FERC and NERC Issue Joint Recommendations in Response to Winter Storm Elliott Potentially Impacting Well Head to the Burner Tip

On November 7, 2023, the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) issued a joint report including recommendations targeting the natural gas industry from the well head to power generators (the Recommendations). The report was in response to Winter Storm Elliott, an unprecedented winter weather event occurring from December 21, 2022, through December 26, 2022. During the storm, 90,500 MW of generating units went out of service, and a total of over 127,000 MW of generation was unavailable. These numbers represent an unprecedented 18% of eastern U.S. electric-generation resources. Natural gas fuel issues accounted for 20% of all causes (and 83% of outages caused by fuel issues). In the Marcellus Shale and Utica Shale formations, production dropped to just 54% during the event, the top causes of which were wellhead freeze-offs, natural gas supply chain equipment freezing, and weather-related transportation issues preventing maintenance, such as road conditions.

The Recommendations focus on natural gas production and FERC and non-FERC pipelines and fall into two categories: (i) those pertaining to cold-weather infrastructure reliability; and (ii) those pertaining to natural gas and electric-generation coordination for cold-weather reliability.

Recommendation 4, which is specific to natural gas production and other infrastructure cold-weather reliability, calls for legislation by Congress and state legislatures, as well as regulation by entities with jurisdiction over natural gas infrastructure reliability. Specifically, the Recommendations call for the establishment of reliability rules for natural production and gas infrastructure necessary to support the grid and natural gas local distribution companies (LDCs). The Recommendations specify that any potential legislation concerning cold-weather infrastructure reliability should address the following issues: (i) cold-weather preparedness plans, freeze protection measures, and operating measures for when extreme cold-weather periods are forecast, and during extreme cold-weather periods; (ii) the need for regional natural gas communications coordinators who can share timely operational communications throughout the natural gas infrastructure chain and communicate potential issues to, and receive grid reliability information from, grid reliability entities; and (iii) the need to require natural gas infrastructure entities to identify those natural gas infrastructure loads that should be designated as critical for priority treatment during load shed and provide criteria for identifying such critical loads.

Recommendations 5-7, which address natural gas and electric-generation coordination for cold-weather reliability, provide for the following: (i) convening natural gas infrastructure entities, electric grid operators, and LDCs to enhance situational awareness and improve communications in future extreme cold-weather events; (ii) considering whether to order FERC-jurisdictional natural gas entities to provide FERC reports describing their roles in assessing and responding to natural gas supply and transportation vulnerabilities in extreme cold-weather events; and (iii) calling for an independent research group to perform studies in early 2024 to consider if additional infrastructure, such as interstate natural gas pipelines and storage, is necessary to increase electric grid and LDC reliability.

The Recommendations will have long-term implications for both the natural gas and electric-generation sectors. In turn, it is critical for stakeholders to review the Recommendations and monitor FERC and NERC for further developments.

For assistance or questions concerning this legal insight, please contact the authors or any member of the Steptoe & Johnson Energy Team.