Certification of US Gas Pipelines: Assault on a “Modern Miracle”?

28 January 2018
By Dr. Jeff D. Makholm

In an upcoming article in the February 2018 issue of the Wiley journal Natural Gas & Electricity, NERA Managing Director Dr. Jeff D. Makholm assesses the threat facing the Federal Energy Regulatory Commission’s (FERC’s) power to issue certificates for pipeline projects, stemming from the Southeast Market Pipelines Project decision in August 2017 from the US Court of Appeals for the District of Columbia Circuit. Combining competitive entry and interstate pipeline price regulation with exacting operational and accounting measures, FERC has permitted interstate pipeline capacity rights to rise to the level of tradable property in competitive markets. This “Coasian market” is a boon to investment in high-technology, unconventional gas production and is the principal reason why US gas commodity prices are generally less than half those anywhere else in the world.

Since the Southeast decision, other courts, state agencies, and interest groups have called into question FERC’s role in the certification of new lines in the face of, among other things, “environmental justice and climate destruction.” If this is a trend—to bring new environmental and regulatory tasks into FERC’s certification procedures—then it is a worrisome one from the perspective of America’s gas market. The calls for FERC to take a more active role in assessing the position of natural gas in America’s energy mix, or in judging the appropriate contribution of natural gas to climate change (vis-à-vis other fuels), would start to turn FERC back into the type of agency role from which it successfully escaped. With any luck, FERC can avoid such a retrograde result.

Makholm, Jeff D. (2018, February). Certification of US Gas Pipelines: Assault on a “Modern Miracle”? Natural Gas & Electricity 34/07, ©2018 Wiley Periodicals, Inc., a Wiley company.