FERC Gas Litigation Pipelines

After Broad Run, FERC’s GHG policy is on thin ice

June 7, 2019

The DC Circuit fired a warning shot this week at the Federal Energy Regulatory Commission and its analysis of the greenhouse gas emissions associated with gas pipeline projects. The court rejected the core legal arguments that underpin the agency’s policy and admonished FERC for its “less-than-dogged” efforts to build a robust record regarding these emissions. Although the court upheld FERC’s approval of the Broad Run project on procedural grounds, the main takeaway is that FERC’s climate policy is contrary to law and must be revised.

FERC’s historic take

FERC reviews applications to construct and operate interstate gas pipelines. Under federal law, FERC must disclose and consider the significance of all the reasonably foreseeable direct, indirect and cumulative effects caused by a proposed pipeline. Applying this to greenhouse gas emissions, or GHGs, FERC historically has cabined its analysis to the emissions caused by the construction and operation of the pipeline itself (midstream emissions). FERC has excluded from its analysis any GHGs associated with gas production (upstream emissions) or gas use (downstream emissions) (see here for more).

Sabal Trail forces FERC’s hand

In 2017, in the landmark Sabal Trail case, the DC Circuit rejected FERC’s approval of the Southeast Market Pipelines project because FERC had failed to include an analysis of the project’s downstream GHGs. While FERC briefly expanded its discussion of both upstream and downstream emissions, last year, FERC issued its current GHG policy, which restricted FERC’s consideration of these emissions to cases that match Sabal Trail exactly (in Sabal Trail, the project’s entire purpose was to transport gas to known power plants). This eliminated from consideration almost all upstream and downstream emissions associated with pipeline projects.

The DC Circuit responds

While not directly addressing FERC’s climate policy, the DC Circuit’s Broad Run decision rejects the core legal arguments that form the basis for that policy.

First, the court dismissed FERC’s restricted reading of Sabal Trail, noting that the case “hardly suggests” that downstream emissions are only to be considered “when the project’s ‘entire purpose’ is to transport gas to be burned at ‘specifically-identified’ destinations.”

Second, FERC has argued that downstream emissions are not reasonably foreseeable because the gas may displace other fuel sources. The court rejected that claim, too, flatly saying that FERC “is wrong to suggest that downstream emissions are not reasonably foreseeable simply because the gas transported … may displace existing natural gas supplies or high-emitting fuels. Indeed, that position is a total non-sequitur.”

Third, FERC has argued that because it does not regulate downstream end-users, its approval of the pipeline transporting the gas to those end-users is not the cause of those emissions. The court also rejected this argument, stating that because FERC can reject a pipeline project due to its harmful environmental effects, its authorization is a legally relevant cause of the project’s downstream emissions, “even where it lacks jurisdiction over the producer or distributor of the gas transported by the pipeline.”

Last, FERC has claimed that, even if it was required to conduct these analyses, because of the various actors involved in the gas supply chain, it would be “an exercise in futility” to ask project developers for more information about the gas’s origin or destination. The court was “troubled,” “skeptical,” and had “misgivings” about this “dubious” claim. It further criticized FERC’s “less-than-dogged” attempts to obtain this information. As noted by the court, federal law requires FERC “to at least attempt to obtain the information necessary to fulfill its statutory responsibilities,” and yet, for Broad Run, FERC made “no effort” to obtain this information from the project developer.

The time is now

In response to the Broad Run decision, FERC Commissioner Richard Glick called on the agency to reform its GHG policy immediately, as the decision “unambiguously affirms” FERC’s legal obligation to analyze the reasonably foreseeable upstream and downstream emissions of projects it approves. For too long, FERC has been trying to check the climate box and move on. FERC must take on this challenge immediately to comply with federal law. Otherwise, FERC is putting itself on a crash course that, in the process, will approve pipeline projects on dubious legal grounds, all the while enabling the taking of private landowners’ property to facilitate those projects and leaving massive energy investments in legal jeopardy. Additionally, by the time a court has a chance to review these approvals, the initial environmental damage likely already has occurred, as many projects do not reach the courts until they are already at least partially built and in service (this was the case in both Broad Run and Sabal Trail).

The time is now for FERC to put itself on a solid legal footing.