Whether the Federal Energy Regulatory Commission should have considered state law and views of state regulators in allowing construction of a proposed $950-million natural gas pipeline expansion in Pennsylvania and New Jersey will be decided by a federal court in coming months—a ruling that could change how the federal agency approves projects by weighing new issues in the changing U.S. energy marketplace. 

A lawsuit filed against FERC in March by opponent groups—which eight states just joined— claims it approved the 36-mile Transcontinental Gas Pipeline loop project despite evidence from New Jersey regulators that more gas capacity is not needed to meet future demand and would harm residents.  

The project would add 829,000 dekatherms a day to the existing pipeline owned by Williams Co., which is part of a 10,000-mile network between Texas and New York City that transports about 15% of U.S. natural gas, said the pipeline firm.

Most project gas would go to New Jersey, with the rest to New York, Delaware, Maryland and Pennsylvania. Construction would include 22.3 miles of 30-in.-dia. lateral gas pipeline and 13.8 miles of 42-in.- dia. loop pipeline in Pennsylvania, a new gas-fired compressor station in New Jersey and modifications to five existing stations and other facilities in both states. 

The New Jersey Clean Energy Act, enacted this year, requires 100% of state power from renewable sources by 2035. State gas utilities also must reduce gas use through energy efficiency peak demand reduction programs under an earlier law.

States Challenge on Policy Authority

In an Aug. 8 supporting brief in the Washington, D.C., appeals court, New Jersey and seven states with similar clean energy laws—Washington, Connecticut, Maryland, Massachusetts, New York, Oregon and Vermont—claim FERC’s decision violates their ability to protect their environments and to make effective energy policy. 

States assert a “critical interest” to reduce greenhouse gas emissions from natural gas that harms "our residents, natural resources, infrastructure and economies," adding that FERC failed to evaluate its significance under New Jersey's climate law, despite data it submitted. The gas project would account for about 48% of New Jersey's total estimated greenhouse gas emissions by 2050 and “significant percentages” in four of the other states, their filing says.

FERC approved the project for "public convenience and necessity" based on contracts in place for all added capacity and a report by consultant Levitan & Associates that the added supply was needed to meet gas utility reliability demand at lower cost in New Jersey and southeastern Pennsylvania.

The agency did not comment on the lawsuit nor its approval rationale.

Opponents argue FERC wrongly looked to “precedent agreements” without also weighing New Jersey's position on its existing gas capacity. 

The agency "irrationally substituted its judgment for New Jersey’s and also overlooked the predictable impacts on other states,” the states' brief says. Federal environmental law requires FERC to evaluate the significance of a project's greenhouse gas emissions and methods to avoid impacts, which it did not do, they claim.

FERC "ignored the carbon 'lock-in' effect of approving natural gas infrastructure at a time when there is broad social and political agreement" in the U.S. on decarbonization to avoid major impacts of climate change, plaintiffs say.

The approval violates the Natural Gas Act, which requires FERC to weigh a project's benefits and harms, including environmental impacts from construction and operation, when deciding whether it should move forward. 

FERC said in the approval that it recognized emissions release that could contribute incrementally to future global climate change. But it concluded: “In light of this analysis, and because we are conducting a generic proceeding to determine whether and how the Commission will conduct significance determinations for GHG emissions going forward," the agency "is not herein characterizing these emissions as significant or insignificant.”

Agency Policy Dilemmas Widen

Climate change impact not considered by FERC "is the most critical part of this [court’s] review,” of the suit, said Gillian Giannetti, senior attorney on the Natural Resources Defense Council's sustainable FERC project. “There is a constant battle between federal authority and state goals. It has to be resolved.” 

While “no one factor is determinative" in agency project approval, she said, "FERC is simply acting as if a factor does not exist at all.”

Former agency Chairman Richard Glick had previously stated that claiming a project has no significant environmental impacts while “refusing to assess the significance of the project’s impact on the most important environmental issue of our time is not reasoned decisionmaking.” 

Commissioner Alison Clements highlighted “inadequacies" of FERC’s 1999 project certification policy. She said agency policies and practices have not evolved to address complexity of today’s project decisions and that failure to consider New Jersey's stand on no new capacity was a glaring omission in approving the pipeline.

But Commissioner James Danly raised concern that FERC's traditional reliance on “precedent agreements” to buy pipeline gas as the most objective evidence of project need would now shift to other information that would “tip the evidence against a finding of need.” Known to have the most rigid interpretation of the Natural Gas Act, he concluded his term at FERC on June 30 but can stay on until the end of the year.

As a further indication of escalating policy conflict among commissioners, FERC struck from its July meeting agenda approvals of six natural gas projects, including transmission and LNG, without explanation. 

Among projects removed was the Gas Transmission Northwest XPress natural gas line, which lawmakers in Oregon and Washington have said conflicts with states' climate change policy. Another was the Port Arthur LNG Phase 2 project expansion proposed by developer Sempra in Texas.

FERC did not respond to an ENR query as to reasons for the deferral and plan for upcoming consideration.  

“It’s important that the certificate be issued," Jeffrey Martin, Sempra CEO, said on an earnings call this month. "We certainly think that it will be issued in the next month or two. We remain optimistic about that.”

The Port Arthur project, first proposed in 2020, would add two additional LNG trains and is expected to be built by Bechtel, which is constructing the $13-billion first phase, with expected capacity of 13 million tons produced per year. The contractor also is building Sempra's Cameron LNG project in Louisiana.

NRDC’s Giannetti says the energy sector interplay between business and politics will help resolve climate change conflict at FERC. “The breadth of recognition in industry can’t be overstated," she said. "There is a great business case for building infrastructure that is climate compatible.”