Pipeline Outlook: How FERC Reliance on Precedent Agreements Could Change

The domestic energy revolution, largely fueled by new sources of natural gas, would not be possible without the interstate pipeline grid that transports that gas to market, every mile of which was authorized under the Natural Gas Act. That law declares the “business of transporting … gas for ultimate distribution to the public” to be “affected with a public interest.” The standard for approval of any interstate natural gas pipeline project is that it is required by “public convenience and necessity,” and that is determined by the Federal Energy Regulatory Commission (FERC). Approval by the FERC confers on the pipeline eminent domain authority. Therefore, how the FERC interprets public convenience and necessity, or public need, is significant, particularly for the many Texas-based energy companies that operate and/or transport natural gas on FERC-regulated pipelines. Recent signals suggest the FERC’s policy might be changing.