Breaking News: DC Circuit Remands FERC's EIS for Sabal, Hillabee and FSC
A surprising ruling today from the U.S. Court of Appeals for the District of Columbia Circuit could have near-term ramifications for the currently operating Southeast Market Pipelines Project, which includes Sabal Trail, Hillabee, and Florida Southeast Connection pipelines, and the timing in which the Federal Energy Regulatory Commission (FERC) takes action on its backlog of gas pipeline projects.
The Ruling
The D.C. Circuit ruled on a challenge to the FERC's issuance of the Certificate Order authorizing construction of the Southeast Market Pipelines Project. The court, in a 2-1 decision, found that FERC had not adequately considered the greenhouse gas emissions that could be indirectly caused by the construction of Sabal Trail and its related pipeline projects. While the court rejected a number of other challenges to the FERC certificate, the majority found that FERC, in its NEPA analysis, "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." While this decision is unlikely to ultimately impact the operations of the pipelines in question, the issuance of this somewhat surprising decision could delay the issuance of FERC certificates for projects whose certificates have already been delayed by the loss of a quorum at FERC.
In its decision, the majority took great pains to explain why this situation was different from the decisions it had reached concerning Liquefied Natural Gas terminals, where it ruled FERC was not obligated to consider the downstream greenhouse gas effects. The majority found that because FERC's role in this case is to consider the public convenience and necessity of the project, which is a broader role than it plays in the LNG terminal cases, it should consider the downstream consequences if they are reasonably foreseeable, even if another agency has permitting authority over the intended downstream facilities. According to the majority, the downstream greenhouse gas effects in this case were "reasonably foreseeable" because using the gas to create electricity at gas-fired electric power plants was "the project's entire purpose." But the dissenting judge asserted that the fact that FERC does not regulate the downstream uses of the gas means it need not consider those uses in its NEPA analysis.
The Read-Through
The impact of this decision on the three Southeast Market projects that were issued certificates is likely to be minimal because the decision simply remands the case to FERC and requires FERC to prepare an environmental impact statement that is consistent with this opinion. Furthermore, Tennessee Gas Pipeline's Northeast Upgrade Project offers precedent for the D.C. Circuit to order FERC to revise its cumulative impacts analysis, in a case in which the Staff did a revised analysis, but the Commission refrained from taking action. The Northeast Upgrade is also distinguishable because it involved an environmental assessment. It is possible that the Sierra Club will file for a stay, for which, not surprisingly, the consortium of Southeast Market project developers (Enbridge, NextEra, Williams) and its shippers, will file for rehearing.
The impact on the FERC backlog of projects, such as NEXUS, PennEast and many others, currently awaiting a decision is tougher to judge. But today's decision may further delay FERC's issuance of a number of certificate decisions that are in the backlog caused by FERC's lack of a quorum. If the Commissioners take a conservative approach, which we suspect they will for a controversial issue, and require the Office of General Counsel to consider the impact of this ruling on other cases, that could further delay the issuances of those pending certificate orders. If the Commissioners either before or after legal review conclude that the D.C. Circuit ruling should apply narrowly; that is, the ruling in the case should be limited to projects in which the primary purpose of the project is to provide fuel for gas-fired power plants, there should be no delay in the issuance of certificates for projects whose purpose is not so singular.
Finally, the impact on future projects will also be greatly influenced by how FERC interprets this decision. If FERC reads the decision broadly to mean it must analyze downstream greenhouse gas effects in all cases, this could lengthen the process for future cases. But if FERC applies this new requirement to only those cases with similar fact patterns, namely projects whose sole purpose is to provide fuel to power plants, the effect on the industry should be minimal.