By Shane Comeaux
America’s energy infrastructure network is nothing less than a modern marvel. The U.S. electrical grid, for example, is often referred to as “the greatest machine in the world” while the more than 2.6 million miles of energy pipelines that crisscross the country serve as veritable superhighways of the energy sector.
Ensuring that such feats have been accomplished safely and in a way that is in the best interest of the American public has been made possible in large part due to the diligent efforts of state and federal regulators at the Federal Energy Regulatory Commission (FERC). Tasked with reviewing and approving interstate electrical transmission and pipeline projects, since its inception the agency has by and large ensured fair and competitive practices and maintained the reliability of the nation’s energy infrastructure. Unfortunately, an important issue now before FERC could determine how much authority the agency retains in serving this critical role.
The debate revolves around the Louisiana Gateway Energy pipeline currently under construction by Oklahoma-based Williams Companies, a new project that would extend more than 150 miles from Texas to the Louisiana Gulf Coast. While the pipeline bears the hallmarks of a traditional high-volume interstate transmission line that would fall under FERC’s purview, Williams opted to classify the pipeline as a gathering line instead. This is critical because gathering lines, which are traditionally smaller pipelines used near wellheads, are not subject to FERC review or approval and such a classification would allow the company to circumvent the stringent review process and series of important public hearings necessary to ensure safety and protect the public interest.
As the American gas industry has grown, FERC has increasingly needed to determine whether new pipelines are transmission lines under their jurisdiction or gathering lines that are not. For the past three decades, FERC has relied on a detailed seven-factor test to make this assessment in hundreds of cases. Among other things, FERC’s seven-factor test includes physical factors such as the pipeline’s size, length, and operating pressure, as well as an examination of the company’s normal business activities and the stated purpose of the pipeline. FERC balances and assesses all of these facts before deciding how the pipeline should be classified and then traditionally makes a jurisdictional determination before construction is started.
With this system in place, companies have commonly reached out to FERC when they are unsure how to classify a pipeline project that could plausibly be considered either a transmission or gathering line. Based on the limited information Williams has shared publicly, it seems that FERC’s seven-factor test would have likely resulted in the project being classified as a transmission line and thus subject to FERC review and approval. But in the case of the Louisiana Gateway Energy project, Williams did not request a jurisdictional assessment from FERC before self-classifying it as a gathering line and beginning construction.
FERC’s role in the siting and approval of new pipeline projects has been tremendously important to ensuring transparency and accountability within the energy industry. Before approving a new transmission pipeline, FERC conducts a legal, scientific, and economic review of the project. The agency also provides notification to potentially affected communities, allows for stakeholder comments, and then considers these views in their decision-making. Without this critical analysis and community engagement, pipeline classification in the United States will be based on little more than a company’s own whims and what they think they can get away with.
If Williams avoids federal review and approval for this project by merely labeling it a gathering line, this could have dangerous ramifications for FERC’s ability to regulate pipeline construction moving forward as there would nothing to stop other companies from following suit. Fortunately, Energy Transfer, a Texas-based energy company, recently filed a petition to FERC asking the agency to examine the Louisiana Gateway project and seek answers from Williams on how they reached their conclusion that what seems to be a large, interstate pipeline should be considered a mere gathering line.
FERC’s decision on the matter will be watched closely by the industry, as it will not only determine the future of a single project, but it will also determine the future of FERC. Setting the wrong precedent here could relegate FERC’s once important role to that of a spectator rather than a regulator – and should be avoided.
Shane Comeaux is a public policy and energy expert from Lockport, who previously worked in offshore drilling operations. The LSU alumnus splits his time between Louisiana and the Washington, D.C. area.