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Monday, July 29, 2013

Interstate Natural Gas Pipelines: Process and Timing of FERC Permit Application Review

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Growth in U.S. shale gas production involves the expansion of natural gas pipeline infrastructure to transport natural gas from producing regions to consuming markets, typically in other states. Over 300,000 miles of interstate transmission pipeline already transport natural gas across the United States. However, if the growth in U.S. shale gas continues, the requirement for new pipelines could be substantial. This ongoing expansion has increased congressional interest in the role of the federal government in the certification (permitting) of interstate natural gas pipelines.

Under Section 7(c) of the Natural Gas Act of 1938, the Federal Energy Regulatory Commission (FERC) is authorized to issue certificates of “public convenience and necessity” for “the construction or extension of any facilities ... for the transportation in interstate commerce of natural gas.” Thus, companies seeking to build interstate natural gas pipelines must first obtain certificates of public convenience and necessity from FERC. The Energy Policy Act of 2005 (EPAct) designates FERC as the lead agency for coordinating “all applicable Federal authorizations” and for National Environmental Policy Act (NEPA) compliance in reviewing pipeline certificate applications.

There are no statutory time limits within which FERC must complete its certificate review process. However, EPAct authorizes FERC to establish a schedule for all related federal authorizations and provides for judicial petition if an agency fails to comply with that schedule. Congress included these provisions in EPAct to address concerns that some interstate gas pipeline and other energy infrastructure approvals were being unduly delayed by a lack of coordination or insufficient action among agencies involved in the certification process. FERC has promulgated regulations requiring certificate-related final decisions from other agencies no later than 90 days after the commission issues its final environmental document.

Notwithstanding the EPAct provisions, there is continuing concern by some in the gas industry and in Congress that FERC review of pipeline certificate applications can still take too long. The only schedule-related legislative proposal to date in the current Congress is the Natural Gas Pipeline Permitting Reform Act (H.R. 1900). This bill seeks to expedite the federal review of certificate applications by imposing deadlines on the agencies involved. H.R. 1900 would impose an explicit 12-month deadline on FERC certificate reviews and would codify the commission’s 90-day regulatory deadline for any certificate-related agency decisions. Any agency decision not meeting the 90-day deadline would be approved by default.

The optimal time for any deadline that Congress might impose on FERC or cooperating agencies is open to debate. The 12-month deadline in H.R. 1900 would be approximately the same as the average FERC certificate review time today. However, 12 months could represent a reduction in the review time that might be expected for atypically lengthy or complex pipeline projects. In light of FERC’s recent record approving new gas pipelines, FERC commissioners have been neutral or modestly supportive towards legislative proposals for stronger certificate review authorities. However, a 12-month deadline on FERC could raise the possibility that the commission might deny certificate applications for some projects simply on the grounds that it lacks sufficient time for an adequate review. The ability of FERC and any other federal or state agencies it works with to expedite their parts of certificate review to meet an expedited schedule may be limited by available resources.

Date of Report: July 8, 2013
Number of Pages: 16
Order Number: R43138
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Friday, July 12, 2013

U.S. and South Korean Cooperation in the World Nuclear Energy Market: Major Policy Considerations

Mark Holt
Specialist in Energy Policy

A South Korean consortium signed a contract in December 2009 to provide four commercial nuclear reactors to the United Arab Emirates (UAE), signaling a new role for South Korea in the world nuclear energy market. The $20 billion deal indicates that South Korea has completed the transition from passive purchaser of turn-key nuclear plants in the 1970s to major nuclear technology supplier, capable of competing with the largest and most experienced nuclear technology companies in the world.

In the 1970s, South Korea launched its nuclear power program through the government-owned Korea Electric Company (now Korea Electric Power Corporation, KEPCO), which purchased the country’s first nuclear power units from Westinghouse. In the early years of the Korean nuclear program, Westinghouse and other foreign suppliers delivered completed plants with minimal Korean industry input. After the first three units, Korean firms took over the construction work on subsequent plants, although the reactor systems, turbine-generators, and architect/engineering services continued to be provided primarily by non-Korean companies. In 1987, KEPCO embarked on an effort to establish a standard Korean design, selecting the System 80 design from the U.S. firm Combustion Engineering as the basis. Combustion Engineering won the competition for the Korean standard design contract by agreeing to full technology transfer, according to KEPCO. The technology transfer program resulted in the development of the APR- 1400 power plant, which is the design purchased by the UAE.

