Powelson to leave FERC deadlocked on gas pipelines, grappling with resilience

Source: By Iulia Gheorghiu, Utility Dive • Posted: Monday, July 2, 2018

As the Federal Energy Regulatory Commission (FERC) takes on several major dockets, the third Republican commissioner on the five-member commission surprised the energy industry by announcing his imminent departure.

Commissioner Robert Powelson’s statement on Thursday said he will leave FERC, effective mid-August, in order to serve as president and CEO of the National Association of Water Companies, a trade association for the private water service sector.

Powelson’s announcement came following recent 3-2 decisions on new natural gas pipeline certifications wherein his vote was seen by FERC observers as decisive for the commission’s approval. FERC has opened up a review of its natural gas pipeline permitting process, accepting comments until July 25. It also has opened a docket to address grid resiliency, and is considering a range of comments received in the wake of the Trump administration’s attempts to prop up coal and nuclear plants.

FERC enjoyed having every one of its five seats filled for a little more than half a year, after December when Chairman Richard McIntyre was sworn in. The commission has gone through a nummber of changes in the last two years, from operating without a quorum to potentially becoming a split 2-2 commission after Powelson leaves.

Powelson was sworn in last August, passed by the Senate unanimously along with fellow commissioner Neil Chatterjee. Their approval restored FERC’s quorum after the departure of former Commissioner Collette Honorable. Powelson was nominated by President Donald Trump in May 2017, to serve through June 30, 2020.

Before FERC, Powelson served on the Pennsylvania Public Utility Commission, including more than four years as chairman. As president of the National Association of Regulatory Utility Commissioners, Powelson had advocated for expansion of energy infrastructure.

“In general, he brought a wealth of expertise to the commission that any independent regulatory agency should have,” Joel Eisen, an energy law professor at the University of Richmond, told Utility Dive.

Powelson was a “very pro-restructured markets commissioner,” said Matt Larson, a partner in the Denver office of Wilkinson Barker Knauer. He noted that a different commissioner pick could “take a harder look or maybe a more skeptical view of what those restructured markets had really become, given all the market interventions and market patches that have been developed to deal with different issues.”

Powelson’s replacement will be crucial to natural gas pipeline development and potentially to FERC’s support of coal and nuclear subsidies. There is potential for a big shift at FERC, if the president will move quickly on a nomination or if he will move “to nominate somebody that maybe takes a more favorable position with regard to some of the activities seen at DOE, et cetera,” Larson said.

Affecting new pipeline certifications

Powelson’s departure creates an immediate impact on the certification of natural gas pipelines, as he had been the majority vote in a several 3-2 decisions, according to former Republican FERC Commissioner Tony Clark.

Cheryl LaFleur and Richard Glick, the Democratic commissioners, have been voting no on new pipeline certifications, most recently on the Tennessee Broad Run Expansion project, based on what they consider to be inadequate greenhouse gas emissions assessments (GHG) as part of its National Environmental Policy Act review.

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FERC issued a 3-2 ruling in May restricting its review of climate change impacts for new natural gas pipeline projects, only considering GHG emissions associated with a specific proposed pipeline, rather than a broader approach that looks at a project’s impact on overall production and consumption of natural gas.

“If everyone digs in their heels, it means pipeline certifications are going to stop for a while.”

“Some of these may be very needed pipelines … but the two no votes now have all the leverage in a situation like that,” Clark said.

Clark foresees a slowdown in the approval of new pipeline infrastructure, until a fifth member of the commission is approved by the Senate and sworn in.

“If everyone digs in their heels, it means pipeline certifications are going to stop for a while. Unless one or the other side compromises in some way,” Clark said.

However, certain orders do go into effect by operation of law if FERC does not act, Clark said, citing the 2014 case of ISO-New England’s Forward Capacity Auction 8 results. The four commissioners at the time, including himself and LaFleur, were deadlocked, but the statutory deadline caused the new rates to eventually go into effect despite not being formally approved by the commission.

Clark, who served from 2012 to 2015 after being nominated by President Barack Obama, had been a North Dakota utility regulator and is now a senior advisor at the law firm Wilkinson Barker and Knauer.

Not everyone expects FERC decisions to devolve into a partisanship battle on issues such as natural gas pipelines, including former Chairman Jon Wellinghoff, a Democrat appointed by President George W. Bush and reappointed by Obama.

FERC rulings have “been fairly consistent voting in the public interest, in voting to support markets,” Wellinghoff told Utility Dive.

“It’s definitely in the White House’s interest to get a nominee up and approved as fast as they can because they don’t have a — to the degree that there are Republican and Democrat votes — working White House majority on the commission,” Clark said.

Rejecting coal, nuke bailout

In addition to the near-term implications of Powelson’s departure for the approval of new natural gas pipelines, his departure also creates uncertainty about the commission’s actions on its resilience docket. Powelson has been very vocal against a coal and nuclear bailout, as proposed by the Trump administration.

“His successor should take careful heed to the statements that he has made that FERC doesn’t pick winners and losers in competitive markets,” University of Richmond’s Eisen said. “He has been a strong voice for maintaining FERC’s independence and that’s an extremely important thing to have in considering these complex and difficult matters.”

While FERC unanimously rejected a DOE subsidy proposal in January, the DOE is considering its options to preserve baseload power as the country faces an increasing amount of coal and nuclear power plant retirements. In a statement at the beginning of June, President Donald Trump called for Sec. Perry to “prepare immediate steps” to prevent the plants from retiring. One possible plan to achieve that, outlined in a draft memo, would have Sec. Perry invoke the department’s emergency powers under Section 202(c) of the Federal Power Act and a 1950s law that allows the DOE to nationalize parts of the power sector during times of national emergency — the Defense Production Act (DPA).

Despite FERC’s earlier rejection, determining that no grid emergency exists to justify implementing 202(c) or the DPA, McIntyre said the 202(c) subsidies could be done without FERC involvement.

“The administration’s plan to bail out coal and nuclear plants under the guise of national security is likely to come to FERC and Powelson won’t be there to join LeFleur and Glick to stop the excess in unnecessary compensation,” Robert Gramlich, federal policy specialist and founder of the consultancy Grid Strategies, told Utility Dive. Among other roles, Gramlich served as Republican FERC Chairman Pat Wood III’s economic advisor from 2001 to 2005.

Coal CEO Robert Murray had called for Trump to fire the four FERC regulators who rejected the bailout proposal in January. Powelson later addressed Murray’s criticisms on Twitter, challenging him to a televised debate, before ultimately deleting that tweet

The White House has faced pressure to save the coal sector as part of Trump’s campaign promises, and a memo released in January showed a version of Murray Energy’s coal sector wish list or “Action Plan,” including many policy initiatives ultimately taken up by the administration.

Market compensation for coal plants was not mentioned in the Murray memo, but it did call for an overhaul of FERC regulators. The Trump administration accomplished that by making four appointments, although it did not guarantee the passage of a coal and nuclear federal subsidy.