The $50 Billion Backlog Of U.S. Energy Projects

For six months, the Federal Energy Regulatory Commission (FERC) lacked the voting quorum necessary to authorize construction of oil and gas pipeline projects and LNG export terminals.

Last week, the Senate confirmed the nominations of Neil Chatterjee and Robert F. Powelson to join the commission, filling two of the four vacancies on the five-seat panel. FERC had been without a quorum since early February this year, when Commissioner Norman Bay stepped down.

Now Chatterjee, a senior energy adviser to Senate Majority Leader Mitch McConnell (R-KY), and Powelson—a member and former chairman of the Pennsylvania Public Utility Commission since 2008 and current president of the National Association of Regulatory Utility Commissioners—are filling the void at FERC. The commission can now return to the business of authorizing energy projects that had been piling up and are estimated to be worth a combined US$50 billion.

“With a quorum restored, our first order of business is the backlog of orders and issues that are awaiting Commission consideration,” FERC Acting Chairman Cheryl A. LaFleur said last week.

Before losing its quorum in February, FERC had certificated seven projects in the first few weeks of this year that include more than 1,500 miles of natural gas pipeline construction and expansions, involving combined additions of more than 7 Bcf/d of capacity.

But then the stalemate at FERC led to half a dozen pipelines worth a total of US$12 billion facing possible delays, and US$38 billion worth of other projects facing a slower-than-anticipated approval process, according to Bloomberg calculations from May this year.

The six-month lack of quorum at FERC has now pushed the proposed in-service date for at least one planned natural gas pipeline back, while several others are facing tight windows between getting construction permits and starting construction works.

Perhaps the most urgent approval at FERC is the US$2-billion Nexus pipeline project—a 50/50 partnership between DTE Energy and Enbridge for a 255-mile interstate natural gas transmission pipeline that will deliver 1.5 billion Bcf/d of natural gas from receipt points in eastern Ohio to existing pipeline system interconnects in southeastern Michigan. Initially, the project was expected to be completed in the fourth quarter this year.

But on July 26, DTE Energy Chairman and CEO Gerry Anderson said at the Q2 results conference call, referring to the Nexus project timetable:

“And as I said on the first quarter call, we expected a year-end 2017 in-service date if we received a FERC certificate by the end of the second quarter or sometime within reach of midyear. We also said on the first quarter call that if the FERC certificate wasn’t received within that timeframe, then the project might push into 2018. Well, that’s where we are now, with an in-service date in 2018.”

Four other natural gas pipelines worth a total of US$10 billion are also among FERC’s backlog.

The US$5.5-billion Atlantic Coast Pipeline, planned to run from West Virginia to North Carolina, received favorable environmental assessment by FERC in July, but the project still needs to be given the go-ahead to start construction.

The US$3.5-billion Mountain Valley Pipeline project in West Virginia and Virginia is also awaiting final certification from FERC after receiving final environmental impact statement (EIS) in June. The target construction start is the fourth quarter this year, with in-service targeted in Q4 2018.

TransCanada’s US$2-billion 165-mile-long Mountaineer Xpress natural gas pipeline in West Virginia is also awaiting final FERC certification, with expected in-service date in 2018.

The US$1-billion, 120-mile-long, PennEast Pipeline from northeastern Pennsylvania to New Jersey is expecting final FERC authorization, and applauded the restoration of the quorum at the commission.

The Natural Gas Supply Association and the Center for LNG also commended the Senate for confirming the FERC nominations.

“This vote restores the Commission to a quorum and enables progress to be made on projects and policies that have been sidelined for months,” said NGSA president and CEO Dena E. Wiggins.

“Returning FERC to full strength will allow LNG developers to move forward with confidence that the required permits and permissions to build projects will be considered quickly and efficiently,” CLNG Executive Director Charlie Riedl added.

The FERC quorum doesn’t necessarily mean the commissioners will move to approve all backlogged projects within days. According to a note by FBR Capital Markets & Co, quoted by Bloomberg, it usually takes on average 30 days for new commissioners to issue a project permit after they had been confirmed, and on average 12 days after they have taken office.

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