Democratic presidential candidates’ promises to fight climate change could hinge on whether they can reshape an obscure federal agency that has overseen a surge in oil and gas projects.
The Federal Energy Regulatory Commission, an independent regulator of pipelines and power markets, derives its authority from decades-old laws that largely predate worries about climate change and were focused primarily on ensuring that energy supplies remain cheap and reliable. But that mandate may interfere with some of the more aggressive climate plans Democrats are contemplating, and candidates are facing pressure to overhaul the agency if elected.
“You can't do a Green New Deal if you allow FERC to continue as it is,” said Drew Hudson, an activist with Beyond Extreme Energy, an anti-fossil fuel group that has routinely disrupted FERC meetings to protest natural gas pipelines. “FERC would just frustrate the efforts, so you have to transform it.”
Though little known to most of the public, FERC has attracted growing notoriety among climate activists, who staged months of sit-ins that thwarted its attempts to hold public meetings during the latter years of the Obama administration. Now, Hudson's group is floating a far-reaching proposal to rebrand the agency as the Federal Renewable Energy Commission and reorient its mission toward fighting climate change.
Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) are the only two Democratic candidates so far to have endorsed turning FERC into FREC, although neither has spelled out in detail how they would make that happen. Other candidates have not included FERC in their climate platforms, but any plan to scale up clean energy deployment, as former Vice President Joe Biden has proposed, or institute a carbon tax, as South Bend Mayor Pete Buttigieg has floated, would require heavy involvement from the federal regulator. All the Democratic presidential hopefuls have pledged to virtually eliminate U.S. greenhouse gas output by midcentury.
The candidates also risk opening up internal conflicts, within both their party and the environmental movement, over the pace of the transition away from fossil fuels.
Even if Democrats take control of the Senate and the presidency next year, any attempt to reshape FERC would probably hit a roadblock in the Senate Energy and Natural Resources Committee, where the top Democrat, West Virginia Sen. Joe Manchin, is a vocal proponent of the natural gas industry and a critic of the Green New Deal.
Manchin’s office declined to comment on the FERC overhaul idea, and leading Democrats on the House Energy and Commerce Committee said they needed more time to study it. New York Rep. Paul Tonko, head of the panel’s Energy Subcommittee, said not to expect any changes to FERC in the broad climate bill his committee is crafting, which will focus on broad carbon goals more than agency changes.
But activists say they will be ready to push changes if a new president takes office in 2021, worried that FERC’s foundational statutes have created an agency that eases the use of fossil fuels and is already undercutting state and local clean energy goals.
The Natural Gas Act of 1938 says FERC must approve pipelines and gas export facilities when they are "required by the public convenience and necessity," and the commission has rarely denied a pipeline because of that standard.
Since 1999, FERC has approved more than 470 pipelines while rejecting only two, and neither for environmental concerns. In 2017, the D.C. Circuit Court of Appeals directed FERC to take climate change into account for pipelines, but the commission’s Republican majority has avoided the ruling by saying it can’t determine how a project’s emissions will affect the climate. The issue is still being litigated.
At the same time, climate activists say FERC’s regulatory authority to ensure "just and reasonable" interstate electricity rates has led it to bail out fossil fuel plants and interfere with state-level clean energy subsidies that cut into their market share.
Earlier this month, FERC’s Republican majority blocked renewable and nuclear energy from the 13-state PJM power market because their government subsidies lower prices for coal and gas plants in the market. The commission has already instituted a similar program in New England, and many worry it will do the same in other markets as wind and solar energy increase.
This fall, FERC approved new authority for the California grid operator to keep financially stressed natural gas plants online using customer-funded contracts known as "Reliability Must Run" agreements. FERC and the grid operator say the move is necessary to avoid blackouts amid growing solar power, but anti-fossil fuel activists argue they could find low-carbon alternatives, like batteries, if FERC had to consider climate change alongside its reliability authority.
“There's numerous examples of FERC currently having a bit of an identity crisis about what its statutory mandate is,” said Narayan Subramanian, a fellow at progressive think tank Data for Progress. He pointed to the commission's struggle to deal with clean energy policies in PJM, where states have moved to financially support renewables and nuclear.
"I think the potential for a Federal Renewable Energy Commission is really clarifying FERC's statutory authority so it can move forward with no ambiguity on a mandate to decarbonize the electricity sector," added Subramanian, whose think tank helped Washington Gov. Jay Inslee craft his well-received climate plan before it was adopted by the Warren camp.
