D.C. Circuit Denies Review of Compressor Orders

However, Court Expresses Misgivings Regarding Commission’s Efforts to Develop Record
Mark Reishus
June 5, 2019 at 09:38:32 ET
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On June 4, 2019, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) denied a petition for review of the Federal Energy Regulatory Commission’s (FERC, or the Commission) decision to authorize the construction and operation of a new natural gas compression facility in Davidson County, Tennessee. In Birckhead v. FERC, No. 18-1218 (D.C. Cir. June 4, 2019), the court expressed “misgivings regarding the Commission’s decidedly less-than-dogged efforts to obtain the information it says it would need to determine that downstream greenhouse gas [(GHG)] emissions qualify as a reasonably foreseeable indirect effect of the Project.” However, because the petitioners “failed to raise this record-development issue in the proceedings before the Commission,” the court concluded it lacks jurisdiction to decide whether the Commission acted arbitrarily or capriciously and violated the National Environmental Policy Act (NEPA) by failing to further develop the record in this case.

FERC's Orders

On Sept. 6, 2016, in Tennessee Gas Pipeline Co. L.L.C., Order Issuing Certificate and Approving Abandonment, 156 FERC ¶61,157 (2016) [Docket No. CP15-77-000] (Certificate Order), FERC granted Tennessee Gas Pipeline Co. L.L.C.’s (Tennessee) application for authorization to construct and operate the Broad Run Expansion Project, to consist of certain compression facilities to be located in Kentucky, Tennessee and West Virginia. FERC also authorized Tennessee to abandon certain compression facilities in West Virginia. According to FERC, the purpose of the project “is to (1) increase firm incremental transportation service on the Tennessee system by 200,000 dekatherms per day (Dth/d) (Market Component); and (2) replace older, less efficient compression facilities with more efficient and cleaner burning compressor units (Replacement Component).”

In its environmental review of Tennessee’s proposed project, FERC said that “the environmental effects resulting from natural gas production are generally neither sufficiently causally related to specific natural gas infrastructure projects nor are the potential impacts from gas production reasonably foreseeable such that the Commission could undertake a meaningful analysis. … Even accepting, arguendo, that a specific pipeline project will induce incremental natural gas production, we have found that the potential environmental impacts resulting from such production are not reasonably foreseeable.”

As for the dangers of GHG emissions from downstream uses of natural gas transported on the expansion project, FERC said that “currently, no standard methodology exists that would enable the Commission to determine what global, physical environmental impacts would result from the project’s incremental addition of GHG’s to the atmosphere.”

On Oct. 6, 2016, Lori Birckhead, Lane Brody, Jim Wright, and Mike Younger, both in their individual capacity and as members of Concerned Citizens for a Safe Environment (Concerned Citizens), filed a request for rehearing of the Certificate Order. They argued that FERC violated NEPA by inadequately evaluating alternatives to the project and by failing to address reasonably foreseeable indirect environmental effects resulting from increased upstream gas production and increased downstream natural gas combustion.

On June 12, 2018, in Tennessee Gas Pipeline Co. L.L.C., Order Denying Rehearing and Dismissing Clarification, 163 FERC ¶61,190 (2018) [Docket No. CP15-77-001] (Rehearing Order), FERC denied Concerned Citizens’ request for rehearing, as well as other rehearing requests.

Among other things, FERC said that “the impacts stemming from incremental production of natural gas that will purportedly be induced by the project do not constitute cumulative impacts associated with the project. Therefore, induced production is not required to be considered as part of the Commission’s NEPA review. The Commission fully responded to commenters’ concerns on this issue in the [Certificate] Order. [Concerned Citizens] have not provided any additional information or arguments on rehearing to change this determination. We therefore deny rehearing on this issue.”

FERC also said it “does not know where the gas will ultimately be consumed or what fuels it will displace, and likely neither does the entity over which the Commission has jurisdiction, i.e., the transporting pipeline. Without such information, the Commission is unable to estimate with any precision the level of GHG emissions from the consumption of the transported natural gas. Any attempt to quantify downstream GHG emissions on the record before us would result in a number so imprecise as to be meaningless. Furthermore, there is nothing in the record showing that specific end uses would not occur absent the proposed project facilities.”

