Amidst Ongoing Policy Statement Controversy, D.C. Circuit Remands Another FERC Pipeline Order Over GHG Analysis

Once again finding the Federal Energy Regulatory Commission’s (“FERC” or “Commission”) environmental assessment (“EA”) analysis of the downstream effect of greenhouse gas (“GHG”) emissions associated with interstate natural gas pipelines and liquefied natural gas terminals certificated pursuant to the Natural Gas Act (“NGA”) legally insufficient, on March 11, 2022, the United States Court of Appeals for the District of Columbia Circuit issued a remand directing FERC to consider the reasonably foreseeable indirect effects of burning natural gas as the result of a pipeline expansion project. The court directed FERC to consider such indirect downstream impacts on remand and to prepare a conforming EA, but declined to vacate the FERC’s orders. Food & Water Watch and Berkshire Environmental Action Team v. FERC, No. 20-1132 (Mar. 11, 2022) (“Food & Water Watch”). Food & Water Watch, authored by Chief Judge Srinivasan and joined by Judges Millett and Katsas, appears to provide further support for some of the reasoning provided by the majority in FERC’s two recent policy statements regarding natural gas certificates.

In Food & Water Watch, the petitioners challenged FERC’s decision under Section 7(c) of the NGA authorizing Tennessee Gas Pipeline Company (“Tennessee”), an interstate natural gas pipeline regulated by FERC, to construct a 2.1 mile natural gas pipeline and replace two less efficient compressor units with one new compressor in Agawam, Massachusetts in order to increase pipeline capacity in western Massachusetts to meet local distribution demand. FERC conducted an EA and concluded that, with appropriate mitigation, the project would not constitute a major federal action significantly affecting the environment and issued a certificate order approving the project. Then-Commissioner Glick (now Chairman) filed a partial dissent addressing GHG impacts.

In the certificate order, FERC determined that the upstream and downstream environmental impacts associated with Tennessee’s project were not reasonably foreseeable. In its request for rehearing before FERC, Food & Water Watch did not identify particular flaws in FERC’s consideration of upstream effects or argue that FERC’s analysis of upstream impacts based on the location and number of wellheads resulting from the project was misplaced. Noting that failure, the court, while “troubled,” found that the petitioner failed to exhaust its administrative remedies and therefore the court lacked jurisdiction to consider the upstream impacts. Opinion at 12-13.

In contrast, the court did reach the merits of petitioners’ argument concerning the project’s downstream GHG emissions. The court disagreed with FERC’s explanation that the downstream gas consumption and related GHG emissions were not reasonably foreseeable. Although FERC argued that petitioners also had failed to properly raise the downstream impacts argument on rehearing, the court found that petitioners’ rehearing petition met the standard for exhaustion of administrative remedies by citing both court precedent and then-Commissioner Glick’s dissent which made the same argument regarding the foreseeability of downstream GHG impacts. Accordingly, the court concluded that Petitioner had properly alerted FERC to the legal argument it made on review. The court observed that “[o]ur precedents establish that downstream emissions are not ‘as a categorical matter, always a reasonably foreseeable indirect effect of a pipeline project.’ … Rather, foreseeability depends on information about the ‘destination and use of the gas in question.’”

The court analyzed the argument concerning the downstream emissions in light of the court’s 2019 precedent on the issue, in Birckhead v. FERC, 925 F.3d 510 (D.C. Cir. 2019) (“Birckhead”), and its 2017 decision in Sierra Club v. FERC, 867 F. 3d 1357 (D.C. Cir. 2017) (“Sabal Trail”). In Birckhead the court upheld FERC’s determination that it could not measure downstream GHG impacts because the record showed only that “the gas [was] headed somewhere in the Southeast,” and therefore ruled that FERC did not act unreasonably in declining to evaluate downstream impacts. In contrast, the Sabal Trail opinion found the record was clear that the gas to be transported was intended for combustion in power plants and the downstream emissions were a reasonably foreseeable indirect effect of the pipeline project. Opinion at 15-16.

