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On December 15, the Federal Energy Regulatory Commission (FERC) issued a permanent certificate authorizing the Spire STL natural gas pipeline serving the St. Louis area. Louisa to continue working. Spire STL has been on a treacherous legal rollercoaster, with its owner receiving FERC certification in 2018, building and operating a 65-mile pipeline in 2019, and then having its certification “emptied” — wiped out — by the Appellate Authority in 2021. US court. Then, during a white-knuckled ride, with the winter of 2021-22 looming, Spire STL received emergency/temporary authorization from FERC to continue operations while a brand new certificate application is considered. In today’s RBN blog, we discuss the case — in which RBN played a role — and what it means for upcoming midstream projects.
We have to admit upfront that RBN is a little biased on this point, as we provided support for Spire STL’s new “statement of need,” the part of the application that directly responds to the appeals court’s criticisms. However, even a truly neutral party would admit that the case raises a number of interesting questions about how the need for pipeline capacity is assessed, the role of diversity of gas supply and how gas infrastructure is approved.
As we said last year in Will you be there?, the Spire STL pipeline (purple line in Figure 1) has, since November 2019, connected the massive Rockies Express (REKS; dark blue line) pipeline to the St. Louis, much of which is served by Spire Missouri, a local distribution company (LDC) and Spire STL branch. Prior to the launch of the Spire STL pipeline 37 months ago, LDC received gas primarily from Enable Midstream’s Mississippi River Transmission (MRT; green line) pipeline, as well as the MoGas pipeline (too small to include on the map in Figure 1) and the Central South Star pipeline (pink line). (Connections to those pipelines, which deliver gas primarily from Louisiana, Oklahoma and Texas, have been maintained.)
Figure 1. REX, Spire STL and other natural gas pipelines in the St. Louis area. Source: RBN
The Spire STP pipeline is proposed as the most efficient way to provide customers in the St. Louis area with supply diversity and lower natural gas costs by establishing an operational connection to the REKS, a massive two-way pipeline between the Marcellus/Utica and Rockies producing areas.
Following much FERC precedent, Spire STL initially demonstrated the need for the project by signing a firm commitment from a customer — in this case, its subsidiary, Spire Missouri. Protests by landowners and environmental groups followed; among other things, they accused the Spire companies of “self-dealing” and thereby not showing a real need. FERC ultimately approved the project, finding in a 3-2 vote that a new pipeline was needed (with now-departing Chairman Rich Glick being one of the dissenters). Of course, opponents of the project asked for a rehearing of the commission’s approval, but they could not go to court to FERC. acted on the request for a rehearing, which FERC did not do until after it has already issued follow-up orders to start construction of the pipeline and then to start operations. While the US Court of Appeals for the District of Columbia heard the case, the pipeline was operating.
Simply put, the Spire STL case ended up being a nightmare scenario for infrastructure investors. Spire STL went through the full regulatory process more than four years ago, secured FERC approval to build and begin operating its 65-mile pipeline, and invested the necessary money, only to be told so by a court after the pipeline was already operational. a year and a half ago that regulatory approval no longer existed. The potential for this to happen on much larger projects for whatever reason has been a big concern for investors still tiptoeing back into gas infrastructure investments.
In the period between FERC’s original approval and the case just decided, the shipper, Spire Missouri, (1) acted in reliance on the new capacity and gave up capacity from its original supplier, Energi Transfer’s MRT, (2) withdrew some compression in own storage, and (3) retired some propane injection capabilities to cover peak loads. Spire STL, in turn, added various operational advantages to Spire Missouri, including pressure sufficient to inject gas into storage without triggering carbon-emitting compression and sufficient to serve growing loads on the west side of St. Louis. So, without Spire STL capacity, Spire Missouri would not be able to handle winter loads.
While Spire STL is understandably pleased that it won’t have to ditch its pipeline, there are troubling aspects of how FERC made its decision. Most importantly, instead of finding that the Spire STL pipeline provides clear and significant benefits to Spire Missouri customers in the St. Louis, the commission suggested that since the pipeline was already built and in operation, and with the drawdown of capacity and supply relying on the pipeline, the commission had no choice but to give it final approval — FERC was stuck.
