April 2020, Vol. 247, No. 4


House Democrats Consider Anti-Pipeline Regulatory Changes

Democrats in the House have introduced two bills that would negatively affect interstate pipelines. The legislative efforts align with a broader push by Democrats, including presidential candidates, to enact “green” energy policies, which will vilify natural gas, if not at least tarnish its reputation, as a climate-preferred alternative to coal and oil. 

One self-standing, bipartisan bill includes provisions to force pipelines to pay customers refunds more quickly for past overcharges. The second Democrat-only bill, which is the latest incarnation of a “Green New Deal,” includes provisions forcing the Federal Energy Regulatory Commission (FERC) to consider negative climate change effects when vetting an application for new pipeline construction and give more credence to landowner complaints about seizure of private property based on eminent domain.

During Feb. 5 hearings, Democrats on the Energy & Commerce Committee, which has jurisdiction over FERC, showed interest in a number of other reform proposals, such as limiting FERC’s ability to greenlight a new project based on the pipeline obtaining a precedent agreement. These are sometimes signed between buyers and sellers owned by the same corporate parent. There is no bill addressing that issue yet.

Reps. G.K. Butterfield (D-N.C.) and Billy Long (R-Mo.) introduced the Protecting Natural Gas Consumers from Overcharges Act of 2020. The bill amends the National Gas Act (NGA) to give FERC the authority to set a refund effective date and order a refund when an interstate pipeline is found to be overcharging for its services. Currently, refunds dictated by FERC can be delayed for years if pipelines file for a new rate case.  

The bill is being supported by energy-user groups, consumer and business – in the latter case, for example, the Natural Gas Supply Association (NGSA). That dual pro-consumer pro-business tilt probably improves its chances of passage. Hinson Peters, strategic communications manager, NGSA, points out that “for the first time in Congress, we have bipartisan legislation to provide FERC with Section 5 refund authority in both the House and Senate.” 

Sens. Blumenthal (D-Conn.) and Burr (R-N.C.) introduced the legislation in the Senate.

While the Section 5 bill has the support of many if not all pipeline customers, the same is not true for the CLEAN Future Act introduced by Reps. Bobby Rush (D-Ill) and Frank Pallone (D-N.J.). Rush is chairman of the Energy subcommittee and Pallone is chairman of the Energy & Commerce Committee. One of the bill’s many provisions makes clear that FERC should be considering the climate impacts of pipeline proposals.

In the last few years FERC has, in effect, limited the consideration of the extent to which greenhouse gas emissions should affect its consideration of new pipeline construction. Rep. Fred Upton (R-Mich.), the top GOP member on the Energy subcommittee, said the NGA “remains sound.” But, he added, he would remain “open-minded about any changes that may be necessary to improve the act.” 

Pallone argues that FERC commissioners “are essentially ignoring the court’s decision in the Sabal Trail case that specifically told FERC to look at greenhouse gas emissions. It is alarming that FERC looks at all other environmental impacts of pipeline projects yet refuses to take climate change seriously.” The Rush/Pallone bill, which is a broad “climate change” bill with many provisions, also touches on FERC by updating natural gas eminent domain laws to better protect landowners.

FERC has already shown some sensitivity to the notion it is giving landowner concerns short shrift. In February, FERC announced it was creating a new division to expedite landowner-related pipeline appeals, known as rehearings. 

“Now, that sounds good, but we’ll have to see if FERC is really getting the message,” Pallone stated at the hearings. 

Michael McMahon, senior vice president, general counsel and secretary, Boardwalk Pipelines, testified for the Interstate Natural Gas Association of America (INGAA) at the February hearings. 

He made the point that natural gas has been a plus for the reduction of greenhouse gas emissions by allowing the U.S. to transition away from coal for the generation of electricity and renewable energy resources, particularly wind and solar. 

“Natural gas-fired generation helps to increase the penetration of renewables by serving as a ‘backstop’ source of electric generation that ensures electric reliability during times when wind and solar resources are not available due to lack of wind or sunshine or other impactful weather conditions,” he said.

Moving to the Butterfield bill, he argued that allowing a process for obtaining retrospective rebates “would disrupt the rate stability that the Natural Gas Act currently provides to both pipeline investors and consumers.” 

McMahon also presented results from an INGAA survey that showed over the last 10 years eminent domain was initiated in 10% of the 15,694 tracts affected by pipeline construction, and 5% of the total tracts involved eminent domain proceedings that remained unsettled long enough to require a hearing for access. Additionally, only 1.67% of the individual tracts needed to construct the projects covered by the survey were acquired after a judicial determination of just compensation in the eminent domain proceedings.

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