FERC, not the Supreme Court, is the right place to fix the Spire pipeline mess

After the D.C. Circuit court vacated Spire STL’s unlawful certificate to operate a 66-mile natural gas pipeline running between Illinois and Missouri in June, Spire last week asked the U.S. Supreme Court to stay the vacatur decision and hand the company back its permission slip.

Not only should the Supreme Court not grant the stay, it shouldn’t even take up the case.

The Spire mess started at the Federal Energy Regulatory Commission, the federal agency designated and empowered by Congress to handle pipeline approvals. And that’s where it should stay.

FERC needs to proceed based on the law as properly administered by the commission and to address the complex facts that warrant the fact-finding review of an expert agency. While FERC’s initial orders authorizing the pipeline were deficient, it has the capability and tools to conduct a fulsome analysis and now has an opportunity to course correct.

EDF filed suit at the D.C. Circuit court last year over serious concerns that the Spire pipeline certificate was granted without the legally-required justification that the pipeline was needed and beneficial to the public. Since the D.C. Circuit ruling, FERC has been diligently addressing the urgent question of whether the pipeline is needed for the upcoming winter season. FERC also needs to determine the long-term fate of the pipeline, and it can’t move forward until the case is out of the courts. Intervention by the Supreme Court now, while FERC is already examining these questions, would undercut one of the agency’s core responsibilities.

The simple fact is, there is no need or justification for the relief that Spire seeks. FERC has already approved the pipeline to operate through December and is poised to extend an authorization to operate through the winter season.

Nor is anyone suggesting anything to the contrary should occur. Spire’s blatant fear-driven public relations campaign hides the real issue that needs to be resolved: how did we get here and how can we ensure this never happens again?

FERC, not the Supreme Court, is the right place to fix the Spire pipeline mess Click To Tweet

Deficient FERC reviews

The saga starts with how FERC reviews gas pipelines under the Natural Gas Act. A rigorous review process is essential for these massive and expensive infrastructure projects which operate for decades and can impact local communities and the environment. FERC requires pipeline developers to demonstrate in an application that there is market need for a project and that its public benefits outweigh its adverse effects.

Companies typically demonstrate market need based on a private system of contracting: two parties negotiate at arms-length for pipeline capacity to ensure a project is right-sized to address a legitimate, identified need.

This framework falls apart when the two negotiating parties are affiliated, can saddle captive ratepayers with costs, and, in effect, are negotiating with themselves. FERC’s approach of looking to the mere existence of a contract (to say nothing of an analysis of the counter parties, the terms, or the surrounding market conditions) is simply falling short, not just with the Spire pipeline, but in general.

Not coincidentally, projects supported by this affiliate-backed model, including PennEast and Atlantic Coast Pipeline, have recently been cancelled. EDF has argued for years that this model does not work, and in June the D.C. Circuit agreed.

The failed affiliate projects and admonishment from the D.C. Circuit make clear that the time for FERC to update its policy statement is now.

A more rigorous approach

FERC has had a proceeding open since 2018 to revisit how to approve new infrastructure, and EDF put forth a detailed set of recommendations. For example, FERC could better assess whether existing infrastructure could be used more efficiently; conduct a more rigorous balancing of benefits and adverse effects; require more information from the pipeline company to justify market need; and give more weight to the concerns of impacted landowners and communities in the vicinity of the pipeline.

Moreover, FERC is not the only agency in need of reform. State public utility commissions also need to ensure they have adequate protections in place to protect against self-dealing. There are currently no rules governing the interactions between a newly formed pipeline developer (like Spire) and its affiliate gas utility during the process when a developer advertises the project and engages in the contract negotiation. One negative consequence is that major infrastructure projects can be proposed and designed primarily for the benefit of the corporate family’s shareholders — not the families and businesses a utility is supposed to serve.

EDF has created a framework that would address this problem head-on. Once a gas utility demonstrates need for new capacity, it should issue a Request for Proposals that invites a full suite of potential solutions that could either provide natural gas supply or reduce demand.

A competitive process like this would not only protect against affiliate abuse by two arms of the same company, but also make room for solutions tailored to meet the actual energy need while minimizing costs, greenhouse gas emissions and adverse impacts on communities. Then, the retail utility would have several options and its selection process would be transparent to regulators and stakeholders.

What to do about Spire?

The most pressing question is what should be done about the Spire pipeline now. Contrary to company claims, EDF has never suggested that service to St. Louis customers should be compromised in any way. But allowing the pipeline to continue to operate without any change in conditions would, in effect, ignore the D.C. Circuit’s June ruling.

In the past, where FERC has identified self-dealing concerns, it has rejected the agreement or rates outright. Here, we offered a reasonable middle ground: Spire can continue to operate its pipeline through the winter, subject to tailored conditions that address, among other issues, the self-dealing concerns raised by the D.C. Circuit.

One important condition proposed by EDF to protect the public interest would alter the rate design by which Spire STL (the pipeline) charges its customer Spire Missouri (the utility, and ultimately its customers) for service.

Today, rates are designed with the assumption that service will be needed every hour of every day for 20 years. Our proposal would tie rates to actual usage of the Spire pipeline to incentivize decreased reliance and to protect ratepayers from the cost of this legally infirm project. We’ve also asked FERC to analyze the available, unused capacity on a neighboring, unaffiliated pipeline. As the emails between Spire and MRT show, Spire Missouri inquired about this capacity after the D.C. Circuit decision, but chose not to pursue it.

Resolving the many issues surrounding this project will have long-term ramifications for critical infrastructure development at a time when our energy system is undergoing a rigorous transformation to combat climate change, to recognize that there are available clean energy alternatives that save families and businesses hard-earned money, and that provide for healthier and more resilient communities. Settling these complex technical issues are questions for FERC.

Going forward, FERC must do a better job of assessing the benefits and burdens of the infrastructure it approves. It can’t simply ignore or minimize project harms, which include significant public health and environmental impacts, massive use of eminent domain to condemn private land for unnecessary projects, and the very substantial adverse economic consequences on families and communities.

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