Dive Brief:

• The Federal Energy Regulatory Commission should hold a technical conference to vet a first-of-its-kind proposal by Tennessee Gas Pipeline Co., a Kinder Morgan subsidiary, for shipping "responsibly sourced natural gas" (RSG), according to the Environmental Defense Fund (EDF).

• Tennessee Gas' proposal could set a precedent for the pipeline industry, but lacks adequate detail around standards for what constitutes RSG, EDF said in a Monday filing at FERC.

• "More discussion and vetting is needed to ensure that the proposed [producer certified gas] Pooling Service Option results in the real reductions in methane emissions from the natural gas supply chain that RSG programs are intended to drive," the environmental group told FERC.

Dive Insight:

Tennessee Gas' mid-December proposal for shipping and trading RSG comes as utilities are looking for ways to reduce greenhouse gas emissions related to natural gas.

An emerging option is RSG, conventional natural gas that has been produced in ways that meet voluntary environmental, social and governance (ESG) standards like reduced methane emissions, according to Kinder Morgan. Xcel Energy, for example, has launched a pilot program to buy RSG certified by Denver-based standards company Project Canary.

Currently, RSG is sold in bilateral deals, so creating the producer certified gas option on Tennessee's 11,760-mile pipeline system between the Northeast and Texas will "greatly enhance" the use of RSG in the United States, according to the company's application with FERC.

However, EDF is raising concerns about the standards for labeling gas as RSG, and other issues. The group supports calls by pipeline shippers like BP Energy and Coterra Energy for FERC to hold a technical conference to examine Tennessee Gas' proposal.

EDF told FERC Tennessee Gas' proposal gives the pipeline company total discretion to define and redefine producer certified gas, including selecting third-party certifiers, selecting what standard set by the certifiers must be met, establishing separate requirements, such as methane emission intensity level thresholds, and determining how the requirements may be met.

It is unclear why Tennessee selected Project Canary and MiQ, a partnership between Rocky Mountain Institute and SYSTEMIQ, as the sole certifiers for RSG under the pooling arrangement, according to EDF.

Tennessee Gas selected Project Canary and a partnership between the Rocky Mountain Institute and environmental solutions accelerator SYSTEMIQ as the sole certifiers for RSG. EDF has disputed this aspect of the pooling arrangement.

"More fundamentally, more discussion and vetting is needed to ensure that the proposed [producer certified gas] Pooling Service Option results in the real reductions in methane emissions from the natural gas supply chain that RSG programs are intended to drive," EDF said.

FERC should look at how Tennessee's proposed tariff proposal would interact with state or federal regulatory requirements, as well as how it would affect companies that are already taking voluntary action, EDF said.

"Given how novel this proposal is, the commission must carefully weigh its risks, including costs to end-use consumers of natural gas, potential double-counting, and how the ambition and design of the program could influence producer and purchaser behavior," the environmental group said.

Tennessee originally asked FERC to allow the proposal to take effect Jan. 17, 2022, but earlier this month requested a new start date of March 1 to give the company time to work with its customers to address concerns about the plan.

The Tennessee Valley Authority and Duke Energy Ohio, Duke Energy Kentucky and Piedmont Natural Gas Co., a Duke Energy Corp. gas utility, backed Tennessee's request to delay the tariff's start date.

In similar filings, TVA and the Duke utilities said they are subject to third-party certification to assess their environmental performance such as meeting emission intensity thresholds and other ESG standards. 

"Interstate pipelines are well positioned to make supply available by creating RSG pooling points to facilitate transactions between RSG producers and markets," they said.

Calpine Energy Services, Consolidated Edison Co. of New York, Exelon Corp., Louisville Gas & Electric Co. and PSEG Energy Resources & Trade have also intervened in the proceeding.