On April 2, 2019, FERC affirmed its decision that the New York Department of Environmental Conversation (“NY DEC”) waived its authority to issue or deny a Clean Water Act (“CWA”) section 401 water quality permit application filed by National Fuel Gas Supply Corporation and Empire Pipeline, Inc. (collectively, “National Fuel”) by failing to act on the application within one year of receipt.  Specifically, FERC held that an agreement between NY DEC and National Fuel to alter the receipt date of the application did not extend the CWA’s statutory one-year deadline for NY DEC to act on the application.
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On March 19, 2019, the U.S. Court of Appeals for the First Circuit (“First Circuit”) found that FERC’s issuance of a certificate of public convenience and necessity (“CPCN”) authorizing Algonquin Gas Transmission, LLC’s (“Algonquin”) compressor station construction in the Town of Weymouth, Massachusetts (“Weymouth”) preempted Weymouth’s later denial of a Wetland Protection Ordinance (“WPO” or “Ordinance”) permit that ultimately prohibited Algonquin from constructing a compressor station in Weymouth.  Notably, the First Circuit found that Weymouth’s WPO permit denial was preempted, in part, because FERC considered essentially the same environmental factors Weymouth relied on to deny the WPO permit.
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On March 21, 2019, FERC issued a Notice of Inquiry (“NOI”) seeking information regarding whether and how to revise its policy for determining the rate of return on equity (“ROE”) used in setting rates charged by jurisdictional public utilities.  The NOI also seeks comment on whether any changes to the Commission’s ROE policies for public utilities should be applied to interstate natural gas and oil pipelines.  Specifically, the NOI requests information in eight areas:  (1) the role of FERC’s base ROE in investment decision-making and what objectives should guide the Commission’s approach; (2) whether uniform application of FERC’s base ROE policy across the electric, interstate natural gas pipeline and oil pipeline industries is appropriate and advisable; (3) performance of the discounted cash flow (“DCF”) model; (4) proxy groups; (5) the choice of financial model(s) used; (6) the mismatch between market-based ROE determinations and book-value rate base; (7) how FERC determines whether an existing ROE is unjust and unreasonable under the first prong of Federal Power Act section 206; and (8) model mechanics and implementation.
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At a time of significant industry transformation driven by technological change and spurred on by environmental policy concerns, the Federal Energy Regulatory Commission (“FERC” or “Commission”) has now added a significant layer to the stack of policy debates – the future of transmission investment.  Many states have seized the initiative in terms of establishing preferable resource mixes for in-state customers, and are spearheading significant pushes for greater renewable and storage resource deployment.  FERC has now joined the fray by opening up the policy debate anew regarding how to spur (or whether to spur) additional transmission sector investment.  The FERC order described below focuses on regulatory and market rules impacting transmission investment (Docket No. PL19-3-000).  The agency also opened a companion docket requesting comments on the details of its policies regarding establishment of a public utility transmission owner’s stated return on equity (“ROE”) (Docket No. PL19-4-000).  The Washington Energy Report will provide detailed summaries of these orders via our blog.  FERC’s mention here of “an increased emphasis on the reliability of transmission infrastructure” (emphasis added) could signal an attempt to re-focus the U.S. Department of Energy’s resiliency concerns to an arena that gives FERC home-field advantage.  Lest the states forget, FERC controls the price of admission for a ticket to the interstate transmission network, and this open-ended fact-finding effort bears a high likelihood of impacting the price of such tickets (for a large portion of the continental United States).
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On February 21, 2019, FERC took “a new approach” to its approval of pending FERC-jurisdictional liquefied natural gas (“LNG”) projects by calculating the direct greenhouse gas (“GHG”) emissions from the operation of the project facilities and comparing those emissions to the national level.  FERC’s approach was a step toward ultimately approving a proposed LNG project that was previously pulled from FERC’s December 2018 open meeting.  Notwithstanding FERC’s approval, Commissioner Cheryl LaFleur reiterated her concern that while FERC’s disclosure of national comparison data is only the first step, “the Commission has not identified a framework for making a significance determination” based on GHG emissions.  Meanwhile, Commissioner Richard Glick dissented, arguing that FERC’s GHG analysis fails to meet the requirements of both the Natural Gas Act (“NGA”) and the National Environmental Policy Act (“NEPA”), both of which require that FERC consider climate change implications in some manner.  Separately, FERC approved two smaller gas pipeline projects, with Commissioner LaFleur issuing separate concurrences, and Commissioner Glick issuing separate dissents, in each.   
