July 2021, Vol. 248, No. 7


Is FERC Changing Rules for Pipelines?

By Stephen Barlas, Contributing Editor, Washington D.C.

The Federal Energy Regulatory Commission (FERC) continues to produce angst among gas pipeline developers with its two recent decisions regarding rehearing demands from pipeline opponents. Its publication of Order 871-B, dealing with delaying construction in the context of eminent domain and its dismissal of a rehearing request that Algonquin wanted in relation to the local community, attempts to snafu an already certificated compressor in Weymouth, Mass. The publication of Order 871-B reflects Chairman Richard Glick’s intention to give new leverage to pipeline opponents. 

“In both dockets, FERC opened up a proceeding that should have been ‘closed’ for additional public comment,” states Emily Mallen, a partner at mega-law firm Sidley, which watches FERC closely. “Both the Weymouth Briefing Order and Order No. 871-B suggest that FERC is willing to go outside the bounds of its traditional procedures to involve the public more openly in its proceedings. To the pipelines, it may feel like FERC is changing the rules in the middle of the game.” 

In issuing Order 871-B, FERC laid out the grounds for halting post-certificate construction related to eminent domain seizures when opponents complain. It was put in place to answer a federal court decision in 2020 that outlawed the commission’s use of tolling orders, which allowed pipelines to continue construction while a hearing process was in process.  

The Interstate Natural Gas Association of America (INGAA) strongly criticized the order, particularly its new policy to presumptively stay a Natural Gas Act (NGA) Section 7(c) certificate order during the 30-day period for seeking rehearing — that is, limiting the exercise of eminent domain authority granted under such certificates. The stay would remain in place until FERC resolves the rehearing request or 90 days following the date that a rehearing request is deemed denied. 

But Joan Dreskin, senior vice president and general counsel of INGAA, said, “Order 871-B exacerbates the core challenges to energy infrastructure development that were created by Order 871 by unlawfully imposing a presumptive stay of all future Natural Gas Act Section 7(c) certificates.   

“This presumptive stay is a dramatic departure from 80 years of precedent and will effectively add up to five months of additional delay at FERC for needed infrastructure projects that the Commission itself has already found to be required by the public interest.”  

But FERC played the decision as a compromise between landowners and pipeline developers. 

“With this order, FERC is working to fulfill its commitment to protect landowners, communities, and the environment while also ensuring that the construction of needed pipelines is not unduly delayed,” FERC Chairman Glick said. “Today’s order strikes a compromise that both protects the interests of the parties affected by a new pipeline while also providing developers with the certainty needed to invest in energy infrastructure.”  

Glick’s reference to “compromise” was a nod to provisions in the order that circumscribe the regulation to those requests for rehearing reflecting opposition to project construction, operation, or need.  

Requests for a rehearing that raise issues related only to a tariff, rate, terms, or conditions of service would not trigger the rule’s prohibition on construction. It also adds some time limitations on the authorization to proceed moratorium. This policy is inapplicable” where the pipeline developer has already, at the time of the certificate order, acquired all necessary property interests and for liquefied natural gas (LNG) construction, which does not implicate eminent domain. 

Order 871-B presumably would slow down construction prior to a pipeline being put in operation. But maybe a bigger problem for pipelines would be FERC agreeing to hear complaints about a pipeline or a compressor station that already has been approved and is in operation. 

FERC’s authority, if it has any, is what is at issue. Community groups in Weymouth, Mass., complained in January that an Algonquin Gas Transmission LLC’s compressor station, which went into operation in January 2021 as part of the Atlantic Bridge project, has violated terms of the certificate it won from FERC in September 2020. 

Those groups asked for a rehearing of the project’s compliance in January 2021. Algonquin, too, asked for a rehearing on opposite grounds in February, hoping to force a discussion of FERC’s authority to intercede after the fact. But on May 19, FERC set aside the rehearing request on technical groups, saying that neither the opponents nor the proponents were damaged by questions they raised.  

In early May, even before FERC put aside the hearing requests, Algonquin asked the Court of Appeals for the District of Columbia to force FERC to hold a rehearing, quoting FERC Commissioner James Dannly, who argued in his dissent of a Feb. 19 briefing order that  “without the sanctity of certificates granted under Sections 3 and 7 of the Natural Gas Act, there would be no private financing, and without private financing there would be no projects.” 

FERC’s dismissal of the rehearing requests on technical grounds – neither party alleged damage – leaves undetermined the authority that the commission must address complaints about a pipeline or compressor station after it is in operation, and on what grounds. 

The Weymouth groups have argued mostly that the compressor’s air emissions exceed what was approved. But the FERC has no authority over air emissions, or even the safety of a compressor or a pipeline. A state environmental agency or the U.S. Environmental Protection Agency (EPA) would come into play on air emissions. The Pipeline and Hazardous Materials Safety Administration (PHMSA) has the responsibility for pipeline safety and leveling fines for violations.  

Sidley’s Mallen said, notwithstanding any federal appeals court decision in the Algonquin case, FERC now has the authority to issue a show-cause order under NGA Section 5, backed by a proposed civil penalty if it has cause to suspect that a pipeline has violated its underlying certificate order.   

FERC reasserted that authority in an enforcement action initiated against the Rover Pipeline on March 18. The Commission charged that Rover destroyed a historic house while its application for certificate was pending, even though it had promised in its application it was “committed to a solution that results in no adverse effects” to the Stoneman House, an 1843 farmstead located near Rover’s largest proposed compressor station.  

FERC is asking for civil penalties of $20,160,000 in that proceeding.  However, in that proceeding, the allegations refer to actions that the pipeline may have taken before it entered operation, when jurisdiction over construction remained with FERC, as opposed to another state or federal agency.  There has been no similar allegation of wrongdoing levied against Algonquin, much less by FERC. 

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