By Ronald Fraser
SPECIAL TO THE NEWS
How much public necessity goes into a Washington-issued Certificate of Public Convenience and Necessity authorizing the construction of a new natural gas pipeline? Let’s take a look.
The Federal Energy Regulatory Commission (FERC) in 2017 granted National Fuel Gas Supply Corp. Section 7, National Gas Act, certificate of public convenience and necessity to build a new, 99-mile long, natural gas pipeline – the Northern Access Project – linking the company’s western Pennsylvania gas fields and existing pipelines in the Buffalo area.
Since then, landowners and public officials in New York communities located along the proposed pipeline’s route have charged that the Northern Access pipeline is neither a public convenience nor a public necessity; that National Fuel, not the American public, desperately needs the added pipeline capacity for export purposes.
Necessity for whom?
They ask, how can FERC declare this pipeline in America’s public interest when National Fuel has contracted to sell 72% of the gas to Canadian customers? Environmental, wildlife and property risks during construction of a 75-foot wide right-of-way from Pennsylvania to Buffalo, and burying a 24-inch pipeline, will be borne here at home while the gas will benefit foreign customers.
Directing its attention to this very issue, a Sept. 6, 2019, opinion issued by the U.S. Court of Appeals for the District of Columbia Circuit, involving a pipeline-for-export case in Ohio, asked FERC to explain, “…why it is lawful to credit [the volume of natural gas to be exported from the U.S.] toward a Section 7 finding that an interstate pipeline is required by the public convenience and necessity.”
The court pointed out that Section 7 of the Natural Gas Act grants FERC authority to issue certificates of public convenience and necessity for “the transportation in interstate commerce” and that the courts have not interpreted interstate commerce to include foreign commerce.
The taking clause
Federal and state governments, according to the eminent domain “taking clause” of the U.S. Constitution, may only condemn private property for public purposes, like building public schools and roads. FERC’s certificate, however, conveys to National Fuel the federal eminent domain powers to use condemnation courts for corporate purposes.
Landowners along the pipeline’s route argue that giving the power to seize land to a private company for the purpose of profiting from the sale of American natural gas to foreign customers is not in the public’s interest.
In the late 1800s, when an urbanizing and industrializing America needed a steady supply of fossil fuels, it may have been in the public’s interest to allow private oil and gas companies to use eminent domain police powers to seize private land. It no longer makes sense.
The Court of Appeals also questioned the legitimacy of pipeline operators using the power to seize private property for the purpose of exporting gas to Canada. By rejecting FERC’s past justification of this practice, the court wrote, “This reasoning begs the unanswered question of whether – given the fact that Section 7 [certificates] authorizes the use of eminent domain – it is lawful for the Commission to credit precedent agreements for export toward a finding that a pipeline is required by public convenience and necessity.”
FERC’s decision-making process
Step one: Upon receipt of a pipeline proposal, industry-related factors are looked at, including demand for natural gas, the pipeline’s effect on market competition and the danger of overbuilding pipeline networks.
Step two: If, from an industry perspective, the proposed pipeline appears feasible, the next step is to look at public benefits, such as meeting unserved domestic demand and lowering costs to consumers and public costs. The pipeline applicant, however, not FERC, is responsible for minimizing adverse effects of the pipeline.
Step three: When the pro-industry factors outweigh negative impacts on existing customers, the environment and private property rights, FERC deems the proposed project to be in the public’s interest.
This skewed application of the term “public” appears to rest on this principle: What is good for the pipeline industry is, ipso facto, in the public’s interest.
In its haste to drill new gas wells, National Fuel created a Pennsylvania gas glut. The company then turned to FREC to bail it out of a self-inflicted pipeline capacity shortage.
Once upon a time, what was good for the fossil fuel industry may have been good for the public. With the fate of the Earth at stake, this is now a reckless, outdated public policy.
Ronald Fraser, Ph.D., writes on public policy issues and lives in the Buffalo area. Write him at email@example.com.