FERC Votes 5-0 to Double Pipeline Cost Caps

The Federal Energy Regulatory Commission on Thursday voted unanimously 5-0 to propose the most sweeping overhaul of the natural gas blanket certificate program since the rules were last substantially revised in 2006, a decision that pipeline executives and LNG developers had been pressing for since construction-cost inflation began running ahead of the program's adjustment mechanism more than a decade ago. The notice of proposed rulemaking released alongside the May 21 vote would lift the automatic authorization cost cap from $14.5 million to $30 million, lift the prior-notice cap from $41.1 million to $86 million, and for the first time extend blanket certificate authority to liquefied natural gas facilities.

Chairman Mark Christie framed the action as a reliability imperative. "New and expanded natural gas infrastructure is essential to help America avoid a grid reliability crisis," Christie said in a statement issued by the commission. The unanimous vote, which crossed party lines, signals a broad institutional consensus that the existing framework had become an obstacle to the infrastructure buildout that data-center, manufacturing, and LNG export demand growth requires.

What Changes Under the Proposal

The blanket certificate program, codified at 18 CFR Part 157 Subpart F, allows interstate natural gas pipeline operators to build and modify infrastructure without seeking case-by-case Section 7 certificate approval, provided each project sits below a specified cost ceiling. The two-tier structure separates fully automatic authorization (lower cap) from prior-notice projects that require landowner notification but not a full certificate filing. The NOPR raises the automatic ceiling from $14.5 million to $30 million, a 107% increase, and lifts the prior-notice ceiling from $41.1 million to $86 million, a 109% increase.

The proposal also replaces the Gross Domestic Product Price Deflator as the annual inflation index with the Handy-Whitman Index of Public Utility Construction Costs, the same benchmark used by FERC in oil pipeline index proceedings. The change is consequential because the GDP deflator has substantially undertracked actual pipeline construction costs since the early 2010s, leaving the practical value of the blanket caps roughly 35% lower in real terms than when they were last reset.

LNG Facilities Get Blanket Authority for the First Time

The proposed expansion of the blanket framework to LNG facilities is the most consequential single change in the package. Until now, every modification to an LNG export terminal, liquefaction train addition, peak-shaving facility, or storage expansion has required a separate Section 3 application. Under the proposed rule, certain LNG modifications below the cost cap would qualify for streamlined authorization. Developers including Cheniere Energy, Sempra LNG, and Venture Global LNG have collectively spent more than three years on capacity addition applications that the new framework could compress to months.

The change comes as US LNG feedgas demand sits at 16.9 billion cubic feet per day according to the latest tracking from S&P Global Commodity Insights and is on track to exceed 20 Bcf/d by 2028 as Plaquemines, Corpus Christi Stage 3, Rio Grande LNG, and Port Arthur ramp toward full nameplate.

Rate Treatment and In-Service Deadlines

Two operational changes round out the package. First, the NOPR allows natural gas pipeline companies to charge incremental rates for prior-notice projects, a structural shift from the existing rolled-in rate methodology that had created cross-subsidisation friction between shippers on a system. Second, the in-service deadline for prior-notice projects extends from one year to two, reflecting the reality that supply-chain bottlenecks and labour shortages have pushed average construction timelines beyond the existing window.

The commission also extended the temporary waiver of blanket program cost limits, which had been set to expire on May 31, 2027, by an additional year through May 31, 2028. The waiver provides industry certainty during the rulemaking process, which will run a 60-day public comment period followed by a final rule expected late in Q3 2026 according to FERC staff guidance issued at the open meeting.

Industry Reaction and Pipeline Stock Response

The Interstate Natural Gas Association of America called the NOPR "a critical step toward reflecting today's pipeline construction realities" in a statement issued shortly after the vote. Pipeline shares moved on the news. Williams, which is currently constructing the 1.6 Bcf/d Transco Southeast Supply Enhancement project under a Section 7 certificate, climbed 1.4% in Thursday trading. Kinder Morgan rose 1.1% and Enbridge ADRs added 0.8%.

Analyst Becca Followill at US Capital Advisors wrote in a Friday note that the rule "materially reduces the regulatory drag on the Williams, Kinder Morgan, and Enbridge growth backlogs and accelerates the timeline for Henry Hub-adjacent LNG capacity to convert reserve commitments into actual takeaway." RBC Capital Markets analyst Robert Kwan estimated the change could shave 9 to 14 months off the average compressor station or pipeline loop project approval timeline, with cumulative net-present-value uplift of roughly $1.5 billion to $2.2 billion across the major interstate operators over the next five years.

What Comes Next

Comments on the NOPR are due 60 days after Federal Register publication, with a final rule expected in late Q3 2026. Environmental groups including the Sierra Club and the Center for Biological Diversity signalled in statements Thursday that they will file extensive comments opposing the LNG expansion and the rate-treatment changes, arguing that the streamlined authority bypasses meaningful environmental review. The commission's National Environmental Policy Act analysis accompanying the NOPR concluded that the proposed changes do not require an environmental impact statement, a finding that is itself likely to be challenged in court if the final rule retains it.