The Senate Energy & Natural Resources Committee held a hearing today to question Federal Energy Regulatory Commission (FERC) Chairman Richard Glick and Commissioners Allison Clements, Mark Christie, James Danly, and Willie Phillips about FERC’s two recent policy statements regarding natural gas certificates.  Those two policy statements, each of which were issued by 3-2 vote with Commissioners Christie and Danly dissenting with separate statements, were issued on February 18, 2022 and are the subject of a separate Pierce Atwood blog post. Members of the Pierce Atwood Energy team watched the livestream video of the Senate hearing, and, in this post, provide some high-level insights based on the Senators’ questions and Commissioners’ responses today.

To no one’s surprise, the hearing was a politically-charged event. With one notable exception, the participating Senators’ response to FERC’s actions was split along party lines, with Democrats generally supporting the policy statements and Republicans criticizing the policy statements with openly expressed dismay and frustration.  The FERC Commissioners’ positions similarly were split along party lines, with the three Democratic Commissioners defending the policy statements and the two Republican Commissioners criticizing the policy statements.

The notable exception to the otherwise clean party division was Committee Chair Senator Joe Manchin (D-WV).  Senator Manchin, who frequently breaks with his party on energy-related issues, expressed a high degree of frustration with the policies, taking particular issue with the timing of FERC’s action given the ongoing Russian invasion of Ukraine, which he referred to as an “energy war.” Other Republican Committee members reiterated Manchin’s concerns and further contended that the policies will strangle timely domestic energy production, increase consumer costs, and cause investors to walk away from natural gas projects—all of which could result in diminished energy security in the U.S.  At a high level, the questions from Senators challenging or explicitly disagreeing with the FERC majority’s actions fell into four major categories:

1. Are FERC’s policies appropriate from a national security perspective, particularly given the crisis in Ukraine, or will the new policies undermine the nation’s ability to provide support to Ukraine and other allies?

2. Given the inability of the Commissioners to reach consensus on the issues raised in the policy statements and the significant amount of industry and political concern, should implementation of the policies be delayed?

3. Is it fair for FERC to apply the new policies retroactively to pending applications for pipeline and LNG facility certificates?

4. Do the policy statements’ treatment of upstream and downstream GHG emissions exceed the permissible scope of FERC’s environmental reviews under the National Environmental Policy Act and the scope of FERC’s jurisdiction under the Natural Gas Act?

In addition, Senator Lisa Murkowski (R-AK) questioned Commissioner Phillips regarding whether the agency appropriately considered the cost impacts for consumers and whether the new policies would help or hurt environmental justice communities. Although he firmly defended his decision to sign on to both policy statements, Commissioner Phillips also seemed willing to work with the other Commissioners to revise the policies.

Both Chairman Glick and Commissioner Clements noted that they have meetings with pipeline representatives scheduled in the coming weeks to discuss the policy statements. However, both staunchly defended the policy statements and neither indicated any willingness to make major changes to the policies during the hearing.  Senator Barrasso ended the meeting by pointedly asking Chairman Glick how he would “clean up this mess.”  Based on Chairman Glick’s response and other remarks made at the hearing, Senator Barrasso stated that he had no confidence that FERC would take action to revise the policies, and that he therefore viewed it as the Committee’s duty to do so.

Our major take-away is that, rather than providing clarity about how FERC’s new policies will be implemented, the discussion at today’s hearing created even more uncertainty. As noted in our prior blog post on the policy statements, the language contained in the four corners of the majority’s orders and the accompanying dissents left many implementation questions unanswered. The responses to questions at the hearing today made it clear that there is a significant difference of opinion among the Commissioners regarding the scope of the policies set forth in the policy statements—perhaps most notably on the issue of direct emissions versus indirect emissions—and what is expected of an applicant seeking to comply with the new guidelines. Some of the disagreement among the Commissioners appears to stem from a fundamental difference in how they read and interpret recent court precedent, including remands from the United States Court of Appeals for the D.C. Circuit (e.g., Birckhead v. FERC, 925 F.3d 510 (D.C. Cir. 2019) and Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017) (also known as “Sabal Trail”)). Interestingly, Chairman Glick gave viewers a glimpse behind the curtain by telling the Committee that the reason there were separate policy statements was that he had hoped to secure four votes on at least one of the policy statements, but in the end he was unable to do so. Barring issuance of revised statements that garner consensus support from the Commissioners and clarify FERC’s expectations and requirements for pipeline certificate applications, these issues seem destined for high profile litigation over the next several years.

Back to the present, the Committee’s focus on Ukraine and the importance of domestic natural gas supplies and new pipelines to both domestic and global security may be a key to any follow-up by FERC.  For example, Senator Manchin announced that he and Senator Murkowski are putting forth a bill that would ban the import of Russian crude oil and petroleum products into the United States. North American oil and gas will be essential to mitigating near-term fallout, including cost impacts on U.S. consumers, from the removal of Russian crude from the market. Further, as several Senators emphasized, increasing availability of LNG produced from domestic sources can help reduce or eliminate European reliance on Russian natural gas. These arguments could influence FERC in determining whether to delay the effective date of and ultimately revise the policy statements.