DC Circuit Rules that FERC Must Consider Global Warming in Approving New Natural Gas Pipelines

by Snell & Wilmer

Snell & Wilmer

The United States has one of the most extensive natural gas pipeline networks in the world.  This vast network enables the ongoing switch away from coal-fired generation and toward a renewables and natural gas-based electric system.  And it has allowed cheap natural gas produced by fracking to be used throughout the U.S.  Permitting natural gas pipelines is overseen by the Federal Energy Regulatory Commission (FERC), which under recent Republican and Democratic administrations, has followed a generally pro-infrastructure policy encouraging the development of new pipelines.

But a major new ruling may put a put a dent in this policy.  Last week, the D.C. Circuit ruled (2-1) that FERC must consider the global warming impact of the natural gas that travels through new pipelines, overturning a FERC order approving several related pipelines.  FERC’s Environmental Impact Statement (EIS) had considered the immediate impacts of the construction, but not the “downstream” impact of the carbon emissions from power plants burning the gas that traveled through the pipelines.  The Court explained that “[i]t’s not just the journey, though, it’s the destination,” and that the gas will go to new and existing power plants, “generating both electricity and carbon dioxide.”  The Court pointed to an administrative rule of the Council on Environmental Quality (CEQ), 40 C.F.R. 1502.16, that requires indirect effects be considered if they are “reasonably foreseeable.”

The court acknowledged that it had ruled—three times no less—that carbon emissions did not have to be considered in permitting Liquefied Natural Gas (LNG) terminals.   The court distinguished those cases, saying that FERC did not have the legal authority to consider emissions in the LNG cases.  In contrast, the Court said FERC has broad powers to balance the “public benefits against the adverse impacts,” and that since it could consider the negative impacts in its decision, it must consider those impacts in its EIS.

FERC also argued that there was no reliable way to determine the amount of emissions that would be caused by the pipelines.  The Court ruled that FERC either had to quantify the expected emissions or explain “more specifically why it could not have” quantified the emissions.  The court also endorsed a degree of guesstimating, noting that “some educated assumptions are inevitable.”

And while the court acknowledged that the pipelines may “make it possible for utilities to retire, dirtier, coal-fired plants,” it said that those benefits would also have to be estimated and weighed against the other impacts.

Judge Janice Rogers Brown dissented.  She would have applied the earlier LNG cases, which found that the ultimate carbon emissions did not have to be considered.  Judge Brown writes that the majority “blithely asserts it is ‘not just the journey,’” while in fact “NEPA is a procedural statute that is all about the journey.”  In essence, her dissent is about the classic legal issue of “causation,” and she notes that the Supreme Court has ruled “but for” causation is not enough to require an impact to be considered in an EIS.  Rather, she argues that “a reasonably close causal relationship,” similar to proximate causation in tort cases, is required.  Judge Brown writes that “the truth is that FERC has no control over whether the power plants that will emit these greenhouse gases will come into existence or remain in operation.”  She explains that new power plants in Florida can only be built if approved under the Florida Electrical Power Plant Siting Act, and it would be that approval, not the approval of the pipelines, that would be the legal cause of any emissions.

On a separate issue, in approving the pipelines, FERC also approved their initial rates, including the use of a hypothetical capital structure to decrease the rates.  FERC found that the return of equity of 14% was too high, but this could be balanced out be reducing the amount of equity in the capital structure.  The Court affirmed this part of the ruling, essentially saying that FERC can use a hypothetical capital structure to reduce, but not increase, rates.  That part of the ruling seems a bit one sided.

Given the current administration’s focus on infrastructure, the importance of the ruling, and the dissent, it seems likely that FERC will pursue further review, either at the D.C. Circuit (through an en banc i.e. a larger panel) or through the Supreme Court.

Following is a link to the D.C. Circuit Opinion in Sierra Club v. FERC https://www.cadc.uscourts.gov/internet/opinions.nsf/2747D72C97BE12E285258184004D1D5F/$file/16-1329-1689670.pdf.

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.

© Snell & Wilmer | Attorney Advertising

Written by:

Snell & Wilmer

Snell & Wilmer 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.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

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.


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.