The Hydrogen Pipeline Debate Requires Candid and Serious Consideration of Existing Regulatory Regimes
Richard E. Powers, Jr., Joseph R. Hicks, William G. Bolgiano – Venable LLP
An active debate is currently underway as to how hydrogen pipelines can and should be regulated. Within this debate are those who believe hydrogen pipelines are (and should be) subject to regulation under the Interstate Commerce Act (ICA), which currently governs pipelines carrying oil, petroleum products, and natural gas liquids (NGLs), and those who believe hydrogen pipelines are (or should be) regulated under the Natural Gas Act (NGA). The former view has been advocated by the authors of this article in academic publications, public forums, and Congressional hearings. The latter view, which has some support in Congress,[i] has been most comprehensively advocated by Michael Diamond in his recent article, Jurisdiction Over Hydrogen Pipelines and Pathways to an Effective Regulatory Regime (hereinafter Hydrogen Pathways or Article).[ii]
As explained below, this interpretation of the current law regarding the regulation of hydrogen pipelines is not supported.[iii] Furthermore, singular focus on the NGA as a vehicle to govern hydrogen pipeline transportation appears driven by unsupported assumptions, economic interests that favor expanding the NGA’s scope, and a lack of understanding as to how other regulatory regimes operate. The authors remain unconvinced that hydrogen pipelines are, could, or should be subject to the NGA’s expansive regulatory regime. Rather, we continue to believe that the law (and policy) favors regulation under the ICA. Our aim in this short article is to address misconceptions regarding the regulation of hydrogen pipelines and clear up some concerns for those readers less familiar with the ICA.
Natural Gas Pipeline Interests Are Biased in Favor of Expanding the Scope of the NGA
In addition to running contrary to existing facts and applicable law, the argument that hydrogen pipelines are (or should be) regulated under the NGA may be driven by the interests of existing natural gas pipelines. Pipelines already regulated under the NGA are likely the only entities that would benefit if hydrogen were exclusively regulated under the NGA. Conversely, existing and new hydrogen pipeline operators as well as hydrogen startups would be harmed, as described in greater detail below. Understanding these interests is invaluable in scrutinizing the arguments made by those who favor expanding the scope of the NGA to cover hydrogen.
Specifically, if the meaning of “natural gas” under the NGA were to be redefined to include hydrogen, all existing natural gas pipelines would have the scope of their FERC certificates significantly expanded. Certificated natural gas pipelines would also necessarily be the only entities authorized to transport hydrogen in interstate commerce. This is because the NGA prohibits regulated pipelines from engaging in any construction, expansion, or transportation of any kind without first obtaining a certificate.[iv] Relatedly, the NGA framework would give incumbent gas pipeline owners an outsized voice in the construction of new hydrogen infrastructure that may amount to a veto over some projects. This is because the NGA framework is oriented around the “orderly” planning of gas infrastructure, where the interest of existing NGA pipelines and their customers must be considered.[v] Approval of new hydrogen pipeline construction would be especially difficult to justify because, in theory, every natural gas pipeline that serves any market would also be authorized to serve that market with hydrogen, whether they ever actually plan to do so. In contrast, as discussed below, under the ICA or the closely related Interstate Commerce Commission Termination Act (ICCTA), any entity can build a new pipeline regardless of whether the market was already served.
The NGA also has a much further reach than the ICA or ICCTA. The NGA regulates pipeline transportation and non-exempt sales “in interstate commerce,” which occurs whenever the pipeline crosses a state line or if the gas transported is commingled with gas that has crossed state lines.[vi] As the authors have said elsewhere, this would likely cover numerous existing hydrogen pipelines throughout the country serving essential services like making fuels, fertilizer, and other chemicals.[vii] These pipelines typically transport hydrogen that is made from natural gas, and the NGA does not exempt interstate gas transportation simply because it is downstream from a processing plant.[viii] These pipelines—and related sales—would likely become regulated if the NGA covered hydrogen.[ix] By contrast, the ICA and ICCTA regimes are much narrower in scope, regulating only the terms of transportation from one state to another. In addition to being less disruptive, this lack of a certificate requirement and narrower scope in the ICA does not present anything like the incentives for regulatory overreach that the NGA creates.
Fundamentally, regulating hydrogen under the NGA without new legislation would require FERC to reinterpret the language and meaning of the NGA so radically that the agency would stray into making legislative decisions unsupported by any of its enabling acts, which are more properly addressed by Congress. However, commenters who view this legal question entirely from the perspective of the NGA may fall into the logical trap of trying to fit every gaseous commodity into that regime.[x] FERC would need to completely reinterpret all relevant statutes to reach the Article’s conclusion that “FERC could deem hydrogen to be ‘natural gas’ in its own right and regulate it identically to other natural gas transported on the interstate pipeline grid.”[xi] If FERC were to somehow adopt the positions advocated, the agency might easily be reversed by an appeals court, especially given the Supreme Court’s recent decisions.[xii] Therefore, regulation of hydrogen under the NGA could only be achieved through new legislation.
