Tennessee Gas Decision: Oil & Gas Implications

by Pillsbury Winthrop Shaw Pittman LLP
Contact

On June 6, 2014, the U.S. Court of Appeals for the DC Circuit ruled that the FERC violated the National Environmental Policy Act (NEPA) by improperly "segmenting" its NEPA analysis of a four-part upgrade to Tennessee Gas Pipeline's 300 Line System. The Tennessee Gas 300 Line connects the booming gas fields of western Pennsylvania to gas-hungry locations in the northeastern U.S. The court held that FERC's NEPA review needed to consider the project in its entirety, not on a segment-by-segment basis.

The Tennessee Gas decision has important ramifications for the U.S. pipeline industry and other industries that construct complex multi-phased projects that are subject to NEPA. NEPA is often triggered by a federal agency’s approval of major construction activity, as was the case here. Where NEPA-affected projects entail segments that 1) overlap in time, and 2) are functionally, physically and financially interrelated, environmental groups often argue that NEPA review should focus extensively on the project as a whole, rather than each segment. The Tennessee Gas opinion will help to support this line of argument. The result could be more NEPA-related project delays for pipeline and other long-line construction projects that require federal approvals subject to NEPA.

Background

Between 2010 and 2013, four pipeline upgrades were constructed along the entire eastern leg of the 300 Line. Tennessee Gas submitted and ultimately received FERC approval for all four upgrades as separate projects. FERC found that each segment was a stand-alone project and decided to review each of the four projects individually for NEPA purposes. Under this approach, the FERC concluded that no single segment warranted the preparation of an Environmental Impact Statement (EIS). An EIS, in contrast to the simpler Environmental Assessment used in this case by the FERC, can significantly complicate and lengthen the overall NEPA review process. The FERC clearly wanted to avoid this kind of delay in bringing needed natural gas to the Northeast.

Environmental organizations challenged the third FERC certification for Tennessee Gas’ 300 Line upgrade (the “Northeast Project”) claiming that it was improper for the FERC to consider that segment in its NEPA review separately from the other three segments, one of which was already under construction and the other two pending before the FERC. A primary focus of the petitioners was the degree of ecological fragmentation caused by the project. The Northeast Project upgrade involved the clearing of 265 acres of forest, whereas the entire project entailed the clearing of 628 acres.

After their NEPA challenge was rejected by the FERC, the environmental groups petitioned the DC Circuit for review in 2013. In its June 6, 2014, opinion, a three-judge panel of the DC Circuit ruled that a federal agency impermissibly “segments” NEPA review when it divides “connected, cumulative or similar” federal actions into separate projects and thereby fails to address the true scope and impact of the activities that should be under consideration. The Court held that the segmentation approach used by the FERC in this case violated NEPA. The court went on to hold that this improper segmentation prevented the FERC from providing any “meaningful analysis of the cumulative impact” of the overall eastern leg upgrade project, a separate violation of the NEPA.

Significance of the Decision

The Tennessee Gas opinion marks the first time that the DC Circuit has fully applied NEPA’s segmentation policy to a pipeline project. Most of the court’s NEPA segmentation cases have dealt with highways and rail lines. The Court gave considerable deference to the applicable NEPA regulations on segmentation (40 CFR §1508.25) noting that the FERC’s brief did not attempt to square its position with these regulations. The applicable NEPA regulations make it clear that federal agencies must consider the effect of “connected actions” and “similar actions” when carrying out their responsibilities under the NEPA. The regulation defines actions as being “connected” if they trigger other actions, cannot proceed without previous or simultaneous actions, or are interdependent parts of a larger action and depend on the larger action for their justification. Id. The court found that all four segments were connected and similar, emphasizing the fact that all of the segments overlapped in time. In summary, the court concluded that all four upgrades were “physically, functionally and financially connected and interdependent,” thus warranting a single NEPA analysis. The case was remanded to the FERC, which will now have to decide how to apply the decision to a project that is already near completion.

The FERC sought to defend its segmentation approach by arguing that each of the four segments was tied to separate gas delivery contracts for the increased volume of gas that the upgrade would provide. This led FERC to contend that each segment had substantial independent utility so as to justify segmentation. The court rejected this line of argument, citing record evidence that the four segments were financially interdependent, i.e. the first segment made the other segments less costly. The FERC also claimed that since there were “no logical termini” for any of the four segments, it was appropriate for the FERC to segment the four projects according to the business considerations that led Tennessee Gas to segment them the way it did. The court likewise rejected this line of argument. The court reasoned that the absence of logical termini along the eastern leg of the 300 Line meant that the Line (and hence the four upgrades) should be considered as a single interdependent project not as four separate projects.

The Tennessee Gas decision has important ramifications for all NEPA-affected projects that are constructed in phases or segments that are related to each other in time and place. To support a segmented approach to NEPA review, the agency and the project proponent will need to marshal convincing evidence that each segment has independent utility and can stand on its own even if the other segments are not constructed. Because oil and gas projects are often developed in phases, the decision will have particular relevance for that industry. In short, projects that avoid full NEPA analysis through segmentation are now more likely to be challenged by environmental groups who will cite to the Tennessee Gas decision to argue for cumulative assessments of impact under NEPA.

Written by:

Pillsbury Winthrop Shaw Pittman LLP
Contact
more
less

Pillsbury Winthrop Shaw Pittman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.