Natural Gas Transmission Regulation in the US Jeff

Natural Gas Transmission Regulation in the US Jeff Wright, Chief Energy Infrastructure Policy Group Office of Energy Projects Federal Energy Regulatory Commission At Comisión Federal de Electricidad Mexico City, Mexico July 29, 2004 1

FERC What Is FERC? • An Independent Regulatory Agency in the Executive Branch of the US Government • Created by the Department of Energy Organization Act (1977) • Federal Power Commission was the predecessor of FERC 2 Office of Energy Projects

FERC How is FERC Organized? • There are 5 Commissioners – Nominated by the President, confirmed by the Senate, President designates Chairman – Each commissioner has a 5 -year fixed term, with one term expiring each year • The Chairman sets the triweekly Commission agenda – Orders voted out by majority rule 3 Office of Energy Projects

FERC is an Independent Federal Regulatory Agency • Political Party – No more than 3 commissioners from one political party • President and Congress – No review of FERC’s decisions by President, Department of Energy or other agencies • Industry Participants – No private discussions of open cases – Restrictions on FERC employees: stock, gifts, future employment 4 Office of Energy Projects

FERC Program Offices Office of Energy Projects Natural Gas Pipeline Construction and Abandonment Hydroelectric Projects (licensing, safety, compliance Environmental Reviews for Natural Gas and Hydro Projects) Office of Markets, Tariffs, and Rates Natural Gas, Electric, and Oil Rates and Terms/Conditions of Service Office of Market Oversight and Investigation Market Monitoring and Enforcement Office of Administrative Litigation FERC Trial Staff 5 Office of Energy Projects

FERC Helping Markets Work Adequate Infrastructure OEP Competitive Market FERC Effective Market Rules OMTR Market Oversight OMOI 6 Office of Energy Projects

FERC Chairman Wood (R) Commissioner Brownell (R) Commissioner Kelliher (R) Commissioner Kelly (D) Vacant Secretary Energy Projects Markets, Tariffs, Rates Executive Director 7 Administrative Litigation External Affairs Market Oversight & Investigations Administrative Law Judges General Counsel Office of Energy Projects

FERC What Does FERC Regulate? • Natural Gas Industry – Interstate transportation rates and services – Interstate gas pipeline and liquefied natural gas terminal construction and oversee related environmental matters • Electric Power Industry – Interstate transmission rates and services – Wholesale energy rates and services – Corporate transactions, mergers, securities issued by public utilities 8 Office of Energy Projects

FERC What Does FERC Regulate? (con’t) • Oil Pipeline Industry – Interstate transportation rates and services of crude oil and petroleum products • Hydroelectric Industry – Licensing of nonfederal hydroelectric projects – Oversee related environmental matters – Inspect nonfederal hydropower projects for safety issues 9 Office of Energy Projects

FERC 10 Major Pipeline Construction Projects Office of Energy Projects

FERC 11 The Regulatory Process As A Balancing Act Office of Energy Projects

FERC OEP Organizational Structure Director J. Mark Robinson Deputy Director Robert J. Cupina Assistant Director Management & Operations Thomas E. De. Witt Energy Infrastructure Policy Group Jeff C. Wright Division of Pipeline Certificates Director - Berne L. Mosley Deputy Dir. – Vacant Division of Gas. Licensing Environment & Engineering Hydropower F. Miles Director - Ann Director - Richard R. Hoffmann Deputy Dir. – Lauren H. O’Donnell Deputy Dir. - Lon R. Crow Division of Hydropower Admin. & Compliance Director - Joseph D. Morgan Deputy Dir. - Hossein Ildari Division of Dam Safety & Inspections Director – Constantine G. Tjoumas Deputy Dir. – Daniel J. Mahoney Certificates Branch 1 Michael J. Mc. Gehee Gas Branch 1 Michael J. Boyle Hydro East Branch 1 Vincent E. Yearick Land Resources Branch John E. Estep Washington Office William H. Allerton Certificates Branch 2 William L. Zoller Gas Branch 2 John S. Leiss Hydro East Branch 2 Edward A. Abrams Engineering & Jurisdiction Branch William Y. Guey-Lee Atlanta Regional Office Jerrold W. Gotzmer Gas Branch 3 Lonnie A. Lister Hydro West Branch 1 Jennifer Hill Biological Resources Branch George H. Taylor Chicago Regional Office Peggy A. Harding LNG Engineering Branch Chris M. Zerby Hydro West Branch 2 Timothy J. Welch New York Regional Office Anton J. Sidoti Portland Regional Office Harry T. Hall 3/18/2018 12 San Francisco Regional Office Takeshi Yamashita Office of Energy Projects

