Going with the Flow Doesn’t Cut It Anymore

The “Kafkaesque regime” that was natural gas pipeline approvals at the Federal Energy Regulatory Commission (FERC) is facing more pushback. That line, coined by D.C. Circuit Judge Millett in Allegheny Defense Project v. FERC, specifically referred to FERC’s prior practice of leaving requests for rehearing of pipeline certificates pending — and thus preventing judicial review — while allowing construction on a pipeline to begin, and in some cases be completed. After the D.C. Circuit’s en banc decision in June 2020, aggrieved parties can now get to court sooner. And two new court decisions have also been critical of the robustness of FERC’s analysis of new natural gas infrastructure. While the path forward for each of the pipelines at issue in these new decisions is yet to be seen, together these cases are sure to have a fundamental impact on FERC’s future pipeline decisions.

Last week, in Vecinos para el Bienestar de la Comunidad Costera v. FERC, the D.C. Circuit found that FERC’s authorization of liquified natural gas export facilities in Texas was flawed under the law. While FERC had quantified the greenhouse gas emissions associated with the project, its error was that it failed to determine the significance of the project’s contribution to climate change. Although FERC cited a lack of a universally accepted methodology as its excuse, the court found that insufficient since FERC did not address requests that it use the social cost of carbon or another generally accepted methodology to value the potential harms of the project.

FERC’s environmental justice analysis was problematic because the agency only considered impacts on environmental justice communities within two miles of the project sites — even though FERC had determined environmental effects of the projects would extend well beyond two miles. FERC also made the head-scratching conclusion that effects of the project “would not be disproportionate but would ‘apply to everyone’ and would ‘not be focused on or targeted to any particular demographic group,’” because all populations affected by the project are minority or low-income. The court remanded to FERC without vacating the project authorizations, giving FERC an opportunity to correct errors and potentially add mitigating conditions.

In the second case, Environmental Defense Fund v. FERC, the D.C. Circuit rejected FERC’s finding that a pipeline was needed and took the unprecedented step of vacating the certificate. On the merits, the court found that FERC’s needs analysis was lacking. The court determined that FERC’s finding of need was based on “plausible evidence of self-dealing” because a single agreement for an affiliate of the pipeline applicant to ship gas using the pipeline was offered to demonstrate need. Given that there was no projected increase in demand to be served by the new pipeline, and no indication of cost savings, that single agreement was insufficient to show need.

Ordinarily, once a certificate is issued by FERC, a pipeline may be constructed while further review is pending. FERC issued a certificate to Spire in a 3-2 decision in 2018. The Spire pipeline is now built and gas is flowing. But the D.C. Circuit’s decision now vacates the authorization for the Spire project. Once the court’s mandate issues, Spire will no longer be able to operate the pipeline.

Spire has launched a multi-pronged strategy to prevent shutdown. Spire has sought rehearing of the remedy from the D.C. Circuit, which delays the issuance of the mandate while pending. The court has asked petitioners in the case to file a response. Spire has also asked FERC for a temporary emergency certificate to allow it to continue operating while FERC considers the case on remand. Spire has argued that shutting down the pipeline would endanger the health and safety of its customers. FERC has responded by asking Spire for additional information to support its claims. Even if FERC does ultimately grant Spire temporary relief, it appears that it is not going to be a rubber stamp.

Both of these cases are likely a sign of what’s to come for similar pipeline cases pending before FERC and in court. And they should provide some lessons for future projects. FERC is currently analyzing its policy for granting certificates. Attorneys general and other advocates have asked FERC to consider the Spire decision in that analysis, arguing that this case “solidifies FERC’s obligations as guardian of the public interest.” These recent court decisions should help guide FERC in more robust analyses of project need and effects on climate change and environmental justice communities.