How the FERC risks a free-for-all in cases for gas facility authorization.

By final rule, the Federal Energy Regulatory Commission (FERC) has adopted a new optional process for applicants seeking a pipeline certificate or gas import/export authority under the Natural Gas Act to construct, operate or abandon a jurisdictional facility.[Fn.1] It's known as the Pre-Filing Collaborative Process, or PFCP, but it means trouble.

In seeking to speed up administrative review, the FERC has only invited delay. By embracing this new process, the FERC in effect has set down the cup to reach for the quart.

Ostensibly, the PFCP draws a focus on environmental issues. Yet it invites delay because it leaves the door wide open to all parties to advance other issues as well. Participants whose competitive or otherwise contentious interests so require can clutter PFCPs with nonenvironmental issues, delaying them and causing applicants to avoid them altogether. Instead, the FERC should limit PFCPs only to environmental concerns.

Of course, the FERC is aware that the review process under the National Environmental Protection Act (NEPA) consumes more time than any other step in pipeline certificate cases. Thus, it encourages a preliminary analysis and resolution of environmental issues through PFCPs earlier than would occur otherwise. With the PFCP, the NEPA process can begin before the application is filed, and end after such filing. A successful PFCP, says the FERC, should produce a preliminary draft NEPA document (an Environmental Assessment or Environmental Impact Statement) to accompany an applicant's subsequent NGA filing. (Without the PFCP, the NEPA process normally begins only after the pipeline has filed its NGA application.)

Nevertheless, the PFCP process lets opponents have their cake and eat it too. First, the process makes no change in FERC regulations. An eventual applicant may stop its PFCP at any time and return to the standard NGA procedures. When that happens, however, and after applicants file their NGA applications, no party is then restricted from opening issues that go beyond what the PFCP previously contained. All entities, including non-PFCP parties and parties that withdraw from a PFCP, retain standard rights to intervene, comment, support, protest or otherwise participate once an NGA application is filed.

How Do I Start a Collaborative?

Future applicants that prepare draft environmental documents and who choose the PFCP option must comply with rules requiring proof of notice, consensus and communications, as follows:

Notice. First, the future applicant invites interested parties to participate in the PFCP. Working with guidance from the FERC staff, the future applicant contacts landowners, customers, local governments, Indian tribes and citizens' groups, plus federal, state or interstate agencies having jurisdiction over recreation, fish and wildlife, and management of water, cultural or other resources.

Consensus. The applicant then shows that most of those concerned will support a PFCP, whether by voluntary general agreement or collective opinion. Beyond exchanging letters, the applicant contacts the interested parties - through teleconferences, FERC staff meetings and so forth - and demonstrates to a reasonable degree that the PFCP will prove productive.

Communications. The future applicant, along with participants and FERC staff, then will negotiate a protocol on how they will communicate on the merits of the proposal and make their recommendations. They identify how information will be documented, distributed and made publicly available.

With these steps completed, the future applicant then describes to the FERC the project's purpose, location, scope and estimated construction dates. This step includes scoping out the environmental issues to discover the public's concerns and to prepare a preliminary draft environmental document. The applicant also schedules an initial public information meeting, sending copies of its request to all affected agencies and interested parties, plus copies of PFCP regulations and instructions on how to file comments.

At last, with the FERC's approval, the PFCP is under way.

How the FERC Loses Control

If PFCPs speed environmental review and leave existing procedures intact, where is the problem? Answer: The FERC invites a free-for-all by abdicating the central role in deciding PFCP issues.

The final PFCP rule says that potential applicants and participants will decide which issues will be covered in each collaboration. Yet in the regular run of cases, it is the FERC that defines the issues, giving them reasoned consideration[Fn.2] and a "hard look."[Fn.3] Thus, with its PFCP, the FERC permits participants to slow down the process or grind it to a halt:

[N]othing in [the final rule] precludes the applicant and the participants from voluntarily deciding to use the process to address non-environmental issues which are not required to be a part of the NEPA process.[Fn.4]

That marks a substantial grant of authority, even to a PFCP - a process that officially does not take place before the FERC. However, the PFCP today is officially adopted by the FERC; during the PFCP, the FERC may even impose deadlines on other federal and state agencies for preliminary recommendations, conditions and comments; and the FERC officially will entertain proposed settlements or agreements among the PFCP parties.

Mischievously exercised, this relaxed authority over issues will threaten PFCP workability.