However, the policy arguments presented in support of such legislation[xiii] are largely unsupported or misplaced. There certainly could be valid arguments for applying certain aspects of the NGA regulatory regime to hydrogen pipelines, such as federal siting authority. But it is not helpful to take the NGA regime’s superiority for granted without offering evidence to support that position or adequately considering the alternatives. As this debate continues, it is important for observers to be mindful of the windfall of benefits that natural gas pipelines would reap from subjecting hydrogen pipelines to the NGA. These biases can lead to results-driven analyses rather than the even-handed review that this question requires.
Incorrect Presentations of Law
The Article’s arguments that hydrogen could be regulated under the NGA, or that it cannot be regulated under the ICA, are not supported by substantive legal authority.[xiv] Primarily, these arguments fail to account for the plain language of the statutes. Contrary to the arguments that the ICA cannot regulate hydrogen because it is a gas,[xv] there is no legal support for the idea that ICA covers only liquids and does not cover gases.[xvi] The plain language of the ICA’s jurisdictional statute (now split with ICCTA) states that it covers “the transportation of oil or other commodity, except water and except natural and artificial gas, by means of pipe lines.”[xvii] Since 1977, the “oil” portion of “oil or other commodity” has been administered by FERC and pipelines carrying “other commodities” are now regulated by the Surface Transportation Board (STB) under its cognate authority under the ICCTA.[xviii] Based on the legislative history, FERC and the courts interpret “oil” broadly as petrochemicals with energy potential.[xix] The current consensus, based on the outdated or mistaken reasoning that hydrogen is not an energy resource, is that hydrogen pipelines are subject to the ICCTA.[xx]
Anecdotal statements such as “‘Oil’ refers to liquids, not gases,”[xxi] or “the ICA covers liquids”[xxii] are not borne out by legal precedent or history. FERC has never based its ICA jurisdiction on whether a regulated commodity is a gas or a liquid (and neither has the STB for its “other commodities” pipelines). In fact, from 1977 to 1990 FERC exercised ICA jurisdiction over pipelines carrying gaseous anhydrous ammonia (because it was made with hydrogen considered to be a petrochemical).[xxiii] In 1990, FERC and the Interstate Commerce Commission (ICC, now the STB) determined that that authority was more properly exercised by the ICC, not because it was a gas, but because ammonia was not used as a fuel.[xxiv] Ammonia pipelines are still regulated by the STB under the ICCTA.[xxv] This would be impossible under the Article’s interpretation of the term “artificial gas”[xxvi] because the STB has no jurisdiction over pipelines carrying “artificial gas.”[xxvii] The cited argument that the ICA can only apply to liquid commodities is not supported by any substantive legal authority.
Furthermore, categorical statements that the dividing line between the NGA and ICA is whether the commodity is liquid or gas[xxviii] makes little practical sense when held up to any scrutiny. “Natural gas” and “artificial gas” have specific meanings that do not cover every gaseous commodity. As the Article admits, carbon dioxide is a naturally occurring gas that is not “natural gas,”[xxix] and ammonia is an artificially created gas that is not “artificial gas.”[xxx] Further, ethane, propane, and butane (i.e., NGLs) are gases at normal temperature and pressure and are regulated by the ICA as “oil” despite the fact that they are gases in their natural state.[xxxi] Methane can also be liquified, as is evident from the existence of liquified natural gas (LNG), which is still regulated as natural gas under the NGA because it is methane.[xxxii] Simply put, the law is clear that NGA jurisdiction depends on whether the pipeline is carrying “natural gas” (i.e., methane) and has nothing to do with the physical state of the commodity. In fact, FERC’s predecessor, the Federal Power Commission (FPC), stated that when prior FPC and court decisions found “the sale of heavier hydrocarbon from a gas stream in a liquid form were found not to be jurisdictional, . . . [it] . . . did not turn on the fact that the heavier hydrocarbons were extracted in the liquid state.”[xxxiii]
Notwithstanding these facts, the Article attempts to expansively define natural and artificial gas to include hydrogen.[xxxiv] Such arguments concerning the definitions of “natural” and “artificial” gas[xxxv] are directly contradicted by the NGA’s legislative history.[xxxvi] And the proposition that the NGA can be applied beyond methane are not supported by applicable precedent.[xxxvii] For instance, the Article claims that propane and ethane have been “deemed” by FERC to be “artificial gases.”[xxxviii] This, however, is simply not accurate: neither ethane nor propane are “artificial gas”—rather, the interstate transportation of these commodities is regulated under the ICA—which explicitly excludes artificial gas—as “oil.”[xxxix] The congressional record and case law makes clear that “natural gas” means methane and “artificial gas” means artificially created methane or the archaic gas sourced from coal and originally used for lighting, sometimes called “town gas.”[xl] None of these definitions apply to hydrogen, which was treated as a commodity separate from methane when the relevant statutes were passed.[xli]
