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Oil and Gas Update

EPA Offices at Odds Over Response to FERC Greenhouse Gas Inquiry

August 7, 2018

By: Robert G. McLusky

In December of 2017, FERC announced that it would review its policies on certification of natural gas pipeline projects. In particular, it announced that it would review its 1999 Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities (available at https://www.ferc.gov/legal/maj-ord-reg/policy-statements.asp). Then, on April 19, 2018, FERC initiated a "notice of inquiry" into its prior policy statement. There, FERC sought input specifically into a number of areas:

  • Its methodology for determining if there is a need for a particular project (including its traditional reliance on contracts for shipping service, sometimes between related entities);
  • Its consideration of the exercise of eminent domain and of landowner interests; and
  • Its evaluation of the environmental impact of a proposed project. In particular, FERC noted that since its last policy statement, there has been increased interest in the scope of its evaluation of greenhouse gas emissions. As recently as May of this year, FERC ruled by a 3-2 vote that it would limit its consideration of GHG emissions to those associated with pipeline construction and would not prepare or consider “upper-bound” estimates of emissions that would result from the installation of new pipeline capacity. See Dominion Transmission, Inc., 163 FERC ¶ 61, 128 F.E.R.C. ¶ 41 (May 18, 2018) (denying rehearing request). There, the dissenting FERC Commissioners stated that the GHG emissions from the production of consumption of natural gas associated with new pipelines are reasonably foreseeable results that should be evaluated under the Natural Gas Act and NEPA.

The 60-day period for responding to FERC's notice of inquiry closed on July 25. Included in the comments are two of note from USEPA. The first, dated June 21 from the Office of Federal Activities, cautiously offered that “in situations where FERC decides to conduct analyses of GHG emissions impacts EPA recommends a number of tools that can be used.” However, later in the letter EPA observed under the heading of “monetizing impacts from GHG emissions” that "estimates of the social cost of carbon and other greenhouse gases (SC-GHG) allow analysts to incorporate the societal value of changes in carbon dioxide and other GHG emissions into benefit-cost analyses of actions that have small or marginal impacts on cumulative global emissions." Further, it said that "estimates of SC-GHG are used in Federal regulatory analysis with the acknowledgement of the many uncertainties involved….” Although EPA fell short in this letter of suggesting that FERC must conduct such an analysis, it did its level best to fill its letter with citations to tools it recommends can be used to quantify up and downstream GHG effects.

Later, however, at the end of the public comment period, EPA's Associate Administrator from the Office of Policy weighed in. She observed that while EPA's June 21 letter had itemized methods of GHG quantification, it had “not [spoken] to the question of whether and when FERC should engage in such analysis” or “whether, when it does, it should monetize its estimate of GHG effects or use any particular tool in doing so.” Continuing, she observed that neither NEPA nor the CEQ’s rules require FERC or other agencies to “monetize costs and benefits of a particular action,” that the “social cost of carbon … tool was developed to aid the monetary cost-benefit analysis of rulemakings…[and] was not designed for, and may not be appropriate for, analysis of project-level decision-making.” Finally, the letter observed that the 2010 social cost of carbon documents “no longer represent government policy.”
 

 

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