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In This List

Broad environmental critique of FERC set to be aired in Cove Point case

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Broad environmental critique of FERC set to be aired in Cove Point case

Withthe U.S. entry to world LNG marketsas the backdrop, a federal court will hear oral arguments in a case that could havewide implications for federal approval of energy export projects.

Whileindustry proponents anticipate a favorable decision, the environmental groups petitioningto review FERC's approval of DominionResources Inc.'s DominionCove Point LNG LP export terminal in Maryland are confident.

"Ido think that our oral arguments regarding Cove Point are even stronger than theones we presented regarding some of the Gulf Coast facilities, because for CovePoint we have additional information from the contracts for the gas suppliers whoare going to be feeding into the terminal," Sierra Club lawyer Nathan Matthewssaid in an interview. Oral arguments in the U.S. Court of Appeals for the Districtof Columbia Circuit are scheduled for April 19.

"Thatmeans that not only does FERC know in the general sense that there's no way forthe terminal to operate without stimulating additional gas production, but there'sinformation in the record that actually identifies who will be providing that gasand some information identifying where that gas is likely to come from, so any argumentby FERC that this issue is somehow unforeseeable is contradicted by that information."

'Speculative' impacts

The SierraClub is part of the EarthReports Inc.-led coalition alleging that FERC's environmentalreview of the 0.82-Bcf/d Cove Point liquefaction and export project, which is ontrack for completion in late 2017, did not comply with the National EnvironmentalPolicy Act, or NEPA. FERC has denied that its September 2014 approval order failedto adequately consider the indirect and cumulative effects of the almost $4 billionproposed terminal under the act, including what the coalition expects to be moredrilling and hydraulic fracturing in the Marcellus and Utica shales.

"NEPAdoes not require the commission to consider all potential impacts no matter howattenuated or speculative," FERC statedin its Jan. 5 brief. "Future natural gas production activities … are not acausally-related effect of the construction and operation of this particular liquefactionfacility. Moreover, the impacts of any such production activities are not reasonablyforeseeable —certainly not from the handful of press releases and new articles EarthReportscites."

SNL Image

Source: SNL Energy, an offering of S&P Global Market Intelligence

Moreover,the Natural Gas Supply Association and the Center for Liquefied Natural Gas, orCLNG, in comments filedJan. 29, argue that an abrupt change to FERC's environmental review process forinfrastructure projects would cause confusion and delays.

"CLNGbelieves an expansion of NEPA beyond its original intent would hinder the developmentof the natural gas infrastructure needed to ensure compliance with clean air goals,"Executive Director Charlie Riedl said in an emailed statement.

"Furthermore,a large body of third-party researchconfirms the global environmental benefits of exporting LNG. … As for the environmentalimpacts from natural gas extraction, the recent FERC brief explains that '[i]n itsinformed judgment, the commission reasonably concluded that no appropriate methodologywas available to determine the significance of their impacts on a regional or globalscale.'"

Joseph Fagan, a Day Pitney LLP partner with experience representingindustry clients in federal regulatory matters, struck a similar note.

"I think it would be more likely than not that the courtwill uphold the FERC decisions," he saidin a recent interview. "And then the arguments about the impacts of the gasproduction … I think it's pretty clear the court will find that's speculative."

Expanding NEPA

The Cove Point case is only one component of the Sierra Club'sbattle against U.S. LNG export projects. The White House Council on EnvironmentalQuality in December 2014 issueddraft guidance urging federal agencies to do more to evaluate climate change impactsduring NEPA reviews. Since then, the U.S. EPA has regularly prodded FERC to makechanges in its review process to provide more detail in the calculation of the climateimpacts of individual natural gas projects such as pipelines and LNG export terminals,including emissions of greenhouse gases from production and consumption of gas upstreamand downstream from the projects.

FERC is comfortable with its NEPA evaluation process, under whichthe commission reviews climate impacts but maintains that quantifying an individualproject's exact contribution to global climate change is impossible.

The petitioners, on the other hand, denied that quantifying indirecteffects is impossible.

"Those 'reasonably foreseeable' emissions can be calculated,even if the climate impact of the project is 'less certain,'" according toa Feb. 10 brief by thecoalition. "The Council on Environmental Quality recognizes that 'the federalsocial cost of carbon … offers a harmonized, interagency metric that can providedecision-makers and the public with some context for meaningful NEPA reviews. …[T]he commission chose not to use the social cost of carbon — or any other tool— to evaluate impacts of the project's life-cycle greenhouse gas emissions. FERCsimply provided no evaluation at all." (D.C. Circuit 15-1127, FERC CP13-113)

The Sierra Club presented similar reasoning in other pendingcases filed in the D.C. Circuit. In November 2015, the court heard oral argumentsin the environmental group's challengeto FERC's 2014 authorizationof Cheniere Energy Inc.'sSabine Pass LNG export terminal to expand capacity. Day Pitney's Fagan said thecourt will probably not rule against FERC.

"What's interesting about Sabine Pass is they've alreadystarted exporting cargoes, so we're waiting on the court's order, but yet that projectis already in service," he said. "In terms of how that would play outin practice if the court were to rule in Sierra Club's favor would be interesting,but I wouldn't be holding my breath." (D.C. Circuit 14-1249, FERC CP14-12)

Oral arguments have not yet been scheduled for the Sierra Club'slawsuit against FERC's 2014 authorizationof Cheniere Energy Inc.'sCorpus Christi LNG facility and the Cheniere Corpus Christi Pipeline LP transportationproject that would supply it. In that case, FERC maintainedthat "the commission made an informed and reasoned decision that an even moredetailed programmatic environmental impact statement, covering the cumulative impactsof all present and future LNG projects scattered throughout the United States, isunnecessary." (D.C. Circuit 15-1133, FERC CP12-507, CP12-508)

The Sierra Club also filed a lawsuit against the U.S. Departmentof Energy in the D.C. Circuit, petitioning for review of the department's 2014 authorizing companies toexport LNG to countries that do not have a free-trade agreement with the U.S.

"DOE violated NEPA by failing to take a hard look at theindirect effects of LNG exports, including both the effect of the specific exportsproposed here and the cumulative effects of other pending and approved export proposals,"the environmental group said in a March 21 brief.

Oral arguments in that case have not been scheduled. (D.C. Circuit15-1489, DOE/FE 10-161-LNG, 11-161-LNG)

Matthews, who said the Sierra Club is "prepared" tobring the Cove Point fight to the DOEif the court determines that the petitioners must present their argument, said NEPAanalyses themselves are the real issue, regardless of the agency.

"Who does the analysis is not as important to us as thefact that it has to be done before any agency approves any part of the action, andso that's our concern here. No one has done the analysis, and everybody has issuedtheir approval without any such analysis."