In Food & Water Watch, the court concluded that the record concerning Tennessee’s project, and FERC’s analysis, more closely resemble the situation in Sabal Trail than Birckhead. The court therefore concluded, consistent with then-Commissioner Glick’s dissent, that FERC knew where the gas to be transported by Tennessee’s project was going and how it would be used. In light of that determination, the court found that FERC had not explained its conclusion that the location and use information in the record was too “generalized” and therefore the downstream emissions were reasonably foreseeable. Id.

The court rejected each of FERC’s attempts to explain its decision and distinguish Sabal Trail and Birckhead, finding the arguments unpersuasive. First, FERC argued that the use profiles of generating stations and local distribution company customers were different. The court ruled that FERC’s reliance on its own Energy Primer to support its position without more was not sufficient evidence that “a difference in foreseeability follows from the distinction between end uses.” Id. at 17. Second, FERC argued that when gas is destined for local distribution it is difficult to determine if increased capacity will result in increased consumption due to possible offsetting reductions. The court rejected this argument based on Birckhead, ruling that the end use is reasonably foreseeable and FERC “invokes nothing more than a mere possibility of offsetting reductions.” Id. at 18. Accordingly, the court remanded to FERC to perform a supplemental EA “in which it must either quantify and consider the project’s downstream carbon emissions or explain in more detail why it cannot do so.” Id.

The court rejected the petitioners’ additional arguments for failure to exhaust administrative remedies, including their challenge to the finding in the EA that FERC could not determine the “significance of the emissions directly connected to the project” and to FERC’s claim that “there is no universally accepted methodology to attribute discrete quantifiable, physical effects on the environment.” Similarly, the court did not address the argument that FERC erred by not considering the social cost of carbon as a means of assessing the significance of GHG impacts. The court further found that FERC acted reasonably in separately evaluating the environmental impacts of the project at issue and a nearby meter upgrade project. Id. at 18-21.

Finally, the court declined to vacate the certificate orders. The court reasoned that, after adequately accounting for foreseeable downstream GHG emissions, it is possible FERC could still issue a finding of no significant impact and not require preparation of an Environmental Impact Statement. Further, the court explained that, because Tennessee’s project is either in mid-construction or is operational, vacating the orders would be “quite disruptive.” Id. at 24 citing City of Oberlin, Ohio v. FERC, 937 F.3d 599, 611 (D.C. Cir. 2019).

It is not clear how Food & Water Watch will affect the future of FERC’s recent policy statements concerning certificates for FERC-jurisdictional natural gas infrastructure. The decision could make it more difficult for entities aggrieved by those policy statements to convince FERC’s majority to change direction. The FERC majority that voted in support of those policy statements did so, in part, based on the view that the policy statements would make future certificate orders “more durable,” that is, less likely to be overturned on appeal. The FERC majority specifically pointed to court decisions like Sabal Trail and Birckhead as examples of the legal risk posed by the agency’s failure to consider downstream GHG impacts in its environmental evaluations, at minimum, and as evidence that the Commission must further quantify the impact of emissions associated with interstate pipeline projects. Food & Water Watch does nothing to ameliorate those concerns, and may even exacerbate the FERC majority’s stated concerns.

After a congressional grilling by the Senate Energy and Natural Resources Committee and criticism from interstate pipelines regarding the scope of its new policies, this new court decision may tend to harden the majority’s position on the policy statements rather than foster revised policy statements or compromises that may ameliorate the concerns of the policy statements’ critics.

As for the FERC Commissioners who dissented from the policy statements, it is possible that they will read Food & Water Watch differently than the FERC majority. Although the court squarely addressed the issue of whether downstream emissions are “reasonably foreseeable,” the court did not address the threshold question of whether FERC’s decision to certificate natural gas infrastructure is the legally relevant “cause” of the downstream emissions. The Commissioners appear to be divided on the issue of whether the agency should, or even can, analyze downstream emissions for which FERC’s certificate decision is not the legally relevant cause. As Food & Water Watch does not speak to that issue, this latest court decision might not heal that division among the Commissioners.