Biden Climate Plan and FERC

Background

The Biden Plan for a Clean Energy Revolution and Environmental Justice lays out goals for the U.S. to achieve a 100% clean energy economy and reach net-zero emissions no later than 2050, rebuild U.S.infrastructure to meet the threat of climate change, and address the fact that communities of color and low-income communities have been disproportionately harmed by U.S. energy policy. This report provides an overview of FERC’s pivotal role in Biden’s Climate Plan. It then delves into what the new FERC Chairman is doing to forward this plan as well as examines the hurdles that FERC still has that is hindering Biden’s Plan. This report also includes the use of case studies to examine the application of the change in FERC policies.

Introduction

The Biden Plan for a Clean Energy Revolution and Environmental Justice lays out multiple goals to combat climate change in an environmentally just way. These goals include achieving a 100% clean energy economy and reaching net-zero emissions no later than 2050. Another goal is to prevent polluters from disproportionately harming communities of color and low-income communities. The Federal Energy Regulatory Commission (FERC) plays a number of roles in forwarding Biden’s Climate Plan.

Upon its creation, FERC’s mission was deemed to “assist consumers in obtaining economically efficient, safe, reliable, and secure energy services at a reasonable cost through appropriate regulatory and market means, and collaborative efforts.” The Federal Power Act gives FERC the authority to regulate wholesale markets of electricity to ensure it is in the public’s best interest. Therefore, FERC’s role in Biden’s Climate Plan is to remove barriers to entry for renewable energy in order to achieve net-zero emissions, as it is deemed in the public’s interest to do so. In order to reach Biden’s goal of 100% clean energy, the expansion of transmission is needed, and since FERC also approves interstate transmission line work, its role in Biden’s Climate Plan is also to remove regulation hurdles for these transmission projects.

FERC’s role in Biden’s Climate Plan is then to take into account environmental justice matters as well as its impact on climate change, such as measuring greenhouse gas (GHG) emissions, when making a decision on approving a pipeline or terminal. Section 7 of the Natural Gas Act gives FERC the authority to review applications for construction and operation of interstate natural gas pipelines. Yet FERC has historically given the oil and gas industry a nearly blank check when it comes to pipelines, denying just six of more than 1,000 natural gas projects between 2001 and 2021. It remains to be seen if these policy changes actually manifest into practice. As U.S. Rep. Jaime Raskin (D) testified in December 2020, "If you are a citizen landowner going before FERC, your chances are 1 in 1,000. If you are an energy company, you've got more than 99 percent chance of winning."

Proposed Changes

Appointed by Biden in January 2021, FERC’s Chairman Richard Glick has already enacted some changes to align FERC’s procedures and priorities with Biden’s Climate Plan goals. Chairman Glick has changed the way FERC makes decisions, first by bringing forth docket CP20-487, which is the new policy of factoring in GHG emissions in project proposal decisions. New projects could be denied on grounds of emitting large amounts of GHG emissions, which then help the United States reach its goal of reaching net-zero emissions no later than 2050. Chairman Glick has also created the Office of Environmental Justice, which creates a new senior-level position on environmental justice to ensure its decisions don't unfairly affect historically marginalized communities. This new position helps advance the Climate Plan’s environmental justice goals as well.

Chairman Glick has also initiated a number of technical conferences related to reforming electricity market design and assessing resource adequacy issues. Reforming the electricity market can help the U.S. to achieve a 100% clean energy economy through measures such as eliminating the minimum offer price rule, or MOPR, which prevents renewable energy from being competitive in the market. In order to increase climate resilience, Chairman Glick has also brought forth docket RM18-1, which examines the threat climate change poses to various wholesale power markets. As a result, the Chairman has announced the Technical Conference on Climate Change, Extreme Weather, & Electric System Reliability.

Hindrances to Biden’s Climate Plan

FERC is currently inhibiting the U.S. from achieving its goal of reaching 100% clean energy by 2050 through both its policy of MOPR and through regulations slowing down development of transmission projects that would help accelerate a transition to renewables. The “minimum offer price rule,” or MOPR, is a mechanism in the capacity market design to account for the possibility of artificially low bids by calculating an alternative higher bid which would be used instead. FERC decided that all generators subject to a subsidy from states should get the MOPR treatment. This means that many renewable and nuclear plants in PJM’s region will have their bids increased by a to-be-determined amount, making them significantly less competitive in the auction market. Renewables will then be less incentivized to enter the market, hindering the goal of reaching 100% clean energy.