“Accordingly,” FERC concluded, “the potential increase of GHG emissions associated with the production, processing, distribution, or consumption of gas are not indirect impacts of the Broad Run Expansion Project. Companies will continue to negotiate for and find natural gas supplies; end use consumption of natural gas will occur regardless of whether the project before us is approved. … Moreover, as the Commission stated in the [Certificate] Order, the Commission cannot make a finding whether a particular quantity of GHG emissions poses a significant impact on the environment, whether directly or cumulatively with other sources, and how that impact would contribute to climate change. We continue to find that no standard methodology exists. Without an accepted methodology, the Commission cannot make a finding whether a particular quantity of GHG emissions poses a significant impact on the environment, whether directly or cumulatively with other sources, and how that impact would contribute to climate change.”

Commissioner Cheryl A. LaFleur concurred with the majority’s decision in the Rehearing Order despite her “strong disagreement with the Commission’s new policy … that limits the review and disclosure of upstream and downstream [GHG] impacts as part of our [NEPA] responsibilities and public interest determination under the [Natural Gas Act (NGA)]”

Commissioner Richard Glick dissented in part. “I disagree that it is futile for the Commission to seek to determine the extent to which a proposed pipeline expansion might contribute to the existential threat that climate change poses. … In deeming an entire category of potential consequences not reasonably foreseeable and any inquiry into the matter an ‘exercise in futility,’ the Commission excuses itself from making any effort to develop that record in the first place. That falls short of our obligations under NEPA and the NGA to make our ‘best efforts’ to identify the consequences that our decisions will have for communities, individuals, and the environment.”

Concerned Citizens timely petitioned the D.C. Circuit for review of the Commission’s orders. It raised the same issues it raised in its request for rehearing, i.e., that FERC violated NEPA by inadequately evaluating alternatives to the project and by failing to address reasonably foreseeable indirect environmental effects resulting from increased upstream gas production and increased downstream natural gas combustion.

Alternatives

The court disagreed with Concerned Citizens’ contention that FERC acted arbitrarily and capriciously by selecting the proposed site for Compressor Station 563 over an allegedly environmentally superior alternative location. “The Environmental Assessment [(EA)] reflects that, in addition to [Tennessee’s] proposed site, the Commission considered twelve alternatives — including Concerned Citizens’ favored site — and evaluated each with respect to eighteen different environmental factors. Acknowledging that several factors weighed in favor of Concerned Citizens’ site, the Commission pointed out in the [Certificate Order] that other legitimate environmental factors weighed in favor of the proposed site. The Commission explained that ‘[b]ased on [an] overall assessment of the various factors, which do not necessarily carry equal weight, … [Concerned Citizens’] alternative site … does not have a significant advantage over the proposed site.’ … That explanation is sufficient under NEPA.”

The D.C. Circuit also rejected Concerned Citizens’ claim that FERC violated NEPA by failing to consider the possibility that locating the compressor station at an alternative site more centrally located between two existing stations would enable Tennessee to reduce emissions from the facility by 40 percent. “The Commission explained in [the Rehearing Order] that any resulting ‘improvement in air quality impacts’ would ‘not be significant,’ … because the Project as a whole would ‘not have a significant impact on regional air quality.’ … Because petitioners point to no record evidence that undermines that conclusion, and because, as previously noted, the Commission identified certain other environmental factors that weigh in favor of the proposed site, we have no basis for saying that the Commission’s alternatives analysis was arbitrary or capricious.”

In addition, the court concluded that there is no indication that FERC treated as dispositive its finding that the chosen location would avoid unnecessary use of eminent domain. “Under the circumstances of this case, the Commission’s selection of the proposed site was reasonable. NEPA requires nothing more.”

Finally, the D.C. Circuit rejected Concerned Citizens’ argument that FERC violated NEPA by failing to adequately consider the option of building a smaller compressor station at the proposed site. “The Commission addressed that possibility both in the certificate order and the rehearing order, explaining that its engineering staff had reviewed the flow diagrams and hydraulic models submitted by Tennessee … and concluded that ‘Compressor Station 563[] [was] properly designed to provide the additional 200,000 Dth/d of incremental capacity proposed for the project.’ … We decline Concerned Citizens’ invitation to second-guess the Commission’s informed conclusion on this highly technical point.”

Indirect Upstream Impacts

Citing Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017), the court explained that, during the NEPA review process, FERC must consider not only the direct effects, but also the indirect environmental effects of a proposed pipeline project. “Indirect effects are those that ‘are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable,’ 40 C.F.R. § 1508.8(b), meaning that ‘they are sufficiently likely to occur [such] that a person of ordinary prudence would take [them] into account in reaching a decision,’ Sierra Club, 867 F.3d at 1371 (second alteration in original) (internal quotation marks omitted). Here the Commission declined to consider the impacts of upstream gas production and downstream gas combustion, concluding instead that such impacts did not qualify as indirect effects.”

