Further Evidence of the Re-Solidification of FERC’s Driftwood Compromise
The Federal Energy Regulatory Commission’s (“FERC” or “Commission”) October 18, 2023 Open Meeting (the “October Open Meeting”) and October 27, 2023 issuance of rehearing of remand orders for the Texas LNG Brownsville LLC and joint Rio Grande, LLC and Rio Bravo Pipeline Company, LLC projects provide further evidence of the re-solidification of the Driftwood Compromise we discussed in our earlier update following the September 21, 2023 Open Meeting (the “September Open Meeting”). At the October Open Meeting, FERC issued certificates to four projects, two of which had initially been pulled from the July 27, 2023 Open Meeting but not readded to the agenda in September. The Agenda also included an amendment for an LNG project and a pipeline abandonment. Commissioner Danly voted in favor of each order, all of which included the Driftwood Compromise language. The October Open Meeting and October 27 issuances affirm our earlier prediction that each type of project currently pending before the Commission has a path forward on downstream greenhouse gas (“GHG”) emissions and the Social Cost of GHGs (“SCC-GHG”). The Commission now appears to be working through its application of the Driftwood Compromise outside of traditional expansion projects.
At the October Open Meeting, FERC issued certificates for three projects designed to serve local distribution companies (“LDCs”), Texas Eastern Transmission, LP’s Appalachia to Market II Project1 and both WBI Energy Transmission Inc.’s Wahpeton Expansion Project2 and Gas Transmission Northwest LLC’s GTN Express Project,3 the two projects that were struck from the July agenda but not readded in September. The ultimate orders for these projects include the Driftwood Compromise and a finding that downstream GHG emissions are reasonably foreseeable. As in the certificate order for Northern Natural Gas Company’s Northern Lights project,4 Commissioner Danly was again able to join Chairman Phillips and Commissioner Christie to approve the projects despite the orders’ characterization of the foreseeability of downstream GHG emissions. Commissioner Danly issued a separate statement in the orders, similar to Northern Natural, partially concurring and partially dissenting over the foreseeability of downstream emissions associated with the LDCs’ customers and raising a number of separate issues. Commissioner Clements issued separate statements opposing the use of the Driftwood Compromise, as she has done in every order utilizing the language. Appalachia to Market II, WBI Energy Transmission and GTN Express should provide comfort to applicants with LDC-related projects that GHG issues likely will no longer delay their certificate issuances.
While it is still not entirely clear what led to the delay in GTN Express and WBI Energy Transmission, the rate treatment in the two orders and Commissioners’ separate statements do provide some insight. In GTN Express, the Commission denied GTN’s request for rolled-in rate treatment. Additionally, Commissioner Danly’s and Commissioner Clements’ separate statements both address the use of precedent agreements to demonstrate project need given the state climate policies where the project will operate. The interplay of the precedent agreements, consideration of state climate policies, and well-documented political sensitivities surrounding GTN Express, likely compounded to cause the delay in the order. In WBI Energy Transmission, the delay may be directly tied to the Driftwood Compromise. Commissioner Danly took issue with language in FERC Staff’s Final Environmental Impact Statement (“FEIS”) for the project, repeated in the order, characterizing the significance of the project’s GHG emissions and their impact on the global climate. Commissioner Christie issued a separate statement noting that the FEIS was issued prior to the development of the Driftwood Compromise while Staff operated under a different Commission policy. Commissioner Christie concluded that the Driftwood Compromise itself, in combination with the ultimate order’s clarification that any inconsistency between the FEIS and the order is controlled by the order, renders the FEIS’s discussion irrelevant. It seems likely that the debate between the Commissioners regarding the language in the FEIS and the application of the Driftwood Compromise in WBI Energy Transmission contributed to the delay in the order’s ultimate issuance.
FERC also applied the Driftwood Compromise to a liquefied natural gas (“ LNG”) amendment project,5 a joint abandonment and lease project,6 and a traditional abandonment project.7 The Commission determined that downstream emissions were not reasonably foreseeable for each of these projects. Because these are not typical expansion projects where GHGs are expected to be a focal point in the Commission’s review, the separate statements in the orders highlight the Commissioners’ differing opinions on how the Commission should consider GHGs impacts associated with these non-expansion projects. Commissioner Clements argued that for the abandonments, where future emissions are being removed, FERC should assess the significance of GHG emissions and find them to be insignificant. Commissioner Danly disagreed on this point. He argued that, not only is the Commission incapable of assessing the significance of GHG emissions, but that, given the nature of abandonment projects, speculating as to whether there are any potential incremental impacts on climate change associated with the projects’ construction emissions or future removed emissions does not aid in the Commission’s decision-making process. We may expect to see similar discussion as other types of Natural Gas Act Section 3 and Section 7 applications come before the Commission. Still, the Commission’s issuance of these orders reinforces the Driftwood Compromise’s durability in addressing GHG emissions for projects moving forward.
Just before midnight on October 27, 2023, FERC issued rehearing of remand orders for the Texas LNG LLC8 and joint Rio Grande, LLC and Rio Bravo Pipeline Company, LLC9 projects. The Commission issued both orders with 40 minutes to spare before the deadline for filing the records of the two proceedings with the D.C. Circuit. The projects had been struck from the September Open Meeting but not readded in October. Texas LNG and Rio Grande/Rio Bravo present a host of issues outside of the Driftwood Compromise. However, both orders explicitly repeat the Driftwood language, highlighting its durability on rehearing.
The October Open Meeting and rehearing orders provide additional evidence of stability for project developers. Through the orders issued, the Commission has reinforced our belief following the September Open Meeting that if project developers take care when preparing their certificate applications to present their projects in a manner most amenable to the Commission’s current GHG consideration framework, that GHG-related issues should no longer delay approval of any type of project.
1 Texas Eastern Transmission, LP, 185 FERC ¶ 61,038 (2023) (“Appalachia to Market II”).
2 WBI Energy Transmission, Inc., 185 FERC ¶ 61,036 (2023) (“WBI Energy Transmission”).
3 Gas Transmission Northwest, LLC, 185 FERC ¶ 61,035 (2023) (“GTN Express”).
4 Northern Natural Gas Company, 184 FERC ¶ 61,186 (2023) (“Northern Natural”).
5 Venture Global Plaquemines LNG, LLC, 185 FERC ¶ 61,037 (2023).
6 Trailblazer Pipeline Company LLC, 195 FERC ¶ 61,039 (2023).
7 Equitrans, L.P., 185 FERC ¶ 61,040 (2023).
8 Texas LNG Brownsville, LLC, 185 FERC ¶ 61,079 (2023) (“Texas LNG”).
9 Rio Grande LNG, LLC and Rio Bravo Pipeline Company, LLC, 185 FERC ¶ 61,080 (2023) (“Rio Grande/Rio Bravo”).
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.