FERC Regulation of Interstate Construction Natural Gas Policy Act (NGPA) Natural Gas Act (NGA) 13 Office of Energy Projects

FERC NGPA • Facilities to Transport Gas Under NGPA Section 311 May Be Constructed Without FERC Approval. • Facilities can only be used to transport on behalf of an intrastate or LDC • Must comply with environmental requirements • If cost of facilities exceeds $7. 5 million, FERC must be notified 30 days prior to construction 14 Office of Energy Projects

FERC Natural Gas Act NATURAL GAS ACT Section 7(c) Interstate Case Specific Blanket Authority Automatic 15 Section 3 Import/Export Case Specific Prior Notice Office of Energy Projects

FERC Natural Gas Act • Blanket Certificate • Automatic Authorization • Cost of facilities is less than $7. 5 million • Facilities are “eligible” facilities • Prior Notice • Cost is between $7. 5 and $21 million • 45 -day notice period prior to construction • Facilities are “eligible” facilities 16 Office of Energy Projects

FERC Natural Gas Act • Case Specific Section 7(c) Certificate • Conduct a full review of proposal including engineering, rate, accounting, and market analysis • Conduct an environmental review by preparing an Environmental Assessment or an Environmental Impact Statement 17 Office of Energy Projects

FERC NGPA OR NGA? • NGA Certificate Grants a Right of Federal Eminent Domain • NGPA Does Not Confer Any Rights of Federal Eminent Domain; Pipeline May Seek State Eminent Domain 18 Office of Energy Projects

FERC Imports/Exports • Any entity that proposes to site, construct and operate or modify facilities used to import or export gas must file an application pursuant to Section 3 of the NGA and file for the issuance of a Presidential Permit. – In order to obtain a Presidential Permit, the Commission must "consult" with the Secretaries of State and Defense prior to its issuance. 19 Office of Energy Projects

FERC Imports/Exports • The owner of the gas must apply to the Office of Fossil Energy, Department of Energy (DOE/FE) for Section 3 authority as well. • Jurisdictional pipelines that filed for Section 3 authorization to site, construct, and operate border facilities will not be the same party that applies for Section 3 authority from DOE/FE. 20 Office of Energy Projects

FERC Major Pipeline Projects 21 Office of Energy Projects

FERC Projects Certificated 22 Office of Energy Projects

FERC Georgia Straits (96) Major Pipeline Projects Certificated (MMcf/d) January 2002 to July 2004 5. CIG (282, 92) 6. CIG (118) 7. Trans. Colorado (125) 8. WIC (116) Northwest (162, 113) Northwest (224) Tuscarora (96) Kern River (282) 1. Algonquin (285) 2. Islander East (285) 3. Iroquois (85) 4. Columbia (135, 270) Iroquois(70) WBI (80) Northwest (191) 6 8 r ive n. R r Ke 6) (88 7 ANR (220, 107, 143) Cheyenne Plains (560) NFS/DTI (150) TETCO(223) TETCO(250) 5 Greenbrier (600) East Tennessee (510) El Paso (140) North Baja (500) 3 1 2 4 Cove Point (445) TETCO (197) Transco (323) El Paso (320) Discovery (150) 11. 3 BCF/D Total 2, 778 Miles Tennessee (320) 1 SCG Pipeline (190) Southern (330) Calypso (832) Ocean Express (842) 23 Office of Energy Projects

