On May 18, 2018, FERC denied rehearing of its April 28, 2016 order (the “April 28 Order”) approving Dominion Transmission, Inc.’s (“Dominion”) New Market Project. Notably, FERC held that it is not required to analyze the upstream and downstream impacts of a proposed pipeline project unless those impacts are considered cumulative or indirect effects within the meaning of the National Environmental Policy Act (“NEPA”). Commissioners Cheryl LaFleur and Richard Glick dissented in part, instead finding that FERC is required to provide the public with information relating to the upstream and downstream impacts of a proposed project and stating that FERC should ask applicants to provide such information.

On June 2, 2014, Dominion filed its certificate application for the New Market Project in New York, which entailed (1) construction and operation of two new compressor stations; (2) modifications to three existing compressor stations; and (3) modifications to one meter and regulating station, all to deliver 112,000 dekatherms per day of gas to National Grid (the “Project”). In the April 28 Order, FERC approved the Project, finding that the benefits of the Project will outweigh any adverse effects. In addition, based on the Environmental Assessment (the “EA”) prepared by FERC staff, FERC found that, if constructed and operated in accordance with certain conditions, the Project will not have a significant impact on the environment.

On May 31, 2016, Otsego 2000, Inc. (“Otsego”) requested rehearing of the April 28 Order, arguing, among other things, that FERC failed to evaluate the upstream and downstream environmental impacts of the Project. Specifically, Otsego argued that the EA failed to evaluate the upstream environmental impacts of increased gas extraction and hydraulic fracturing and the downstream environmental impacts of the development of additional infrastructure (e.g., natural gas-fired power plants, distribution facilities, etc.).

In denying Otsego’s request for rehearing, FERC disagreed that it was required to evaluate the upstream and downstream impacts of the Project in its cumulative analysis. FERC explained that the scope of the cumulative analysis varies on a case-by-case basis and depends on which impacts are reasonably foreseeable. With respect to the Project, FERC noted that there was no information in the record regarding the specific area of supply for the incremental natural gas transported due to the Project – rather, the record only stated that the gas was received via interconnections with Transcontinental Gas Pipe Line Company, LLC and Texas Eastern Transmission, LP – or information regarding any specific end use of the Project, and thus such impacts were not reasonably foreseeable and did not meet the definition of cumulative impacts.

FERC found no evidence in the record that potential indirect impacts of increased greenhouse gas emissions associated with the production or consumption of natural gas were causally related to FERC’s approval of the Project. In doing so, FERC concluded that upstream and downstream environmental effects are not required to be evaluated or quantified by NEPA when “those effects are not indirect or cumulative effects, and thus are not environmental effects of the proposed action . . . .” FERC also held that it “does not control the production or consumption of natural gas” and its approval of interstate natural gas transportation facilities does not induce natural gas production or consumption. Moreover, FERC held that it is not “required to consider environmental effects beyond those which are required by NEPA.” In sum, FERC concluded that it does not need to provide the public with information regarding the potential impacts associated with natural gas production and consumption unless those impacts are cumulative and indirect impacts for purposes of NEPA.

Commissioners LaFleur and Glick dissented in part from FERC’s decision. Specifically, in her separate dissent, Commissioner LaFleur stated that, although she believes that the Project is in the public interest, FERC’s decision resulted in a “policy shift” and that the upstream and downstream impacts of a project are relevant for FERC’s public interest analysis under the Natural Gas Act. In his dissent, Commissioner Glick noted that NEPA requires agencies to take a hard look at the environmental effects of their decisions, and thus FERC was “shirking” its responsibility under NEPA. Instead, both Commissioners LaFleur and Glick stated that FERC should begin asking applicants for information relating to the upstream and downstream impacts of proposed pipeline projects.

A copy of the April 28 Order, including the dissents of Commissioners LaFleur and Glick, is available here.