Misplaced Policy Arguments Against the ICA and in Favor of the NGA
Policy arguments in favor of regulating hydrogen pipelines under the NGA and not the ICA tend to be unsupported, poorly analyzed, and demonstrate a misunderstanding of relevant statutes. These include arguments that hydrogen pipelines should not be regulated under the ICA if blends of hydrogen and methane would be regulated under the NGA;[xlii] that the NGA is preferable because it contains exemptions for facilities;[xliii]that the NGA allows for federal eminent domain authority;[xliv] and that the NGA’s methods of allocating constrained capacity are superior.[xlv] These policy arguments, taken together, create problems concerning hydrogen regulation under the ICA where our work indicates that none exist and focus on theoretical advantages of the NGA that are of uncertain relevance to the hydrogen industry.[xlvi]
First, the claim that pipelines carrying hydrogen should not be regulated under the ICA because regulation of blends of hydrogen and methane would be regulated under the NGA, leading to a problem of divergent regulation where FERC would “regulate hydrogen under two different statutes,”[xlvii] ignores the fact that the entire NGL industry already operates this way without any of the unspecified “practical problems” the Article implies.[xlviii] Under the current energy regulatory regime, pipelines carrying methane blended with NGLs are NGA-jurisdictional, while the transportation of NGLs on their own is governed by the ICA,[xlix] because NGLs are considered “oil” for purposes of the ICA’s jurisdiction.[l] FERC has separately regulated the transportation of blended and unblended NGLs under the NGA and ICA for years without incident.[li] There is no reason hydrogen transportation could not operate in the same way. The concerns over FERC regulating hydrogen pipelines under two separate regimes thus fails to account for how pipelines operate in reality. Further, categorical assertions that hydrogen “will be transported in natural gas pipelines”[lii] and “will be a direct substitute for natural gas”[liii] are unsupported. In fact, the smart money is taking a more skeptical view regarding the adoption of hydrogen as a direct replacement for natural gas compared to other uses such as transportation fuel, and projecting hydrogen’s current uses in refining and fertilizer production remain dominant in the near term.[liv]
Another legally misplaced argument is the claim that the NGA is preferable for the regulation of hydrogen because it contains limited exemptions for some intrastate or local activities in the form of its Hinshaw and gathering pipeline exemptions[lv] The ICA only covers shipments by pipelines between states or internationally[lvi] and does not have the same level of regulatory reach over regulated company activities, as found in the NGA.[lvii] Simply put, the ICA has no need to exempt a small subset of intrastate activity because no intrastate activity is regulated by the ICA in the first place.
Claims that the NGA is superior for the regulation of hydrogen pipelines because it allows for federal eminent domain authority[lviii] have two major weaknesses. First, the NGA’s certification process—which requires gas pipelines to apply for and receive a Certificate of Public Convenience and Necessity from FERC prior to exercising federal eminent domain authority—is currently a lengthy and expensive process that typically takes years to resolve.[lix] Importantly, this certificate is required before a gas pipeline can begin construction, expansion, or transportation of any kind.[lx] Second, before it grants a certificate, FERC must evaluate the need for, and impacts of, the proposed pipeline, and it is unclear how FERC (or anyone) has adequate expertise to answer these questions for an emerging industry like hydrogen or how the agency would adapt its existing gas policies.[lxi] This is not ideal for fostering the efficient construction or repurposing of pipelines for use in hydrogen transportation, as a major goal in the development of hydrogen pipeline systems is to quickly move forward with decarbonization.
Furthermore, the Article does not mention that there are currently more than two hundred thousand miles of crude oil, petroleum products, and NGL pipelines that were built and are functional without the need for federal eminent domain authority, including nearly fifty thousand miles built in the last ten years.[lxii] Given that state governments have been applying in droves to host “hydrogen hubs,” it is simply implausible that they would be so hostile to hydrogen pipeline construction that federal preemption would be needed. There are certainly potential advantages with federal siting authority, but it is unreasonable to take for granted that federal oversight is always superior without any serious consideration of countervailing evidence.
