Driven by recent court actions, the Federal Energy Regulatory Commission is facing a serious challenge to the way it handles natural gas pipeline cases. How the commission will react now that it has a full five members, and how a new administration may influence the decisions, likely will be a FERC focus in the months ahead.
A recent analysis by the Washington law firm of Pitney Day examines the difficulties facing FERC on pipeline certifications. The paper highlights four recent FERC cases in the D.C. Circuit Court of Appeals:
- Food & Water Watch, a gas pipeline expansion from western Pennsylvania to metro New York. According to the Justia summary, the court found “FERC had amply discussed the significance of GHG emissions and that it was not required to label the increased emissions and ensuing costs as either significant or insignificant.”
- New Jersey Conservation Foundation , a pipeline expansion from Pennsylvania to New Jersey where the court found that FERC “acted arbitrarily by not adequately explaining its decision regarding the significance of greenhouse gas emissions and failing to discuss possible mitigation measures.” In another, perhaps more significant, wrinkle the court found FERC “did not properly consider evidence showing that current capacity was sufficient to meet New Jersey’s natural gas demands and that the precedent agreements with LDCs did not necessarily indicate market need.”
- Healthy Gulf, an LNG terminal in Louisiana, where FERC “inadequately explained its failure to determine the significance of the project’s GHG emissions and failed to properly assess the cumulative effects of the project’s NO2 emissions.”
- Alabama Municipal Distributors Group , a series of expanded pipelines, compression facilities, and meter stations. As Justia explained, “The court found that FERC’s certification was reasonable and reasonably explained, as was its decision to deny a windfall to a pipeline owner’s existing customers.”
What to make of these apparently contradictory appeals court rulings? According to the Day Pitney analysis, “While the finding of whether FERC acted arbitrarily in reaching certain conclusions on a project’s environmental impacts varied in each case, the Court’s reasoning for its decisions remained the same – namely, that FERC must reasonably explain its analyses and decision.”
The thrust of the cases, argues the analysis, is that FERC must try harder to come up with a consistent explanation of its decisions. “Viewed together,” the lawyers concluded, “these cases indicate that FERC will need to provide more-comprehensive evaluations of the entire record when considering certificate applications.”
The New Jersey case “in particular, could significantly impact natural gas companies seeking regulatory approval…as they may need to provide more rigorous mitigation plans and substantial evidence beyond simply providing precedent agreements to demonstrate need.”
The analysis essentially suggests that the court found the commission has been lazy in its analysis of the need for projects, relying solely on shippers’ assertions and precedent agreements.
“We hold that FERC acted arbitrarily in granting the Certificate Order because it did not respond to some of the 21 material challenges to its finding of market need for the Project.” — U.S. Court of Appeals for the District of Columbia
In the New Jersey opinion, the court wrote “We hold that FERC acted arbitrarily in granting the Certificate Order because it did not respond to some of the 21 material challenges to its finding of market need for the Project.”
The commission didn’t explain why it rejected New Jersey’s two independent market studies showing current capacity would meet New Jersey’s natural gas demands beyond 2030. It didn’t examine how local gas distribution companies “can pass on fixed pipeline construction costs to existing captive ratepayers while profitably selling any excess capacity to others, perhaps even at below-market prices.” FERC arbitrarily dismissed New Jersey law mandating “sizeable and continuous reductions to natural gas usage by public utilities, and instead described those requirements as unenforceable.”
The Day Pitman paper also said the rulings, and a new commission, may prompt FERC to revive its “currently dormant” February 2022 “Interim Greenhouse Gas (GHG) Emissions Policy Statement (PL21-3-000).” That essentially brought the commission into line with the National Environmental Policy Ac. Without explanation, FERC shelved it a month later amid Congressional pushback.
–Kennedy Maize