D.C. Circuit Rules that FERC, In Some Circumstances, Must Consider Downstream Greenhouse Gas Emissions Resulting from Projects It Approves

Today, the D.C. Circuit Court of Appeals issued its opinion in Sierra Club, et al. v. FERC, No. 16-1329. The case primarily concerned the analyses of greenhouse gas (GHG) emissions and environmental justice in the Federal Energy Regulatory Commission’s (FERC’s) Sabal Trail Project National Environmental Policy Act (NEPA) review. Writing for the majority, Judge Griffith announced an update to the Court’s black-letter NEPA jurisprudence:
“We conclude that at a minimum, FERC should have estimated the amount of power-plant carbon emissions that the pipelines will make possible.”

Id. at *19. The D.C. Circuit rejected the application of Dept. of Transportation v. Pub. Citizen, 541 U.S. 752 (2004), that defendants put forward, which held that agencies do not have to consider environmental effects that they have no legal authority to prevent. It also distinguished several of its recent liquid natural gas (LNG) holdings, on the grounds that, in those cases, “FERC was forbidden to rely on the effects of gas exports as a justification for denying an upgrade license” to the relevant LNG export facilities. No. 16-1329, at *22 (emphasis in original).
The Court also rejected FERC’s argument that it is impossible to predict the quantity of GHG emissions resulting from its approval. Instead, the Court found that FERC’s estimation of the total estimated capacity of the approval project (here, approximately 1M dekatherms/day, or roughly 1.1B cubic feet/day) was a reasonable baseline assumption.  The panel similarly rejected FERC’s argument that it should be excused from making emissions estimates “just because the emissions in question might be partially offset by reductions elsewhere.” See No. 16-1329, at *25-*26.
Plaintiffs had also challenged the capital structure relied upon by FERC in approving the pipelines.  As proposed, the project would have had a 14% rate of return, with a 60% equity/40% debt capitalization split.  FERC held that 14% was too great a return, but approved the project on the basis of a “hypothetical capitalization structure” of 50% equity/50% debt. The Court “confess[ed] to being skeptical” that FERC could justify this “hypothetical capitalization structure” solely on the grounds that it had approved a similar rate for a similar capital structure in the past. However, the Sierra Club hadn’t attacked that specific structure in its opening brief, instead focusing on hypothetical capital structures in the abstract. Id. at *33.  Because of its failure to address arguments about FERC’s proposed capitalization structure, the Court held that the Sierra Club had waived that argument. It therefore refused to set aside FERC’s determination concerning the rate structure.
The dissent would have adopted FERC’s reasoning viz. GHG emissions, on the grounds that Judge Brown believed that DOT v. Pub. Citizen should have been controlling. Specifically, Judge Brown opined that FERC was not actually obligated to consider downstream GHG emissions from pipelines that it approved.
On the whole, this decision is welcome news for advocates seeking to compel meaningful analysis and review of climate change effects before federal approvals are issued. In particular, the Court pointed out that an agency is not excused from reviewing environmental effects simply because another agency has jurisdiction over those effects. To use one of the Court’s examples, merely presuming that a project will receive a Clean Air Act permit does not relieve the agency from conducting its own independent review of “reasonably foreseeable” air quality impacts of a project under NEPA.

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