United States: FERC Issues NGA Section 7(c) Certificate To Dominion For Lebanon West II Project, In The Process Dismissing Numerous Concerns Raised By The Pennsylvania DEP Regarding The Environmental Assessment

On November 19, 2015, FERC granted Dominion Transmission, Inc.'s ("Dominion") request for a certificate to construct and operate pipeline, compression, regulation equipment, valves, and other facilities in Ohio and Pennsylvania (the "Lebanon West II Project") pursuant to section 7(c) of the Natural Gas Act. Dominion stated that the proposed Lebanon West II Project will enable it to provide an additional 130,000 dekatherms per day of firm transportation service from Dominion's Mark West Liberty Bluestone Interconnection in Butler County, Pennsylvania, to the Lebanon-Texas Interconnection with Texas Gas Transmission Corporation in Warrant County, Ohio.

On September 30, 2014, Dominion filed its certificate application, proposing to (1) replace sections of its existing TL-400 pipeline in parts of Ohio and Pennsylvania; (2) add compression and appurtenant facilities at its existing Rural Valley Compressor Station in Armstrong County, Pennsylvania; (3) install additional regulation to reduce the pressure on its TL-400 pipeline exiting the Newark Compressor Station in Licking County, Ohio; (4) install additional regulation equipment at its existing Beaver Compressor Station in Beaver County, Pennsylvania, to allow additional gas to flow from its existing TL-400 Extension 1 pipeline to its TL-400 pipeline segments; (5) install crossover piping at Dominion's existing Washington Compressor Station in Fayette County, Ohio, to make the TL-400 pipeline bi-directional; and (6) add a new relief valve on Dominion's existing LN-25 pipeline at its existing Coxcomb Gate Assembly Site in Allegheny County, Pennsylvania. R.E. Gas Development, LLC will receive the incremental service provided by the additional facilities. On June 2, 2015, FERC issued an environmental assessment ("EA") for Dominion's proposal.

In the November order, FERC determined that Dominion satisfied the threshold requirement that the Lebanon West II Project not be subsidized by existing shippers, because Dominion proposed to charge incremental rates for service utilizing the expansion capacity that are higher than the pipeline's existing maximum system rates for comparable service. FERC concluded that Dominion's incremental cost of service and proposed rates, which were based on a pre-tax rate of return of 13.70 percent, are just and reasonable. Further, FERC found that the proposal will not degrade service to Dominion's existing customers. In addition, FERC found that there will be no adverse impact on other pipelines in the region or their captive customers because Dominion does not intend the proposed expanded capacity to replace service on other pipelines. FERC also found that Dominion designed the project to minimize adverse impacts on landowners and surrounding communities. In this regard, Dominion will construct over 90 percent of the proposed facilities on existing rights-of-way and on previously disturbed property.

With respect to the EA, FERC concluded that the environmental effects resulting from natural gas production are generally neither caused by a proposed pipeline project nor are they reasonably foreseeable consequences of approval of an infrastructure project. FERC further noted that a causal relationship sufficient to warrant Commission analysis of non-pipeline activity as an indirect impact would only exist if the proposed pipeline project would transport new production from a specified production area and that production would not occur in the absence of the proposed pipeline (i.e., there would be no other way to move the gas). Accordingly, FERC found that the record did not demonstrate the requisite reasonably close causal relationship between the impacts of future natural gas production and the Lebanon West II Project which would warrant further analysis. FERC agreed with the conclusions presented in the EA and stated that, if constructed and operated in accordance with Dominion's application as well as other conditions imposed in Appendix B to the order, approval of the proposed project would not constitute a major federal action.

FERC also responded to numerous objections raised by the Pennsylvania Department of Environmental Protection ("DEP"). DEP observed that Dominion needed a Federal Clean Water Act, section 401 Water Quality Certification. FERC found that the record indicated such certificate had been obtained. DEP stated that FERC must base its air quality analysis "on the latest and most accurate emission estimation techniques available," per 40 C.F.R. § 93.159(b). DEP maintained that the EA provided no details about its methodology or calculations for estimating emissions, left out construction vehicle emissions, and did not use "deterioration rates" to more accurately reflect non-road equipment emissions. In response, the Commission noted that an EA does not typically include all supporting documentation, because such documentation is contained in the application. Reviewing both the EA and Dominion's application, FERC concluded that the record included non-road emissions calculations, including "deterioration rates," to incrementally increase emission factors of non-road equipment as such equipment ages.

DEP objected that the EA did not include increased emissions from increased highway traffic and changes in traffic patterns caused by the project, including employee trips to and from the project. FERC responded that, due to its limited and temporary nature, project construction would not significantly affect traffic patterns in a way that would significantly increase highway emissions. Therefore, an air quality traffic analysis was not warranted. FERC further noted that the EA did quantify the construction vehicle emissions, and concluded that construction equipment would not result in a significant impact on air quality.

DEP also objected that the EA's air quality analysis pertaining to future emissions needed more transparency and detail so commenters could determine whether future emissions were estimated properly. In particular, DEP the EA's air quality analysis needed an estimate of volatile organic compound emissions due to leaks, blowdown venting, future pipeline maintenance, and all other fugitive events for future years, or include a detailed protocol for preventing such events. DEP further asserted that (1) the EA air emissions analysis improperly failed to include other emissions; (2) PHMSA should submit an EA pertaining to future indirect emissions occurring due to corrosion, which DEP maintained is required by EPA's General Conformity regulations; and (3) the Commission should work with other relevant federal agencies to ensure the EA incorporates all analyses of future emissions.

In response, the Commission again noted that an EA does not typically include all supporting documentation. The Commission noted that its environmental staff had prepared an analysis that was publicly available on the Commission's eLibrary website pertaining to "fugitive emissions," which determined that construction emissions would fall below the General Conformity applicability threshold. Further, the EA had "sufficiently and conservatively" estimated the potential impacts of "direct and indirect construction and operational emissions." The Commission concurred with the EA's conclusion that the project would not result in significant adverse impacts on air quality.

A copy of the order is available here.

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