Bill would limit agency reviews

An impressive collection of industry associations applauded when the U.S. House of Representatives voted 252 to 165 to approve the Natural Gas Pipeline Permitting Reform Act (H.R. 1900).  The bill is part of a larger effort by Republicans and some Democrats (H.R. 1900 had bipartisan support) to build the additional infrastructure—primarily interstate pipelines—needed to transport America’s new treasure trove of natural gas to manufacturers, energy generators, and the public.  The bill’s success in the House is also in part a response to the bitter fallout from the administration’s obvious reluctance to approve the Keystone XL pipeline. 

While Keystone is an international project intended to transfer crude oil, its supporters and many behind H.R. 1900 speak in one voice when it comes to opposing what they perceive as the roadblocks federal agencies pile up in front of any expansion of fossil fuel energy generation. 

In terms of natural gas, H.R. 1900 would address permitting by amending the Natural Gas Act in two ways.

• First it would it would require that the Federal Energy Regulatory Commission (FERC) approve or deny an application to site, construct, expand, or operate an interstate natural gas pipeline no later than 12 months after providing public notice that it has received an application for the project.  The FERC approval is called a certificate of public convenience and necessity.
• Second, after the FERC issues either an environmental impact statement (EIS) or environmental assessment (EA) for the project—as required by the National Environmental Policy Act—any federal agency that has received an application for a permit, license, or approval for the project has 90 days (the FERC may grant an additional 30 days on request from an agency) to approve or deny the application.  If the agency does not meet that deadline, the permit, license, or approval takes effect. 

Despite the House vote, opposition to the bill is based on several strong arguments.  Primarily, for complex projects, opponents say the bill would compel federal agencies to rush through the permitting process.  The result is that permits may be granted before all aspects of environmental impact have been reviewed and adequate controls and mitigation written into permits.  Also, H.R. 1900 does not require that agencies approve permits.  Faced with deadlines and the possibility that they may be issuing nonprotective permits, the agencies have the option under the bill of simply denying the permit before the deadline arrives, thereby blocking automatic approval.  In other words, projects that may have been approved if agencies had additional time may be denied, forcing pipeline companies to reapply.

White House opposition

House approval of H.R. 1900 is probably as far as the bill will go.  Two days before the House vote, the White House announced that President Obama’s senior advisors would recommend that the president veto the bill if it arrived at his desk, creating a near certainty that a related bill would not survive a Senate vote. 

But in the knotty world of Washington politics and policy, H.R. 1900 has succeeded in drawing attention to the adequacy of the natural gas pipeline infrastructure and whether current law and regulation are helping or hindering the nation from taking advantage of the opportunities for economic and job growth and energy independence the natural gas boom is offering.  H.R. 1900 will likely pass into history.  However, the issues it raises and solutions it offers will likely resurface in other legislation and will possibly be addressed in federal regulation as industry and its government advocates continue to pressure the administration to build a better national system for natural gas development, transportation, and commercialization. 

Price spikes

According to the Interstate Natural Gas Association of America (INGAA), more than 200,000 miles of natural gas pipelines crisscross state boundaries.  But Republican members of the House Energy and Commerce Committee say that the existing pipeline infrastructure is not adequately accommodating the increased supply of gas being made possible by the explosion of shale gas development resulting from refinement of new technologies such as hydraulic fracturing and directional drilling.  As a result, some areas of the country are not benefitting from the new abundance in gas.  The Committee points to a November 12, 2013, article by the Energy Information Administration (EIA).

“The increased use of natural gas for electricity generation has raised concerns about fuel diversity, as the Northeast is also reliant on natural gas for part of its heating needs and has limited pipeline capacity to bring gas to market,” said the EIA.  “The winter of 2012-13 saw spikes in wholesale electricity prices in New England and New York as demand for natural gas from both electric generators and natural gas distribution companies taxed the capacity to bring natural gas into these markets.” 

For example, for January 2013, the price for 1,000 cubic feet of natural gas in Connecticut, Maine, Massachusetts, and Vermont was between $13.07 and $15.33 while the national average was $9.19. 

Organizations such as the INGAA believe the primary approach to avoiding gas price spikes in the Northeast and generating industry growth and employment is to build new pipelines.  A good scenario through 2035, says the INGAA, would see the annual addition of approximately 1,400 miles of new gas transmission pipeline and 600 miles of laterals to and from natural gas-fired power plants, processing facilities, and storage fields. 

