US Supreme Court ruling could fuel efforts to clip FERC gas project policies

The Federal Energy Regulatory Commission's efforts to bolster climate change considerations in its natural gas project decisions could be one of the next battlegrounds over administrative agency powers following a recent US Supreme Court decision.

The high court on June 30 invoked a legal line of reasoning known as the "major questions doctrine" in finding that the Obama-era Clean Power Plan exceeded the EPA's authority. It reasoned that courts should not defer to agencies on matters of "vast economic or political significance" unless Congress has explicitly granted the authority to act (West Virginia v. EPA, 20-1530).

Even before the latest high court ruling, some intervenors and a dissenting FERC commissioner had invoked the doctrine to argue FERC's majority was overstepping its bounds in the proposed gas project policies.

Now Republican Commissioner Mark Christie and some other critics of the proposed policies argue the new ruling bolsters their position -- even as environmental lawyers resist the notion that the doctrine should apply.

"The Supreme Court's decision in West Virginia. v. EPA supports my dissent last February to the majority's certificate policy," FERC Commissioner Mark Christie said in an email July 5 to S&P Global Commodity Insights. In his view, FERC lacks authority to reject a pipeline based on an estimate of global greenhouse gas impacts or to require a pipeline to mitigate indirect GHG impacts from activities outside of its jurisdiction, such as from an end-user.

"Such actions implicate major questions of policy that fall under the Supreme Court's major questions doctrine, as West Virginia v. EPA makes crystal clear," he said. On the other hand, Christie offered his view that FERC does have authority to require "reasonable measures to mitigate direct GHG emissions from the pipeline itself."

Teeing up the potential for legal challenges to the policies, a coalition of attorneys general from states including Louisiana, also argued back in April that because "the rules implicate major questions and push the limits of executive and federal power, they must be clearly authorized by Congress," adding, "They are not."

Eyes on FERC response

Dena Wiggins, president and CEO of the Natural Gas Supply Association, said her group is waiting to see how FERC will respond. She noted the commission has already rescinded the two policies on gas project reviews first issued in February and reissued them in draft form.

"I think that the signal from the Supreme Court is that there are limitations on the extent to which an agency can act, and that it needs to make sure it's acting within the four corners of statutory authority," she said. "I would anticipate that they'll have to take this recent Supreme Court case into consideration before they finalize these policy statements."

NGSA previously has argued that FERC is an economic regulator and that some of what was being proposed was outside the scope of FERC's authority, she said.

Environmentalist and public interest lawyers are holding to their view that FERC was regulating within its wheelhouse.

Jennifer Danis, an attorney for the Niskanen Center, said the major questions doctrine has been raised and advocated for "erroneously" in FERC's GHG policy docket for gas projects.

"FERC and the Federal Power Commission before it understood that in evaluating whether or not any particular project would serve the public interest, it had to be concerned about all the adverse impacts and all the potential public benefits," she said in an interview July 5. "So this is nothing new."

In her view, as much as the industry is trying to distinguish climate change from other adverse impacts, "I really see no legal or principled basis to do so."

Environmental litigants

Maya van Rossum of the Delaware Riverkeeper Network said that if FERC retreats on climate change, organizations like hers would be left to challenge the policies on the flipside because the National Environmental Policy Act is clear about the kinds of things agencies must consider.

"Ideally, we would see FERC be proactive and positive and swiftly acting on climate, the way [FERC Chairman Richard] Glick has said they should be all along," she said. "I think the reality is they get cold feet fast, and this is likely to impact what they do from the get-go in terms of how proactive they're going to be on climate."

Other FERC commissioners did not comment on the matter.

ClearView Energy Partners, in a note to clients, said the decision "would appear to put FERC on thin legal grounds if it were to condition or deny a [Natural Gas Act]-jurisdictional project on the basis of its indirect (upstream/downstream) emissions."

William Scherman, a partner at Gibson Dunn & Crutcher, said legal challenges invoking the Supreme Court's major questions doctrine could arise in several ways. Among them: if FERC gets three votes to issue either or both policy statements in a manner close to the prior versions, or if FERC uses a similar analysis to deny a project or to impose onerous mitigation requirements such that an applicant will take them to court.

"There is no clear and express language in the Natural Gas Act that enables FERC as envisioned in the policy statements to dramatically and fundamentally change the way gas pipelines have been certified in this country since 1938," he said.