What’s the issue?
The chair of FERC is expected to switch from Republican control to Democratic control on January 20, 2021, when President-elect Biden takes office and will likely demote Chairman Danly and name one of the two Democrats, either Commissioner Glick or Clements, as the chair.
Why does it matter?
The chair decides the agenda for the Commission, including the timing of votes for gas pipeline projects, and sets the priorities of the Commission’s staff. Under President Trump, the Commission purportedly was in favor of infrastructure projects such as gas pipelines, but the time period for approval lengthened substantially during the four years of that administration, as compared to the last four years of the Obama administration. The time period for approval could grow even longer in a Democrat-led FERC.
What’s our view?
Based on historical data, we believe that it is possible to establish an appropriate length of time for the review and approval of a FERC pipeline project that requires the preparation of an Environmental Assessment (EA) as opposed to an Environmental Impact Statement. Projects that require an EA have been, and will likely continue to be, the vast majority of projects under review at FERC. As such, the industry may want to advocate either to FERC or to Congress for at least a “goal” for the review process, so that all parties, including the applicant, staff and Commission, can be held accountable for the length of its review times.
Upon being sworn in as president, one of the first actions President-elect Biden is expected to take is to demote Chair Danly at FERC, and to name one of the two Democrats as the chair. While full Democratic control of the Commission may need to wait until a replacement for Commissioner Chatterjee is named when his term expires in June 2021, the change in the chair can have a significant impact on the work at FERC.
The chair decides the agenda for the Commission, including the timing of votes for gas pipeline projects, and sets the priorities of the Commission’s staff. Under President Trump, the Commission purportedly was in favor of infrastructure projects such as gas pipelines, but as we show below, the time period for review, especially following the environmental review period, lengthened substantially during the four years of President Trump’s administration, as compared to the last four years of the Obama administration. With a Democratic chair, there is concern that the focus of the Commission will shift from natural gas projects to other areas, like facilitating the integration of renewables into the grid, and thus the review times for pipeline projects could lengthen even more.
Based on historical data, we believe that it is possible to establish an appropriate length of time for the review and approval of a FERC pipeline project that requires the preparation of an Environmental Assessment (EA) versus an Environmental Impact Statement (EIS). As we discuss below, absent extraordinary circumstances, a goal of just over ten months for projects that do not require the preparation of an EIS seems to be appropriate. The industry may want to advocate, either to FERC or to Congress, for just such a “goal” for the review process so that the Commission and staff can be held accountable for the length of its review times. And FERC should be supportive of such a specific and measurable goal, which should incentivize project applicants to provide quantifiable support for their schedule.
Complex Projects Take Longer to Review
The complexity of a project will naturally lead to longer review times. A key indicator of a project’s complexity is the scope of the required environmental review. It is understandable that a project that requires the preparation of an EIS will take longer to review than one that requires only an EA. In our dataset, of all FERC section 7c projects dating back to fiscal year 2008, over 80% of FERC projects, however, required only an EA. Those are the projects we focus on below to determine whether the data provides an appropriate goal for FERC to use when assessing these types of projects.
Who’s In Charge?
We break down the review time for projects into two key phases between the time the applicant submits a project for review until the time FERC issues an order either approving or denying the requested certificate. During the first phase, from the time the applicant submits the application to FERC and lasting until the EA is issued, the review timeline is generally under the control of FERC’s Office of Energy Projects, which is charged with completing the EA. Following this environmental review phase, we then measure the time period from the issuance of the EA to the issuance of the FERC certificate order, which we call the Commission review phase. During the Commission review phase, the timeline is generally under the control of FERC’s Office of General Counsel and the Commission itself, because both are responsible for preparing the FERC order regarding the requested certificate. It is important to keep this distinction in mind because goals should be established for each phase so that the party responsible for moving the project along has its own independent goals to which it is working.
Timelines for Both Phases Lengthened in the Middle of the Last Decade
We set forth below the range of review time periods for each of the two phases, environmental review and Commission review, based on the fiscal year in which a project was filed starting in 2008 and running through 2019 -- which is the most recent year in which a significant number of reviews have been completed.
As can be seen above, the length of both phases grew tremendously in the middle of the last decade, starting in 2015 for the environmental review phase and in 2016 for the Commission review phase. However, as we noted in FERC Environmental Review Timelines Improve -- But Costs are Up, there is a key issue to note about the workload on FERC during that time period. In each of the years from 2015 through 2019, the backlog of cases at the beginning of those fiscal years was over 40 projects, primarily because of the huge increase in the number of projects being submitted, beginning in 2014.
Normal Workload Timelines
If we separate the years in which the backlog of cases exceeded 40 going into the fiscal year, we get two very different plots for the average time it takes FERC to review a project.
As seen above, when considering years where the backlog of cases was less than 40 coming into the year, the timeline for review is very different. The median for the environmental review phase is less than six months, and is just over two months for the Commission review phase. Conversely, for the years in which the backlog exceeded 40 cases, the median for the environmental review phase increased by almost 50% to about eight months, and the Commission review phase almost doubled to just less than five months.
By using the 75th percentile from each of these periods as the goal for review times, we allow for variances in the complexity of projects, while also not setting the goal so low that most projects would not meet it. Based on that level, but taking into account the impact that a backlog will have on review timelines, it would seem fair to fix the following time frames as goals for each of the two phases.
Establishing goals such as these would allow both FERC and the parties interested in projects to build realistic timelines for how long a project will likely take to complete its review by FERC. This would also enable all participants to have reasonable expectations regarding the review of the project in which they have an interest.