Statement of Commissioner James P. Danly
July 31, 2023
CP23-518-000
I dissent from today’s order because the Commission should have disclaimed jurisdiction over the facilities at issue in NFEnergía’s application under Natural Gas Act (NGA) section 3.[1] Given the fact that our jurisdiction is, at best, uncertain, it would have been best to simply get out of the applicant’s way and allow them to build desperately needed infrastructure unimpeded. Prudence, both legal and practical demand such a result here. Worse yet, having asserted jurisdiction, the Commission ignores the requirements of the Administrative Procedure Act (APA) and the National Environmental Protection Act (NEPA). Thus, today’s order is both imprudent and infirm.
The reliability and resource adequacy of Puerto Rico’s electric system is a matter of significant (and immediate) concern. That Puerto Rico is facing imminent, severe electric system failures can be seen in a number of recent Commission proceedings. I have covered some of the reliability concerns in my separate statements in another proceeding regarding a different liquefied natural gas (LNG) terminal, EcoEléctrica, L.P.’s (EcoEléctrica) import facility at Guayanilla Bay in Peñuelas, Puerto Rico (Docket No. CP95-35-000). There, I highlighted the reliability concerns expressed by both the Governor of Puerto Rico and the Puerto Rico Electric Power Authority (PREPA) arising from the operation of Puerto Rico’s natural gas system.[2] I will not repeat those concerns here.
In this proceeding, NFEnergía LLC (NFEnergía) seeks an NGA section 3[3] authorization to construct an interconnection of approximately 220 feet of 10-inch pipe to an existing, available blind flange at the San Juan Micro-Fuel Handling Facility (“MFH Facility”)[4]—an LNG import and regasification facility, located at the Port of San Juan in Puerto Rico—in order to deliver natural gas to the emergency temporary generation project located adjacent to the PREPA San Juan Power Plant, at the Federal Emergency Management Agency and the United States Army Corps of Engineers’ direction.[5] As today’s order recognizes “[t]he proposed pipeline is intended to help stabilize Puerto Rico’s electrical grid in preparation for the 2023 hurricane season.”[6]
PREPA, the agency responsible for the electric system in Puerto Rico, explains that this “temporary power generation project” is “urgent” because “[t]he emergency temporary power generation must be operational by August 15, 2023 in order to ensure sufficient electrical capacity to meet demand in Puerto Rico during this hurricane season and to stabilize the electrical grid while long-term repairs are made to the system.”[7] PREPA goes on to say that “[w]ithout immediate and prompt action from the Commission on this matter no later than by July 28, 2023, Puerto Rico faces the risk of serious reliability problems that will exacerbate the ongoing energy crisis on the Island to the detriment of the Puerto Rican people.”[8] NFEnergía LLC explains “that without the accommodation . . . the lack of electrical energy supply could seriously jeopardize the stability of the Puerto Rican grid.”[9] In short, this infrastructure is unquestionably needed.
But the need for infrastructure, no matter how acute, does not confer authority upon the Commission. For that, we need a statute. Nor does it allow us to skirt our obligations under other statutes—more on that later.[10] Here, the Commission does not (and cannot) rely on any statutory authority to support its order. Instead, in a moment of admirable (or, perhaps, breathtaking) candor, the Commission plainly states that “[t]here is no explicit statutory authority for the Commission to issue the section 3 authorization sought by the NFEnergía because the existing LNG terminal is still pending authorization by the Commission.”[11]
Having conceded that there is no authority in statute, the order then goes on to cite our regulations. Pointing to 18 C.F.R. § 153.13, the order states that “[t]he Commission’s regulations provide for the emergency reconstruction of facilities authorized under [NGA section 3] for the purpose of immediately restoring interrupted service for the protection of life or health or for maintenance of physical property in an emergency due to a sudden unanticipated loss of gas supply or capacity.”[12] Why even mention this? Jurisdiction is conferred by statute, not by regulation.[13] In any event, this provision is inapplicable because, by its plain terms, it only applies to facilities over which the Commission has jurisdiction and that are already in operation, “permit[ting] reconstruction for the purpose of immediately restoring interrupted service for the protection of life or health or for maintenance of physical property in an emergency due to a sudden unanticipated loss of gas supply . . . .”[14] According to uncontested record evidence, this is a new facility, not a “reconstruction” of facilities to “restor[e] interrupted service.”[15]
If, indeed, the Commission has the non- “explicit statutory authority”[16] to issue a section 3 authorization and it acts upon it, then immediate encumbrances attach under NEPA and the APA. As far as NEPA goes, absent a categorical exclusion upon which we can rely,[17] any time the Commission undertakes a major federal action, it must prepare an environmental assessment or environmental impact statement.[18] No categorical exclusion is applicable.[19] We have completely ignored NEPA.
