Energy Transition, Natural Gas, Emissions

January 27, 2025

Transco pipeline expansion regains certificate from US FERC in response to court ruling

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HIGHLIGHTS

Order avoids pipeline service disruption

FERC decision praised by industry groups

Importance of precedent agreements highlighted

The Federal Energy Regulatory Commission restored authorization for Transcontinental Gas Pipe Line's Regional Energy Access expansion project on Jan. 24, issuing an order in response to an appeals court decision that vacated the Natural Gas Act certificate for the project, intended to increase pipeline capacity into the Mid-Atlantic.

In a lengthy order defending the restoration of the Natural Gas Act (NGA) certificate after the US Court of Appeals for the District of Columbia Circuit vacated it in July 2024, FERC said it considered New Jersey's law calling for reduced gas usage, studies submitted by parties asserting that the added pipeline capacity would not be needed, and the commission's requirements under the National Environmental Policy Act (NEPA). On each point, FERC said the evidence in the case supports reinstating the NGA certificate and dismissing the arguments made by environmental groups and the New Jersey Division of Rate Counsel.

The unanimous decision from the five commissioners at FERC allows service on the Transco expansion to continue and avoids having facilities taken out of service in the middle of winter when gas demand is elevated to meet home heating needs. Because the project, known as the REA expansion, had been built and already partially placed into service when the DC Circuit issued its order, FERC and pipeline industry officials had noted the potential for disrupting gas service without a reissuance of the certificate.

With the NGA certificate now restored for the REA's 829,400 Dt/day expansion, FERC said it did not need to act on Transco's request for an emergency certificate.

The Jan. 24 decision (CP21-94) avoids endangering the health and safety of gas utility customers in Delaware, Maryland, New Jersey, New York and Pennsylvania, the American Gas Association (AGA) said in a Jan. 26 statement.

AGA and the Interstate Natural Gas Association of America (INGAA), in its own statement Jan. 27, commended the FERC order that will keep the Transco expansion in service and allow for the continued delivery of gas to families and businesses in those states.

Responding to the court, FERC said it closely examined studies of gas demand put forth by several parties in the case, including project opponents that pointed to unused pipeline capacity during certain times of the year and the release of pipeline capacity that gas utilities had signed up for.

The commission ruled that precedent agreements signed by pipeline customers are sufficient evidence of market need for pipeline additions, with Transco's expansion 100% covered by shipper precedent agreements. "We will continue to treat precedent agreements as persuasive evidence of market need and will not look beyond them to assess need by other means unless there is credible, contrary evidence discounting their probative value," FERC said.

FERC did not agree with the parties that argued energy efficiency and other measures, including New Jersey's 2018 Clean Energy Act that directs gas utilities to achieve slight reductions in gas usage in the coming years, would negate the need for the pipeline expansion. The parties opposing the Transco project did not prove that New Jersey utilities have developed strategies to actually lower gas usage, and nothing in the record supports the conclusion that the pipeline capacity will not be needed, FERC said.

Even if New Jersey gas utilities reach the law's goal of a 0.75% reduction in the average annual gas use, "this outcome is not inconsistent with the [REA] project, which is designed to diversify, enhance, and secure access to natural gas supply, providing overall reliability and diversification of energy infrastructure in the Northeast by easing locational constraints caused by limited pipeline takeaway capacity," FERC said.

State regulatory oversight

As for the pipeline capacity contracting practices of gas utilities and project opponent claims that utilities can sign up for capacity and sell it in the secondary market for a profit, FERC said state regulatory oversight of gas utilities is beyond its jurisdiction. It noted, however, that the New Jersey Board of Public Utilities has oversight and consumer protection mechanisms in place for such measures if it finds that a utility was imprudent in acquiring a certain amount of pipeline capacity.

The REA project will allow gas utility shippers to lower their costs by purchasing lower-priced Marcellus Shale gas instead of gas through typically higher-priced peaking contracts or spot market purchases for delivery during peak demand periods, FERC added. Based on the evidence, and "having further assessed and weighed the impacts of New Jersey's clean energy laws," FERC found that the REA project is not inconsistent with state laws, nor do the laws undermine the need for the project.

Turning to NEPA and FERC's conclusion in the original certificate order for the Transco expansion that it could not make a finding of "significance" about greenhouse gas emissions associated with the project, FERC pointed to other appeals court decisions and recent orders of its own in response to those court decisions that support its position.

FERC told the court that it cannot characterize any project's GHG emissions as significant or insignificant "because we are unable to identify any accepted tool or method, including use of the social cost of GHGs, that would allow us to determine what level of GHG emissions' contribution to adverse climate change impacts is significant under NEPA."

The commission said a past decision that it could reach a significance finding of GHG emissions associated with a Northern Natural Gas pipeline project has been overruled. It will be FERC practice "not to make a binary significance determination for GHG emissions and to instead rely on a qualitative discussion of the potential adverse effects," as upheld by the DC Circuit in other cases.

The FERC order responding to the DC Circuit marks "an important step towards regulatory clarity," INGAA President and CEO Amy Andryszak said.

The court's July 2024 decision "departed from, and at times disregarded, its own precedent regarding the strong value of precedent agreements in demonstrating market need," Andryszak said. FERC's order "affirms that precedent agreements are the best evidence of actual need for a project."

A spokesperson for The Williams Cos., which owns Transco, said in a statement that Transco appreciates FERC reinstating the NGA certificate for the project and the guidance provided on the importance of precedent agreements.

The REA expansion is in full service, and the only pending regulatory matter is an appeal of Pennsylvania's state permits to the Pennsylvania Environmental Hearing Board. Williams is waiting on the board's decision, the spokesperson said.