Claims that the NGA’s methods of allocating constrained capacity are superior to the ICA’s because they allow a pipeline to “allocate scarce capacity based on price, quantity, and length of a contract”[lxiii] do not appreciate how pipelines operate under the ICA. Fundamentally, these concerns simply do not arise. The ICA is a common carrier regime, where contracts are the exception. However, ICA pipelines can enter into contracts to support new or expanded capacity, and when they do those contracts govern allocation of capacity in times of constraint.[lxiv] Such contracts can account for all the factors about which the Article was concerned. But, otherwise, service on ICA pipelines must be offered to all shippers on an equal basis,[lxv] typically based on a pro-rata or historical basis.[lxvi] Therefore, when an ICA pipeline allocates limited capacity among its non-contract shippers, there are no “differences in price” or “length of a contract” to consider.
Finally, NGA regulation would have a detrimental impact on the existing hydrogen industry and pipelines that currently transport hydrogen. Imposing the requirements of the NGA on existing hydrogen manufacturers and transporters without exemption would lead to serious regulatory burdens that have a high probability of disrupting or even crippling the burgeoning hydrogen industry.[lxvii] In order to have practical value, a policy analysis must address the serious concerns of a large and important industry that would be directly impacted by its proposal. For instance, in his written testimony to the Senate, Mr. Powers analyzed how all major substantive requirements of the ICA’s much more simplified regime could be readily applied to hydrogen.[lxviii] Just as importantly, that testimony also discussed how that regime’s narrower scope would cover much less economic activity than the NGA, reducing the likelihood and extent of unintended consequences.[lxix]
Conclusion
While there are some aspects of the NGA worth further examination, there has yet to be a convincing argument for that statute’s wholesale absorption of the hydrogen pipeline industry under new or existing law. Overall, as the fulsome analyses provided by Mr. Bolgiano illustrate, under current law hydrogen pipelines are most properly considered regulated under the ICA and not under the NGA.[lxx] More importantly, from a policy perspective, the more limited regulatory regime of the ICA is ideal for a developing industry like hydrogen, where the economic realities from production to consumption are all still in rapid flux, as Mr. Powers testified to in the Senate last summer.[lxxi]
[i] Building American Energy Security Act of 2022 S. Amdt. 6513, 117th Cong. § 12122 (2022) (rejected amendment that would have, among many much more controversial provisions, redefined natural gas under the NGA to include hydrogen).
[ii] Michael Diamond, Jurisdiction Over Hydrogen Pipelines and Pathways to an Effective Regulatory Regime, 3 EBA Brief, Fall 2022, 1 (2022) [hereinafter Article or Hydrogen Pathways].
[iii] As explained by Richard Powers in his testimony before the Senate Environmental Resources Committee and expounded upon in great detail in William Bolgiano’s Energy Law Journal article, all of the existing legal evidence—including statutory language, legislative history, and prior precedent—supports the interpretation that hydrogen pipelines cannot be subject to the NGA and must therefore be subject to regulation either under the ICA or the closely related Interstate Commerce Commission Termination Act (ICCTA). Hearing to Examine Federal Regulatory Authorities Governing the Development of Interstate Hydrogen Pipelines, Storage, Import, and Export Facilities, Before the S. Comm. on Energy & Nat. Res., 117th Cong. (July 19, 2022) (Written Testimony of Richard E. Powers, Jr.), https://www.energy.senate.gov/services/files/542E24C8-F2A2-4483-869F-1201C6E7D9FD [hereinafter Powers Senate Testimony]; William G. Bolgiano, FERC’s Authority to Regulate Hydrogen Pipelines Under the Interstate Commerce Act, 43 Energy L.J. 1 (2022) [hereinafter Hydrogen Pipelines]. Furthermore, Joseph Hicks recently debated Mr. Diamond at the Energy Bar Association mid-year conference regarding these very issues. Rich Reidorn, Jr., Lawyers, Industry Debate Path for Hydrogen Regulation: Natural Gas Act, Interstate Commerce Act or New Law? RTO Insider (Oct. 16, 2022), https://www.rtoinsider.com/articles/30955-lawyers-industry-debate-path-hydrogen-regulation.
[iv] 15 U.S.C. § 717f(c)(1)(A).
[v] Certification of New Interstate Nat. Gas Facilities, 178 F.E.R.C. ¶ 61,107, at P 69 (2022) (“Ensuring the orderly development of natural gas supplies includes preventing overbuilding. One way that the Commission can prevent overbuilding is through careful consideration of a proposed project’s impacts on existing pipelines. To the extent that a proposed project is designed to substantially serve demand already being met on existing pipelines, that could be an indication of potential overbuilding.”); see also Associated Gas Distributors v. FERC, 899 F.2d 1250, 1259 (D.C. Cir. 1990) (competitors have standing to challenge NGA licensing determinations).
[vi] 15 U.S.C. § 717(b); FPC v. E. Ohio Gas Co., 338 U.S. 464, 467 (1950).
