Project Finance Blog

The effect of FERC's quorum issue on natural gas projects

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Based on campaign pronouncements, the Trump administration was widely expected to be a proponent of oil and gas infrastructure projects.  This has turned out to be the case for oil pipeline projects such as the Keystone and Dakota Access pipelines. However, an unexpected turn of events has stalled gas pipeline and liquefied natural gas (LNG) projects.  

The Federal Energy Regulatory Commission (FERC or Commission) has final approval authority over interstate natural gas pipelines and LNG export terminals. To give final approval, FERC requires a quorum, which consists of at least three of the five commissioners being present. Since February 3rd, when demoted Chairman Norman Bay resigned, FERC's Commission consists of only two commissioners, thus lacking a quorum and the ability to approve gas pipeline and LNG projects. Until FERC regains a quorum with a third commissioner, many natural gas infrastructure projects will be stalled. Rumors continue to circulate with respect to names of potential appointees and the Senate Energy and Natural Resources Committee has indicated that it is poised for quick action. Nevertheless, the White House has yet to nominate a commissioner, leaving the natural gas industry in limbo.

Although the FERC staff has delegated authority to rule on uncontested applications, it has been reluctant at times to exercise that authority. More importantly, the lack of a quorum has emboldened parties threatening to protest otherwise uncontested applications at FERC. 
  • Several major contested gas projects are beginning to back up awaiting FERC approval;  
  • One pipeline project converting a gas line to a liquids line was delayed until a protest was withdrawn;
  • Uncontested rate filings have been accepted by the FERC staff but only subject to suspension and further order of the new Commission; and
  • Final approval of at least one FERC blanket certificate application for an intrastate pipeline's rates and terms and conditions of interstate transportation service has been delayed.

Until FERC regains a quorum, natural gas project developers and existing pipelines should expend extra efforts to address potential issues before filing their certificate applications or rate changes to avoid protests and present uncontested applications to FERC staff. Developers and pipelines should also encourage FERC staff to exercise its delegated authority to approve all aspects of pending uncontested applications.

Like all matters pending at FERC, each case is unique and requires analysis to develop a tailored strategy to address all potential issues. This is especially true as the natural gas industry waits for the White House to nominate at least one FERC commissioner now and another one after current Commissioner Collete Honorable's term expires at the end of June.  


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