FERC's Climate Review in Flux
The United States Federal Energy Regulatory Commission's ("FERC") approach to the way it assesses climate impacts in natural gas pipeline and LNG facility proceedings looks to remain uncertain in 2023. FERC's climate review has been a source of intense debate in recent years. When President Biden appointed Richard Glick as the FERC chair in 2021 and FERC gained a Democratic majority, Glick vowed to adjust the agency's approach to weighing pipelines' greenhouse gas emissions. And indeed, under Glick's leadership, FERC formally addressed the significance of a natural gas pipeline's greenhouse gas emissions for the first time in FERC's history and attempted to update its natural gas certificate policy statement—an overarching document that guides the agency's pipeline certificate reviews—for the first time in more than 20 years.
However, FERC's progress toward a revamped climate review has been halting due to resistance both within and without FERC. The revised certificate policy statement faced strong opposition by FERC's two Republican commissioners and the industry. Ultimately, despite a Democratic majority commission, FERC voted to downgrade the policy statement to a "draft" policy in March of 2022. Republican commissioners have also strongly dissented from other FERC orders attempting to expand FERC's assessment of greenhouse gas emissions, and these FERC decisions have drawn heavy political fire.
The political division within FERC and its impact on FERC's approach to its climate review will likely continue to be prominent in 2023. Glick's departure in January left FERC with a four-member Commission that is split along party lines. It is too early to tell whether this split will lead to a change in direction or a stalemate. Commissioner Willie Phillips was appointed to replace Glick as the FERC chairman in January, but it is uncertain whether climate change will remain the same focus under Phillips' leadership as it was under Glick's. Phillips has stated that FERC will not "sit on its hands with regard to important issues," but statements by Phillips so far seem focused more on grid reliability than climate change.
Finally, recent decisions by the D.C. Circuit remanding FERC natural gas pipeline certificate orders seem to have done more to increase uncertainty than to chart a course for the agency. In a spate of rulings in the last two years, the D.C. Circuit ordered FERC to reconsider greenhouse gas impacts—or explain why it cannot do so—for projects that FERC had already approved. The D.C. Circuit generally did not vacate FERC's orders, but instead remanded the orders for FERC to complete more fulsome climate impact reviews. FERC has yet to issue a sufficient number of orders in these remand proceedings to demonstrate precisely how it will address the court's requirements or how the remands will change its approach to climate reviews.
FERC's emergent policy on its climate review, the changing composition of the Commission, and ongoing remand proceedings all generate additional regulatory risk and uncertainty for natural gas and LNG build-out projects. Companies desiring to properly evaluate and mitigate these risks must stay continuously apprised of FERC's evolving approach to its review of climate-related impacts, must appropriately build administrative litigation costs and time into project assessments, and must monitor and understand the changing political environment both within and without FERC.
Read the full Climate Report here.