[vii] See Richard E. Powers, Jr., et al., Permitting Bill Would Impose Regulatory Burdens and Economic Disruption on Hydrogen Infrastructure Owners, Venable LLP (Sept. 23, 2022), https://www.venable.com/insights/publications/2022/09/permitting-bill-would-impose-regulatory-burdens [hereinafter Regulatory Burdens of Permitting Bill].
[viii] Rendezvous Gas Servs., L.L.C., 112 F.E.R.C. ¶ 61,141, at P 15 (2005) (“in the absence of countervailing factors, pipeline facilities located downstream of a processing plant may be considered exempt from NGA regulation only when they are incidental extensions of the processing plant or of the behind-the-plant gathering system.”). See also International Paper Co. v. FPC, 438 F.2d 1349, 1355 (2d Cir. 1971) (FERC has jurisdiction over the transportation and facilities of a company that transports gas through its own pipeline from a processing plant to the company’s own plant for consumption).
[ix] Powers, et al., Regulatory Burdens of Permitting Bill, supra note 9.
[x] See, e.g., Diamond, Hydrogen Pathways, supra note 2, at 5 & nn.38-39, discussed infra.
[xi] Id. at 6. But see id. at 13 (claiming that “Under current law, hydrogen is most logically classified as ‘artificial gas’ under the NGA).
[xii] See West Virginia v. EPA, 142 S. Ct. 2587, 2609 (2022) (“in certain extraordinary cases, both separation of powers principles and a practical understanding of legislative intent make us ‘reluctant to read into ambiguous statutory text’ the delegation claimed to be lurking there. To convince us otherwise, something more than a merely plausible textual basis for the agency action is necessary. The agency instead must point to “clear congressional authorization” for the power it claims.”) (quoting Utility Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014)); see also Alabama Ass’n of Realtors v. Dep’t of Health & Hum. Servs., 141 S. Ct. 2485, 2489 (2021). For a discussion of the Major Questions Doctrine, see Harvey L. Reiter, Would FERC’s Landmark Decisions Have Survived Review Under the Supreme Court’s Expanding “Major Questions Doctrine” And Could The Doctrine Stifle New Regulatory Initiatives?, 3 EBA Brief, Spring 2022, 1 (2022).
[xiii] See discussion infra & notes 45-48.
[xiv] See, e.g., Diamond, Hydrogen Pathways, supra note 2, at 6-9.
[xv] See, e.g., id. at 7 (“The most basic distinction between substances regulated under the NGA and ICA is that the NGA covers gases while the ICA covers liquids”) (citing Mobil Oil. Corp. v. FPC, 483 F.2d 1238, [sic] 243-46, [presumably 1238-40] (D.C. Cir. 1973) (dicta); Gulf Cent. Pipeline Co., 50 F.E.R.C. ¶ 61,381, at 62,164 (1990) (also dicta)) see also id. at 8 & n.87 (“‘Oil’ refers to liquids, not gases. When in gaseous form, ‘petroleum by-products, derivatives, or petrochemicals’ are classified as either ‘artificial gas’ or ‘natural gas’ under the NGA, not oil. Because hydrogen is transported on pipelines as a gas, not a liquid, it is not ‘oil’ under the ICA.”)
[xvi] The Article in fact quotes the portion of FERC’s Gulf Central decision that was not providing a holding at all but rather describing the “common usage” of the word “oil” that the D.C. Circuit and FERC specifically found not to control that question. Gulf Cent. Pipeline Co., 50 F.E.R.C. ¶ 61,381, at 62,164 (1990); aff’d CF Indus., Inc. v. FERC, 925 F.2d 476, 477 (D.C. Cir. 1991) (“The legislative history, moreover, confirms that ‘oil’ was not to be given a dictionary meaning”). Compare Bolgiano, Hydrogen Pipelines, supra note 5, at 42-50 with Diamond, Hydrogen Pathways, supra note 2, at 7-8 (repeating Mr. Bolgiano’s analysis of the cases but inserting the word “liquid” throughout without citing authority for it).
[xvii] Hepburn Act, Pub. L. No. 59-337, 34 Stat. 584, 584 (1906) (codified as amended at 49 U.S.C. app. § 1(1)(b) (1988)).
[xviii] See 49 U.S.C. § 15301(a).
[xix] CF Industries, 925 F.2d at 478 (“Congress intended a broader meaning of ‘oil’ . . . The legislative history, moreover, confirms that ‘oil’ was not to be given a dictionary meaning”) (citing S. Rep. No. 95-367, at 69 (1st Sess. 1977) (Conf. Rep.); h.r. Rep. No. 95-539, at 69 (1st Sess. 1977) (Conf. Rep.)); see also Bolgiano, Hydrogen Pipelines, supra note 5,at 42-50.
