In a 2-1 decision, the D.C. Circuit of the U.S. Court of Appeals has ruled that the Federal Energy Regulatory Commission (“FERC”) did not satisfy the requirements of the National Environmental Policy Act (“NEPA”) when it failed to provide any analysis of downstream greenhouse gas (“GHG”) emissions that will result indirectly from its approval of a natural gas pipeline. Sierra Club v. FERC, No. 16-1387, slip op. at 24 (D.C. Cir. Aug. 22, 2017). Barring a reversal by the D.C. Circuit sitting en banc, or the U.S. Supreme Court, the decision means that agencies performing NEPA environmental reviews must analyze reasonably foreseeable impacts associated with downstream GHG emissions at a level commensurate with their anticipated effects and establishes that agencies should quantify those impacts if able to do so.

In February 2016, FERC approved construction of three related segments of the Southeast Market Pipelines Project (spanning Alabama, Georgia, and Florida) by issuing a Section 7 certificate of public convenience and necessity under the Natural Gas Act, 15 U.S.C. § 717 et seq. The primary purpose of the pipeline, which has since been built and begun operating, is to provide natural gas to Florida power plants. FERC prepared an environmental impact statement (“EIS”) documenting the anticipated direct and indirect environmental impacts of the project; however, the EIS did not discuss the anticipated downstream GHG emissions resulting from the power plants’ burning of the transported natural gas, on the ground that such activity was not a reasonably foreseeable effect of FERC’s approval.

On appeal by environmental groups and local landowners, the D.C. Circuit held that because GHG emissions were a reasonably foreseeable indirect effect of FERC’s approval of the pipeline, FERC’s EIS “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 [even if based on educated assumptions] or explained more specifically why it could not have done so.” Importantly, the court—citing a decision issued just one week earlier, Sierra Club v. U.S. Dep’t of Energy, No. 15-1489, slip op. at 22 (D.C. Cir. Aug. 15, 2017)—caveated that quantification of GHGs is not a blanket rule. Further, the court found that FERC’s EIS should have discussed the Social Cost of Carbon and either deployed it in its analysis or explained why it was inappropriate to do so as FERC has done in the past, EarthReports, Inc. v. FERC, 828 F.3d 949, 956 (D.C. Cir. 2016) (analysis of Social Cost of Carbon not useful because of contested elements and inclusion of harms not significant under NEPA).

Despite the court’s invalidation of FERC’s Section 7 certificate, the pipeline owners have indicated that they will continue to operate the pipeline, and FERC has remained silent. The environmental groups and landowners may oppose any interim pipeline operations. More broadly, the Sierra Club v. FERC opinion gives renewed support to the policy that NEPA analyses should include discussion (and in some cases quantification) of GHG emissions when they are reasonably foreseeable direct or indirect effects of a proposed project. The case illustrates the legal limitations of recent actions by the Trump Administration to deemphasize consideration of climate change impacts in NEPA analysis, such as the rescission of the Council on Environmental Quality’s 2016 guidance on NEPA analysis of GHG emissions, see 82 Fed. Reg. 16576 (Apr. 5, 2017), and the Social Cost of Carbon guidelines. Projects subject to NEPA should give increased attention to whether GHG emissions are reasonably foreseeable from their projects, both directly and indirectly. If GHG emissions are expected to increase, action agencies should be pushed to evaluate the significance of related climate change impacts and to use quantitative analysis when possible.