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What the New FERC Quorum Means for the Marcellus and Utica

On the night of August 3rd, the US Senate confirmed a package of new Trump administration nominees before adjourning to go on recess. Among those 65 nominees approved were the administration’s first two nominees to the Federal Energy Regulatory Commission (FERC), Robert Powelson and Neil Chatterjee, drawing to a close a saga that began on February 3, 2017, when FERC lost its quorum and its ability to approve new natural gas pipeline projects. As the lack of quorum persisted, many projects, especially in the Marcellus and Utica, were thrown into limbo or had construction schedules put in jeopardy, but now that the return of FERC’s quorum is impending, Northeast pipeline projects have only smooth sailing ahead, right? Not quite.

Even with all the partisan rancor in Washington DC, Powelson’s and Chatterjee’s confirmations are on par with the average time of about 150 days that we have seen over the past 10 commissioners’ confirmation process. We still must await both commissioners to be officially sworn in, but it will most likely be expedited as compared to previous commissioners to finally restore a quorum to FERC and begin addressing the backlog of cases up for review.

While electricity rate cases will most likely be the bulk of the commission’s backlog, a few important Appalachian pipe projects are in there as well, notably Nexus and PennEast, both of which have missed their scheduled certificate approval dates (which were due in February and July, respectively) as a result of the lack of a FERC quorum. In February 2017 when there was a push by FERC to approve projects prior to losing its quorum, both Rover and Atlantic Sunrise received their approval, while NEXUS’ decision was left out. This was based on FERC’s methodology of addressing projects by their original application date. Now with FERC’s quorum restored, there is no reason to think it will be delayed much longer.

Atlantic Coast Pipeline and Mountain Valley are both scheduled to receive their certificate approval at the end of September. FERC should be in full swing of things by then, however any ramifications due to the backlog of approvals would put this timing at risk.

Nevertheless, even with an approval, the path forward for all the projects above will still be bumpy as they all face obstacles beyond a FERC approval. NEXUS is facing limited commercial support with only two-thirds of its capacity subscribed, leaving it the only major greenfield in the Northeast not fully subscribed. In addition, TransCanada Mainline’s recently discounted tariff rates will make the MichCon/Dawn market even more competitive, hurting shippers’ netbacks on NEXUS.

Meanwhile, not only are Atlantic Coast Pipeline and Mountain Valley Pipeline facing increased environmental pushback, but they are also expected to receive increased scrutiny in Virginia after the Virginia Department of Environmental Quality has said they will more thoroughly look into portions of the pipe. State regulators have also been increasingly turning up the pressure on PennEast after New Jersey regulators found PennEast’s application for a crucial water permit deficient and denied their request for an extension on the application.

So, we should welcome the new FERC quorum since they will allow a crucial step in the pipeline regulatory process to resume. However, this doesn’t mean pipeline developers and shippers should rest easy. A FERC quorum and approval is only half the battle and will not solve the larger challenges faced at the state level. For in depth infrastructure analysis and forecasts, request a sample of our Northeast Gas Outlook service.

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Matthew Hoza is a Manager of Energy Analysis for BTU Analytics. Currently he is leading the power team in the development of BTU Analytics’ Power View platform, which provides capacity, generation, and power price outlooks for ISOs and utility areas across the US. Previously, Matthew led the natural gas team that develops and maintains outlooks for natural gas production, demand, pricing, and infrastructure, as well as provided bespoke natural gas market analysis. He holds a M.S. in Finance from the Simon Graduate School of Business at the University of Rochester and B.S. in Physics from Florida State University.

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