FERC decides if LNG facilities benefit the public. Is it doing its job?

Sometime in the next few weeks, a government agency that most Americans know little about could approve a new fossil-fuel project that would have lasting consequences for the climate. The Federal Energy Regulatory Commission is expected to give Venture Global the green light to build Calcasieu Pass 2, one of the largest liquefied-natural-gas export facilities ever proposed in the United States, on the Louisiana coast.

The Biden administration will have the final say on whether CP2 goes forward when the U.S. Department of Energy decides if it should grant the facility permission to export LNG to Europe, most of Asia, and dozens of other countries. But the DOE has never denied an export permit to an LNG facility that the Federal Energy Regulatory Commission (FERC) has approved.

If all planned phases of the project are completed, CP2 will be capable of processing and shipping roughly 4 billion cubic feet of natural gas every day. That’s equivalent to 4% of all the consumer-grade natural gas produced daily in the U.S. last year. Some estimates suggest that the emissions from fracking, liquefying, transporting and burning that gas will be as high as half a million metric tons of greenhouse gases per day — as much as an average gas-fired power plant emits in an entire year.

The proposed export terminal is part of a rapid buildout of LNG export capacity in the U.S. and especially on the Gulf Coast that’s occurred over the last seven years — and has sped up dramatically since the start of 2022. Eight LNG export terminals are now operating in the U.S., and 24 more terminals and expansions have been proposed or approved, including CP2. Already, with just the facilities currently online, over 10% of U.S. natural gas is exported.

Climate activists say this trend can’t continue if the world wants to limit warming to 1.5 or even 2 degrees Celsius, and if the Biden administration wants to meet its climate goals. The International Energy Agency’s roadmap to net zero has natural-gas use falling by an average of 5% per year in the 2030s and dropping 55% from 2020 levels by 2050.

But FERC isn’t explicitly required to take climate impacts into consideration when deciding whether to approve an LNG terminal. Climate activists are trying to change that. Buoyed by a series of successful challenges to FERC’s environmental reviews in federal court, they hope the mounting legal pressure will persuade the commissioners to treat climate change with more urgency.

For now, though, FERC is caught in a political limbo that renders such bold action unlikely.

A narrow view of ​“the public interest”

The Natural Gas Act of 1938 — as amended by the Energy Policy Act of 2005 — grants FERC ​“the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal” and requires that projects be approved unless they ​“will not be consistent with the public interest.”

To date, FERC has stuck to a narrow definition of ​“the public interest,” interpreting its congressional mandate mostly through an economic lens. The commissioners look for evidence that the gas sent through a facility will be sought by international buyers and won’t cause natural-gas prices to rise too much for U.S. consumers. (Climate and consumer advocates are sharply critical of how FERC conducts its economic analyses, arguing that domestic natural-gas prices are in fact rising markedly as a growing share of U.S. gas is shipped abroad.)

Using those criteria, FERC has only ever rejected one proposed LNG export terminal — the Jordan Cove facility in Oregon — after finding in 2016 that the developer failed to prove there would be demand for the gas. But the agency then approved a revised application for that project four years later. (The Jordan Cove export facility was ultimately scuttled due to state-level opposition.)

“The default is approval,” said Gillian Giannetti, a senior attorney at the Natural Resources Defense Council who advocates for FERC to factor climate change into its public-interest determinations. ​“It’s a shell of what the public-interest assessment is supposed to be.”

Activists have pushed FERC in recent years to expand its view of the public interest to include both climate change and environmental-justice issues. Constructing and operating LNG export terminals damages nearby ecosystems and releases harmful pollutants into surrounding communities. According to FERC’s own estimates, the larger facilities emit millions of tons of carbon dioxide equivalent each year once they’re up and running. That’s as much climate pollution as would come from a whole new coal-fired power plant — or, in the case of CP2, two new coal plants.

“FERC is the guardian and protector of the public interest and should be making all of its decisions with a public-interest assessment front and center,” Giannetti said. ​“Unfortunately, it is unusual for that to actually be the case.”

Progress stymied by politics

Over the past few years, environmental groups have had some success in getting FERC to acknowledge that climate change and environmental justice are tied to the public interest.

After FERC approved two Texas export terminals, Rio Grande LNG and Texas LNG, in 2019, the Sierra Club and local organizers sued the agency. In 2021, the D.C. Circuit Court of Appeals deemed FERC’s environmental reviews of both projects inadequate and directed it to reevaluate the climate and environmental-justice impacts before deciding to let either proceed.

