Regulation in the Energy Sector

As the Oil and Gas industry works on developing “new markets” in the Northeast, local residents are bearing the burden of the influx of oil and gas infrastructure.  Local communities are fighting the industrialization of their landscape, to mixed results.

FERC really gets my goat.
Protesters in front of the gate at the Crestwood-Midstream Arlington Gas Storage Project in Watkins Glen, NY protest FERC. Including a goat.

Despite years of opposition from the community, including expert testimony and legal intervention, the Federal Energy Regulatory Commission (FERC) has approved storage of compressed natural gas and liquid petroleum gas (LPG) in salt caverns under Seneca Lake.   Compressor stations are being fought across NY, just as in Minisink.  The Constitution and Dominion pipelines continue to be opposed by the hundreds of communities they will affect.  A new month, a new community facing their land and health being taken by the oil and gas industry.  What is happening? And how do we stop it?

This is the subject of the “Protecting Communities from Fracking’s Collateral Damage” conference.  I have been helping Bill Podulka prepare background information about the regulation processes and procedures of the energy sector.  The information presented at the conference is designed to be an overview, so I am posting my summary here.  This is by no means a comprehensive overview of energy regulation – there are whole textbooks written about it! – but it is snippets of information others will find useful as they try to wrap their head around this seemingly unregulated industry.

The Federal Energy Regulatory Commission

FERC is an agency with limited jurisdiction.[1] If Congress did not delegate authority over a particular thing to FERC, FERC does not have the authority to regulate it. Three statutes give FERC the majority of its authority: (1) the Federal Power Act (FPA), (2) the Natural Gas Act (NGA), and (3) the Interstate Commerce Act (ICA).

“Generally only state and local permitting processes that duplicate the FERC process–such as siting or zoning requirements–will be deemed preempted by federal law. Where state or local agencies require environmental permits or propose conditions to protect local resources, FERC frequently makes compliance with these requirements a condition of the certificate.”

– Carolyn Elefant, Knowing and Protecting Your Rights When an Interstate Gas Pipeline Comes to Your Community[2]

Natural Gas Pipelines

Interstate pipelines. The Federal Energy Regulatory Commission regulates interstate transportation and sale of natural gas, including pipelines, storage, and associated facilities under the Natural Gas Act of 1938. [3] A company cannot undertake the construction or extension of natural gas pipelines, or storage facilities without authorization by FERC, issued in the form of a certificate of public convenience and necessity.[4] The process for gaining such a certificate involves application in writing, and a hearing set with reasonable notice to all interested persons.

The certificate is granted when following criteria are met:

  1. Applicant is qualified, willing and able to perform the service proposed, in accordance with the NGA and any other relevant FERC regulations,[5] and
  2. The proposed action is or will be required by public convenience and necessity.[6] FERC must ask the question “is it needed?” All NE states have legislation requiring consideration if it could be avoided via conservation.[7]

The Certificate of Public Convenience and Necessity may have conditions attached to it.[8] The Commission must ensure that the issuance of the Certificate and its associated construction activities “are consistent with all applicable environmental laws.”[9] Often the Commission divides this process into two sets of orders addressing environmental and non-environmental issues separately.[10] This typically involves working with agencies at the state and federal level, beginning the process by issuing a Notice of Availability of the Draft Environmental Impact Statement (EIS).[11] The Certificate grants eminent domain authority to the applicant if a contractual arrangement for the land cannot be acquired.[12]

Intrastate pipelines, including gathering lines, are regulated by each State’s Public Service Commission in addition to minimum federal safety standards.[13] The American Petroleum Institute’s API RP 80, incorporated by reference in federal pipeline safety law, is the standard for operators to determine whether or not a pipeline is considered a gathering line.[14]

The New York State Public Service Commission prescribes minimum safety requirements “for the design, fabrication, installation, inspection, testing and operation and maintenance of gas transmission and distribution systems, including gas gathering lines, gas pipelines, gas compressor stations, gas metering and regulating stations, gas mains, service lines, gas storage equipment of the closed pipe type fabricated or forged from pipe or fabricated from pipe and fittings, and gas storage lines not covered by 49 CFR 192.”[15] It seems that the PSC only has the authority to ensure its standards are being met, rather than any ability to approve or deny a project on its merits.

