People’s Dossier of FERC Abuses: Budget Issues

FERC Bias is Emboldened by Its Ballooning Budget and Lack of Oversight

(Download Printable copy of “People’s Dossier of FERC Abuses: Budget Issues with attachments here)

Per federal law, FERC relies on the industry it regulates for its entire budget (42 U.S. Code § 7178(a)(1). [1] This funding structure means that FERC is vulnerable to the whims and wishes of the very industry it’s charged with overseeing.  Nowhere is this more true than in the case of pipelines and related infrastructure including LNG facilities and compressors.  The lack of oversight by other branches of government or watchdog agency helps to perpetuate FERC’s biased decision making.

FERC’s Funding Structure Leads to Bias in Fact

FERC issues a volume based per-unit charge on natural gas pipelines to cover the agency’s costs. This means that the more pipelines, gas delivery, and LNG facilities FERC approves, the more fees it is able to collect for its self-inflating, FERC-created budget.

As a result of this funding structure, FERC is all but compelled to decide in favor of pipeline companies.  The record of pipeline project approvals by FERC Commissioners demonstrates a clear bias in FERC decision-making; in the last thirty years, FERC’s Commissioners have denied only one pipeline project brought before them for approval, and that denial happened relatively recently, on March 11, 2016.  Up until this time, FERC had a 100% approval rating for all natural gas pipeline projects brought before its Commissioners for a vote. Interestingly, FERC’s singular denial came just one week after a challenge was filed against FERC’s pipeline program in which its then-100% approval rate was cited as a key piece of evidence. There is not a single other federal agency that has this exceptionally high rate of approvals for applicants seeking an authorization or certification.

FERC is Insulated from Oversight

This industry-financing mechanism not only encourages the biased approval process for proposed projects, but it also provides FERC with a significant degree of insulation from the legislative branch of government. FERC is simultaneously free from the oversight of the executive branch because of the limitation of the President’s power to remove FERC Commissioners. The “for-cause” limitation on the removal of FERC’s Commissioners only allows the removal of Commissioners under a very narrow set of circumstances, i.e. “inefficiency, neglect of duty, or malfeasance.” (42 U.S. Code § 7171(b)(1)).

In fact, FERC brags about the lack of oversight it receives.  According to FERC:

“FERC’s decisions are not reviewed by the President or Congress, maintaining FERC’s independence as a regulatory agency, and providing for fair and unbiased decisions.” (Attch 1)

While FERC asserts the lack of oversight is beneficial for decisionmaking, the reality is actually quite different; FERC’s independence from the oversight of both the executive and legislative branches of government leaves FERC especially vulnerable to the undue influence of the industry that funds its budget. This is particularly true because FERC itself operates without the scrutiny of any type of regulatory oversight or regulatory board, i.e. a watchdog responsible for overseeing regulatory quality.

FERC’s Budget Outpaces Other Agencies – Including its Parent the DOE

FERC’s ability to secure funding from the regulated industry has resulted in a budget that has grown appreciably faster than its parent government agency, the Department of Energy, as well as the Federal government as a whole. In fact, over the past decade, FERC has seen its annual budget grow by more than 60-percent – rocketing from sub-$200 Million in 2004 to more than $346 Million projected for 2017. A substantial portion of this boom occurred during a recessionary period that left other independent agencies reeling from budget slashes in the hundreds of millions of dollars.

The fiscal year 2017 budget request for FERC seeks a 3% increase in base operating costs and includes a “building modernization project” for FERC offices, the cost of which has nearly doubled from $40 million dollars to $79 million dollars. (Attch 2)

FERC’s growing budget demands are sustained by the Agency’s approval of an increasing number of infrastructure projects.

[1] See Federal User Fees: Budgetary Treatment, Status, and Emerging Management Issues, U.S. Government Accountability Office (GAO) Report to the Chairman, Committee on the Budget, House of Representatives, GAO/AIMD-98-11 (Identifying 27 agencies that rely on federal user fees for a significant portion of their budget, none of which are fully funded or nearly fully funded like FERC, are independent executive entities, presently exist, are independent executive agencies, and conduct direct adjudications that affect its finances) (December 19, 1997).

Complete People’s Dossier: FERC’s Abuses of Power and Law 
available here.