FERC 24 Currently Pending Projects Office of Energy Projects

FERC Major Pipeline Projects Pending (MMcf/d) July 2004 Algonquin (140) Algonquin BG LNG (500) Cheyenne Plains (170) Mill River (800) San Juan Expansion (Transwestern) (600) Cheniere Sabine (2, 600) Cheniere Corpus Christi (2, 600) 11. 2 BCF/D Total 153 Miles 1 Trunkline (1, 500) Mc. Mo. Ran (1, 500) Compass Pass (1, 000) 25 Office of Energy Projects

FERC On The Horizon 26 Office of Energy Projects

FERC Project Evaluation How Does FERC Evaluate All Of These Major Projects? Are There Any Criteria Used in This Evaluation? 27 Office of Energy Projects

FERC Major Pipeline Projects in Pre-filing (MMcf/d) July 2004 Questar (102) Entrega (En. Cana) (1, 300) Transcontinental (105) Logan Lateral (Texas Eastern) (900) El Paso (Piecance Expansion) (300) 3. 1 BCF/D Total 402 Miles Seafarer Pipeline (El Paso) (372) 1 28 Office of Energy Projects

FERC Major Pipeline Projects On The Horizon (MMcf/d) July 2004 Panhandle Eastern (500) Bison Pipeline (Northern Border) (240) Trailblazer (100) Coronado (500) Sun Devil Project(Transwestern) (500) Piceance to Cheyenne (KM Interstate) (500) Advantage Southern (KM Interstate) (330) Silver Canyon Project (KM Interstate) (750) KM West Texas (KM Interstate) (300) Wheatland Expansion (KM Interstate) (80) Western Frontier (So. Star)(540) Kern River Expansion (500) Trans. Colorado (750) 8. 3 BCF/D Total 3, 640 Miles Maritimes Phase IV (400) Blue Atlantic (El Paso) (1, 000) Transcontinental (150) Northwinds Pipeline (NFG) (500) Freedom Trail (Tennessee) (150) Petal (500) 1 29 Office of Energy Projects

FERC PL 99 -3 -000 Certificate Policy • New Certificate Policy Statement issued on September 15, 1999. • Clarification of Certificate Policy Statement issued on February 9, 2000. • Further clarification issued on July 26, 2000. 30 Office of Energy Projects

FERC Certificate Policy Problems • The reliance on percentage of capacity under long-term contracts to show demand. • The pricing of new facilities. 31 Office of Energy Projects

FERC 32 Policy Drawback: Reliance on Contracts • The amount of contracted capacity is not a proxy for all public benefits. • Requirement for long-term contracts contrasts with industry’s move to shortterm contracts with marketers. • Loss of customer choice reduces efficiency. • Contracts don’t offer adequate justification to landowners. Office of Energy Projects

FERC Policy Drawback: Pricing of New Facilities • Rolled-in pricing bias leads to: – Subsidization by existing customers – Overbuilding of facilities – Aggravate adverse environmental impacts – Distortion of competition between pipelines 33 Office of Energy Projects

FERC PL 99 -3 -000 Certificate Policy Goals n Foster Competition n n 34 Consider Captive Customers Avoid Unnecessary Physical Impacts Achieve Optimal Amount of Facilities Encourage Complete Record Expedite Review Time Office of Energy Projects

FERC PL 99 -3 -000 Certificate Policy • Apply Threshold Test – Subsidization Incremental Rates – No Subsidization Rolled-in Treatment – System improvements for existing customers Rolled-in Treatment 35 Office of Energy Projects

FERC PL 99 -3 -000 Certificate Policy • Develop Record – Adverse Impacts on • Existing Customers and Pipelines • Landowners • Communities – Specific Benefits – Need and Market – Condemnation Impact 36 Office of Energy Projects

FERC PL 99 -3 -000 Certificate Policy Needs and Benefits Record Adverse Impacts n n 37 Balance Benefits and Impacts Complete Traditional Environmental Process Office of Energy Projects

FERC Opportunities for Public Involvement The FERC Process: • Issue Notice of the Application • Project Sponsor Sends Landowner Notification Package • Issue Notice of Intent to Prepare the NEPA Document (i. e. , scoping) • Hold Scoping Meetings 38 Public Input: • File an Intervention; register for e-subscription • Contact the project sponsor w/questions, concerns; contact FERC • Send letters expressing concerns about environmental impact • Attend scoping meetings Office of Energy Projects