In fact, the new application was accompanied by an extensive demonstration of needs, in addition to simply satisfying the desires of the affiliate. For example, it turns out that while the overall natural gas load in St. Louis hasn’t increased, it’s been steadily shifting westward into the suburbs — a challenge, given that pre-Spire supply to STL from the MRT was on the east side the system. This meant that, in the absence of the pressure boost offered by the Spire STL, significant new plant would be needed in the system to carry more gas from east to west. Also, an unrelated pipeline — MoGas, which sends gas to the St. Louisa from the west — was on fire, saying the Spire STL pressure boost means MoGas won’t have to build a huge, full-scale copy of its mainline to manage growth.
Crucially, one of the original attractions of the Spire STL tie-up with REKS — access to cheap natural gas from the Appalachians and the Rockies — proved true to a degree never expected in the original case back in 2018. Winter storm Uri, which famously drove mid-continent gas prices to unprecedented levels (including a huge price spike from Enable East/MRT; blue line in Figure 2 below) in February 2021, cities as far north as Minneapolis saw huge increases in the price of natural gas, which leads to long-term disputes about the final collection of costs. However, access to REX enabled by Spire STL allowed St. Louis to be the only major Midcontinent city that did not experience a spike in prices (red line). In other words, Spire STL helped consumers in the St. Louis to avoid the spray of bullets that hit many of their counterparts from the Mid-Continent.
Figure 2. February 2021 natural gas prices in Enable East, REX Zone 3 and Henry Hub. Source: Natural Gas Intelligence
And the economic benefit from the REKS approach should be long-lasting. As we see, the transformation of the Gulf Coast from a supply center to a demand center as LNG exports continue to grow (see Where is it for more on that) strongly suggests that going forward southern prices will be higher than northern prices for most of the year.
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The fact that FERC appears to have given no weight to these benefits of Spire STL is disappointing, as the company’s showing of need in the new application seemed like a strong attempt to conform to FERC’s certification policy. It has been clear for some time that a merits-based showing of need is necessary to obtain the eminent domain authority that comes with FERC certification. But as the industry looks at the ordeal this short but highly valuable pipeline has had to go through, and there is still no clear confirmation from FERC on how the show of need should be done, it leaves another layer of uncertainty as investors decide to Will the pipeline be a good place to invest money. As the commission does whatever it does with its pending certification policy reviews, it’s critical to know what kind of display can clear the road. This uncertainty comes at a time when inadequate gas infrastructure is once again threatening the ability of the nation’s abundant natural gas to come to market and keep prices low – look at what’s been happening lately. Wild Wild West gas market for the right case.
Finally, as for the Spire STL itself, we hate to say it, but there’s a reason we said “helps with security” and not “ensures” in the title of this blog. This is because, once FERC declares its decision final, there is always the possibility of the same opposing parties returning to court. If that happens, we believe the commission has a lot more facts to stand on now than in 2021. One saving grace in this uncertainty is that if no one is asking for a rehearing of the authorization itself (unlike other issues like the right to method of remediation), they cannot ask the appeals court to annul the approval. We will know that answer (reconsideration of the petitions) by mid-January. Fingers crossed for a happy New Year.
“I Need You” is a song written and sung by George Harrison on The Beatles’ fifth studio album, Help!, which is the soundtrack for the film of the same name. The song was recorded at the EMI studio in London in February 1965 and was produced by George Martin. The songs “Ticket To Ride” and “Another Girl” were recorded at the same sessions. “I Need You” is said to have been written for Harrison’s future wife, Pattie Boyd. An interesting feature of the song is Harrison’s volume on the electric guitar, which was allegedly done by John Lennon by hand on Harrison’s guitar as he played. Harrison may have gotten the idea for this technique from old Jimmy Bryant records. (Bryant was an American country music guitarist.) Jeff Beck would later put it to good use on his Fender Esquire during his tenure playing guitar in The Yardbirds.
The personnel on “I Need You” included: George Harrison (electric and acoustic guitars and lead vocals), John Lennon (snare drums and harmony vocals), Paul McCartney (bass and harmony vocals) and Ringo Starr (percussion, cowbell and acoustic rhythm guitar). The Help! The LP was released in August 1965. It went to #1 on the Billboard top 200 album chart and was certified 3X Platinum by the Recording Industry Association of America.
The Beatles were a British rock band founded in Liverpool in 1960. With a lineup of John Lennon, Paul McCartney, George Harrison and Ringo Starr, they became the biggest and most influential band in history. During their career together as a band from 1963 to 1970, The Beatles made 13 studio albums. John Lennon was killed in 1980, and George Harrison died in 2001. Paul McCartney and Ringo Starr are still actively touring today.
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