The Trump Administration’s Last FERC Meeting – Seven Bcf/day of Projects Are Pending

This article was published on Insights January 15th.

What’s the issue?

FERC is meeting on January 19, one day before we expect President Biden to demote Chairman Danly.

Why does it matter?

Chairman Danly has listed some substantial decisions on the agenda, including mega projects such as MVP and PennEast and FERC’s policy on staying construction for rehearing requests, but that may be a wish list as opposed to an actual agenda. In addition, anything voted on that does not have at least one Democratic vote may likely be reversed on rehearing and those that aren’t approved may be in limbo until later this year.

What’s our view?

Seven Bcf/day of projects are pending at FERC that did not make next week’s agenda and may face a delay in being approved. Also, many of the items on the agenda seem unlikely to be unanimous, which could mean that many of next week’s decisions, if they do not get at least one Democratic vote, may simply be reversed on rehearing or following the change in control at the Commission.

FERC open meetings are usually held on the third Thursday of the month. But Chairman Danly scheduled this month’s meeting for the third Tuesday in an apparent effort to beat, by one day, the day on which we expect him to be demoted by President Biden. The agenda for that meeting, posted late on Tuesday of this week, is full of matters of interest to the industry, ranging from new projects awaiting approval like Iroquois Pipeline’s ExC project, to consideration or reconsideration of FERC policies, and to approvals of controversial amendments for PennEast and Mountain Valley Pipeline.

The agenda looks like it is Chairman Danly’s attempt to clear the table before his demotion, but you have to wonder whether he has the votes to issue any controversial decision, as most of these would appear to be. Today we look at the status of the larger FERC projects that are pending and at the more controversial items on the agenda.

Pending Projects

There are a number of projects pending at FERC that will provide a significant amount of additional pipeline capacity. A review of the larger projects, though, reveals four trends. First, pipeline companies are working together to minimize the environmental impacts of the projects. Second, while the projects offer substantial new capacity, most of them are designed to provide shippers with optionality of supply. Third, the new driver for these major projects is the export market, mainly as a supply to the LNG facilities being built in this country and in Mexico. Fourth, pipelines have become conservative in estimating how long it will take to put a project into service following its approval.

Joint Projects

The Gulf Run and Line CP Modification Project, a 2.8 Bcf/day project, and the Enable Gulf Run Transmission Project, a 1.1 Bcf/day project, are essentially just one project being jointly developed in a manner to minimize environmental impacts. As explained in the Enable Gulf Run application, the assets being built in the CP modification project will be sold to Gulf Run following their construction. Those assets, along with the assets being built by the new Gulf Run pipeline will form an integrated system that will provide its only shipper, the Golden Pass LNG terminal, with interconnections to a multitude of gathering and transmission systems. The new Gulf Run pipeline will thus be able to access supply from a variety of sources, including the Barnett, Permian, East Texas, Haynesville, Anadarko (SCOOP/STACK), Marcellus, and Utica basins.The target in-service date for the project is December 31, 2022.

A similar pairing of projects are the Evangeline Pass Expansion Project and the SNG Evangeline Pass Expansion Project, each of which are 1.1 Bcf/day projects. Under the SNG project, Southern Natural Gas will provide the entire capacity of the project to Tennessee Gas Pipeline pursuant to a twenty-year lease agreement, and under the Evangeline Pass project, Tennessee Gas Pipeline will provide the entire capacity to its sole shipper, the Venture Global Plaquemines LNG terminal. Both projects seek to be in-service by December 1, 2022.

LNG Exports

Both of the projects discussed above are designed to provide supply to the LNG export terminals being built along the U.S. Gulf Coast. But they are not the only major projects with an export purpose. The North Baja Xpress Project, a 0.495 Bcf/day project, has only one shipper, Sempra LNG International, and its stated purpose is to create capacity to provide feed gas for the Energia Costa Azul LNG export plant located in Ensenada, Baja California, Mexico. Its targeted in-service date is November 1, 2022.

Schedule Risk

One of the key features of the LawIQ platform is the proprietary model we use to project the anticipated timeline for FERC projects, including four key milestones following the application filing: the date the environmental review is complete, the date the FERC order is issued, the date the project is authorized to commence full construction, and the date the project is placed into service. We recently completed a revision to our model to take into account the correlation — as we noted in New Goals for the Timing of FERC Project Reviews — between the review time for a new project and the backlog of projects awaiting approval. We set forth below the results of our model for the projected FERC certificate date and the length of time from approval to in-service.

