under the Clean Water Act, New York had 12 months to complete its review of the Millennium application. The state argued the clock began in August 2016 when it judged Millennium to have submitted a complete application. The D.C. Court essentially disagreed and said Millennium could file a request for an exemption from the CWA with FERC, and FERC could grant it. FERC has never granted an exemption like that for a pipeline, though it has done so for hydro projects.

The Pennsylvania Department of  Environmental Protection has held up a permit to Transco for Atlantic Sunrise because of nitrogen oxide emissions generated by construction equipment involved in building the pipeline. Those emissions would violate the Clean Air Act. However, Transco has asked the agency to allow it to claim emission-reduction credits earned when improving air pollution from one of its compression stations on the existing Transco pipeline in Ellicott City, MD. That “offset” would presumably allow Pennsylvania to approval the permit.

But clean air issues aren’t the only state regulatory barriers in Pennsylvania. The state has sent Transco technical deficiency letters having to do with applications for two other permits, one dealing with water obstruction and encroachment, the other with erosion and sediment control.

Chatterjee Named New FERC Chairman 

On Aug. 10 President Trump named Commissioner Neil Chatterjee to be chairman of the Federal Energy Regulatory Commission. “I want to thank Chairman (Cheryl) LaFleur for the tremendous work she’s done in guiding the agency,” Chatterjee said. “The absence of a quorum was unprecedented, yet she rose to the challenge and created stability through her unwavering leadership. I am honored that President Trump has designated me as chairman of the Commission until Kevin McIntyre is confirmed, and I am eager to take on this responsibility,” Chatterjee said. “I look forward to working with Commissioner LaFleur and Commissioner (Robert) Powelson on behalf of the American people. And I hope that we will have all five commissioners here soon with the confirmation of Kevin McIntyre and Rich Glick.”

Chatterjee and Powelson were appointed by Trump in May to fill two of the three vacancies in the FERC leadership. Chatterjee was a senior energy adviser to Senate Majority Leader Mitch McConnell and Powelson, a Pennsylvania regulator. Their positions expire in 2021 and 2020, respectively. Glick and McIntyre, who co-leads Jones Dayâ, a global energy practice, were nominated on Aug. 2 by Trump to fill the third and fourth vacancies. McIntyre was believed to be in line for the chairmanship after his confirmation. Glick is the Democratic general counsel for the Senate Committee on Energy and Natural Resources.

A coalition of industrial groups has called on Pennsylvania legislators to oppose a package of energy tax increases that cleared the state Senate in July, claiming that it would hurt the state’s economy and smother its budding petrochemical industry. The bill is unpopular with environmentalists, too, because it would roll back some of the state’s environmental regulations. Some nonprofit groups have discussed suing to block portions of it.

The business groups have consistently opposed Democratic Gov. Tom Wolf’s tax proposals, but they’re sounding a more urgent alarm this year, according to press reports. A bipartisan compromise in the state Senate would impose a direct state tax on gas production for the first time. Most oil- and gas-producing states impose a production tax. The budget bill would impose a variable tax, in addition to the annual impact fee that producers pay for each well. An analysis by nonprofit group Resources for the Future estimated the production tax would have brought in $90 million in 2015. The state budget is about $32 billion.

A new tax would not only harm producers, it would raise costs for plastic manufacturers, factories and other big energy users, said Dave Taylor, president of the Pennsylvania Manufacturers’ Association. Environmentalists, too, are trying to kill the bill, which includes a series of measures aimed at speeding up permitting for gas production and would create a committee to review the state Department of Environmental Protection’s proposed regulations aimed at controlling methane emissions from the industry.