FERC and permitting

In general, industry does not perceive the FERC to be the obstacle in the construction of new gas pipelines.  The interstate permitting process involves three key phases: a voluntary prefiling phase, an application phase, and a postauthorization phase with multiple steps.  In a February 2013 report, the Government Accountability Office said that it was informed by stakeholders that the interstate pipeline process is consistent because the FERC acts as a lead agency in coordinating multiple parties.   For example, the FERC developed its pre-filing process in which the FERC attempts to address, clarify, and point toward the resolution of issues that may delay a project before the application is submitted.  The process includes interaction with other federal agencies that must provide permits or approvals for the project. 

In terms of pipeline projects approved, the FERC has also been productive.  FERC data show that from 2009 to 2012, the FERC approved 69 major natural gas pipeline projects, comprising 3,000 miles in 30 states and having a capacity of nearly 30 billion cubic feet a day.  The average time for filing and approval was under nine and half months.  Also, the FERC decides 90 percent of certificate applications within 12 months.

“Currently, under the overall direction of the [FERC], the approval and permitting process for interstate natural gas pipelines is generally very good—particularly when compared with the permitting processes for other types of energy infrastructure,” said INGAA president and CEO Donald F. Santa in testimony before the House Subcommittee on Energy and Power.

But while its efforts are generally commendable, FERC’s ability to move pipeline projects through the complex federal permitting process has not been sufficient to speed up actual pipeline and infrastructure improvements, added Santa.  The delays are traced to the multiple permits companies must obtain from other federal and state agencies before construction can begin.  Apart from the FERC certificate, the INGAA indicates the following are the most common federal authorizations pipeline companies must obtain:

• Bureau of Land Management (BLM) Right-of-Way Grant
• Army Corps of Engineers Clean Water Act (CWA) Section 404 Permit
• Army Corps of Engineers Rivers and Harbors Act Section 10 Permit
• Endangered Species Act (ESA) Section 7 Consultation
• National Historic Preservation Act (NHPA) Section 106 Consultation
• U.S. Forest Service Special Use Permit for Use of National Forest System Land
• Coastal Zone Management Act (CZMA) Consistency Determination

Of these, the INGAA notes that the most common delays were associated with BLM’s right-of-way grants, the Corps’ River and Harbors Act permits, and the CZMA Consistency Determination.  The INGAA has found that causes for delay included agency inexperience and inadequate agency staff, interagency conflicts, applicant changes to the project requiring additional or revised environmental review, and site-access problems.

The Energy Policy Act of 2005 (EPAct 2005) attempted to address permitting delays by giving the FERC the authority to set deadlines on when other agencies must act on permit applications.  But the statute failed to give the FERC the power to enforce those deadlines.  As a result, “permitting agencies routinely ignore them,” according to Santa.  In fact, research by the INGAA indicates that post-EPAct there has been more than a threefold increase in the percentage of federal authorizations delayed more than 90 days beyond the standard FERC authorization deadline. Project sponsors must also obtain permits from states through which pipelines pass; for example, CWA and Clean Air Act permits are typically required from states that have EPA authorization to issue those permits. 

Rushing permits

Opponents of H.R. 1900 argue that the bill would neither eliminate permitting delays nor expedite pipeline construction.  In their dissenting views, Reps. Henry Waxman (R-CA) and Bobby L. Rush (D-IL) contend that the bill errs by applying the same rigid deadline to every pipeline project.  “It applies to a straightforward 30-mile pipeline far from population centers that crosses no rivers and a complex 500-mile pipeline that goes through a major population center and crosses a dozen rivers.”

This would result in two possible scenarios that would prevent a project from advancing, state the congressmen.  First, if in the    12-month time frame, the FERC cannot finish the analysis necessary to produce a complete certificate that adequately addresses all the environmental, engineering, tariff, and accounting issues presented in a pipeline application, the FERC may be required to dismiss the application.  “This bill, aimed at speeding up FERC permitting, could end up having the opposite effect,” they contend.

Second, the 90- or 120-day deadline for federal and state agencies to approve or deny applications for all other permits or approvals required by federal law may lead to either pipeline permit denials or legally dubious permits that do not adequately protect public health, safety, and the environment.  Alternatively, agencies “may have no choice” but to deny the application to comply with federal law and avoid adverse impacts to health, safety, and the environment.  The congressmen note that the EPA, BLM, and the Corps have all stated that they could be forced to deny permit applications if they are denied the time to complete “complex reviews.”

Supporters of H.R. 1900 respond that these agencies are usually well-informed about projects (for example, as participants in the prefiling phase) long before the 90-day clock begins and that 90 additional days should be sufficient to make final permitting decisions.

H.R. 1900 is available at thomas.loc.gov. 

William C. Schillaci