New transmission lines play a key role carrying renewable energy across the country to replace electricity from coal and natural gas. FERC approves interstate transmission line work but the rate at which they were approving transmission projects in 2020 and 2021 would leave the U.S. well short of Biden’s goals. Chairman Glick claims he intends to make transmission incentives and planning a priority but FERC has not yet launched a formal process and actually pulled a set of new incentives from its agenda in January 2021. Transmission lines can take decades to plan and build and without these incentives and expedited planning, the U.S. will be unable to reach its goal of 100% clean energy by 2050.

FERC is also hindering Biden’s Climate Plan by not actually implementing some of its own policy changes. In order to approve a project, FERC only needs to determine a Certificate of Need. The Commission can then claim that the demand for energy outweighs the climate change implications, and that GHG emissions need not be taken into account. The certificate of need also allows environmental justice issues to be ignored, such as landowner rights and the creation of sacrifice zones. This interpretation of public interest has also allowed the traditionally non-partisan commission to become partisan.

Case Studies

The PennEast Pipeline

In January 2018, FERC issued a Certificate of Public Convenience and Necessity for the PennEast Gas Pipeline. In February 2018, however, the New Jersey Department of Environmental Protection denied permits for the pipeline, claiming that there is compelling evidence the PennEast pipeline is not needed, that it would irreparably harm protected waterways and wildlife, and would be inconsistent with New Jersey’s clean energy goals. With the state of New Jersey still not approving the proposed pipeline, in February 2020, the PennEast Pipeline Company filed an amendment with the FERC to construct the pipeline in two phases. The first phase would be 68 miles in Pennsylvania, while the second phase would complete the remaining route in Pennsylvania and New Jersey. With FERC approving this phased approach and releasing a favorable environmental review, the PennEast Pipeline could start construction in Pennsylvania while the New Jersey permitting remained up in the air. The PennEast Pipeline Company ultimately took New Jersey to court to acquire state-controlled land for its project. On June 29, 2021, the Supreme Court of the United States ruled that a certificate of public convenience and necessity issued by FERC under section 7 of the Natural Gas Act authorizes a private company to exercise eminent domain to condemn state-owned property.

This case sets the dangerous precedent of letting a pipeline company claim that one pipeline is actually multiple pipelines for the sake of getting around state prohibitions. It also gives FERC a large amount of power to determine public needs by claiming that the demand for energy outweighs the climate change implications. Since the pipeline’s approval in February 2020, FERC’s new policies in accordance with forwarding Biden’s Climate Plan would have theoretically influenced the PennEast Pipeline’s approval, as it would not be consistent with clean energy goals as well as environmental justice issues. It remains to be seen, however, if these new policies will manifest into the denial of future pipelines.

The Texas LNG Terminal vs. The Jordan Cove LNG Terminal (as of July 2021)

In 2019, FERC approved the Texas LNG Terminal, along with the Annova LNG Terminal in Brownsville, and the Rio Grande LNG Terminal. This approval was despite extreme opposition from environmentalists and fishermen, due to GHG emissions as well as local environmental degradation considerations. The Sierra Club and two grassroots organizations filed two lawsuits challenging the FERC’s approval, arguing that FERC’s socioeconomic and environmental justice studies were flawed, as was FERC’s ruling that the LNG facilities are in the public interest. The plans for the pipeline, however, continue to move forward.

In comparison, the Jordan Cove LNG Terminal was denied by FERC, citing that there is no public need for the terminal. FERC claimed that the need for Jordan Cove was based entirely on demand for natural gas from customers in Asia, and with those markets in upheaval, an absence of such demand was cited as a reason for rejecting the project in 2016. FERC denied the approval of the Jordan Cove LNG Terminal not based on environmental considerations, but purely economic considerations.

Comparing these two cases, we can see that despite the extreme environmental opposition to the Texas LNG Terminal, it was approved because FERC found its sponsors claims of providing economic benefits credible, while the Jordan Cove LNG Terminal was denied approval because it does not currently demonstrate economic benefits. This shows that FERC’s determination of public needs and interests were purely based on economic benefits, and does not take into account GHG emissions or environmental justice issues. The recent policy changes in determination of public needs aim to ensure that both GHG emissions and environmental justice issues are taken into account, but its true implementation remains to be seen. A more nuanced definition of “economic benefits” would also help FERC better assess the value of new projects, given the negative economic impact of fossil fuel pollution and climate change on the U.S. economy.