As far as the APA goes, it is black letter law that the Commission is obligated to engage in reasoned decision making. Merely acknowledging and summarizing comments and protests absent some substantive response is an unambiguous failure of reasoned decision making.[20] These infirmities have placed a cloud of uncertainty over this badly needed infrastructure due to the obvious litigation risks that this order presents.[21]
What we have now is a mess. We could have just disclaimed jurisdiction and it would not have been a problem: Puerto Rico would have had jurisdiction over the facilities. We could have asserted jurisdiction and issued a legally durable order. But instead, we did the one thing we could not do—assert jurisdiction (sort of) and ignore the other legal obligations that attend its exercise. Where does that leave the applicant? If challenged (and if its manifest infirmities are not remedied on rehearing), this order will be remanded. This leaves the status of these facilities in grave uncertainty. Worse yet, what if the order is vacated? Having exercised jurisdiction, will the applicant have to await another order, or will the jurisdictional determination (if we can call it that) itself be vacated such that authority again reverts to Puerto Rico? One way or another, this is no way to handle an application for desperately needed infrastructure. We are adding to the chaos.
Given their recent experience before the Commission, I am not at all surprised by the manner in which NFEnergía styled its request. I would caution the public not to read too much into their submission. It certainly should not be read to suggest that the applicant is either confident that the Commission has jurisdiction nor that the applicant has a preference in the matter. Consider the history of Commission proceedings regarding the MFH facility.[22] Consider also that petitions for declaratory order are expensive[23] and the Commission has proven that it has no qualms about allowing petitions for declaratory order regarding section 3 jurisdiction to languish for years.[24] Given the evident urgency for the project, the applicants likely viewed a filing under NGA section 3 as their sole means by which to obtain certainty. It is a shame that today’s order offers them none.
For these reasons, I respectfully dissent.
[1] 15 U.S.C. § 717b.
[2] See EcoEléctrica, L.P., 179 FERC ¶ 61,038 (2022) (Danly, Comm’r, concurring) (citing Governor of Puerto Rico February 24, 2022 Letter at 2 (“Returning the EcoEléctrica LNG storage tank to full operation is critical to [the Puerto Rico Electric Power Authority’s] ability to reliably supply economic electric power to the people of Puerto Rico and to minimize risks of blackouts on the island.”); Puerto Rico Electric Power Authority February 24, 2022 Letter at 2 (“EcoEléctrica and Costa Sur units are also essential for maintaining the required operational reserve, which is key for the reliability and safety of Puerto Rico’s electrical system. A reduction in the available capacity of these units would adversely affect the reliability and safety of the electrical service.”)); EcoEléctrica, L.P., 180 FERC ¶ 61,054 (2022) (Danly, Comm’r, concurring at 2) (recognizing that “the hurricane season has begun and yet we still have no resolution regarding the level at which EcoEléctrica can safely operate its [LNG] storage tank and the potential consequences to the reliability of Puerto Rico’s electric system should problems arise” and noting comments in the docket that “raised serious reliability concerns”).
[3] 15 U.S.C. § 717b.
