PennEast Project Earns Conditional Ferc OK
PennEast Pipeline earned conditional – but not unanimous – approval January 19 from the US Federal Energy Regulatory Commission (Ferc) for its $1.13bn PennEast Project, a 116-mile greenfield pipeline that would provide capacity to move 1.1bn ft3/day of Marcellus gas to markets in New York, New Jersey and Pennsylvania.
Commissioner Richard Glick dissented, arguing that PennEast failed to prove a need for the project and disagreeing with Ferc’s conclusion that its benefits outweigh its potential for harm.
The PennEast Project, underpinned by long-term precedent agreements covering 990mn ft3/day of capacity from 12 shippers – six of which are affiliates of PennEast – consists of a 116-mile mainline transmission pipeline extending from Luzerne County, Pennsylvania to Mercer County, New Jersey, three laterals connecting to various local utilities and interstate transmission systems in Pennsylvania and New Jersey and one new compressor station in Carbon County, Pennsylvania.
PennEast, a new entrant to the interstate gas transmission business, is a joint venture of Spectra Energy Partners and subsidiaries of AGL Resources, New Jersey Resources, South Jersey Industries and UGI Energy Services.
Ferc attached a total of 56 conditions to its approval, most dealing with environmental mitigation measures.
The Ferc application, filed in September 2015, attracted numerous protests and adverse comments, most of which raised issues relating to the need for the project and whether the use of eminent domain was appropriate.
Commissioners, with the exception of Glick, rejected most of the protests, satisfied that the existence of precedent agreements covering more than 90% of the project’s capacity proved the need for the project and approving the use of eminent domain.
In his dissent, however, Glick argued that PennEast had not proved the need for the project and rejected the conditional nature of the approval.
“In today’s order, the commission relies exclusively on the existence of precedent agreements with shippers to conclude that the PennEast Project is needed,” Glick wrote, noting also that affiliates of PennEast hold more than 75% of the project’s subscribed capacity.
“While I agree that precedent and service agreements are one of several measures for assessing the market demand for a pipeline, contracts among affiliates may be less probative of that need because they are not necessarily the result of an arms-length negotiation,” he wrote. “By itself, the existence of precedent agreements that are in significant part between the pipeline developer and its affiliates is insufficient to carry the developer’s burden to show that the pipeline is needed.”
Reflecting on the commission’s obligation to find that a project’s benefits outweigh its harms, Glick argued that the commission needed to do more to ensure that the project was, in fact, in the public interest, especially given the absence of what he considered to be adequate evidence of need from PennEast.
“The commission addresses this lack of evidence by conditionally granting the certificate, subject to PennEast’s compliance with the environmental conditions,” Glick wrote in his dissent. “I recognize that the courts have upheld the commission’s authority to issue conditional certificates. Nevertheless, doing so comes with significant consequences for landowners whose properties lie in the path of the proposed pipeline. Although the certificate is conditional, it gives the pipeline developer the authority to exercise eminent domain and condemn land as needed to develop the pipeline.”