On March 11, 2016, the Federal Energy Regulatory Commission (FERC) denied an application by Jordan Cove Energy Project, L.P. (Jordan Cove) for authority under Section 3 of the Natural Gas Act (NGA) to site, construct, and operate a facility at Coos Bay, Oregon, for the exportation, principally to Asia, of liquefied natural gas (LNG). In that same order, FERC denied a related application by Pacific Connector Gas Pipeline, L.P. (Pacific Connector) for an NGA Section 7 certificate to construct and operate a 232-mile, 36-inch diameter upstream pipeline to supply natural gas to Jordan Cove. As discussed below, the Commission’s denial of a Section 7 certificate for Pacific Connector was a fairly routine application of its Certificate Policy Statement, balancing the benefits of the proposed project against its adverse impacts. Importantly, the denial of the Jordan Cove application extends to Section 3 proposals a similar balancing of benefits and impacts, raising questions as to how the Commission might address future applications for Section 3 authorization to construct LNG facilities that are not supported by contracts for service on the proposed facilities.

The Commission’s Application of the Section 7 Balancing Test

In denying Pacific Connector’s certificate application under Section 7, FERC applied its “Certificate Policy Statement.” Under the Certificate Policy Statement, “the Commission balances the public benefits against the potential adverse consequences.” FERC “will approve an application for a certificate . . . only if the public benefits from a proposed project outweigh any adverse effects.” In this context, FERC indicated it takes a “proportional approach” in balancing “the impact of the proposed project on the relevant interests . . . against the benefits to be gained from the project.” If a project will affect a large number of interests adversely or if it will have a strong adverse effect on a particular interest, a greater showing of need and public benefits will be required for project approval. Continue Reading.