In a January 5 letter to the Federal Energy Regulatory Commission (FERC), Massachusetts Senators Elizabeth Warren and Ed Markey demanded more answers on a possible conflict of interest in the environmental review of a Spectra Energy natural gas project.
This latest inquiry, the third in the past several months, was prompted by exclusive revelations by DeSmog that the contractor assisting FERC in the review was working for Spectra on a related project.
Warren and Markey are now asking FERC’s chair, Norman Bay, to specify precisely how the Commission vets third-party contractors. Such contractors, though paid by the applicant pipeline company, are considered independent consultants working under the direction and supervision of FERC staff.
Yet as DeSmog first reported, the contractor for Spectra’s Algonquin Incremental Market (AIM) and Atlantic Bridge projects, NRG, had been working simultaneously for Spectra from at least August 2014 on a related project, the proposed PennEast Pipeline. Internal documents show that when hired by FERC to work on Atlantic Bridge in early 2015, NRG did not disclose its work on PennEast.
In fact, there’s no indication NRG notified FERC of its parallel work on PennEast at any time. FERC’s own guidelines require contractors to immediately notify the commission of any changes that may affect its interests.
Both AIM and Atlantic Bridge are major upgrades to Spectra’s Algonquin Pipeline, which transports fracked gas from Pennsylvania through New York and into New England. Concluding the projects will not cause a major environmental impact, the final environmental reports for each of them were ultimately beneficial for Spectra. While the AIM pipeline project is virtually complete and set to go online soon, Atlantic Bridge is pending FERC’s approval.
Questioning FERC’s Own Standards
In his most recent response to Warren and Markey, Bay said that according to FERC’s guidelines, work for an applicant pipeline company does not automatically disqualify a potential third party contractor. Rather, only when the contractor derives more than 1% of its total income from the company in each of the previous three years, a conflict is present and the contractor must be disqualified.
Senators Warren and Markey took serious issue with these guidelines. “We are concerned,” they write, “that FERC’s current test regarding conflicts of interest may not be sufficient to ensure that all potential conflicts of interest are eliminated.” As an example they cite NRG’s disclosure for 2014, where it derived 0.75 percent of its income from Spectra. However, “that income is approaching the threshold set by FERC to be a disqualifying conflict of interest.”
The senators thus question the validity of the one percent standard. “Does FERC believe that a contractor deriving a lower percentage of its revenue — 0.75 or 0.5 percent — could ever represent a conflict of interest?”
They also raise doubt as to FERC’s method of limiting its examination of a contractor’s work for the applicant company to the previous three years. If, they hypothesize, a contractor derived 100% of its income from the company four years earlier, that would not show up as a disqualifying conflict of interest under FERC’s current test.
“It is hard to imagine that in such a scenario a conflict of interest from a long and significant business relationship would not be present,” wrote Warren and Markey.
Finally, the senators questioned whether FERC staff independently verifies that the information provided by third-party contractors is both accurate and complete.
In the past, FERC has said that it never responds publicly to letters to Chairman Bay, but instead lets him respond in due time to the senators.
Main image: Senators Ed Markey and Elizabeth Warren continue pushing for answers about potential conflicts of interest in FERC processes surrounding natural gas pipelines in the Northeast. Credit: DeSmog. Original image of Warren at a 2012 campaign rally, Credit: Tim Pierce, CC BY 2.0