Federal Changes Reform, Streamline Pipeline Processes
This month there are lots of changes to report. From Capitol Hill, legislative news includes repeal of the oil export ban, new processes to expedite National Environmental Policy Act (NEPA) reviews of rights of way on federal lands for pipeline projects and progress on reauthorizing Pipeline and Hazardous Materials Safety Administration (PHMSA). Just a few blocks away from the Capitol, the Federal Energy Regulatory Commission (FERC) has established a ceiling on the rate increases oil pipelines may impose on shippers, revised its manual for preparing environmental reports, and is overseeing new natural gas pipeline projects proposed in response to various shale plays.
The House of Representatives, on Dec. 3, 2015, approved H.R. 8, a comprehensive energy bill entitled the North American Energy Security and Infrastructure Act of 2015. A similar bill was approved last summer by the Senate Energy and Natural Resources Committee; that bill might make it to the Senate floor for debate later this year. The House bill contains two provisions that were added during the floor debate. First, the National Energy Security Corridors Act would establish a process for designating “National Energy Security Corridors on Federal Lands” and require the Department of Energy to establish procedures to expedite and approve applications
for rights of way for natural gas pipelines across National Energy Security Corridors. Second, the current Presidential Permit process for cross-border energy projects, such as oil and gas pipelines (most notably the Keystone XL pipeline, which was ensnared in process for seven years) would be replaced with a “certificate of crossing,” which would need to be completed 120 days after completion of environmental review.
The Consolidated Appropriations Act, which was signed into law on Dec. 18, 2015, includes a repeal of the 1975 ban on crude oil exports. Subsequently, the Commerce Department’s Bureau of Industry and Security issued a statement that, effective immediately: “A Department of Commerce license is no longer required to export crude oil.”
In December 2015, President Barack Obama signed into law new highway funding legislation — Fixing America’s Surface Transportation Act (FAST Act). But the FAST Act does a lot more; it also streamlines NEPA permitting for infrastructure projects, including pipelines. For example, the new law establishes an interagency council, requires permitting timetables, creates a public online “dashboard” to track projects and authorizes federal agencies in some instances to use environmental review documents prepared under state law to comply with NEPA. Additionally, the FAST Act includes litigation reforms that generally reduce the NEPA statute of limitations from six years to two years and requires courts to consider the negative effects on jobs when overturning project approval.
Also in December, the Senate Committee on Commerce, Science and Transportation passed S.2276, Securing America’s Future Energy: Protecting our Infrastructure of Pipelines and Enhancing Safety Act (SAFE PIPES Act), bipartisan legislation intended to ensure the safety of America’s pipeline network by reauthorizing the PHMSA through 2019. With this action, the legislation is being sent to both the House and Senate for consideration.
Every five years, FERC is required to set an index rate, which establishes a ceiling on the rate increases oil pipelines may impose on shippers. On Dec. 17, 2015, FERC issued the quinquennial order establishing, beginning July 1, 2016, an index level pegged at the Producer Price Index for Finished Goods plus 1.23 percent (PPI-FG+1.23).
Shale plays are resulting in lots of natural gas pipeline activity at FERC. Some of the larger pipeline projects include:
• In November 2015, Algonquin Gas Transmission LLC commenced the FERC pre-filing process to construct and operate its Access Northeast Project, which would provide 925 million cubic feet per day (MMcf/d) of capacity on Algonquin’s system in New York, Connecticut, Rhode Island and Massachusetts, and 6.8 Billion cubic feet (Bcf) of LNG storage capacity at the proposed Access Northeast LNG facility in Acushnet, Massachusetts — all to serve electric generation requirements in New England.
• In November 2015, NEXUS Gas Transmission LLC requested authorization to construct and operate its NEXUS Pipeline Project, which would provide 1,500 MMcf/d of capacity to markets in Ohio and southeastern Michigan.
• In November 2015, Texas Eastern requested authorization to construct and operate its Appalachian Lease Project, which would provide 950.2 MMcf/d of capacity to markets in the Midwest via a lease to NEXUS.
• In December 2015, Texas Eastern Transmission LP commenced service under its Ohio Pipeline Energy Network (OPEN) Project, which provides 550 MMcf/d of capacity from Ohio receipt points to delivery points in the Gulf Coast.
• In December 2015, Tennessee Gas Pipeline Co. LLC requested authorization to construct and operate its Northeast Energy Direct Project, which would provide 1,200 MMcf/d of capacity from Troy, Pennsylvania, to Wright, New York (the Supply Component) and 1,300 MMcf/d of capacity from Wright to Dracut, Massachusetts, (the Market Component) to serve markets in New England.
• In November 2015, Delfin LNG LLC requested authorization to amend its application to construct and operate facilities in Cameron Parish, Louisiana, to serve the company’s proposed offshore LNG export terminal in the Gulf of Mexico. The amendment would provide an additional 800 MMcf/d of capacity for a total 2,300 MMcf/d.
Finally, on Dec. 18, 2015, FERC’s Office of Energy Projects issued a revised draft of its Guidance Manual for Environmental Report Preparation. The Guidance Manual is intended to help sponsors of natural gas projects who file environmental information with the FERC, with the primary focus to identify the environmental documentation that needs to be included in Environmental Reports filed under FERC’s regulations implementing NEPA. According to FERC, the Guidance Manual “provides helpful information about required environmental documentation and is intended to be a ‘cookbook’ for preparing that documentation, but is not a substitute for the regulations themselves.”
As you may know, this environmental report cookbook is divided into two volumes: Volume 1 addresses the preparation of resource reports for both interstate natural gas project and FERC jurisdictional LNG facilities, while Volume 2 is specific to LNG facilities. Look for an updated version, with new recipes, in early 2016.
Washington Watch is a bimonthly report on the oil and gas pipeline regulatory landscape by Steve Weiler, a partner in the Washington, D.C., office of Stinson Leonard Street LLP. Weiler has more than 25 years of experience in a broad range of administrative, judicial, and transactional matters, involving the natural gas and oil pipeline industries. Contact him by email at email@example.com.