Activists have long argued that the Federal Power Act and Natural Gas Act can be interpreted to allow FERC to regulate carbon emissions when it evaluates pipelines and power rates. But for decades, FERC regulators from both parties have disagreed.
The Federal Power Act gives FERC responsibility to oversee interstate power markets, but it must do so in concert with the states, which retain ultimate authority to decide which plants are built and shut down. The FPA does not give FERC explicit environmental authorities, and even its most liberal member doubts whether the law can be read to allow FERC to institute a price on carbon or other emissions regulations.
“I'm not entirely convinced at this point that we actually have the authority to go beyond what we've already been doing" to consider climate change in power markets, Democratic Commissioner Richard Glick told POLITICO this May. “I think it's a different scenario if a [regional grid operator] comes in and suggests to us that we should approve a carbon [price] … than whether we should affirmatively, aggressively go out there and regulate greenhouse gas emissions through our ratemaking authorities themselves.”
Activists say Glick’s perspective shows why statutory changes are needed. Rather than a neutral overseer of the markets, they want FERC to take a more active role in pushing fossil fuel plants off the grid.
“The Federal Power Act says nothing about promoting renewable resources or greenhouse gas emissions or any of that kind of thing,” Subramanian said. “If the statutory mandate were clarified, whether or not you have Democratic appointees, they are statutorily mandated to consider environmental impacts or the carbon impacts of generation sources.”
Those changes, however, would upend decades of "fuel neutral" regulation that FERC staffers prize as a last bastion of nonpartisan regulation in an increasingly polarized Washington. That mission has been under threat in recent years as the Trump administration has pushed FERC to support financially stressed coal and nuclear plants, and some agency veterans compare the climate reform push to those White House efforts.
“Politicizing of fuel choices is not necessarily new, but it's taken on a higher profile as we graft on environmental and climate issues” to FERC issues, said former FERC Chairman Pat Wood III, a Republican appointed by President George W. Bush. “I think you saw the reverse of that happen with the potential for a coal bailout in the first years of this administration.”
Some FERC observers say revising the commission's statutes is unnecessary to fight climate change. If its authorities are not changed, a liberal majority at FERC could approve carbon pricing plans brought to it by regional grid operators, and New York market participants are slowly putting such a plan together. And if Congress or the EPA finish new carbon regulations, FERC could also serve as a more passive implementing agency, overseeing power reliability through the transition.
“I could imagine doing [climate legislation] in such a way where you don’t need to reform FERC,” said Ari Peskoe, Director of the Harvard Electricity Law Initiative. “If there was just a national [renewable energy standard], you would just need someone to make sure utilities are complying. That could be FERC, but it could also be [the Department of Energy] or EPA as well.”
FERC was expected to fill that implementation role for the Obama administration’s landmark climate rule for power plants before it was held up in court and abandoned by the Trump administration. In that case, FERC was tasked with ensuring that the carbon rules on coal plants would not interfere with electric reliability, and offered substantial comments that influenced the EPA’s final rule. It could take a similar role if Congress passes more ambitious climate regulations or EPA comes up with another plan.
But if FERC is to help implement a climate plan from Congress or EPA, activists say it will need to change its current course of counteracting clean energy policies. A new president could tap a new FERC chairman, but because of the agency’s staggered terms, all three Trump GOP appointees could be on the commission until mid-2021. Chairman Neil Chatterjee — a long-time protégé of Senate Majority Leader Mitch McConnell — has publicly pledged to complete his term, and if his Republican colleagues follow, they could preserve a GOP majority for months into a new administration.
“If we do have a big climate mandate form the federal government, you’re going to need some federal actor to be playing an [implementation] role,” Peskoe said. “But if you look at who is head of FERC in 2021 … maybe [Democrats] would want to just expand [the number of regulators] or start fresh.”
If a new administration wants to change FERC's underlying statutes, Wood suggested a more modest approach. Instead of completely reshaping the agency, the former chairman said Congress could focus on expanding the commission’s authority to site electric transmission lines, which researchers say will be essential to deliver remotely located wind and solar energy to cities. FERC can force landowners to cede property to gas pipelines under its eminent domain authority, but it does not have the same power for transmission.
“Giving FERC more authority over transmission would be a great step, but you don't have to call it a renewable energy commission to make it happen,” Wood said.