As seen above, the project applicants requested approval from FERC in a time frame that is fairly consistent with the average and conservative time frames suggested by our model. However, all of these projects have estimated that the post-approval period will be much longer than even our conservative modeling would suggest is required. We can only assume the applicants are being overly conservative, because our data shows over 90% of projects were able to be constructed within their estimated timelines—and none of these projects rival the biggest projects in our data set.

However that apparent cushion in the schedule may be needed because a key risk for all five of these projects is that they are not listed on next week’s open meeting agenda, which means they may be delayed by the expected change in the composition of FERC, which we discuss below. While this delay is not as certain as the delay when FERC lost its quorum following President Trump’s demotion of Chairman Bay and his subsequent resignation, we fully expect that there will be a pause in approvals for projects while the Democrats determine the terms on which they will approve such projects going forward and ascertain whether they can work with one or more Republicans to approve the projects.

Changes at FERC

We fully expect that, following his inauguration, President Biden will immediately demote Chairman Danly and elevate either Commissioner Glick or Commissioner Clements. It is unclear whether Chairman Danly will resign following his demotion or stay on the Commission. If he resigns, the new Democratic chair will be faced with a 2-2 split until Chairman Danly can be replaced with a Democrat. If Chairman Danly does not resign, then the new Democratic chair will be faced with a Republican majority until Commissioner Chatterjee, whose term ends on June 30, 2021, can be replaced. It is unclear, however, how much of an impediment that will be for the new chair because the views of the newest commissioner, Commissioner Christie, are unknown on most of the critical issues facing FERC. Also, Commissioner Chatterjee has indicted a willingness to work with Commissioner Glick to move project approvals forward.

A quick look at the agenda for next Tuesday’s meeting, however, shows how critical the change in viewpoints may be. Some of the key items listed on the agenda and how they might be impacted include the following:

Categorical Exclusions under the National Environmental Policy Act (NEPA)

A recent revision to the NEPA regulations encourages agencies to develop a list of actions that do not require any type of environmental review. The change in control of the Congress and the presidency, however, could result in these revised regulations being repealed and we expect that the Democrats and Republicans on FERC may have very different views on what projects need no review. So it will be key to listen mainly to the Democrats about whatever is announced under this agenda item.

Iroquois’s ExC project

This is a compression only project to provide additional pipeline capacity for New York City. Approval of this project on terms that do not include at least one Democratic vote may be overturned on any rehearing request filed following the change in control at the Commission.

PennEast Pipeline Company, LLC

This is PennEast’s request to split its project into two phases and to obtain authority to complete the Pennsylvania phase while its appeal to condemn land owned by the state of New Jersey is pursued at the Supreme Court. Approval of this project on terms that do not include at least one Democratic vote may be overturned on any rehearing request filed following the change in control at the Commission.

Mountain Valley Pipeline, LLC

This is MVP’s request to modify the stream and wetland crossings between mileposts 0 and 77 from open cut to conventional bores so that it can proceed without obtaining approval from the U.S. Army Corps of Engineers. We fully expect that both Democrats will oppose such an approval. So, even if the current Commission grants the request, we expect it to be reversed on rehearing.

Mountain Valley Pipeline, LLC

There are two additional items on the agenda concerning MVP. One concerns FERC’s decision to lift its stop work order for areas near the Jefferson National Forest, and the other one appears to be MVP’s request to lift the stop work order within the Jefferson National Forest. Commissioner Glick objected to the stop work order being lifted prior to the Fourth Circuit ruling on the issues regarding Nationwide Permit 12, and we expect Commissioner Clements will join him now that we expect her to be voting. So, even if the current Commission grants the requests, we expect they will be reversed on rehearing.

Limiting Authorizations to Proceed with Construction Activities Pending Rehearing

This item concerns FERC’s issuance of its Instant Rule that limited its ability to issue notices to proceed with construction while rehearing requests were possible or were pending. This rule has been appealed to the D.C. Circuit and FERC may be modifying its decision in response to those appeals. However, like the other items on the agenda, if the decision does not include at least one Democratic vote, it may still be reversed following the change in control at the Commission.