FERC Opportunities for Public Involvement The FERC Process: • Issue Notice of Availability of the DEIS Public Input: • File comments on the adequacy of DEIS • Hold Public Meetings on DEIS • Attend public meetings to give comments on DEIS • Interveners can file a request for Rehearing of a Commission Order • Issue a Commission Order 39 Office of Energy Projects

FERC Comments and Protests 40 Office of Energy Projects

FERC Traditional vs. Pre-Filing Process Announce Open Season Develop File Study Prepare Resource At Corridor FERC Reports Traditional - FERC Announce Open Season Develop Study Corridor Conduct Scoping 0 1 2 3 4 5 6 7 Traditional - Applicant Conduct Scoping File Prepare Resource At FERC Reports Review Draft Resource Reports & Prepare DEIS Issue Draft EIS Pre-Filing - Applicant Issue Draft EIS Issue Final Order EIS Pre-Filing - FERC 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (months) 41 Issue Final Order EIS Office of Energy Projects

FERC Benefits of Pre-Filing • More interactive NEPA process, no shortcuts • Earlier, more direct involvement by FERC, other agencies, landowners • Goal of “no surprises” • Time savings realized only if we are working together with stakeholders • FERC staff is an advocate of the Process, not the Project! 42 Office of Energy Projects

FERC An Example: Kern River Expansion • • 716 miles of pipeline looping through CA, NV, UT, WY 3 New Compressors $1. 2 Billion 885. 6 MMcf day of additional / capacity – Doubles Kern River’s capacity from 845. 5 MMcf/day to 1. 7 Bcf/day X 43 PROPOSED COMPRESSOR STATION PROPOSED PIPELINE LOOPING Office of Energy Projects

FERC Kern River Expansion Environmental Highlights • Environmentally Acceptable – New pipe parallels initial right-of-way. – Mitigation measures minimize potential impacts. • First Major Project to utilize NEPA Pre-Filing 44 – Order issued less than 1 year from initial filing date - Final EIS completed in June 2002 which was 11 months from filing date. – In comparison, FEIS and certificate for Gulfstream required 16 months from initial filing date; Kern River’s initial greenfield project required 30 months for the FEIS. – Interagency cooperation contributed to meeting Federal and state environmental requirements. Office of Energy Projects

FERC Issues/Initiatives Issue Timely Business Decisions Initiative Preliminary Determinations (1988) Staff Resources Environmental Third-Party Contractors (1994 and 1998) Staff Accountability/Incentive GPRA Compliance (1999) Policy Guidelines Certificate Policy Statement (1999) Certificate Rule (1999) Effective Regulations 45 Office of Energy Projects

FERC Issues/Initiatives Issue Initiative Due Process and Reroutes Landowner Notification Rule (1999) Administrative Procedures Ex Parte Communication Rule (1999) Concurrent Order and EIS (2000) EIS Process Staff Accessibility OEP = Gas/Hydro Synergy (2000) Outreach (2000) Rehearing Timing 30 -Day Deadline (2001) Staff Resources 46 Office of Energy Projects

FERC Interagency Agreements • IA for Environmental Review of Natural Gas Pipelines – Signed May 2002 – Working Group Established – FERC chairs working group – Each participating agency developed internal agency guidance – Group working on survey to get feedback on implementation experiences/success 47 Office of Energy Projects

FERC Interagency Agreements • IA for LNG Safety and Security – Signed January 2004 by FERC, USCG, DOT – Defines roles and responsibilities – Establishes FERC as lead for NEPA review – Stresses coordination, seamless review – Coordination continues from initial review through construction and operation – Includes terminal facilities and ships 48 Office of Energy Projects

FERC Infrastructure Conferences • Five Conferences Held – – – Seattle New York City Orlando Chicago Denver • Purpose – Bring together experts to discuss infrastructure issues in region 49 Office of Energy Projects

FERC Topics Addressed • Adequacy of Existing Infrastructure • Necessary Additions of Infrastructure • Barriers to Expansion • Environmental and Landowner Concerns 50 Office of Energy Projects