Eleven Projects Caught in the Climate Change Crossfire: FERC and DC Circuit
FERC’s path for addressing the climate change impacts from the pipeline projects it reviews has been developing since the Sabal Trail decision by the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) on August 22, 2017, which we discussed in Impact of Sabal Trail D.C. Circuit Ruling on Pipeline Backlog. FERC first increased the scope of its downstream greenhouse gas (GHG) analysis (as a result of that decision). But in May 2018, FERC announced a new approach for addressing the GHG analysis, stating that where “there is nothing in the record that identifies any specific end use or new incremental load downstream of the [project],” the environmental assessment can exclude analysis of the impact from potential GHG emissions that could result from the use of the gas transported.
This new approach has created two risks for projects pending at FERC. First, as we noted in Government Shutdown Will Impact Projects at all Stages, this new approach has led to repeated dissents by Commissioner Glick and may be causing the delay of nine projects if Commissioner LaFleur is withholding her vote. Second, until the DC Circuit clarifies its Sabal Trail decision, two projects that have been approved with a reduced GHG analysis are at risk of a court decision reversing the certificate, as the court did in Sabal Trail.
If you have a financial interest in the applicant of any of these projects, or are the developer of a project caught in this crossfire between the DC Circuit and FERC, or are awaiting the in-service date for these projects, you will want to be tuned to this risk factor until we get a full complement of commissioners and further clarification from the DC Circuit.
FERC’s Winding Greenhouse Gas Path
Prior to the D.C. Circuit’s Sabal Trail decision, FERC’s downstream GHG analysis was becoming more robust, and had essentially evolved to a calculation of the maximum expected GHG emissions arising from a burn of the gas transported by the pipeline. At the time of the Sabal Trail certificate order, FERC was taking the position that it did not need to calculate the expected downstream gas emissions. The DC Circuit disagreed with that position, at least in cases similar to Sabal Trail, where the end-use of the gas was clearly known.
When the DC Circuit reversed the Sabal Trail order, the environmental groups that had challenged the decision declared it a major victory and asserted that the decision required FERC to calculate both upstream and downstream GHG emissions and to use an economic analysis tool called “the social cost of carbon” to assess the environmental impact of a project. The industry, and eventually FERC, viewed the decision as far more limited, to include only downstream GHG impacts, and only if the end-use of the gas was known and, even in those limited cases, the decision only required a qualitative impact analysis and did not require the use of the social cost of carbon tool.
Current Commissioner’s Views
Based on a number of dissents and concurrences filed since FERC adopted its interpretation of the Sabal Trail decision in May 2018, the current commissioners appear to be split on the proper interpretation of that case:
Until there is a fifth commissioner, this divergence of opinion means that Commissioner LaFleur holds a critical vote, which she may be withholding on certain projects. To date, the following pipeline projects were reviewed by the FERC environmental staff with a GHG analysis in its environmental assessment that does not meet Commissioner LaFleur’s standard. Whether these projects will gain approval from a four-member commission will likely depend on whether Commissioner LaFleur is willing to overlook this deficiency.
Sweden Valley Project
Empire North Project
Portland XPress Phase III Project
Cheyenne Connector Pipeline Project
Northeast Supply Enhancement Project
Southeastern Trail Project
South Mainline Expansion Project
Northern Lights 2019/ Rochester Expansion Projects
Adelphia Gateway Pipeline Project
Projects at Risk of an Adverse DC Circuit Decision
Even if these projects are ultimately approved by FERC, they will join a list of projects that are at risk of being reversed by the DC Circuit on appeal, as the DC Circuit has yet to clarify its Sabal Trail decision. As discussed below, based on recent decisions and oral arguments before the DC Circuit, it appears that the LaFleur position may ultimately be the one that the court adopts, which means the following projects, which have already been approved, are at risk of being reversed if appealed:
Gateway Expansion Project
Line 8000 Replacement Project
Highest Cost Project Currently in the Crossfire
Reading the DC Circuit Tea Leaves
The DC Circuit panel that issued the Sabal Trail decision included Judges Rogers, Brown and Griffith. Since that decision, there has been only one appeal decided that addressed the adequacy of FERC’s GHG analysis. In that case, an appeal of the Atlantic Bridge certificate order, a different three-judge panel, Chief Judge Garland and Judges Tatel and Millett, in a unpublished decision (which means that the opinion may not be used as precedent), found that the FERC analysis was adequate.
A second appeal, challenging the adequacy of FERC’s GHG analysis in the Mountain Valley Pipeline project, was argued in late January before a three-judge panel of Judges Tatel, Katsas and Sentelle. Based on the questioning in that case, it appears that this panel of judges was also satisfied with FERC’s analysis.
The positive news for the industry is that the analysis in both of those cases essentially followed the LaFleur methodology, without the use of the social cost of carbon tool. This means it is very unlikely that the court is going to rule that Commissioner Glick’s interpretation of the Sabal Trail decision is correct. The troubling aspect of these decisions, especially for the nine projects for which Commissioner LaFleur may be withholding her vote, is that both panels appeared to have relied on the LaFleur methodology as a basis for upholding FERC’s decisions.
Until there is a published opinion by the DC Circuit that supports the current FERC methodology, projects that are approved at FERC under an environmental analysis that doesn’t meet the LaFleur standard appear to be at substantial risk to a successful appeal of the FERC certificate. Whether a successful appeal would lead the court to vacate any such certificate will be key to determining the impact from any such reversal. Similarly, until there are five members at the Commission, or unless, Chairman Chatterjee concedes to Commissioner LaFleur’s methodology, the projects that have not yet been approved appear to be at risk of remaining in limbo.
Insights Coming Soon
- EIA burn of gas compared to capacity holders
- LNG (Cameron/Sabine) phase/hurdle Analysis