Navigating FERC Regulation and Pipeline Permitting
The development of interstate natural gas pipelines and liquefied natural gas (LNG) terminals in the United States hinges heavily on the decisions made by the Federal Energy Regulatory Commission (FERC). As the key federal agency responsible for permitting such infrastructure, FERC plays a pivotal role in shaping the pace, direction, and viability of midstream energy projects. However, FERC's regulatory framework operates within a constantly evolving political, legal, and environmental landscape. Understanding how this complex system works—and the risks it introduces—is essential for any developer planning long-term investments in natural gas infrastructure.
This article explores the core dynamics of FERC’s regulatory authority, focusing on three critical dimensions: the evolving policy landscape, the rise of legal challenges, and the broader implications of policy instability. Together, these themes provide a comprehensive view of the volatile environment that governs pipeline and LNG project permitting in the United States today.
FERC and the Evolving Policy Landscape
At its core, FERC is tasked with evaluating whether proposed energy infrastructure projects serve the public interest, a vague and contested mandate that can be interpreted in dramatically different ways depending on the political context. Over the years, FERC's approach to pipeline and LNG terminal approvals has been influenced by broader national priorities—ranging from energy independence and economic growth to climate action and environmental justice.
Under administrations favoring fossil fuel development, such as the Trump administration, FERC leaned toward a more permissive stance, fast-tracking permits and emphasizing the need for energy “dominance.” This approach aimed to remove perceived regulatory barriers to expedite infrastructure projects. However, more recent political shifts have pulled FERC back toward a more cautious and environmentally conscious regulatory model. For instance, during the Biden administration, the commission has faced growing pressure to integrate climate considerations into its approval process and ensure compliance with federal environmental statutes like the National Environmental Policy Act (NEPA).
This pendulum swing creates an environment of both opportunity and uncertainty. On one hand, a pro-energy administration might reduce permitting delays and expand market opportunities for developers. On the other hand, even under favorable administrations, environmental reviews remain a legal necessity, and court decisions increasingly define the boundaries of what is permissible. Developers must now operate in a context where policy direction can change abruptly and where long-standing approvals may be revisited or reversed.
Legal Challenges: The New Normal
Even when developers receive the green light from FERC, that approval is no longer a guarantee of progress. Increasingly, pipeline and LNG projects are being challenged in court by a diverse coalition of stakeholders—including environmental advocacy organizations, Indigenous groups, and local communities. These lawsuits typically target the adequacy of FERC’s environmental analysis, especially under NEPA, which mandates comprehensive assessments of how a project might affect ecosystems, public health, water resources, and climate.
A notable case illustrating this trend is the Rio Grande LNG project, whose FERC permit was vacated after a court found that its environmental review was insufficient. The ruling sent a strong message that agencies must go beyond surface-level assessments, particularly when evaluating potential climate impacts and cumulative environmental harms.
Groups such as the Sierra Club and Natural Resources Defense Council (NRDC) have become adept at using legal channels to delay, modify, or even halt large-scale energy projects. Their objections often center around issues like greenhouse gas emissions, threats to endangered species, impacts on Indigenous land and water rights, and violations of procedural fairness. These legal challenges have become an expected part of the permitting timeline—often dragging on for years and adding significant costs.
For developers, this new legal landscape demands advanced preparation and robust documentation. Legal resilience must be built into every stage of the permitting process, including thorough environmental studies, community engagement efforts, and strong legal counsel. Companies must now treat litigation not as an afterthought, but as a strategic component of project planning.
Policy Instability and Investor Risk
Perhaps the most destabilizing factor in the current FERC regulatory environment is policy instability. The rules and priorities that guide FERC's permitting decisions can change significantly depending on which party controls the White House or Congress. As administrations shift, so too do the criteria for what constitutes a "public interest" project. A pipeline approved under one administration may be scrutinized, delayed, or even canceled under another.
This inherent volatility creates what experts refer to as a "policy risk premium." In practical terms, this means that developers and investors must account for the risk that the regulatory landscape could change midstream—raising capital costs, delaying returns, or forcing costly redesigns. Projects that would otherwise be bankable become financial gambles in a politically divided environment.
For example, a shift in federal leadership could lead to the suspension of LNG export permits or impose new climate-based restrictions on pipeline construction. Investors wary of these risks may demand higher returns or decline to finance projects altogether. The long lead times and high upfront costs typical of energy infrastructure only amplify the effect of policy uncertainty, making it harder for developers to commit to multi-billion-dollar projects that may take years or decades to complete.
As a result, policy instability doesn't just slow down construction—it threatens the fundamental economics of energy development. Developers must now build flexibility into their models, engage more actively in public and political discourse, and establish contingency plans to manage the regulatory turbulence that may arise during a project's lifespan.