[4] You may recall the orders that led up to the filing of the application under NGA section 3 for the MFH Facility. See New Fortress Energy LLC, 174 FERC ¶ 61,207 (2021), notice of reh’g denial, 175 FERC ¶ 62,108 (2021), order addressing arguments raised on reh’g, 176 FERC ¶ 61,031 (2021); see also infra note 11. I dissented from the orders in that proceeding because I disagreed with the Commission’s finding that the LNG handling facility owned and operated by New Fortress Energy LLC is an LNG terminal as defined by the NGA and subject to the Commission's jurisdiction under NGA section 3. See New Fortress Energy LLC, 174 FERC ¶ 61,207 (2021) (Danly, Comm’r, dissenting); New Fortress Energy LLC, 176 FERC ¶ 61,031 (2021) (Danly, Comm’r, dissenting). I recognize that the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) affirmed the Commission’s broad interpretation of its jurisdiction in the New Fortress Energy LLC orders. See New Fortress Energy Inc. v. FERC, 36 F.4th 1172 (D.C. Cir. 2022) (denying the petitions for review of the Commission’s determination that the New Fortress facility is jurisdictional under NGA section 3). Nonetheless, as I stated in my dissents, NGA section 3 is poorly drafted, and NGA section 2(11), 15 U.S.C. § 717a(11), which defines “LNG terminal” is ambiguous and broad.” See, e.g., New Fortress Energy LLC, 174 FERC ¶ 61,207 (Danly, Comm’r, dissenting at PP 2-3) (recognizing that the definition for “LNG terminal” in NGA section 2(11) is broad but doubting that the text was intended to be broadly interpreted and also “that any majority of commissioners charged with implementing the statute from the time of its enactment would have found that jurisdiction should have been exercised over [a] rail yard in Topeka” “that takes shipments of LNG in ISO containers shipped by rail from Canada and holds them for a period of time before sending them elsewhere by rail”). I remain convinced that had the Commission taken a narrow view of its jurisdiction, consistent with my dissents that interpretation of our jurisdiction would also have been affirmed by the D.C. Circuit as reasonable and that interpretation—by the agency that oversees the siting of LNG terminals—would have therefore been afforded deference. See Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005) (“If a statute is ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires a federal court to accept the agency’s construction of the statute, even if the agency’s reading differs from what the court believes is the best statutory interpretation.”) (citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843-844 & n.11 (1984) (Chevron)); Chevron, 467 U.S. at 843 (“if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute”); see also City of Arlington v. FCC, 569 U.S. 290, 307 (2013) (finding “the preconditions to deference under Chevron are satisfied because Congress has unambiguously vested the [Federal Communications Commission] with general authority to administer the Communications Act through rulemaking and adjudication, and the agency interpretation at issue was promulgated in the exercise of that authority”).
[5] NFEnergía explains in its request that “[t]he Puerto Rico Grid Stabilization Task Force is a joint operation between the [U.S. Army Corps of Engineers], Environmental Protection Agency (‘EPA’), Department of Energy (‘DOE’), and Federal Emergency Management Agency (‘FEMA’) that is charged with restoring Puerto Rico’s power system reliability.” NFEnergía July 18, 2023 Request for Amendment at 1 n.4.
[6] NFEnergía LLC, 184 FERC ¶ 61,061, at P 3 (2023).
[7] PREPA July 18, 2023 Comments at 1.
[8] Id. at 2.
[9] NFEnergía July 18, 2023 Request for Amendment at 2.
[10] Contra Transco. Gas Pipe Line Co., 184 FERC ¶ 61,066 (2023) (Phillips, Chairman & Christie, Comm’r, concurring).
[11] NFEnergía LLC, 184 FERC ¶ 61,061 at P 3. The Commission previously found that New Fortress “must file with the Commission an application for authorization under section 3 of the NGA” for the MFH Facility and “[the Commission] will not require the facility to cease operating.” New Fortress Energy LLC, 174 FERC ¶ 61,207 at P 39. NFEnergía filed the application for NGA section 3 authorization on September 15, 2021 in Docket No. CP21-496-000. That application remains pending.
[12] NFEnergía LLC, 184 FERC ¶ 61,061 at P 3 n.5.
[13] I have long acknowledged that NGA section 3(e)(1), 15 U.S.C. § 717b(e)(1), which grants the Commission “the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal,” is far from a model of clarity. NGA section 2(11) defines “LNG terminal” to
include[] all natural gas facilities located onshore or in State waters that are used to receive, unload, load, store, transport, gasify, liquefy, or process natural gas that is imported to the United States from a foreign country, exported to a foreign country from the United States, or transported in interstate commerce by waterborne vessel, but does not include—
(A) waterborne vessels used to deliver natural gas to or from any such facility; or
(B) any pipeline or storage facility subject to the jurisdiction of the Commission under section 717f of this title.
15 U.S.C. § 717(a)(11). As I have explained in another proceeding, this text is broad and ambiguous. New Fortress Energy LLC, 174 FERC ¶ 61,207 (Danly, Comm’r, dissenting at P 3). We are not being asked to authorize an LNG terminal, we are being asked to authorize a pipeline conceived of an appurtenance to an as-yet unauthorized facility which might one day be an approved LNG terminal. The ambiguity of the statute is not at issue.
[14] 18 C.F.R. § 153.13.
[15] Id.
[16] Supra P 5.
[17] See 18 C.F.R. § 380.4 (providing the Commission’s categorical exclusions under NEPA); see also 40 C.F.R. § 1501.4.
