July 2013, Vol. 240 No. 7


Chairman Jon Wellinghoff Departing FERC

There probably will be neither tears nor jeers from the pipeline community over the departure of FERC Chairman Jon Wellinghoff. He announced his exit in late May and is staying on until President Obama nominates a successor.

[Editor’s note: This article went to press before President Obama announced the nomination of Ron Binz, the chairman of the Colorado Public Utilities Commission from 2007 to 2011. The comments on other possible nominees below are left for the reader’s consideration.]

Possible replacements include the two Democratic FERC commissioners, Cheryl LaFleur and John Norris. Norris might have the edge since his term extends to 2017 while LaFleur’s ends next year. Also Norris was a public utility commissioner; LaFleur was an electric industry executive.

Another possibility is Colette Honorable, chair of the Arkansas Public Service Commission. An African-American, she would give Obama a diversity bonus at a time when he has been criticized for the white maleness of appointees in his second term. She also has a substantial gas pipeline background and serves on PHMSA’s Technical Pipeline Safety Standards Committee as well as the National Association of Regulatory Utility Commissioners Pipeline Safety Task Force.

Wellinghoff has shown very little interest in gas issues. He delegated the issue first to Marc Spitzer, a commissioner until 2011, for over five years, paralleling Wellinghoff’s tenure. Spitzer, now a partner at Steptoe & Johnson, says, “The fact he didn’t go to Houston and make speeches on natural gas doesn’t mean he did not care about the issue.” Spitzer points to the new pipeline miles sited during Wellinghoff’s term, as well as some liquid natural gas facilities, and the smooth working of the FERC Office of Energy Projects which Spitzer calls one of the best offices in the federal government. Spitzer adds, however, “We didn’t always see eye-to-eye on natural gas issues.”

Commissioner Philip Moeller has lately picked up the natural gas mantle, to the extent anyone at FERC has, particularly with regard to gas/electric coordination issues. However, on that latter, important issue, FERC has made very little progress. At a recent hearing on that issue in a House committee, Moeller and LaFleur testified. Wellinghoff was absent. In fact, the last time he testified before any congressional committee was in October 2011.

One industry lobbyist says Wellinghoff maintained an attitude of “benign neglect” toward the natural gas industry. But referring to the standoff between the natural gas industry and electric generators on the “coordination” issue, and Wellinghoff’s hands-off approach there, this lobbyist says, “When the power goes out in the entire New England region, you don’t want to say ‘Well, I held six technical conferences.'”

DOI Makes Some Concessions In Fracking Proposal
Early indications are the Department of Interior (DOI) made some favorable changes to its proposed rule on fracking. The new proposed rule issued May 11 appears to take into account some objections oil and gas companies raised when DOI issued an earlier proposed rule last year. Groups such as America’s Natural Gas Alliance (ANGA) criticized that proposal for creating a federal regulatory structure which would supersede what many believe is strong state regulation already in place.

Drilling on federal and Indian lands has dropped off precipitously compared to non-private lands. Some is likely due to the recession. Industry groups argue that the difficulty of obtaining federal permits is an impediment to drilling and that a new regulatory program tied to fracking would only exacerbate that situation.

To answer that concern, the proposed rule adds a provision allowing the Bureau of Land Management (BLM), the agency with jurisdiction within the DOI, to approve a variance of any new federal standard that would allow technologies, processes or standards required or allowed by the state or tribe to be accepted as compliance with the upcoming BLM rule.

Amy Farrell, vice president of Regulatory Affairs for ANGA, said, “It is encouraging the administration revisited its original proposal and appears to have made some favorable changes, including accounting for the expertise and work being done at the state level. We will reserve judgment on the proposal more broadly until we have had a chance to thoroughly evaluate it.”

But the API continues to question the need for any new federal regulatory program. Erik Milito, API director of Upstream and Industry Operations, says rigorous state rules and state-based tools, such as FracFocus.org, are already in place to ensure responsible oil and natural gas development. “States have led the way in regulating hydraulic fracturing operations while protecting communities and the environment for decades. While changes to the proposed rule attempt to better acknowledge the state role, BLM has yet to answer the question why BLM is moving forward with these requirements in the first place.”

Key congressional Republicans echo that. House Energy & Commerce Committee Chairman Fred Upton (R-MI), Energy & Power Subcommittee Chairman Ed Whitfield (R-KY), and Environment & the Economy Subcommittee Chairman John Shimkus (R-IL) issued a joint statement: “The rule remains an unnecessary layer of red tape standing in the way of important energy production and job creation opportunities.”

Bills Would Speed Up Approval Of Pipeline Construction Applications
Legislation designed to force federal agencies to move faster on interstate pipeline construction applications should clear the House easily. The Senate may be a different story. Rep. Mike Pompeo (R-KS) introduced the Natural Gas Pipeline Permitting Reform Act (H.R. 1900) against the backdrop of pipeline infrastructure shortfalls in places such as New England and the Midwest.

However, the bill appears to address a problem that, if it exists at all, is not a big issue. Interstate pipelines have actually been satisfied with the FERC approval process. Don Santa, the INGAA chairman and CEO, told the Senate Energy and Natural Resources Committee May 14, “The current process for the review, approval, permitting and siting of natural gas pipelines generally works well.” It is true occasionally agencies such as the Fish and Wildlife Service (FWS) and National Oceanic and Atmospheric Administration (NOAA) have dragged their feet on approving construction after FERC has greenlighted a project.

The Pompeo bill sets a deadline, 12 months, for FERC to approve or deny a pipeline permit application. Other federal agencies with permitting authority would have 90 days (which may be extended 30 days) to act. If the agency does not issue a determination within 90 days, the permit is considered granted.

Santa also mentioned a second bill in his testimony to the committee. The Energy Infrastructure Improvement Act (H.R. 1587) would allow the Secretary of Interior to approve construction of a pipeline through national park land. Today, before a pipeline can be built within a national park, Congress must pass a bill. So, for example, the Senate Energy Committee passed the Denali National Park Improvement Act (S. 157) on April 22. That bill authorizes the Secretary of the Interior to issue right-of-way permits for: (1) a high-pressure natural gas transmission pipeline (including appurtenances) in non-wilderness areas within the boundary of the park within, along, or near the 7-mile segment of the George Parks Highway that runs through the Park; and (2) any distribution and transmission pipelines and appurtenances that the Secretary determines necessary to provide natural gas supply to the park.

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