[xx] Paul W. Parfomak, Cong. Rsch. Serv.,Pipeline Transportation of Hydrogen: Regulation, Research, and Policy 10(2021) [hereinafter CRS Report]; Statement Regarding a Coordinated Framework for
Regul. of a Hydrogen Econ., 72 Fed. Reg. 609, 618 (U.S. Dep’t of Transp., Jan. 5, 2007); Gov’t Accountability Off., Issues Associated with Pipeline Regulation by The Surface Transportation Board, app. I (1998).
[xxi] Diamond, Hydrogen Pathways, supra note 2, at 8.
[xxii] Id. at 7.
[xxiii] See Bolgiano, Hydrogen Pipelines, supra note 5, at 43-47.
[xxiv] Gulf Cent. Pipeline Co., 7 I.C.C.2d 52 (1990); Gulf Cent. Pipeline Co., 50 F.E.R.C. ¶ 61,381, aff’d CF Industries, 925 F.2d at 477. See Bolgiano, Hydrogen Pipelines, supra note 5, at 42-50; Diamond, Hydrogen Pathways, supra note 2, at 8.
[xxv] See CF Indus., Inc. v. Koch Pipeline Co., L.P., 4 S.T.B. 637, 640 n.11 (2000) (rejecting the argument that STB lacks jurisdiction over ammonia because it is a gas), aff’d CF Indus., Inc. v. STB, 255 F.3d 816 (D.C. Cir. 2001).
[xxvi] Diamond, Hydrogen Pathways, supra note 2, at 13 (“Under current law, hydrogen is most logically classified as ‘artificial gas’ under the NGA, because in most cases it is ‘artificially created by the agency of man.’”) (quoting Natural Gas Pipeline Co. of Am., 13 F.E.R.C. ¶ 61,165, at 61,352 (1980) (finding that biomethane could not be “natural gas”); see also id. at 5-7.
[xxvii] 49 U.S.C. § 15301(a) (no jurisdiction over pipelines carrying “water, gas, or oil.”); Act to Revise Without Substantive Change the ICA, Pub. L. No. 95-473, 92 Stat. 1337, 1470 (1978) (changing to words “natural or artificial gas” to simply “gas” without impacting their meaning).
[xxviii] Id. at 7 (“The most basic distinction between substances regulated under the NGA and ICA is that the NGA covers gases while the ICA covers liquids.”) (citing dicta and summary of arguments as explained in notes 17-18, supra).
[xxix] Diamond, Hydrogen Pathways, supra note 2, at 4-5.
[xxx] Id. at 9-10.
[xxxi] Williams Olefins Feedstock Pipelines, L.L.C., 145 F.E.R.C. ¶ 61,303 (2013).
[xxxii] See, e.g., Distrigas Corp., 47 F.P.C. 752 (1972).
[xxxiii] See, e.g., id. at 816 (emphasis added) (rather it “was because the sales were not an incident in the sale of natural gas”). See also CF Indus., Inc. v. Koch Pipeline Co., L.P., 4 S.T.B. 637, 640 n.11 (2000) (rejecting the argument that ICCTA excluded pipelines carrying gaseous commodities under cognate statutory provision identical to that currently defining FERC’s ICA jurisdiction).
[xxxiv] Diamond, Hydrogen Pathways, supra note 2 at 4-7.
[xxxv] See id. at 5 (claiming “FERC has deemed several substances to fall within the category of ‘artificial gas.’” and that “FERC has left the door open to considering whether other substances also may be classified as ‘natural gas’ in light of the ‘goals and purpose’ of the NGA.”)
[xxxvi] See Bolgiano, Hydrogen Pipelines, supra note 5,at 16-30. In particular, the Congressional record at the time of the NGA’s (and Hepburn Act’s) passage clearly that “natural gas” was understood to “consist[] principally of methane.” See id. at 24-25 & nn.116-17 (quoting Fed. Trade Comm’n, Final Report No. 84-A, Economic, Corporate, Operating and Financial Phases of the Natural-Gas-Producing, Pipeline, and Utility Industries, with Conclusions and Recommendations, S. Doc. No. 70-92 (1st Sess. 1936) [hereinafter Report No. 84-A]). Report No. 84-A was identified by Congress as the basis for the NGA. NGA section 1(a), Pub. L. No. 75-688, 52 Stat. 821, 822 (1938) (codified at 15 U.S.C. § 717). This narrow definition of natural gas was confirmed by other legislative sources in the preceding years. See id. at 25 & nn.118-121 (citing legislative reports provided by the Department of Interior). The record also reflects that “artificial gas” was understood to be the inferior substitute made primarily from coal. Id. at 25-26 & nn.123-24. Most importantly though, at all relevant times the Congressional record reflected a clear understanding of hydrogen as its own resource with unique values and applications that was distinct from artificial or natural gas. See id. at 25 & n.120, 26 & n.125. Hydrogen Pathways does not address the legislative history regarding the definition of natural or artificial gas.