[18] See 18 C.F.R. § 380.6(a)(1) & (b) (“Except as provided in paragraph (b) of this section, an environmental impact statement will normally be prepared first for the following projects: (1) Authorization under sections 3 or 7 of the Natural Gas Act and DOE Delegation Order No. 0204–112 for the siting, construction, and operation of jurisdictional liquefied natural gas import/export facilities used wholly or in part to liquefy, store, or regasify liquefied natural gas transported by water” unless “the Commission believes that a proposed action identified in paragraph (a) of this section may not be a major Federal action significantly affecting the quality of the human environment, an environmental assessment, rather than an environmental impact statement, will be prepared first. . . .”). I note that the Council on Environmental Quality’s (CEQ) regulations provide for alternative procedures in circumstances where there is an emergency. See 40 C.F.R. § 1506.12 (“[w]here emergency circumstances make it necessary to take an action with significant environmental impact without observing the provisions of the regulations in this subchapter, the Federal agency taking the action should consult with the [CEQ] about alternative arrangements for compliance with section 102(2)(C) of NEPA. Agencies and the [the CEQ] will limit such arrangements to actions necessary to control the immediate impacts of the emergency. Other actions remain subject to NEPA review.”).
[19] At the January 2021 Commission meeting, as Chairman, I presented for a vote a Notice of Inquiry to solicit comments on categorical exclusions listed in other agencies’ NEPA procedures that the Commission should consider adopting and on any new categorical exclusions the Commission should consider establishing. See Staff Presentation on Categorical Exclusions under the National Environmental Policy Act (RM21-10-000), FERC, https://www.ferc.gov/news-events/news/staff-presentation-categorical-exclusions-under-national-environmental-policy-act (Jan. 19, 2021). That order was voted down by my colleagues. I remain convinced that the Commission needs to initiate an inquiry in regard to its categorical exclusions and whether there are new ones that should be added. Perhaps it could have helped in this situation.
[20] See New England Power Generators Ass’n, Inc. v. FERC, 881 F.3d 202, 211 (D.C. Cir. 2018) (finding “that FERC did not engage in the reasoned decisionmaking required by the Administrative Procedure Act” because it “failed to respond to the substantial arguments put forward by Petitioners and failed to square its decision with its past precedent”).
[21] See NFEnergía LLC, 184 FERC ¶ 61,061 at PP 2-3 (summarizing comments, not responding, and stating instead that the Commission “will conduct a complete examination of the merits of the continued operation of the proposed pipeline, including an examination of potential ongoing environmental and safety impacts, as part of the pending proceeding related to the authorization of the LNG terminal”).
[22] See New Fortress Energy, LLC, 171 FERC ¶ 61,230, at P 1 (2020) (“In this order, pursuant to Rule 209(a)(2) of the Commission's Rules of Practice and Procedure, we direct New Fortress Energy LLC . . . to show cause why the [LNG] handling facility it has constructed adjacent to the San Juan Combined Cycle Power Plant at the Port of San Juan in Puerto Rico is not subject to the Commission's jurisdiction under section 3 of the Natural Gas Act (NGA).”), 174 FERC ¶ 61,207 at P 1 (“find[ing] that the LNG handling facility is subject to the Commission’s jurisdiction under NGA section 3[,] . . . direct[ing] New Fortress Energy to file an application for authorization to operate the facility within 180 days of this order” and “allowing operation of the facility to continue during the pendency of an application”), notice of reh’g denial, 175 FERC ¶ 62,108, order addressing arguments raised on reh’g, 176 FERC ¶ 61,031 (addressing the arguments raised on rehearing and “reach[ing] the same result”).
[23] See 18 C.F.R. § 381.302(a) (“the fee established for filing a petition for issuance of a declaratory order under § 385.207 of this chapter is $35,980. The fee must be submitted in accordance with subpart A of this part.”); see also id. § 385.207(a)(2) (“A person must file a petition when seeking: . . . A declaratory order or rule to terminate a controversy or remove uncertainty[.]”); id. § 385.207(c) (“Except as provided in § 381.302(b), each petition for issuance of a declaratory order must be accompanied by the fee prescribed in § 381.302(a).”).
[24] See, e.g., Bradford County Real Estate Partners LLC, Petition for Declaratory Order Disclaiming Jurisdiction and Motion for Expedited Action, Docket No. CP20-524-000 (Sept. 18. 2020) (pending for 1042 days, i.e., nearly 3 years) & Delaware River Partners LLC, Petition for Declaratory Order Disclaiming Jurisdiction and Motion for Expedited Action, Docket No. CP20-522-000 (Sept. 11, 2020) (pending for 1049 days, i.e., nearly 3 years).