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FERC’s Pipeline Decisions Benefit Economy

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FERC’s Pipeline Decisions Benefit Economy

November 8, 2017

The Federal Energy Regulatory Commission operated without a quorum on its board from February to August this year. During this time, its ability to make decisions on major natural gas pipelines was severely constrained. Prior to the loss of quorum, the Commission had made a promising start to the year, but the rate of approvals slowed to barely a trickle in the following months and the backlog of proposals awaiting a decision grew. After the quorum was restored in August with the confirmation of two new commissioners, the agency was finally able to make decisions on pipeline projects again, which is important to allow energy transportation infrastructure to keep pace with rising demand.

After a strong start to the year, the lack of quorum has caused the rate at which new projects are certificated to fall far behind last year’s pace. With quorum finally restored, the board was able to approve four pipeline projects adding 2.6 billion cubic feet of capacity per day in the latter part of the month. The most notable approval was for the NEXUS project, a 258-mile pipeline project representing $2 billion in investment, adding more than 1.5 billion cubic feet per day of capacity by itself. It will transport natural gas from the Appalachian Basin to parts of Ohio, Michigan, and Canada. Even with this burst of productivity, through the end of August, the agency had only certificated 26 projects, compared to 41 over the same period in 2016.

Fortunately, FERC has continued to make decisions on well-vetted proposals at a productive clip in October, with many of them being sited in the Northeast, which will substantially increase the capacity to transport natural gas from developments in the Utica and Marcellus natural gas shales, as the map from the Energy Information Administration below illustrates. In Ohio, natural gas withdrawals were up almost 27 percent relative to the same month a year ago, and West Virginia saw an increase of about 19 percent. 

Source: Energy Information Administration, “Federal Energy Regulatory Commission Regains Ability to Certificate Natural Gas Pipelines,” October 30, 2017.

Five major projects have been approved in October: Mountain Valley Pipeline, Equitrans Expansion Project, Supply Header Project, Eastern Shore 2017 Expansion Project, and the Atlantic Coast Pipeline. When completed they will add more than 5.6 billion cubic feet per day of capacity. These pipelines will help transport natural gas from its source to markets where it can be sold or stored. The ability to produce more domestic energy is beneficial to the economy and to energy independence, but the benefits are undercut if producers lack the ability to get their product to its destination. Pipelines form a crucial link in this chain, and the recently-approved projects are a great example of this. 

Even after long-awaited approval from FERC, these projects have to obtain the requisite permits from state and local agencies. In some cases, such as the Atlantic Coast Pipeline, state governments have indicated that this will not be a straightforward proposition.  A federal appeals court has also issued a temporary stay on construction of the pipeline. The Montgomery County Board of Supervisors just voted to request a rehearing regarding FERC’s decision to approve the Mountain Valley Pipeline in October. In New York, FERC remains at odds with the state’s Department of Environmental Conservation, which has petitioned a federal appeals court to block the Millennium Pipeline. FERC had previously overruled the department’s earlier denial of permits citing a failure to act in a timely manner.

FERC has a fundamental role to play in vetting and approving pipelines that would add much-needed capacity to America’s energy transportation infrastructure. Since its board regained quorum, FERC has approved sizable pipeline projects that had been awaiting decisions for months, and it is finally reducing the backlog of projects under review. However, other obstacles, such as intransigent state or county governments, could still impede progress the

Domestic natural gas production has increased substantially in states throughout the country, such as North Dakota and West Virginia. Higher levels of production and the development of new areas require a corresponding increase in transportation capacity. After its quorum was restored, FERC has fortunately approved major natural gas pipelines that will do just that. The agency should continue to work through the 46 projects currently under review, which bodes well for domestic energy as long as state and local governments do not throw up additional roadblocks. 

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes

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