FERC’s consideration of indirect environmental impacts of the projects it certifies has been heavily debated as the concerns over climate change increase.  Both the National Environmental Policy Act (NEPA) and Natural Gas Act (NGA) require that FERC consider how an interstate natural gas pipeline directly and indirectly affects the human environment.  Although consideration of direct impacts may be a less controversial topic, FERC’s approach with respect to indirect impacts[1] has proven to be more complex.  It is particularly relevant in light of the Council on Environmental Quality’s (CEQ’s) June 2019 proposed guidance, directing how federal agencies should assess project-related greenhouse gas emissions, discussed in detail here and here.  The guidance suggest that FERC should employ a “rule of reason” when considering impacts of greenhouse gas emissions and if FERC lacks adequate information about these emissions, it does not need to quantify them.  This recommended approach, however, seems to conflict with how the D.C. Circuit interpreted FERC’s duty in analyzing greenhouse gas and other indirect emissions in its earlier June 2019 decision Birckhead v. FERC, USCA Case No. 18-1218 (D.C. Cir. 2019). 

As a threshold matter, all interstate natural gas pipeline projects must be first approved by FERC, which issues a certificate of public convenience and necessity.[2]  Additionally, under the NGA, FERC must account for environmental factors when deciding whether to issue a certificate; indeed, FERC may deny a certificate on the ground that a proposed pipeline would harm the environment even with mitigation.  FERC’s duty to quantify and consider climate-related emissions from pipeline projects was first addressed in 2017 in Sierra Club v. FERC, a case involving the Sabal Trail pipeline.  Sierra Club v. FERC, 867 F.3d 1357, 1371 (D.C. Cir. 2017).  The Sierra Club court held that because downstream combustion of gas transmitted through an interstate pipeline in some instances is a “reasonably foreseeable” effect of the pipeline, FERC must quantify and consider those emissions, or explain in detail why it cannot do so.  Sierra Club, 867 F.3d at 1374.

Just last month, the same court expounded on its Sierra Club decision in Birckhead v. FERC, suggesting that FERC should at least attempt to obtain information regarding upstream and downstream impacts of a pipeline project, to determine if quantification is possible.  Birckhead involved a challenge brought by Nashville residents and businesses to FERC’s approval of the Tennessee Gas Pipeline Co.’s compressor station, part of the Broad Run Expansion project.  Petitioners argued that FERC violated NEPA by failing to address reasonably foreseeable indirect environmental impacts resulting from increased gas production upstream from the compressor station and increased gas combustion downstream from the facility.[3]

Petitioners asserted that upstream gas production impacts result from drilling additional wells and extracting gas for transportation through the expanded pipeline capacity.  FERC concluded that the impacts did not even qualify as indirect, and so it did not consider them during the project review.  Specifically, FERC indicated it lacked the required information to assess those impacts, but as Commissioner LaFleur wrote in her concurrence supporting the underlying certificate, FERC did not have this information because “we have not asked applicants to provide this sort of detail.”  Birkhead, No. 18-1218, at 7-8.  The court did not find FERC’s argument that asking for such information “would be an exercise in futility” to be persuasive: “[W]e are dubious of the Commission’s assertion that asking Tennessee Gas to provide additional information … would be futile.”  Id. at 8-9.

With respect to downstream gas consumption impacts, Petitioners asserted that these result from burning natural gas by industrial and residential customers.  In Birkhead, Petitioners claimed that Sierra Club explicitly mandated FERC to consider and quantify those indirect impacts.  Id. at 9.  The court flatly rejected the argument, indicating that its holding in Sierra Club was specific to the facts of that case.  The court explained that Sierra Club did not establish a general rule that downstream gas consumption impacts are always reasonably foreseeable indirect impacts.  Id. at 9-10.  The court likewise rejected other arguments put forward by FERC, including FERC’s inability to quantify the impacts based on the unknown identity of gas consumers and FERC’s lack of jurisdiction over shippers, distributors, and end users.  Id. at 10-11.

The court notably echoed the concern it expressed in the upstream emissions portion of the opinion: “We are troubled … by the Commission’s attempt to justify its decision to discount downstream impacts based on its lack of information about the destination and end use of the gas in question.”  Id. at 12.  Although the court did not find FERC’s failure to consider upstream and downstream emissions arbitrary based on procedural grounds,[4] it indicated that NEPA required FERC to “at least attempt to obtain the information necessary to fulfill its statutory responsibilities.”  Id.  The court added that “an agency must use its best efforts to find out what it reasonably can,” id. (citing Barnes v. U.S. Department of Transportation, 655 F.3d 1124, 1136 (9^th Cir. 2011), siding with Commissioner Glick, who in his dissent against issuance of the underlying certificate pointed to FERC’s failure to request this information.  Moreover, FERC’s efforts to seek out information would not be futile, since at the oral argument the pipeline project counsel expressed their preparedness to promptly supply FERC with any requested information.  Id. at 13.  An instance like this, the pipeline project’s counsel pointed out, would be no exception.

Petitioners challenging pipeline certificates also often argue that FERC fails to consider the impacts of greenhouse gas emissions because they constitute “cumulative impacts” – that is, impacts taken in combination with other environmental hazards in the same area.[5]  Sierra Club, 867 F.3d at 1370-71.  Although this issue was not discussed in Birkhead, the Sabal Trail decision made it clear that, at least on the facts of that case, FERC had to include in its NEPA analysis a discussion of cumulative impacts of the proposal “when added to other past, present, and reasonably foreseeable future actions.”  Id. at 1374.  Probably not surprisingly, the CEQ’s proposed guidance differs on this point, and indicates that federal agencies do not need to prepare a separate cumulative effects analysis for greenhouse gas impacts “because the potential effects of GHG emissions are inherently a global cumulative effect.”[6]  A direction from the court on this aspect of NEPA analysis may be soon forthcoming.

Consequently, FERC is now faced with competing guidance from the executive and judicial branches regarding its role in considering indirect impacts of greenhouse gas emissions from the projects it certifies.  Although CEQ indicates in its proposed guidance that federal agencies may forego quantification of emissions where information is not available, the D.C. Circuit clearly suggests otherwise, indicating that FERC should at least request the information it needs to make further evaluation.

In light of these developments, where interstate natural gas pipeline and presumably LNG projects are seeking certificates of convenience and necessity from FERC,  applicants should anticipate receiving such requests from FERC.  Additionally, these issues will continue to evolve and it will be important to monitor all branches of government for further developments.

[1] Indirect impacts are those that “are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable.” 40 C.F.R. § 1508.8(b).  Reasonably foreseeable are impacts “sufficiently likely to occur [such] that a person of ordinary prudence would take [them] into account in reaching a decision.” Sierra Club v. FERC, 867 F.3d 1357, 1371 (D.C. Cir. 2017).  Direct impacts, in contrast, are impacts “which are caused by the action and occur at the same time and place.” 40 C.F.R. § 1508.8(a).

[2] 15 U.S.C. § 717(c)(1)(A).

[3] Petitioners also asserted other challenges, not relevant here.

[4] Because the Petitioners did not argue that FERC’s failure to request this information from the pipeline applicant violated NEPA.

[5] As defined in the Code Federal Regulations, cumulative impacts are the “incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative impacts can result from individually minor but collectively significant actions taking place over a period of time.”  40 C.F.R. § 1508.7.

[6] 84 Fed. Reg. 30,098 (June 26, 2019).