Subcommittee Evaluates Role of FERC in Today’s Changing Energy Landscape

December 5, 2013

WASHINGTON, DC – The Energy and Power Subcommittee, chaired by Rep. Ed Whitfield (R-KY), today held a hearing on “Evaluating the Role of FERC in a Changing Energy Landscape.” The subcommittee examined the legal and regulatory authorities of the Federal Energy Regulatory Commission and the challenges and opportunities facing the commission as a result of America’s newfound energy abundance. Acting Chairman Cheryl LaFleur testified today alongside Commissioners Philip Moeller, John Norris, and Tony Clark.

“America’s energy picture is rapidly changing, and America’s energy regulators must keep pace. Long-held beliefs in American energy scarcity have given way to a new era of energy abundance, especially in regards to oil and natural gas,” said full committee Chairman Fred Upton (R-MI). "But many policies and attitudes are still rooted in the outdated assumptions of shortages and rising imports, with the potential to obstruct the opportunities before us. And FERC is in the middle of many of these debates.”

Members questioned the commissioners about many of FERC’s responsibilities, including ensuring grid reliability and security, solving gas-electric coordination challenges, natural gas pipeline permitting, LNG export project siting, and transmission planning and cost allocation.

Chairman Whitfield pressed the commissioners about the impact of Environmental Protection Agency regulations on electric reliability. Each of the commissioners expressed serious concerns about capacity shortfalls in the years ahead, especially in the Midwest. Commissioner Moeller stated in his testimony, “There are growing reliability concerns related to the electric industry meeting the requirements of the Environmental Protection Agency’s rule known as the Mercury and Air Toxics rule. These concerns appear most critical in the Midwest in the footprint of the Mid-Continent Independent System Operator especially approaching the summer of 2016.” Moeller warned of potential rolling blackouts and added, “In the face of these reliability challenges over the next several years, economic regulators and environmental regulators at the federal, state, and local levels must act with urgency when considering proposed solutions to this impending set of challenges.”

The commissioners expounded on FERC’s efforts to respond to challenges posed by the nation’s increasing natural gas supplies. “This flood of domestic gas and oil, combined with new EPA rules has upended utility planning models and market fundamentals. The commission is heavily engaged in the work of assessing and responding to these fuel mix changes,” said Commissioner Clark.

Explaining the challenges in ensuring timely natural gas pipeline permits, Moeller said, “Simply put, the commission is dependent on state and federal agencies to submit timely determinations/conditions as part of the regulatory review of projects. It is especially difficult when these agencies issue their determinations or impose conditions late in the process. In addition, these determinations and conditions may be based on an agency’s specific focus, rather than the balanced review of all public interest considerations that the commission is required by statute to undertake.”

The committee has taken action to help address these pipeline permitting problems. The House recently passed H.R. 1900 to hold agencies more accountable to deadlines, and the committee is considering legislation by Chairman Upton and Rep. Gene Green (D-TX) to modernize the permitting process for pipelines and electric transmission lines that cross U.S. borders. Chairman LaFleur said that, with changes, she believed that FERC would “be comfortable operating under the new law.”

FERC is also responsible for siting LNG infrastructure projects, and as a result of the surge in shale gas production, the need for LNG export terminals has developed. Clark stated, “The large amount of natural gas in the U.S. is also creating an impetus for something that was nearly unimaginable ten or fifteen years ago, LNG export, as opposed to import terminals. This is an area of significant workload increase for the commission.” He suggested that there should be additional resources allocated to this work, adding, “Given this influx of natural gas siting work, I believe that the FERC must continually assess our staffing levels and priorities to ensure that we task enough resources to process these projects in a timely and thorough manner. In addition, while the FERC has no control over the other federal agencies that inform our siting processes, I would encourage them to help us by also doing what they can to be timely in their assessment work.”

Chairman Whitfield concluded, “The sectors and industries regulated by FERC comprise a substantial portion of the U.S. economy and infrastructure, so it is critical that FERC carry out its statutory duties independently and effectively, and do so in a manner that will help facilitate our new era of energy abundance.”

###