The D.C. Circuit noted that, at oral argument, FERC “conceded that there may well be instances in which upstream gas production is both reasonably foreseeable and sufficiently causally connected to a pipeline project to qualify as an indirect effect. … But according to the Commission, unless the record demonstrates that the proposed project represents the only way to get additional gas ‘from a specified production area’ into the interstate pipeline system, … no such ‘reasonably close causal relationship’ exists.”

FERC argued that the record lacks the information necessary to establish the required causal relationship, and, even if such causation is assumed, the environmental effects of any upstream gas production induced by the proposed project would not be reasonably foreseeable because the source area for the gas to be transported is ill-defined and the number or location of any additional wells are matters of speculation. The court observed that Commissioner LaFleur suggested that one reason the Commission lacks the specificity of information to determine causation and reasonable foreseeability is because it did not ask Tennessee to provide it. “According to the Commission, however, asking for such information ‘would be an exercise in futility,’ because the applicants themselves are unlikely to have it.”

The court found that “Concerned Citizens have failed to either persuasively rebut the Commission’s analysis or meaningfully dispute its assertion of futility.” They identified no record evidence that would help FERC predict the number and location of any additional production wells induced by the project. Nor did they support with evidence their allegation that Tennessee’s shipper would not extract and produce the gas in question without the project because it would have no ability to bring its gas to market.

In addition, the D.C. Circuit said that, “although we are dubious of the Commission’s assertion that asking Tennessee … to provide additional information about the origin of the gas would be futile, Concerned Citizens nowhere claim that the Commission’s failure to seek out additional information constitutes a violation of its obligations under NEPA. We are thus left with no basis for concluding that the Commission acted arbitrarily or capriciously or otherwise violated NEPA in declining to consider the environmental impacts of upstream gas production.”

Downstream Environmental Impacts

According to the D.C. Circuit, the parties’ dispute over whether the Commission reasonably declined to consider GHG emissions and other environmental impacts related to downstream gas consumption “centers largely on the breadth of our court’s 2017 decision in Sierra Club v. FERC. In that case, we held that downstream [GHG] emissions resulting from the combustion of natural gas were a reasonably foreseeable indirect effect of a pipeline project designed to transport gas to certain power plants in Florida.”

Concerned Citizens argued that FERC’s refusal to quantify or otherwise consider downstream emissions related to Tennessee’s project directly contravenes Sierra Club, “which they characterize as standing for the general proposition that combustion-related emissions are necessarily a reasonably foreseeable indirect effect of a pipeline project that ‘must be considered and quantified by the Commission under NEPA.’ ”

FERC argued that Sierra Club is narrowly limited to the facts of that case, and does not establish a bright-line rule that the Commission must evaluate downstream GHG emissions in all circumstances. In the Sierra Club case, FERC said, the destination and use of the transported gas were known, and, therefore, it was reasonably foreseeable that the gas would be burned by identified power plants and produce new GHG emissions at their locations. FERC asserted that the circumstances in this proceeding are markedly different because the destination and the end users are unknown. “As a result, the Commission claims, it is impossible to assess whether the Project will result in increased emissions overall or offset emissions by reducing demand for other (perhaps dirtier) fuel sources. According to the Commission, then, unlike in Sierra Club, ‘[a]ny attempt to quantify downstream … emissions on the record before us’ in this case ‘would result in a number so imprecise as to be meaningless.’ ”

The D.C. Circuit said that “[n]either side has it exactly right.”

FERC “is wrong to suggest that downstream emissions are not reasonably foreseeable simply because the gas transported by the Project may displace existing natural gas supplies or higher-emitting fuels. Indeed, that position is a total non-sequitur: as we explained in Sierra Club, if downstream [GHG] emissions otherwise qualify as an indirect effect, the mere possibility that a project’s overall emissions calculation will be favorable because of an ‘offset … elsewhere’ does not ‘excuse[]’ the Commission ‘from making emissions estimates’ in the first place.”

Concerned Citizens are wrong because they “go too far to the extent they claim emissions from downstream gas combustion are, as a categorical matter, always a reasonably foreseeable indirect effect of a pipeline project.”