FERC was chaired at the time by Democrat Richard Glick, who had drawn heat from fossil-fuel advocates after breaking from the other four commissioners and voting to reject multiple LNG export facilities. In February 2022, Glick and the two other Democratic commissioners outvoted their Republican colleagues and adopted a new policy that would have FERC examine LNG projects’ greenhouse-gas emissions and environmental-justice impacts more thoroughly. The changes, the commissioners said, were ​“intended to improve the legal durability” of its decisions.

The fallout on Capitol Hill was swift and intense — and exacerbated by the fact that Russia invaded Ukraine, upending the global LNG market, just one week after FERC’s announcement. Republican leaders treated the new policies as an attack on the natural-gas industry, and Sen. Joe Manchin of West Virginia (D), a vocal supporter of LNG, denounced the more exacting standards. FERC walked back the policies within weeks.

Nevertheless, Manchin refused to support President Biden’s May 2022 nomination of Glick to a second five-year term. By January 2023, Glick was out. His seat on the commission has remained vacant since then, leaving FERC split between two Democrats and two Republicans. Biden has yet to nominate a new candidate to fill the fifth slot; whomever he nominates must pass muster with Manchin, who maintains a deciding vote in confirming the nominee in the closely divided Senate.

In the aftermath of that blowback, ​“FERC has seemed less willing to scrutinize, in detail, these LNG and pipeline projects,” said Hannah Wiseman, a law professor at Penn State University. ​“It’s…still following all the laws. It’s doing the environmental reviews as needed. But I think especially that walkback of the guidelines represented a meaningful shift in FERC’s public stance.”

This past April, FERC released estimates that the total ​“social cost of greenhouse gases” — a metric for quantifying the harms caused by climate change — from building and operating Rio Grande LNG and its associated pipeline would be over $20 billion and the total social cost of greenhouse gases from building and operating the smaller Texas LNG facility would be over $2 billion. Yet the commission still voted a second time to authorize both terminals, and on Oct. 27, it denied opponents’ requests for a rehearing.

Buckling under political pressure

Though FERC is an independent agency, it’s hardly insulated from politics. The president nominates commissioners for staggered five-year terms, and those nominations must be confirmed by the Senate. (No more than three of the five commissioners can be from the same party.)

“FERC has become incredibly politicized,” said Suzanne Mattei, an energy policy analyst at the Institute for Energy Economics and Financial Analysis, a think tank that studies the energy transition.

Stuck in the crossfire of the 50–50 Senate, a chastened FERC has leaned away from exercising its discretionary authority on LNG, rather than toward it.

“FERC clearly has to take a look at the greenhouse-gas impacts of a new facility,” said William Boyd, a professor at the UCLA School of Law and Institute of the Environment and Sustainability. ​“But that doesn’t mean that it has to require the facility to somehow mitigate those greenhouse-gas impacts, or it doesn’t have to deny the permit based on that.”

In its April filings on Rio Grande LNG and Texas LNG, FERC inserted a caveat immediately below its estimates of the social cost of greenhouse gases: ​“We note that there currently are no accepted tools or methods for the Commission to use to determine significance. […] Accordingly, we have taken the required ​‘hard look’ and have satisfied our obligations under [the National Environmental Policy Act].” (Democratic Commissioner Allison Clements dissented, arguing that FERC hadn’t tried hard enough to seriously consider the social cost of greenhouse gases.)

Three months later, in its final environmental impact statement for the Calcasieu Pass 2 terminal, FERC found that the social cost of greenhouse gases from building and operating it would be almost $25 billion. The agency determined that the facility could increase Louisiana’s greenhouse-gas emissions by 4.6% per year starting in 2026 and take up 7.1% of the state’s carbon emissions budget by 2030.

Still, as with previous LNG projects, FERC said it couldn’t judge whether CP2’s emissions would be significant or insignificant and said greenhouse-gas mitigation was beyond the scope of its review.

Experts anticipate, given FERC’s track record, that CP2 will clear the commission with little difficulty, as will six additional projects that are at earlier stages in the approval process.

So far, the commission’s central role in the buildout of LNG infrastructure has stayed largely outside of the public gaze. But more Americans are starting to pay attention. As The Washington Post recently put it, ​“Environmentalists are gearing up for their next giant climate fight: They want to force a showdown with the Biden administration over the massive expansion of U.S. natural gas exports.”

Mattei hopes FERC will double down on accounting for climate change and environmental justice, but she thinks it’s much more likely to retreat back into what she called its ​“very long-standing pattern of just approving projects with very inadequate information.” Without congressional intervention, the commission is unlikely to stick its neck out again anytime soon, she said.

“I don’t know how they can fix their problems and start doing proper analysis,” Mattei added, ​“because I don’t think they have any backing for that.”