In the two-to-one decision in Sierra Club v Federal Energy Regulatory Commission, the US Court of Appeals for the DC Circuit vacated and remanded a Natural Gas Act Section 7 certificate of public convenience and necessity granted by the Federal Energy Regulatory Commission (FERC) to the Southeast Market Pipelines Project in 2016.

Overview

The project comprises three natural gas pipelines under construction in Alabama, Georgia and Florida that, once built, will transport over 1 billion cubic feet of natural gas per day over 500 miles in order to feed new and existing natural gas-fired electric plants in Florida and serve the growing natural gas demand of Florida utility customers. The ground to vacate and remand the certificate was FERC's failure under the National Environmental Policy Act to adequately discuss the downstream effects of carbon emissions from natural gas transported through the pipelines in the project's environmental impact statement (EIS).

Decision

The court determined that downstream greenhouse gas emissions constituted a reasonably foreseeable indirect effect of authorising the project, which FERC had legal authority to mitigate. The court concluded that, at a minimum, FERC should have estimated the amount of power plant carbon emissions that the pipelines would make possible as an indirect effect of the project. It directed FERC to redo the project's EIS in order to provide a quantitative estimate of the downstream greenhouse gas emissions that would result from burning natural gas to be transported by the pipelines or explain more fully why it could not do so. It also directed the EIS to explain FERC's position on the social cost of carbon, a tool developed by an interagency working group that attempts to value in dollars the long-term harm caused by each ton of carbon emitted.

Comment

Sierra Club marks the first successful National Environmental Policy Act challenge to a FERC-issued Section 7 certificate since the DC Circuit's 2014 decision in Delaware Riverkeeper Network, Inc v FERC.(1) The decision follows a string of recent unsuccessful attempts by the Sierra Club and others to stymie fossil fuel development through National Environmental Policy Act challenges to natural gas infrastructure.(2)

The court distinguished Sierra Club from these other proceedings – each of which concerned the export of liquefied natural gas (LNG) from terminals approved by FERC – on the grounds that FERC had no statutory authority to consider the indirect effects of LNG exports under the authority delegated to it. Instead, the only agency with statutory authority to act on that information was the Department of Energy (DOE). In contrast, the court determined that Section 7 of the Natural Gas Act gave FERC the statutory authority to deny a pipeline certificate on the grounds that it would be too harmful to the environment, making FERC the legally relevant cause of the direct and indirect environmental effects of the pipeline. Judge Brown, dissenting, argued that there is no difference between the DOE's role in limiting FERC's ability to regulate emissions from LNG exports from the role of Florida state regulators with oversight of power plant emissions. Brown countered that FERC was not the legally relevant cause of the emissions, and thus had no National Environmental Policy Act obligation to assess the downstream impacts.

The court provided a simple path for FERC to follow on remand, with guidance on how to approach the emissions calculation in an updated EIS. However, the remand is the first court-mandated test for FERC's newest commissioners to consider and address greenhouse gas emissions and climate change. Former Chair Norman Bay raised the impact of greenhouse gas emissions, and suggested that FERC pay them greater consideration in Section 7 certificate proceedings immediately before his February 3 2017 departure from the agency.

For further information on this topic please contact Emily Mallen at Sidley Austin by telephone (+1 202 736 8000) or email (emallen@sidley.com). The Sidley Austin LLP website can be accessed at www.sidley.com.

Endnotes

(1) 753 F.3d 1304 (2014).

(2) See, for example, Sierra Club v FERC (Freeport), 827 F.3d 36 (DC Cir 2016); Sierra Club v FERC (Sabine Pass), 827 F.3d 59 (DC Cir 2016); and EarthReports, Inc v FERC, 828 F.3d 949 (DC Cir 2016).

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