[xxxvii] For instance, the Article claims that hydrogen pipelines could attain NGA jurisdiction by blending trace amounts of methane but only cites cases that deal with blending interstate and intrastate natural gas. See Diamond, Hydrogen Pathways, supra note 2, at 3 & n.15 (citing Opinion No. 610, United Gas Pipe Line Co., 47 F.P.C. 245, 258 (1972); Conn. Light & Power Co. v. FPC, 324 U.S. 515, 536 (1945)). This precedent is inapplicable, and this extrapolation is flatly wrong—in fact, FERC and FPC precedent establishes that trace amounts of natural gas (i.e., methane) in non-NGA pipelines does not establish NGA jurisdiction. See S. Jersey Gas Co. v. SunOlin Chem. Co., 47 F.E.R.C. ¶ 61,031, at 61,095 (1989) (finding “no necessity for [FERC] to attempt to trace these stray [natural gas] molecules, much less regulate them” under the NGA).
[xxxviii] Diamond, Hydrogen Pathways, supra note 2, at 5 & nn.38-39 (citing Paiute Pipeline Co., 52 F.E.R.C. ¶ 61,311, at 62,253-54 (1990) and Columbia Gas Transmission Corp., 17 F.E.R.C. ¶ 61,020 (1981)). These cases do not stand for this, in fact they do not even use the word “artificial.” The other examples in the Article claiming “several substances” have been “deemed” to be “artificial gas” are all just examples of methane manufactured using different processes. See Diamond, Hydrogen Pathways, supra note 2, at 5. Further, “regulated as natural gas under the NGA” (Diamond, Hydrogen Pathways, supra note 2, at 7) is a misnomer because the transportation of artificial gases is exempt from regulation unless they are mixed with, and therefore meet the definition of, natural gas.
[xxxix] See, e.g., M3 Ohio Gathering LLC, 179 F.E.R.C. ¶ 61,221 (2022) (exercising ICA enforcement jurisdiction over propane and ethane pipelines); Williams Olefins, 145 F.E.R.C. ¶ 61,303 (ethane subject to ICA, rather than ICCTA); Mid-America Pipeline Co. v. FPC, 330 F.2d 226, 227 (D.C. Cir. 1964) (“an interstate common carrier of natural gas liquids . . . is subject to regulation only by the [ICC],” since replaced by FERC).
[xl] See note 38, supra. For a discussion of “town gas,” see CRS Report, supra note 22, at 6 (“Beginning in the 1800s, gas used for lighting streets and buildings was manufactured from coal (primarily), pitch, petroleum products, and even whale oil. Commonly referred to as ‘town gas’” or “water gas,” it typically consisted of hydrogen, methane, carbon monoxide, and small amounts of carbon dioxide and nitrogen. .. . . the increasing availability of lower cost natural gas from domestic reserves starting in the 1940s eventually supplanted town gas in these distribution systems, although town gas was still used in some communities until the 1950s.”). See also Bolgiano, Hydrogen Pipelines, supra note 5, at 35-42 (describing cases where only methane has been found to be natural gas, and only synthetic methane has been found to be “artificial gas”).
[xli] Id. at 25 & n.120, 26 & n.125.
[xlii] Diamond, Hydrogen Pathways, supra note 2, at 8-9, 13.
[xliii] Id. at 13.
[xliv] Id. at 12.
[xlv] Id. at 13.
[xlvi] See Powers Senate Testimony, supra note 5, at 8-12.
[xlvii] Diamond, Hydrogen Pathways, supra note 2,at 8-9, 13.
[xlviii] Id. at 8-9.
[xlix] Bolgiano, Hydrogen Pipelines, supra note 5, at 57-58 (“Case Study: The Ethane Molecule”).
[l] See note 41, supra, and authorities cited therein.
[li] Importantly, FERC does not broadly regulate the entire NGL market (or the crude oil or refined products markets) like it does with natural gas. Rather, FERC regulates only transportation of these commodities (and directly related services) on a route-by-route basis. See Powers Senate Testimony supra note 5, at 9-12.
[lii] Diamond, Hydrogen Pathways, supra note 2, at 8.
[liii] Id.