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On February 19, 2019, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an unpublished opinion in Appalachian Voices v. FERC, No. 17-1271, denying petitions for review filed by Appalachian Voices, Chesapeake Climate Action Network, and the Sierra Club, among others (“Petitioners”), that challenged FERC’s issuance of a certificate of public convenience and necessity (“certificate”) for the 300-mile natural gas Mountain Valley Pipeline extending from Wetzel County, West Virginia to Pittsylvania County, Virginia. The D.C. Circuit’s order rejected all sixteen of the Petitioners’ challenges to FERC’s approval of the certificate, and notably concluded that: (1) market need for the project was demonstrated by long-term precedent agreements, even though the agreements were with affiliates, and (2) FERC’s estimate of emissions resulting from the end-use combustion of natural gas and explanation why the Social Cost of Carbon is not an appropriate measure of project-level climate change impacts were all that was required by the National Environmental Policy Act (“NEPA”).
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On February 14, 2019, FERC Chairman Neil Chatterjee testified alongside officials from the North American Electric Reliability Corporation, the Department of Energy (“DOE”), the National Guard, and an engineering firm at a hearing before the U.S. Senate Committee on Energy and Natural Resources (“Committee”) to consider cybersecurity efforts in the energy industry.  In response to Senators’ questions about whether the natural gas industry should be subject to mandatory cyber security standards, a position the Chairman laid out in a June 2018 op-ed written with fellow FERC Commissioner Richard Glick, Chairman Chatterjee acknowledged that natural gas pipelines remain vulnerable to cyber-attacks and that it is imperative to continue work to address these threats.  He made clear, however, that industry and government have made significant strides toward addressing the issue even without mandatory cybersecurity standards.  Chairman Chatterjee assured the Committee that FERC is dedicated to protecting the energy sector from cyber threats and is ready to work with Congress and other agencies to bolster the nation’s cybersecurity posture.
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On February 5, 2019, in an unpublished summary order, a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit (“2nd Circuit”) overturned the New York State Department of Environmental Conservation’s (“New York DEC”) denial of a water quality certification for National Fuel Gas Supply Corporation’s (“National Fuel”) Northern Access Pipeline Project and remanded it back to the state for further explanation.
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On January 29, 2019, over 180 environmental organizations (“Environmental Groups”) wrote a letter to members of Congress requesting a congressional hearing into the approval process for interstate gas pipelines.  The Environmental Groups argue that FERC approves nearly all proposed pipelines, abuses its eminent domain authority, and relies on erroneous data when evaluating whether to allow pipeline companies to begin construction.
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On January 25, 2019, the U.S. Court of Appeals for the District of Columbia (“D.C. Circuit”) in a unanimous decision granted a petition for review in Hoopa Valley Tribe v. FERC, No. 14-1271 (D.C. Cir., Jan. 25, 2019).  The key holding in the case, which concerns the ongoing FERC’s relicensing of the Klamath Hydroelectric Project, is that the States of California and Oregon waived their authorities under section 401 of the Clean Water Act (“CWA”), 33 U.S.C. § 1341, by failing to rule on the applicant’s submitted application for water quality certification within one year from when it was initially filed in 2006.  The applicant for many years had followed, at the request of the States, the common industry practice of “withdraw-and-resubmit” of its water quality certification application in an attempt to annually reset the one-year time period for the States to act, as established under CWA section 401.  The D.C. Circuit in Hoopa Valley Tribe invalidated this practice as a means of resetting the statutory clock, instead holding that the clear text of CWA establishes that “a full year is the absolute maximum” time for a state to decide on a water quality certification application.
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