Pipelines and Politics
69 Pages Posted: 20 Apr 2023 Last revised: 21 Apr 2023
Date Written: April 10, 2023
This Article documents and seeks to explain a significant shift in how we construct natural gas pipelines in the United States. Natural gas pipelines are enormously consequential infrastructure projects. They provide essential services to people; but they can also come with significant costs. Their operation can pose safety and health risks to the surrounding community, which often includes low-income and minority populations. And, perhaps most importantly, they have taken on new significance in the era of climate change: they transport natural gas for combustion, which accounts for approximately a third of all carbon dioxide emissions from fossil fuel combustion in the United States.
Under a federal law known as the Natural Gas Act, the Federal Energy Regulatory Commission (FERC) is in charge of permitting interstate natural gas pipelines. Specifically, the Act authorizes FERC to issue a "certificate of public convenience and necessity" to private companies to construct pipelines, and, with it, the power to seize land through federal eminent domain. FERC may grant such a certificate only if it finds that the pipeline is in the public interest.
As this Article shows, historically, FERC made this public interest determination by engaging in complex and highly political proceedings in which it weighed a variety of factors related to the long-term social and economic costs of the pipeline. But, over the last twenty years, FERC's approach has changed. Based on an original database of hundreds of FERC's pipeline certificate decisions over the last twenty years, in which FERC has approved more than 400 major pipeline projects and denied only two, this Article shows that FERC's decision whether to certificate a pipeline has come to turn primarily on one factor: whether the applicant has a contract with a private party that will ship gas along the pipeline. If such a contract is documented, then FERC certificates the pipeline, regardless of its costs to the environment or the surrounding community.
The Article seeks to explain why FERC's approach to pipeline certification changed. It argues that the shift is best explained as a result of a change in the political dynamics at the level of the individual pipeline proceeding. Always a reluctant regulator, FERC historically was forced to engage in a more robust public interest inquiry by the presence of major players in its proceedings who opposed the construction of pipelines--namely, coal, railroad, and labor interests. In the modern era, however, these players have dropped out, leaving FERC to default to a review that is deferential to pipeline interests. And while this deferential review, viewed holistically, likely violates the Natural Gas Act, because of the unique political dynamics of natural gas and the structure of the individual pipeline proceeding, the Article argues that it will be difficult for any institution--courts, the President, Congress, or the states--to effectively check FERC.
At bottom, this Article concludes that the regulation of natural gas infrastructure in the United States cannot be understood based solely on the formal rules and statutes that have been put in place to govern the industry. Rather, understanding natural gas infrastructure regulation requires a comprehensive view, one that threads together the relationship between the formal laws on the books, the informal political dynamics driving the system, and the institutional landscape in which laws and politics operate. In short, understanding the regulation of natural gas pipelines requires understanding the political economy of natural gas.
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