The Nickel Report

Federal agencies that authorize or permit large infrastructure projects, like interstate natural gas pipelines, are often subject to the requirements of the National Environmental Policy Act (NEPA), and environmental organizations frequently rely on NEPA to challenge a project. The D.C. Circuit recently struck down a decision by the Federal Energy Regulatory Commission (FERC) to approve the construction and operation of three interstate natural gas pipelines because the Court found defects in FERC’s NEPA analysis. The court’s decision to vacate FERC’s authorization now threatens to shut down the pipelines, including the Sabal Trail pipeline currently supplying natural gas to newly constructed power plants in Florida.

In our earlier post about the Dakota Access Pipeline (DAPL), we addressed whether a court could halt construction or cease operations of a pipeline when it finds deficiencies in the government’s environmental analysis under NEPA. In the DAPL case, the US District Court for the District of Columbia concluded “no,” vacating the federal authorization was not warranted due to the significant likelihood that the agency would substantiate its authorization and the potential for disruptive consequences. In stark contrast to the DAPL decision, the D.C. Circuit has taken a different approach.

On August 22, 2017, a majority of the three-judge panel decided to vacate FERC orders authorizing the construction and operation of the pipelines because the Court found FERC’s environmental analysis was deficient under NEPA. Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017). According to Judge Thomas Griffith who authored the majority opinion, FERC’s environmental impact statement (EIS) did not contain enough information regarding downstream greenhouse gas emissions that would result from burning the gas that the pipeline would carry. The court required FERC to “quantify and consider the project’s downstream carbon emissions or explain in more detail why it cannot do so.” It also ordered FERC to explain whether (and if so, why) it continues to maintain that the “Social Cost of Carbon” – a tool developed for the purpose of assigning dollar values to harms caused by carbon emissions – is not useful for FERC’s NEPA review of particular pipeline projects. Judge Janice Brown dissented, arguing the court’s decision was inconsistent with earlier precedent, and that FERC is not the legally relevant cause of downstream emissions because FERC does not authorize or control “whether the power plants … will come into existence or remain in operation.” Thus, Judge Brown argued NEPA did not require FERC to calculate the power plants’ emissions.

In October 2017, the pipeline operators and FERC filed petitions asking the court to change its remedy to allow the pipelines to continue operating while FERC revises its EIS, similar to the D.C. District Court’s approach towards DAPL.  Rather than remand and vacate the FERC certificates, effectively requiring the pipelines to halt operations, the government and the pipeline operators asked the court to remand without vacating the authorizations. This would allow FERC to supplement its environmental analysis and further consider downstream greenhouse gas emissions while avoiding the disruptive consequences of shutting down natural gas delivery. Citing Supreme Court and D.C. Circuit precedent, including the Allied-Signal test applied in the DAPL decision, the petitions argued that FERC could readily substantiate its decision on remand, and that vacatur would cause significant financial and environmental disruptions.

On January 31, 2018, however, the court denied the petitions for rehearing without any further explanation or legal analysis. Absent further action by the D.C. Circuit, the Supreme Court, or FERC, the D.C. Circuit’s mandate will issue seven days after any order denying the D.C. Circuit stay motions, requiring the pipeline to halt operations.

This case reflects greater scrutiny of NEPA documents by environmental groups and the courts, and demonstrates that even relatively minor defects in the environmental analysis can halt the development or operation of a project. Thus, it is important for project proponents to plan accordingly and work closely with regulatory agencies to ensure that they develop comprehensive environmental analyses.