[liv] See e.g., Goldman Sachs, Carbonomics: The clean hydrogen revolution 26 (Exhibit 46), https://www.goldmansachs.com/insights/pages/gs-research/carbonomics-the-clean-hydrogen-revolution/carbonomics-the-clean-hydrogen-revolution.pdf (projecting relatively modest adoption of hydrogen for “Grid blending (heating industrial & buildings)” even under a 2050 “bull scenario”); Michael Cembalest, The Elephants in the Room, J.P. Morgan 2022 Annual Energy Paper, May 2022, at 28, 38, https://privatebank.jpmorgan.com/content/dam/jpm-wm-aem/global/cwm/en/insights/eye-on-the-market/2022-energy-paper/elephants-in-the-room-jpmwm.pdf; Hydrogen Council And McKinsey & Co., Hydrogen Insights: a Perspective on Hydrogen Investment, Deployment and Cost Competitiveness 35 (Fig. 17) (Feb. 2021), https://hydrogencouncil.com/wp-content/uploads/2021/02/Hydrogen-Insights-2021.pdf (ranking “Hydrogen competitiveness per end application in 2030” and ranking uses such as heating buildings or powering turbines as less competitive compared to transportation and existing applications of hydrogen); Int’l Energy Agency, Global Hydrogen Review 241 (Sept. 2022), https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf (“The option to use hydrogen, either co-fired with natural gas or as a pure fuel in gas turbines . . . may be limited due to the high associated costs and the competition from a large pool of technologies that can provide grid flexibility (such as pumped hydro, batteries and demand side response, among others) . . . The scope of direct use of hydrogen in buildings in the near term is limited as other options, such as heat pumps, can be deployed much faster and more efficiently.”). See also id. at 262 (“Hydrogen blending [into natural gas pipelines] can be a first step while developing infrastructure for dedicated hydrogen transport. . . . For the longer term, the capability of new equipment to be ready to operate on pure hydrogen or to be easily upgraded should be considered.”),
[lv] Diamond, Hydrogen Pathways, supra note 2,at 13.
[lvi] See Aircraft Serv. Int’l, Inc. v. FERC, 985 F.3d 1013, 1020 (D.C. Cir. 2021); See also Powers Senate Testimony supra note 5, at 3-4.
[lvii] See Powers Senate Testimony supra note 5, at 9-10. See also Powers, et al., Regulatory Burdens of Permitting Bill, supra note 9.
[lviii] Diamond, Hydrogen Pathways, supra note 2, at 12 (“Unlike the NGA, the ICA grants FERC no certificate and siting authority. FERC’s inability under the ICA to preempt state and local laws and provide pipeline companies the right of eminent domain would be a major drawback to regulation of hydrogen under the ICA.”).
[lix] See, e.g., Hearing to Examine Federal Regulatory Authorities Governing the Development of Interstate Hydrogen Pipelines, Storage, Import, and Export Facilities, Before the S. Comm. on Energy & Nat. Res., 117th Cong. (July 19, 2022) (Spoken Testimony of Chad Zamarin, the Williams Companies) (estimating that it takes 4-5 years to build an interstate gas pipeline that could physically be built in a year and claiming the cost of NGA certification has raised the cost of building a pipeline from $1 million a mile to $8-20 million).
[lx] 15 U.S.C. § 717f(c)(1)(A).
[lxi] Powers, et al., Regulatory Burdens of Permitting Bill, supra note 9.
[lxii] Pipeline & Hazardous Materials Safety Admin. Pipeline Mileage and Facilities (accessed March 8. 2023), available at https://portal.phmsa.dot.gov/analytics/saw.dll?Portalpages&PortalPath (select “hazardous liquid” under “system, type”); see also Powers Senate Testimony at supra note 6, 7-8, 11-12 (noting recent projects approved by Pennsylvania and Illinois regulators).
[lxiii] Diamond, Hydrogen Pathways, supra note 2, at 13.
[lxiv] See, e.g., Navigator Borger Express LLC, 175 F.E.R.C. ¶ 61,133, at P 30 (2021)(approving proration policy allocating capacity to committed shippers first).
[lxv] See, e.g., Tricon Energy Ltd. v. Colonial Pipeline Co., 171 F.E.R.C. ¶ 61,078, at PP 24 (2020) (assessing whether a pipeline’s prorationing policy “is just and reasonable, and not unduly discriminatory or preferential”).
[lxvi] See Oil Pipeline Capacity Allocation Issues & Anomalous Conditions, 178 F.E.R.C. ¶ 61,105, at PP 2-4. (2022).
[lxvii] Powers, et al., Regulatory Burdens of Permitting Bill, supra note 9.
[lxviii] See Powers Senate Testimony at supra note 5, 4-9, 11-12.
[lxix] Id. at 3-4, 9-11.
[lxx] See generally Bolgiano, Hydrogen Pipelines, supra note 5.
[lxxi] See generally Powers Senate Testimony.