While Judge Nixes Social Cost Of Carbon, FERC Will Alter How It Evaluates Merits Of Pipeline Projects
On February 17, the Federal Energy Regulatory Commission (FERC) adopted new rules that require the commission to consider a project’s greenhouse gas impacts during construction, while in operations, and when the natural gas it delivers is used or burned. That cost-benefit calculus will now be added to FERC’s traditional criteria of determining the market’s need for the project.
As a reminder, the FERC is composed of five commissioners, each serving five-year terms, appointed by the president. The current chair, Richard Glick, previously has voted against nearly every pipeline project that came before FERC and his dissents generally were based on his objection that the project’s greenhouse gas impacts were not considered.
As such, the new rules are not entirely surprising, but they could have a serious impact on the approval of energy pipelines. In fact, according to MSCI’s partners at the Energy Equipment and Infrastructure Alliance, the changes mean that FERC now has a “blank check to deny a project’s certificate on subjective, ideological, or political grounds even if there is a clear market need for the natural gas it would deliver.” The application of the policy will necessarily be subjective, for example, because for most projects the destination and use of its natural gas over its lifetime is completely unknowable.
Sen. Joe Manchin (D-W.Va.), immediately issued a statement opposing the rules. He argued the “reckless decision” puts the nation’s security “at risk.” He also said the FERC “went too far by prioritizing a political agenda over their main mission — ensuring our nation’s energy reliability and security.”
Read more about the FERC’s new rules here and here.
As a reminder, the social cost of carbon is the estimated cost to society of releasing one ton of carbon dioxide into the atmosphere. Under the Biden administration, the metric has played a significant role in how federal regulators weigh the costs and benefits of proposed rules. Indeed, one of President Joe Biden’s first acts in office was to establish a cross-governmental team to calculate the social cost of carbon.