Gathering Line construction requires notice to the PSC. Gathering lines are regulated dependent upon the pressure in them. For gathering lines operating at a pressure of 25 psig (862 kPa) or more, notice of intent must be given to the PSC 30 days prior to construction. For gathering lines operating at < 25 psig (862 kPa), only 48 hours notice is required. Notice to the landowners and the local Soil and Water Conservation District is required only if the land has been recently used as a commercial farm.[16]

Storage of Natural Gas

Storage of natural gas that is being transported by interstate pipeline is regulated by FERC under the same general rules for the issuance of a Certificate of Public Convenience and Necessity as interstate pipelines.[17]

LPG Facilities

The NYS Public Service Commission has rules with which all LPG storage and terminal facilities must comply.[18] Letters of intent must be filed with the PSC 30 days prior to construction.[19]

LNG Facilities

FERC has sole authority for approval or denial of “an application for the siting, construction, expansion, or operation of an LNG terminal” onshore or in state waters.[20] However, this section reserves to states powers under the Clean Air Act, Clean Water Act, and Coastal Zone Management Act.[21] Additionally, if the LNG terminal is located in federal waters, the Marititme Adminstration (MARAD) and the U.S. Coast Guard have jurisdiction under the Deepwater Port Act of 1974 (DWPA).[22]

Regulatory Hooks

NEPA – The National Environmental Policy Act of 1969

Prior to filing an application with FERC, an applicant must comply with a pre-filing process required under NEPA.[23]

“Under the National Environmental Policy Act (NEPA), FERC must consider project alternatives, as well as a wide range of potential impacts, including socio-economic and cumulative impacts. Cumulative impacts are impacts that result from the proposed action as well as past, present and foreseeable actions, which may be minor individually but collectively, are significant.”

– Carolyn Elefant, Knowing and Protecting Your Rights When an Interstate Gas Pipeline Comes to Your Community[24]

While the NGA preempts much state or local regulation of natural gas, states generally retain their rights under the Coastal Zone Management Act, the Clean Air Act, and the Federal Water Pollution Control Act, except as expressly provided otherwise.[25] This applies to LNG terminals, interstate gas pipelines, gas storage facilities, etc.

Clean Air Act

The Clean Air Act gives states the ability to enforce air quality standards.

The 2012 EPA new rules governing natural gas production under the Clean Air Act apply primarily to new sources, and not to anything downstream of the gas entering the transmission pipeline, including underground storage and compressor stations.[26]

Waste Disposal

Publicly Owned Treatment Works

Under the federal Clean Water Act, the EPA may designate its permitting authority to states with adequate programs. In NY, surface water discharges from water treatment facilities are regulated under the NYS Department of Environmental Conservation’s State Pollutant Discharge Elimination System (SPDES) program. “Acceptance by a treatment plant of a waste stream that upsets its system or exceeds its capacity may result in a SPDES permit effluent violation or a violation of water quality standards within the receiving water.”

POTWs are required to have pre-treatment programs prior to acceptance of industrial waste. In many cases, pre-treatment simply consists of testing the waste. In the case of the Auburn POTW, they were accepting “brine” from wells drilled in NY. Each delivery of “brine” was not tested; only a representative sample from the company was required.[27] At the Watertown POTW, this pre-testing resulted in the rejection of waste from the Ross 1 well in Maryland, NY.[28]

Brine Spreading

The New York State Department of Environmental Conservation requires gas, oil well, and LPG “storage fluid” haulers to petition for a beneficial use determination (BUD) in order for production brine to be used for road spreading.[29]  The public is not notified prior to a BUD being granted; it is at the discretion of the NYSDEC.  Notice does not appear in the Environmental Notice Bulletin.  There is no standard procedure for the public to challenge a BUD, but the DEC can revoke a BUD. The public could petition (or sue?) the DEC to consider revoking a BUD?

The details
A Beneficial Use Determination (BUD), is a designation made by the Department as to whether the Part 360 Solid Waste Management Facilities regulations have jurisdiction over waste material which is to be beneficially used. Once the Department grants a BUD, the waste material ceases to be considered a solid waste (for the purposes of Part 360) when used as described.
Since BUDs involve determinations over the jurisdiction of the solid waste permit program, BUDs differ significantly from permits. Accordingly, compliance with 6 NYCRR Part 617 State Environmental Quality Review and 6 NYCRR Part 621 Uniform Procedures do not apply to the BUD review process.
                                                    – NYSDEC website

Produced water or brine is not one of the 16 pre-determined BUDs enumerated in the statute.  6 NYCRR Part 360-1.15(b). Therefore, a BUD must be determined on a case-by-case basis, in writing by the Department.  6 NYCRR Part 360-1.15(d).

