Saturday, May 26, 2018

FERC Must Consider GHG Impact of Pipelines, DC Circuit Rules

By Rich Heidorn Jr.

FERC must consider the impact of greenhouse gas emissions when licensing natural gas pipelines, a split D.C. Circuit Court of Appeals panel ruled Wednesday (16-1329).

The panel’s 2-1 ruling in favor of a petition by the Sierra Club parted with previous D.C. Circuit rulings that found FERC did not have to consider the climate-change effects of exporting natural gas in its licensing of LNG terminals.

The majority — Judges Thomas Griffith, a George W. Bush appointee, and Judith Rogers, a Bill Clinton appointee — remanded FERC’s environmental impact statement (EIS) on the Southeast Market Pipelines Project, ordering the agency to estimate the project’s impact on GHG emissions or explain more fully why it could not do so.

Judge Janice Rogers Brown, also appointed by Bush, dissented, saying the court should have ruled as it did in the LNG cases.

FERC GHG Natural Gas D.C. Circuit

FERC’s ruling affects the Southeast Market Pipelines Project, including the nearly 500-mile Sabal Trail pipeline between Alabama and Florida | Sabal Trail Transmission

The Southeast Market Pipelines Project involve three pipelines, including the nearly 500-mile Sabal Trail, which will connect the other two pipelines between Tallapoosa County, Ala., and Osceola County, Fla., south of Orlando. Scheduled for completion in 2021, the project has a capacity of more than 1 Bcfd.

Existing Pipelines near Capacity

With both of its two major natural gas pipelines near capacity, Florida is at risk of having demand outstrip supply, according to Florida Power & Light and Duke Energy Florida, which have committed to buying nearly all the gas the project can transport.

The project’s developers — Duke Energy, FP&L parent NextEra Energy, Spectra Energy Partners and the Williams Companies — said increased gas supplies will allow utilities to retire old coal-fired power plants, thus providing a net reduction in GHG emissions.

FERC has jurisdiction over licensing interstate gas pipelines under Section 7 of the Natural Gas Act, which requires a finding that the project will serve the public interest before issuance of a certificate of public convenience and necessity. The commission began the EIS on the project in fall 2013 and issued its final report in December 2015, before approving the project in February 2016 (CP14-554, et al.). It rejected rehearing requests on the order in September 2016.

Because some of the pipeline’s gas would be burned by new or existing electric generators, resulting in CO2 emissions, “at a minimum, FERC should have estimated the amount of power-plant carbon emissions that the pipelines will make possible,” Griffith and Rogers ruled.

Prior Rulings

The pipeline developers contended FERC was not obliged to consider emissions, based on the Supreme Court’s 2004 ruling in Department of Transportation v. Public Citizen (541 U.S. 752), in which it said that because the Transportation Department could not exclude Mexican trucks from the U.S., it was not required to gather data about the environmental harms of admitting them.

The D.C. Circuit applied the Public Citizen rule in three challenges to FERC approvals of LNG terminals, siding with the commission in all of them because it is the Energy Department — not the commission — that ultimately decides whether the terminals can export gas (Sierra Club v. FERC, 827 F.3d 36 (D.C. Cir. 2016); Sierra Club v. FERC, 827 F.3d 59 (D.C. Cir. 2016); EarthReports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016)). FERC’s jurisdiction over LNG, delegated by DOE, is limited to approving the construction of the terminals.

In reviewing pipelines, “FERC is not so limited,” the court said in this week’s order. “Congress broadly instructed the agency to consider ‘the public convenience and necessity’ when evaluating applications to construct and operate interstate pipelines.” Thus, FERC could deny a pipeline certificate by concluding that the environmental harm posed by the project outweighed its public benefits, making the commission a “legally relevant cause” of environmental effects of pipelines it approves, the judges said.

FERC: Impact Unknown

FERC contended that the impact of the pipelines on GHG emissions was unknowable, dependent on variables including the operating decisions of individual plants and regional power demand. But the court said the National Environmental Policy Act — which mandates an EIS for each “major federal action significantly affecting the quality of the human environment” — requires some “reasonable forecasting.”

“The EIS gave no reason why [the pipeline’s capacity] could not be used to estimate greenhouse gas emissions from the power plants, and even cited a Department of Energy report that gives emissions estimates per unit of energy generated for various types of plant,” the court said. It said FERC “should have either given a quantitative estimate of the downstream greenhouse emissions that will result from burning the natural gas that the pipelines will transport or explained more specifically why it could not have done so.”

Without comparing the emissions from this project to other projects or to total emissions from the state or the region, “it is difficult to see how FERC could engage in ‘informed decision making,’” the judges said.

The court said FERC also must explain in the revised EIS its position on whether it should use the Social Cost of Carbon in its evaluations. The commission has argued previously against using the measure, saying that some of its components are subject to dispute and that not every harm it accounts for is “significant” under NEPA.

Dissent, Reaction

In her dissent, Brown said the pipeline case presented “virtually identical circumstances” to the LNG cases that the court said did not require GHG impact analyses. Because the Florida power plant Siting Board has the sole power to approve or deny new power plants in the state, “this breaks the chain of causation,” Brown said.

FERC declined to comment on the ruling.

The American Petroleum Institute, which absorbed America’s Natural Gas Alliance in 2015, said it believes FERC acted properly and is evaluating the ruling. “Regulatory certainty is critical to ensuring that infrastructure is constructed efficiently. Further delays due to needless regulatory hurdles will slow consumer access to reliable, affordable natural gas and opportunities for job creation,” it said.

The Natural Gas Supply Association, which represents 14 large gas producers and marketers, said it was “disappointed” by the order but had no other immediate comment.