In the UAE deal, the South Korean consortium is headed by KEPCO and includes other major Korean industrial companies that are involved in Korea’s rapidly growing domestic nuclear power plant construction program. The consortium also includes Pittsburgh-based Westinghouse Electric Company, which currently owns the U.S. design on which the Korean design is based, and the Japanese industrial conglomerate Toshiba, which now owns most of Westinghouse. Because the AP-1400 is based on a U.S. design, U.S. export controls will continue to apply.

U.S.-Korean nuclear energy cooperation is conducted under a “123 agreement” required by Section 123 of the Atomic Energy Act of 1954. The current agreement was signed in 1973 and will expire on March 19, 2014. A new 123 agreement does not require congressional approval, but it must lie before Congress for 90 days of continuous session before going into effect.

As with most U.S. 123 agreements, the existing U.S.-Korean agreement requires U.S. consent for any reprocessing or enrichment activities related to U.S.-supplied materials and technology. Korea is requesting that the new 123 agreement include U.S. advance consent for future Korean civilian reprocessing and enrichment activities. The United States has opposed the idea, on grounds of general nonproliferation policy and the complications that such activities might pose for other security issues on the Korean peninsula. To comply with the 90-day congressional review requirement, a new agreement probably would need to have been submitted to Congress by spring 2013. Any lapse in the agreement could affect exports of U.S. nuclear materials and reactor components to Korea, potentially affecting ongoing construction of the UAE project.

With time running out to address the fundamental U.S. and Korean differences over reprocessing, the two countries announced on April 24, 2013, that they would extend the existing agreement by two years to allow for additional negotiations. Legislation to authorize the two-year extension was introduced by Representative Royce on June 20, 2013 (H.R. 2449).

Date of Report: June 25, 2013
Number of Pages: 21
Order Number: R41032
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Wednesday, July 3, 2013

Offshore Oil and Gas Development: Legal Framework

Adam Vann
Legislative Attorney

The development of offshore oil, gas, and other mineral resources in the United States is impacted by a number of interrelated legal regimes, including international, federal, and state laws. International law provides a framework for establishing national ownership or control of offshore areas, and domestic federal law mirrors and supplements these standards.

Governance of offshore minerals and regulation of development activities are bifurcated between state and federal law. Generally, states have primary authority in the three-geographical-mile area extending from their coasts. The federal government and its comprehensive regulatory regime govern those minerals located under federal waters, which extend from the states’ offshore boundaries out to at least 200 nautical miles from the shore. The basis for most federal regulation is the Outer Continental Shelf Lands Act (OCSLA), which provides a system for offshore oil and gas exploration, leasing, and ultimate development. Regulations run the gamut from health, safety, resource conservation, and environmental standards to requirements for production based royalties and, in some cases, royalty relief and other development incentives.

In 2008, both the President and the 110
th Congress removed previously existing moratoria on offshore leasing on many areas of the outer continental shelf. As of the date of this report, Congress has not reinstated the appropriations-based moratoria that were not renewed by the 110th Congress. Other recent legislative and regulatory activity suggests an increased willingness to allow offshore drilling in the U.S. Outer Continental Shelf. In 2006, Congress passed a measure that would allow new offshore drilling in the Gulf of Mexico. Areas of the North Aleutian Basin off the coast of Alaska have also been made available for leasing by executive order. Most recently, the five-year plan for offshore leasing for 2012-2017 adopted by the Bureau of Ocean Energy Management (BOEM) scheduled 16 more lease sales in the Gulf of Mexico and off the coast of Alaska, but did not schedule new lease sales in other areas. The 113th Congress has also shown an interest in this area, including the introduction of H.R. 2231, which would open new offshore areas to leasing and amend other aspects of the offshore leasing program.

In addition to legislative and regulatory efforts, there has also been significant litigation related to offshore oil and gas development. Cases handed down over a number of years have clarified the extent of the Secretary of the Interior’s discretion in deciding how leasing and development are to be conducted.

Date of Report: June 25, 2013
Number of Pages: 26
Order Number: RL33404
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