How the Agenda Grows

What are examples of nonenvironmental issues? In certificate cases the FERC typically will examine issues such as rates, capacity allocation and project need, and will draw comparisons with competing projects. It will identify how the project might affect current customers. The FERC also cites other issues considered by many to be nonenvironmental. Such questions include matters related to markets and competition, plus terms of service, landowner concerns, and alternatives to the project described in the NGA certificate proposal.

Plainly, these are big-ticket items, worthy of close consideration by any affected participant.

Moreover, the FERC intends that PFCPs should generate data on nonenvironmental issues for Endangered Species Act, National Historic Preservation Act and other non-NEPA statutory purposes, and that PFCPs resolve any non-NEPA legal processes mandated by federal or state agencies.

How the Process Slows Down

How can the participants in the process employ nonenvironmental issues to delay PFCPs? They can do it in these ways, at least:

* Fault the Notice. Challenge the applicant's PFCP notice as inadequate, inappropriate or prejudicial, given the greater number of issues, both nonenvironmental and environmental.

* Wreck the Consensus. Complicate the applicant's effort to demonstrate PFCP consensus across the greater number of non-environmental and environmental issues.

* Go Fishing. Use PFCP communications protocols to discover information for their upcoming protests against the applicant's certificate filed under the NGA, or for agendas extraneous to the application.

Central to the process is the question of which PFCP-produced data will accompany the NGA application. The future certificate applicant and the PFCP participants ordinarily will set PFCP deadlines for all requests to the applicant for scientific environmental studies or alternative route analyses. After the NGA application, additional requests for such studies may be made to the FERC only for good cause shown. Those same procedures obviously apply to non-environmental studies, giving participants the chance to bog down the process with requests for such studies. If an applicant rejects participant requests to produce nonenvironmental studies, the FERC encourages participants to order up the commission's dispute resolution procedures, adding a procedural layer to PFCPs. Even if the studies are produced as requested, the applicant and participants eventually must decide whether such data will accompany the NGA application, adding another opportunity for delay.

PFCPs can lead to nonenvironmental settlements or agreements that may be submitted with an NGA application, distracting attention from environmental issues, if supported by substantial evidence (documents, studies). Anyone may comment on or protest such filed settlements, agreements or applications. Any party to an NGA case may seek to enter additional nonenvironmental data into the record to argue its position. If they wish, the applicant or PCFP participants may select a neutral facilitator or mediator other than the FERC staff to coordinate PFCP handling of nonenvironmental issues.

PFCPs are voluntary. The applicants and participants may choose either not to risk PFCP delay in the first place, or to walk away from a PFCP once begun. Applicants or cooperating participants can petition the FERC to put a stop to a PFCP by showing that consensus no longer exists for its continued productive use. Served on all other participants (who may respond), the petition recommends specific, appropriate procedures. Any responsive FERC order only ends the PFCP, and does not affect the applicant's right to file for the proposed facilities.

What the FERC Should Do

The commission's PFCPs make the perfect the enemy of the good. By opening PFCPs to nonenvironmental issues on the hope of also resolving them, the FERC risks wasting the concrete opportunity to speed up the environmental analysis. It is inevitable: Participants with contentious interests will use the PFCP to address nonenvironmental issues. Any middle ground between substantial delay and outright disuse of PFCPs will be impracticably narrow.

The FERC's goal is commendable. Yes, let's speed up the process. Yet I believe that goal is not served by opening PFCPs to nonenvironmental issues. The FERC should fix its PFCP final rule by limiting it to its main focus.

Michel Marcoux is a partner in Bruder, Gentile & Marcoux L.L.P., a Washington, D.C. law firm specializing in natural gas and electric utility industry work. He principally has represented gas distributors and electric utilities in gas matters before the FERC. He can be reached at 202-783-1350 or jmmarcoux@brugen.com.

1 Collaborative Procedures for Energy Facility Applications, Order No. 608, Sept. 15, 1999, 64 Fed. Reg. 51,209-22 (regulations at 18 C.F.R. Parts 153, 157 & 375), reh'g granted, Nov. 4, 1999.

2 Permian Basin Area Rate Cases, 390 U.S. 747, 792 (1968).

3 Panhandle Eastern Pipe Line Co. v. FERC, 890 F.2d 435, 439 (D.C. Cir. 1989).

4 64 Fed. Reg. at 51,213.

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