BUDs are exempt from the regulations that require public notice and comment as noted in the second paragraph above.  This is confirmed from the speed of approval:  A BUD petition by Broome County for use of salt brine from the TEPPCO facility in Hartford, NY on roadways was submitted to the DEC on Dec. 8, 2008; the determination was issued Dec. 22, 2008.  (Toxics Targeting FOIL request.  http://toxicstargeting.com/sites/default/files/pdfs/foil-hl-110718.pdf)   Determinations take 1-8 months.  A Chataqua County petition to use gas well production brine took 8 months in 2009.  Conditions included an annual report with analytics from representative samples of the brine.

Of other note, “drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas or geothermal energy” are identified as “not a hazardous waste.” 6 NYCRR § 371.1(e)(2)(v)

REVOKING A BUD
The department may revoke a BUD if it finds that “one or more of the matters serving as the basis for the department’s determination was incorrect or is no longer valid or the department finds that there has been a violation of any condition that the department attached to such determination.”  6 NYCRR Part 360-1.15(d)(4)  http://www.dec.ny.gov/regs/4415.html#14622

Spreading of produced water / brine BUD might be challenged under 6 NYCRR subpart 360-1.15(d)(2)(i), the criterion that “the essential nature of the proposed use of the material constitutes a reuse rather than disposal.”

I hope you have found this useful!  – Lindsay

References

[1]James H. McGrew, FERC: Federal Energy Regulatory Commission (2d ed. 2009, ABA Basic Practice Series), at 11.

[2] Carolyn Elefant, Law Offices of Carolyn Elefant, Knowing and Protecting Your Rights When an Interstate Gas Pipeline Comes to Your Community: A Legal and Practical Guide for States, Local Government Units, Non – Governmental Organizations and Landowners On How the FERC Pipeline Certification Process Works and How You Can Participate, May 17, 2010, http://lawofficesofcarolynelefant.com/wp-content/uploads/2010/06/FINALTAGguide.pdf

[3] Wikipedia. Natural Gas Act of 1938. Accessed October 13, 2014. http://en.wikipedia.org/wiki/Natural_Gas_Act_of_1938

[4] 15 U.S. Code § 717f(c)(1)(A)

[5] 15 U.S. Code § 717f(e)

[6] Id.

[7] Class Notes. Oil and Gas Law, Professor Jacqueline Weaver, Vermont Law School. Summer Session 2014.

[8] Id.

[9] McGrew, supra, at 85.

[10] Id.

[11] McGrew, supra, at 86.

[12] 15 U.S. Code § 717f(h)

[13] 49 CFR Part 192 – TRANSPORTATION OF NATURAL AND OTHER GAS BY PIPELINE: MINIMUM FEDERAL SAFETY STANDARDS

[14] 49 CFR § 192.8

[15] 16 CRR-NY 255.1(a) http://govt.westlaw.com/nycrr/

[16] 16 CRR-NY 255.9(c) http://govt.westlaw.com/nycrr/ http://bit.ly/1tUPzxt

[17] 15 U.S. Code § 717f(c)(1)(A)

[18] 16 CRR-NY 257.0 http://bit.ly/1zsOGj9

[19] 16 CRR-NY 257.3 http://bit.ly/1ulMbxe

[20] 15 U.S.C. § 717b-1(e)(1) as amended by the Energy Policy Act of 2005

[21] Exportation or importation of natural gas; LNG terminals, 15 U.S.C. § 717b(d) (2014)

[22] McGrew, supra, at 89.

[23] 15 U.S.C. § 717 b-1(a).   It is possible that this applies strictly to LNG facilities. This was added in the 2005 Energy Policy Act and everything around the statement pertains to LNG facilities.

[24] Carolyn Elefant,

[25] 15 U.S. Code § 717b(d) “Except as specifically provided in this chapter, nothing in this chapter affects the rights of States under- (1) the Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.); (2) the Clean Air Act (42 U.S.C. 7401 et seq.); or (3) the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.).”

[26] Amy Mall. The new EPA Clean Air Act rules for dangerous air pollution from natural gas operations–what do they mean? Switchboard: Natural Resources Defense Council Staff Blog.

[27] Alex Bissell, Wastewater Wasteland: An Investigation of Flowback Fluid Disposal in NY, Neighbors of the Onondaga Nation, 2011, http://www.peacecouncil.net/NOON/hydrofrac/docs/WastewaterWasteland-NOONWhitePaper.pdf

[28] Id.

[29] New York State Department of Environmental Conservation, Response to Toxics Targeting Freedom of Information Law Request for Documents, http://www.toxicstargeting.com/MarcellusShale/documents/2011/07/21/wastewater-spreading. 2012.

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