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DC Circuit upholds FERC order but has 'misgivings' on climate review of pipeline

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DC Circuit upholds FERC order but has 'misgivings' on climate review of pipeline

The U.S. Appeals Court for the District of Columbia upheld Federal Energy Regulatory Commission orders in another case that tested the commission's greenhouse gas analysis in its reviews of applications to build natural gas pipelines, but the court expressed "misgivings" about FERC's "less-than-dogged" efforts to obtain the information on potential climate change impacts.

In a June 4 opinion, a three-judge panel concluded that it lacked jurisdiction to rule based on those misgivings over this part of FERC's review under the National Environmental Policy Act, or NEPA. The court said the petitioners, Lori Birckhead and other residents and business owners, failed to raise questions at the appropriate time about the commission's efforts to seek greenhouse gas emissions information. The court denied the petition for review of the FERC authorization order for the Broad Run expansion project proposed by Kinder Morgan Inc.'s Tennessee Gas Pipeline Co.

The petitioners had argued that the FERC authorization was flawed because the environmental review failed to consider upstream and downstream greenhouse gas emissions at the upstream and downstream ends of the pipeline, which ran counter to the D.C. Circuit's findings in a 2017 decision that involved Enbridge Inc.-led Sabal Trail pipeline project in the Southeast.

FERC's approach to weighing indirect greenhouse gas emissions associated with gas projects has divided commissioners, adding uncertainty over FERC's ability to issue Natural Gas Act certificates to gas transportation projects and LNG export projects and over whether those certificates can hold up to court challenges. Another challenge to the commission's climate analysis before the D.C. Circuit that involved a different pipeline project, Dominion Energy Inc.'s 112,000-Dth/d New Market expansion, also fell on procedural grounds on May 9.

At the center of the most recent case was Tennessee Gas Pipeline's Broad Run expansion, which would add 200,000 Dth/d of transportation capacity to move Appalachian shale gas to Southeastern U.S. markets. The court was dubious about FERC's assertions about why it did not seek out more information from project developers on the end uses of the gas or locations of the upstream origins of the gas.

"It should go without saying that NEPA also requires the commission to at least attempt to obtain the information necessary to fulfill its statutory responsibilities," the court said.

The court also rejected the line of reasoning from FERC that it need not consider downstream greenhouse gas emissions if the agency's approval of the project cannot be considered a legally relevant cause.

"This line of reasoning gets the commission nowhere," the court said, since FERC has such authority in the context of pipeline certification. "Because the commission may therefore deny a pipeline certificate on the ground that the pipeline would be too harmful to the environment, the agency is a 'legally relevant cause' of the direct and indirect environmental effects of pipelines it approves."

Glick welcomes ruling

Commissioner Richard Glick, who has dissented in gas project cases, said the ruling "unambiguously affirms FERC's obligation under NEPA and the [Natural Gas Act] to consider the reasonably foreseeable upstream and downstream [greenhouse gas] emissions caused by an interstate natural gas pipeline."

“Although the court denies the petition on procedural grounds, the opinion puts to bed any suggestion that NEPA and the NGA do not permit FERC to seriously consider the [greenhouse gas] emissions caused by a pipeline," Glick said.

As to downstream emissions in this case, the court found that "neither side has it exactly right" in applying the court's prior finding that FERC had not done enough to consider downstream emissions from power plants served by the Sabal Trail pipeline and two related projects.

FERC is wrong to suggest downstream emissions are not reasonably foreseeable simply because the gas transmitted may displace existing supplies or higher-emitting fuels, the court said. And FERC too narrowly construed the Sabal Trail decision to apply only when a project's entire purpose is to ship gas to specifically identified destinations, the court added.

But petitioners went too far in claiming downstream combustion is always a reasonably foreseeable indirect effect of a pipeline, the court said.

More data requests

Gary Kruse of LawIQ called the decision "a definite rebuke of the current majority position" at FERC.

The opinion offered a strong suggestion that NEPA requires FERC to ask applicants about the downstream use of the gas, Kruse said. In addition, if the applicant provides an answer, there is a strong hint that there is no legal reason why that would not be an indirect impact, and FERC must determine this on a factual basis considering the particulars in the case, he said.

Howard Nelson, attorney and shareholder at Greenberg Traurig LLP, said the ruling may not change the commission's policy other than to prompt FERC to ask more questions about where the gas is going and to make a good-faith effort to ascertain that. The answers may be clearer if the shipper is an electric power plant compared to a producer selling gas into the spot market or a local distribution company, he said.

As for upstream emissions, the court found petitioners did not adequately counter the FERC argument that unless a pipeline project is the only way to get gas to market, there is not a reasonably close causal relationship to the indirect climate impacts.

The petitioners offered no record evidence that would help FERC predict the number and location of added wells, and they offered no evidence that the project shipper, producer Antero Resources Corp., would not extract the gas in absence of the project, the court said. (U.S. Appeals Court for the D.C. Circuit docket 18-1218)

Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.