FERC Ignores CEI’s Advice to Steer Clear of Climate Policy

The Social Cost of Carbon (SCC) is a deeply flawed attempt to assign a dollar value to the cumulative climate-related damages caused by an incremental ton of carbon dioxide-equivalent (CO2e) greenhouse gas (GHG) emissions. But at least it is a number. And without numbers, bureaucrats in charge of permitting or regulating fossil fuel infrastructure cannot even pretend to calculate the benefits of climate change mitigation measures.

That is the predicament in which the Federal Energy Regulatory Commission (FERC) now finds itself, because two weeks ago, in Louisiana v. Biden, federal district Judge David D. Cain, Jr. granted injunctive relief to 10 states seeking to block the Biden administration’s use of its SCC estimates in permitting and regulatory decisions.

On February 17, FERC issued an Interim Greenhouse Gas Policy Statement describing how it will consider climate impacts in infrastructure project reviews under the National Environmental Policy Act and the Natural Gas Act. Through technical conferences and various notices inviting public comment, FERC has been encouraging stakeholder advocacy of SCC analysis in natural gas pipeline approvals since April 2018 (see these comment letters).

Similarly, FERC has encouraged advocacy of SCC-based carbon pricing in regional power markets since September 2020.

Yet despite that history and the SCC boosterism of several presenters at the Commission’s November 2021 technical conference on greenhouse gas mitigation under the Natural Gas Act, the interim policy statement does not mention “social cost of carbon.” Thank you, Judge Cain!

In the meantime, FERC seeks comment on all aspects of the interim policy statement, “including, in particular, the approach to assessing the significance of the proposed project’s contribution to climate change.” FERC clarifies that the statement does not establish “binding rules.” It will, however, guide FERC’s review of pending and new projects. FERC presumably wants to adopt a binding rule but will wait until Louisiana v. Biden is resolved.

As described in FERC’s Fact Sheet, the Commission is establishing a rebuttable presumption that proposed projects with 100,000 metric tons per year of carbon dioxide equivalent emissions will be deemed to have a significant impact on climate change. In other words, if the project’s annual emissions are less than that amount, approval may not require mitigation measures.

Note, though, some environmental groups will undoubtedly argue for lower thresholds in the comment period, and subsequently challenge any rule exempting large projects from mitigation measures.

The Fact Sheet also says that FERC will follow Council on Environmental Quality regulations and quantify a project’s GHG emissions that are reasonably foreseeable and have a reasonably close causal relationship to environmental effects. Such emissions are deemed to include the downstream (combustion) emissions from gas transported by pipelines, but not the downstream emissions from gas exported by liquefied natural gas (LNG) facilities. Expect climate campaigners to kick up a fuss about that, too.

The FACT Sheet further states that to determine if a project is in the public interest, FERC will consider proposals by the project sponsor to mitigate all or a portion of the project’s climate change impacts, and may condition its authorization on the project sponsor further mitigating those impacts. FERC does not say that it will reject projects unless mitigation measures can limit annual emissions to 100,000 metric tons, but neither does it deny that it will do so. 

In early January, CEI submitted comments in response to questions posed by FERC  about GHG mitigation and the Natural Gas Act (NGA). We advised FERC to “Steer Clear of Climate Policy,” for three main reasons.

First, the NGA cannot lawfully be aligned with the Biden administration’s NetZero agenda to decarbonize and degasify the U.S. electric power sector. Biden’s goals conflict with the NGA’s “principal purpose,” which is to “encourage the orderly development of plentiful supplies of electricity and natural gas at reasonable prices.” In addition, climate change is not a factor Congress authorized FERC to consider. The words “climate,” “carbon,” “greenhouse,” “global,” “warming,” and “mitigate” do not occur in the Act.

Second, although the direct and indirect emissions of natural gas infrastructure may be “reasonably foreseeable,” the climate effects are not. FERC’s project reviews are governed by the National Environmental Policy Act. NEPA requires scrutiny of federal actions “significantly affecting the human environment.” Even the emissions of the largest natural gas projects are too small to discernibly affect global climate, and no project’s “climate footprint” is big enough to influence the fate or fortunes of any community, business, or human being anywhere in the world.

Third, the social cost of carbon—an estimate of the present value of the cumulative climate damages of an incremental ton of CO2e emissions—is too speculative and subjective, and too easily manipulated for political purposes, to be weighed in the same scale with an infrastructure project’s estimated economic benefits.

As CEI’s comments show, the Biden administration’s SCC estimates are egregiously biased in favor of climate alarm and regulatory ambition, rendering any agency action that relies on them arbitrary and capricious. We look forward to filing comments on the interim policy statement.