DC Circuit Directs FERC to Consider Environmental Impacts of LNG Facilities

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In an August 3 opinion in the case of Vecinos para el Bienestar de la Comunidad Costera et al. v. FERC, Case No. 20-1093, the U.S. Court of Appeals for the District of Columbia Circuit determined that the Federal Energy Regulatory Commission (FERC or Commission) failed to adequately review the impacts of two proposed liquefied natural gas (LNG) export facilities on greenhouse gas emissions and environmental justice communities. The court remanded the proceedings to FERC for further consideration and explanation of these issues. Though the decision focused on FERC’s authorization of natural gas facilities, it signaled that the court will carefully scrutinize an agency’s obligations under the National Environmental Policy Act (NEPA), a statute that has far-reaching applicability in the hydropower context.

In 2016, Texas LNG Brownsville LLC (Texas LNG) and Rio Grande LNG LLC (Rio Grande) applied to FERC for authorization to construct and operate two LNG export terminals in Cameron County, TX. In 2019, FERC completed its environmental review under the National Environmental Policy Act (NEPA) and issued Environmental Impact Statements (EIS) for the projects. Later that year, FERC issued orders approving the projects, and denied requests for rehearing of those orders filed by the petitioners — a group that includes area residents, environmental advocacy groups, and a local city. The petitioners appealed to the D.C. Circuit, alleging that FERC’s analysis of the projects’ impacts on climate change and environmental justice communities was insufficient under both NEPA and the Administrative Procedure Act (APA).

The petitioners first argued that, pursuant to the Council on Environmental Quality’s (CEQ) regulations implementing NEPA (40 C.F.R. § 1502.21(c)), FERC was required to use the “social cost of carbon” protocol or another “generally accepted methodology” to analyze the impacts of the projects’ greenhouse gas emissions. The relevant section of the regulations provides that “[i]f … information relevant to reasonably foreseeable significant adverse impacts cannot be obtained … because the means to obtain it are not known, the agency shall include within the environmental impact statement … [t]he agency’s evaluation of such impacts based upon theoretical approaches or research methods generally accepted in the scientific community.” The petitioners took the position that FERC should have used the social cost of carbon tool to assess the impacts of the projects’ greenhouse gas emissions based on FERC’s previous recognition of the tool as a “generally accepted” method for calculating the impact of greenhouse gas emissions. The court agreed and noted FERC’s concerns with the social cost of carbon methodology, but concluded that it was nevertheless “required to address Petitioners’ argument concerning the significance of 40 C.F.R. § 1502.21(c), and that its failure to do so rendered its analyses of the projects’ greenhouse gas emissions deficient.” The court remanded the issue to FERC to provide additional explanation on whether 40 C.F.R. § 1502.21(c) requires it to apply the social cost of carbon tool or a different analytical tool for determining greenhouse gas impacts.

The petitioners also argued that FERC’s environmental justice analyses were arbitrary and capricious under the APA, as it limited its consideration of the projects’ impacts on environmental justice communities to census blocks within two miles of the project sites. The court agreed, noting the Commission’s failure to adequately explain “a rational connection between the facts found and the decision made” when elsewhere in its environmental analyses, FERC determined that environmental effects of the projects would extend beyond two miles from the project sites. The court remanded the issue to FERC for additional explanation on why it chose to limit the environmental justice analyses to two miles of the project sites, or to establish a different radius within which to consider those effects.

FERC’s Chairman Richard Glick issued a statement applauding the court’s ruling, noting that he had previously voted against authorizing the LNG terminals because, in his view, FERC did not adequately consider the greenhouse gas impacts of the projects. On the issue of environmental justice, he stated that “[t]his decision clearly demonstrates that the Commission has the authority and obligation to meaningfully analyze and consider the impacts from GHG emissions and impacts to environmental justice communities,” indicating the importance of these issues to him and his likely focus on them as FERC continues to consider applications not only for natural gas facilities, but also for other energy infrastructure projects.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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