After the DC Circuit court removed Spire STL’s illegal 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 suspend the vacancy decision and hand over the company’s license.
The Supreme Court should not only grant stay, it should not even take up the case.
The Spire mess started with the Federal Energy Regulatory Commission, the federal body designated and authorized by Congress to handle pipeline approvals. And that’s where it’s going to be.
The FERC must proceed based on the law as properly administered by the Commission and address the complex facts that warrant an investigation by an expert agency. Although the FERC’s original orders approving the pipeline were deficient, it has the ability and tools to carry out an adequate analysis and now has an opportunity to correct, of course.
EDF brought an action before the DC Circuit Court last year over serious concerns that the Spire pipeline certificate was issued without the legally required justification that the pipeline was necessary and for the benefit of the public. Since the DC Circuit ruling, the FERC has diligently addressed the pressing question of whether the pipeline is needed in the coming winter season. The FERC must also determine the long-term fate of the pipeline, and it cannot proceed until the case is out of court. The intervention of the Supreme Court now, while the FERC is already examining these issues, would undermine one of the Agency’s main responsibilities.
The simple fact is that there is no need or justification for the relief that Spire seeks. The FERC has already approved the pipeline for operation by December and is ready to extend a permit to operate through the winter season.
Nor is there any suggestion that anything opposite should occur. Spire’s obvious fear-driven PR campaign hides the real problem to be solved: how did we get here, and how can we ensure that this never happens again?
Inadequate FERC reviews
The saga starts with how FERC reviews gas pipelines under the Natural Gas Act. A rigorous audit process is crucial to these massive and expensive infrastructure projects that work for decades and can impact communities and the environment. The FERC requires pipeline developers to demonstrate in an application that a project is needed on the market and that its public benefits outweigh its negative effects.
Companies typically demonstrate market needs based on a private contract system: two parties negotiate at arm’s length about pipeline capacity to ensure a project is the right size to meet a legitimate, identified need.
This framework falls apart when the two negotiating parties are linked, can saddle prisoner payers to prisoner with costs and in fact negotiate with themselves. The FERC’s approach to looking at the very existence of a contract (not to mention an analysis of counterparties, terms or surrounding market conditions) is simply falling short, not just with the Spire pipeline, but in general.
It is no coincidence that projects supported by this affiliate-supported model, including PennEast and the Atlantic Coast Pipeline, have recently been canceled. EDF has been arguing for years that this model does not work, and in June, DC Circuit agreed.
The failed affiliate projects and admonition from the DC circuit make it clear that the time has come for the FERC to update its policy statement now.
A more rigorous approach
The FERC has had a procedure open since 2018 to revise how to approve new infrastructure, and EDF made a detailed set of recommendations. Eg. Could the FERC better assess whether existing infrastructure could be used more efficiently; make a stricter balance of benefits and adverse effects require more information from the pipeline company to justify market needs and give greater weight to the concerns of affected landowners and communities in the vicinity of the pipeline.
Furthermore, the FERC is not the only agency in need of reform. State public utilities commissions must also ensure that they have adequate protection in place to protect against self-trafficking. There are currently no rules for the interactions between a newly created pipeline developer (such as Spire) and its associated gas tools during the process when a developer announces the project and participates in the contract negotiation. A negative consequence is that major infrastructure projects can primarily be proposed and designed for the benefit of the business family’s shareholders – not the families and companies that a tool should serve.
EDF has created a framework that will solve this problem directly. When a gas tool shows the need for new capacity, it should issue a request for proposals inviting a complete package of potential solutions that can either provide natural gas supply or reduce demand.
A competitive process like this would not only protect against two-arm affiliate abuse in the same company, but also provide space for solutions tailored to meet actual energy needs, while minimizing costs, greenhouse gas emissions and negative consequences for society. Thereafter, the retail trade would have more options and its selection process would be transparent to regulators and stakeholders.
What to do at Spire?
The most pressing question is what to do with the Spire pipeline now. Contrary to the company’s claims, EDF has never proposed that service to St. Louis customers should be compromised in any way. But letting the pipeline continue to operate without changes in terms would in effect ignore DC Circuit’s ruling in June.
In the past, where the FERC has identified proprietary trading issues, it has rejected the deal or is betting directly. Here we offered a reasonable middle ground: Spire can continue to operate its pipeline through the winter, subject to tailor-made conditions that address, among other things, the concerns surrounding the DC circuit.
An important condition proposed by EDF to protect the public interest would change the pricing structure by which Spire STL (pipeline) charges its customer Spire Missouri (the utility and ultimately its customers) for service.
Today, the rates are designed with the assumption that service will be needed hourly every day for 20 years. Our proposal would tie rates to the actual use of the Spire pipeline to stimulate reduced dependence and to protect taxpayers from the cost of this legally weak project. We have also asked the FERC to analyze the available, unused capacity of a nearby, unconnected pipeline. As emails between Spire and MRT show, Spire asked Missouri about this capability following the DC Circuit decision, but chose not to pursue it.
Resolving the many issues surrounding this project will have long-term implications for critical infrastructure development at a time when our energy system is undergoing a rigorous transformation to combat climate change, to recognize that clean energy alternatives are available that save families and businesses hard-earned money and it provides healthier and more resilient communities. Deciding these complex technical issues is a matter for the FERC.
Going forward, the FERC must do a better job of assessing the benefits and burdens of the infrastructure it approves. It can not just ignore or minimize project damage, which includes significant consequences for public health and the environment, massive use of prominent domain to condemn private land for unnecessary projects and the very significant negative economic consequences for families and communities.