The court determined that Sierra Club “falls short of resolving this case in favor of either party.” The D.C. Circuit explained that, contrary to FERC’s position, “Sierra Club hardly suggests that downstream emissions are an indirect effect of a project only when the project’s ‘entire purpose’ is to transport gas to be burned at ‘specifically-identified’ destinations. … Indeed, the Commission itself backed away from this extreme position during oral argument in Otsego 2000 [v. FERC, No. 18-1188 (D.C. Cir. Apr. 11, 2019)], a companion case heard the same day as this one.”

In its brief to the court, FERC suggested that it need not consider downstream GHG emissions if the Commission cannot be considered a legally relevant cause of such emissions due to its lack of jurisdiction over any entity other than the pipeline applicant. The D.C. Circuit found that “this line of reasoning gets the Commission nowhere. Although it is true that ‘[a]n agency has no obligation to gather or consider environmental information if it has no statutory authority to act on that information,’ in the pipeline certification context the Commission does have statutory authority to act. … As we explained in Sierra Club, ‘Congress broadly instructed the [Commission] to consider “the public convenience and necessity” when evaluating applications to construct and operate interstate pipelines.’ … 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’ — even where it lacks jurisdiction over the producer or distributor of the gas transported by the pipeline. Accordingly, the Commission is ‘not excuse[d] … from considering these indirect effects’ in its NEPA analysis.”

Turning to the question of whether FERC acted reasonably in declining to consider GHG emissions and other environmental impacts from downstream gas combustion in this proceeding, the court said it was “troubled,” as it was in the upstream-effects context, “by the Commission’s attempt to justify its decision to discount downstream impacts based on its lack of information about the destination and end use of the gas in question.” The D.C. Circuit pointed out that it has held that “NEPA analysis necessarily involves some ‘reasonable forecasting,’ and … agencies may sometimes need to make educated assumptions about an uncertain future.” 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 found that FERC “made no effort to obtain the missing information from Tennessee …. Despite initially attempting, once again, to invoke the limited nature of its jurisdiction in order ‘to point out that there are limitations to [its] ability to ask’ for the necessary information, the Commission ultimately conceded during oral argument that its lack of jurisdiction over shippers, distributors, and end users ‘doesn’t preclude or foreclose’ it from further developing the record by requesting additional data from the project applicant. … Although the Commission asserts that the project applicant itself is unlikely to possess the needed information, we are skeptical of any suggestion that a project applicant would be unwilling or unable to obtain it if the Commission were to ask for such data as part of the certificate application process. In fact, when we asked counsel for Tennessee … during oral argument ‘what would have happened if the Commission …, as part of your application,’ had requested that ‘you … ask the shipper/marketer where the gas is coming from,’ he replied that the company ‘would have gone to Antero [the shipper] and posed the question.’ … ‘When the regulator asks us questions,’ counsel explained, ‘we generally answer them as promptly as possible and as completely as possible.’ ”

Despite these misgivings over FERC’s attempts to obtain information it would need to determine that downstream GHG emissions qualify as a reasonably foreseeable indirect effect of Tennessee’s project, the D.C. Circuit found that “Concerned Citizens failed to raise this record-development issue in the proceedings before the Commission. We therefore lack jurisdiction to decide whether the Commission acted arbitrarily or capriciously and violated NEPA by failing to further develop the record in this case.”

The court explained that NGA section 19(b) provides that no objection “shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do.” Therefore, the court said, “taking the record as it currently stands, we have no basis for concluding that the Commission acted unreasonably in declining to evaluate downstream combustion impacts as part of its indirect effects analysis.”

Glick's View

In a series of “tweets” posted on Twitter.com on June 4, 2019, Commissioner Glick said the court’s decision “unambiguously affirms” the Commission’s obligations under NEPA and NGA “to consider the reasonably foreseeable upstream & downstream [GHG] emissions caused by an interstate [natural gas] pipeline.” Although the court denied the petition on procedural grounds, “the opinion puts to bed any suggestion that [NEPA and the NGA] do not permit [the Commission] to seriously consider the [GHG] emissions caused by a pipeline. … The Court also rejects [the Commission’s] effort to hide behind artificial limits on its jurisdiction as a basis for ignoring a pipeline’s effect on [climate change].”

For More Information

See ¶603: Environmental Compliance and ¶608: Certification Under §7(c) for more information on FERC’s review of proposed interstate natural gas pipeline projects.

Birckhead v. FERC, No. 18-1218 (D.C. Cir. June 4, 2019).