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Staff Presentation | Certification of New Interstate Natural Gas Facilities

Docket Nos. PL18-1
Item C-1 | C-1 News Release | C-1 Fact Sheet 

Good morning, Mr. Chairman and Commissioners.

Item C-1 is a draft Updated Policy Statement on the certification of new interstate natural gas facilities which will inform the public as to how the Commission will determine whether a proposed natural gas project “is or will be required by the public convenience and necessity,” as that standard is established in section 7 of the Natural Gas Act.

In April 2018 and February 2021, the Commission issued Notices of Inquiry seeking information and stakeholder perspectives to help the Commission explore whether, and if so how, it should revise its approach under the 1999 Policy Statement on the certification of new interstate natural gas facilities.  In response to the Notices of Inquiry, the Commission received over 38,000 comments from a diverse range of stakeholders.

Based on the comments received in this proceeding, and the significant changes that have occurred since issuance of the 1999 Policy Statement, the Updated Policy Statement will provide stakeholders with more clarity on the Commission’s decision-making process.

The goals and objectives of the Updated Policy Statement remain consistent with those of the 1999 Policy Statement, including to:  (1) “appropriately consider the enhancement of competitive transportation alternatives, the possibility of over building, the avoidance of unnecessary disruption of the environment, and the unneeded exercise of eminent domain;” (2) “provide appropriate incentives for the optimal level of construction and efficient customer choices;” and (3) “provide an incentive for applicants to structure their projects to avoid, or minimize, the potential adverse impacts that could result from construction of the project.”

While the 1999 Policy Statement includes an analytical framework for how the Commission evaluates effects of certificating new projects on economic interests, the Updated Policy Statement provides a more comprehensive framework for the Commission’s decision-making process.  Specifically, the Updated Policy Statement clarifies how the Commission will evaluate all factors bearing on the public interest, including the balancing of economic and environmental interests, in determining whether a project is required by the public convenience and necessity.

The Updated Policy Statement reaffirms the Commission’s commitment, when assessing the need for a project, to consider all relevant factors.  It states that, although precedent agreements remain important evidence of need, precedent agreements alone often may not be sufficient to establish need for a project.  The Updated Policy Statement further encourages applicants to provide specific information detailing how the gas to be transported by a proposed project would ultimately be used, why the project is needed to serve that use, and the expected utilization rate of the project.

The Updated Policy Statement states that, in determining whether to issue a certificate of public convenience and necessity, the Commission will consider four major interests that may be adversely affected by the construction and operation of new projects:  (1) the interests of the applicant’s existing customers; (2) the interests of existing pipelines and their captive customers; (3) environmental interests; and (4) the interests of landowners and surrounding communities, including environmental justice communities.

As to impacts on existing customers of the pipeline applicant, the Updated Policy Statement maintains the Commission’s existing policy that a pipeline applicant must be prepared to financially support its proposed project without relying on subsidization by its existing customers, though it will no longer characterize that as a “threshold” question.

With respect to impacts on existing pipelines and their customers, the Updated Policy Statement explains that the Commission will continue to assess whether proposed new capacity could impact existing pipelines through a potential loss of market share and impact captive customers of those pipelines if they must pay for any resulting unsubscribed capacity in their rates.  While noting that it is not the role of the Commission to protect existing pipelines from the effects of fair competition, the Updated Policy Statement explains that the Commission must consider the possible harm to captive customers that can result from a new pipeline, regardless of whether there is evidence of unfair competition.

Pursuant to the Updated Policy Statement, the Commission will consider environmental impacts, and any potential mitigation of those impacts, along with other adverse impacts in making its public interest determinations.  It explains that part of the Commission’s consideration of environmental impacts will include a project’s potential impact on climate change, as discussed further in item C-2 and the next part of the presentation.

Regarding impacts on landowners, the Updated Policy Statement provides that the Commission will, to the extent practicable, consider a wider range of impacts than just the economic impact associated with a permanent right-of-way on a landowner’s property.  It explains that the Commission’s consideration of landowner impacts will be based upon robust early engagement with all interested landowners, as well as continued evaluation of input from such parties during the course of any given proceeding.

Further, the Updated Policy Statement explains that, in assessing impacts to the communities that surround a proposed project, the Commission must look carefully at potential impacts to environmental justice communities.  To adequately evaluate these impacts, the Commission must promptly and properly identify such communities.  The Updated Policy Statement also explains that the Commission will consider measures to eliminate or mitigate a project’s adverse impacts on environmental justice communities, and that mitigation must be tailored to the needs of different environmental justice communities.

In deciding whether to issue a certificate of public convenience and necessity, the Updated Policy Statement states that the Commission must consider all of the benefits of a proposal together with all of its adverse impacts, including economic and environmental impacts.  Consistent with the 1999 Policy Statement, it provides that “[t]he more interests adversely affected or the more adverse impact a project would have on a particular interest, the greater the showing of public benefits from the project required to balance the adverse impact.”  The Updated Policy Statement declines to adopt any bright-line test for how the Commission would carry out this balancing, explaining that its approach must remain flexible enough for the Commission to resolve specific cases and take into account the different interests that must be considered.

We would like to acknowledge and thank the team of more than 30 staff from the Offices of the General Counsel, Energy Projects, Energy Market Regulation, and Energy Policy and Innovation that worked on the Updated Policy Statement.  This concludes the part of the presentation on C-1.  Thank you.

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