FERC splits again on affiliates, climate in Florida pipeline approval

Dive Brief:

The Federal Energy Regulatory Commission approved the Okeechobee Lateral pipeline project in a 4-1 vote that demonstrated the agency’s divide over assessing pipeline need and climate change impacts.
Commissioner Richard Glick dissented, writing FERC should have more closely scrutinized the need for the pipeline because its owner and offtaker are both owned by the same holding company. Commissioner Cheryl LaFleur issued a concurrence, writing FERC could have better evaluated the carbon emission impacts from building the pipeline.
The FERC majority said it cannot judge the significance of carbon emissions resulting from the pipeline and that the relationship between pipeline owner and offtaker “does not call into question the need for the project.”

Dive Insight:

FERC’s latest split pipeline decision highlights a growing partisan divide over pipeline approvals at the commission.

LaFleur and Glick, the two Democratic commissioners at FERC, have regularly issue dissents or concurrences based on affiliate relationships and carbon impacts since the agency’s quorum was restored last year. The three Republican commissioners, meanwhile, typically vote to approve applications.

That divide will likely influence FERC’s ongoing review of its pipeline certification policies, announced by Chairman Kevin McIntyre in December 2017.

In this case, Glick took aim at the relationship between Florida Southeast Connection, owner of the proposed 5-mile pipeline, and Florida Power & Light, which owns the natural gas plant that would be the sole recipient of its gas.

Florida Southeast says it has contracts for capacity on its proposed pipeline, called precedent agreements, with FP&L, but both companies are owned by NextEra Energy, which Glick said should raise questions over whether the pipeline is actually needed.

“Although precedent agreements generally can be one measure for determining whether a pipeline is needed, precedent agreements among affiliates are less valuable for this purpose because they are not necessarily the product of arms-length negotiations,” Glick wrote. “Instead, under such circumstances, the Commission must look behind the precedent agreements and consider other indicia of need … including projections of the demand for natural gas, analyses of the available pipeline capacity, and assessments of the cost savings that the proposed pipeline would provide to consumers.”

The FERC majority dismissed this argument, writing that it is “current Commission policy to not look behind service agreements to make judgments about the needs of individual shippers.”

“The mere fact that Florida Power & Light is an affiliate of Florida Southeast does not call into question the need for the project or otherwise diminish the showing of market support,” the majority wrote.

Both Glick and LaFleur also challenged FERC’s assessment of carbon impacts of the proposed pipeline, saying it could do more to estimate the impacts on natural gas production and consumption resulting from the new project.

“We are required by the National Environmental Policy Act (NEPA) to reach a determination regarding the significance of all environmental impacts, including the indirect impacts of downstream GHG emissions,” LaFleur wrote, arguing the agency could use the Social Cost of Carbon, a valuation tool that measures indirect impacts.

The Republicans at FERC, however, have opposed efforts to analyze indirect carbon emissions. Last month, the agency voted 3-2 to exclude those considerations from pipeline reviews, calling the information “speculative.”

The majority picked up that argument in the Florida Lateral case, writing that even if indirect impacts were quantified, the commission cannot judge their significance.

“[T]here is no widely accepted standard to ascribe significance to a given rate or volume of GHG emissions,” FERC wrote. “Accordingly, while the Commission is unaware of any such standard established by international or federal policy, or by a recognized scientific body, this does not in any way indicate that the Commission is not cognizant of the potentially severe consequences of climate change."