Jul 19 2022
Fed up with the US Federal Energy Regulatory Commission's recent handling of natural gas projects, Republicans of the Senate Energy and Natural Resources Committee were reluctant to place regulatory authority over hydrogen pipelines in FERC's hands during a July 19 hearing, fearing the consequences it could create for the natural gas industry.
"The current majority of the FERC wants to make it nearly impossible to upgrade pipelines or build new ones," said ranking Republican Senator John Barrasso of Wyoming. "I'm concerned that some on the commission may seek to make the ability to ship higher blends of hydrogen a reason to impose new conditions on newer upgraded natural gas pipelines."
The committee's top Republicans have repeatedly pushed back against recent FERC actions that could delay or add new regulations to the permitting process for natural gas pipelines. Earlier this year, for instance, Barrasso warned that FERC's proposed changes to the gas pipeline certification review process would delay pending projects, and he threatened to use the Congressional Review Act to turn back new FERC policies.
Committee Chairman Joe Manchin, Democrat of West Virginia, later joined his Republican colleagues in condemning FERC's treatment of gas projects. But during the July 19 hearing, he conceded that FERC was the right venue for shaping the rules of a nascent hydrogen economy.
"I certainly have had my fair share of disagreements with FERC over natural gas issues recently," Manchin said. "Still, it's clear to me that the commission's natural gas siting authority helps avoid challenges that we see again and again. It certainly makes sense to regulate hydrogen infrastructure in a similar fashion to the natural gas facilities. No matter what, the Natural Gas Act and FERC will play at least some role in the growing hydrogen economy."
Enacted in 1938, the Natural Gas Act was designed to encourage the development of natural gas supplies with reasonable rates, and the Act grants FERC the authority to permit interstate natural gas projects and operations.
As written, the act narrowly pertains to the regulation of natural gas pipelines or pipelines that blend smaller amounts of other fuels in the natural gas stream, according to energy attorney Richard Powers, Jr. who testified before the Senate Energy Committee. Although Congress could move to amend the Natural Gas Act to include hydrogen-only pipelines under its authority, there are other options.
Congress could place hydrogen pipeline regulations under the Interstate Commerce Act, which would fall under the authority of either the Service Transportation Board or FERC. Or Congress could enact an entirely new regulatory statute for hydrogen. Of these options, it's Powers' opinion that the Interstate Commerce Act is best suited for hydrogen pipeline regulation and that FERC is the best body to oversee its enforcement.
"I believe that it's more appropriate to apply FERC's jurisdiction under the ICA," Powers said. "Integrating our pipelines into our nation's energy policy and infrastructure is best served by having these carriers under one FERC roof."
"I'm not quite clear what strapping this nascent hydrogen industry to the Natural Gas Act would mean for the industry," he said. "There are tried and true methods of regulating under the ICA, and I don't believe that it's burdensome."
One of Republicans' top priorities in creating a set of hydrogen pipeline regulations is to ensure that it would give FERC no opportunities to burden natural gas companies with more regulation, like requiring developers to upgrade existing pipelines to accept higher blends of hydrogen.
"Any effort to encourage the use of hydrogen as a fuel source must not provide another tool for those who seek to keep natural gas in the ground," Barrasso said. And "any effort to encourage the use of hydrogen as a fuel source should support rather than undermine our existing natural gas pipeline network."
According to Chad Zamarin, senior vice president for Williams Companies, permitting processes have lengthened project construction times to four or five years for a pipeline that would take just one year to build. And regulatory burdens have skyrocketed pipeline costs from $1 million per mile to $8 million to $20 million per mile.
"FERC is our primary regulator for natural gas pipelines, and it does seem like that's a likely venue for us to approach with respect to hydrogen," Zamarin said. "That said, we don't want to create a traffic jam before the car even gets out of the garage. The current FERC process has become an incredibly difficult process to facilitate the building of energy infrastructure."