2018 Vermont Law Top 10 Environmental Watch List

Permitting Natural Gas Pipelines

In 2017, environmental advocates and some states like New York who have long been concerned with the climate change impacts associated with new liquefied natural gas (LNG) pipelines had reason for optimism. A number of recent regulatory and judicial developments hinted at a new direction in how the Federal Energy Regulatory Commission (FERC) must assess the environmental impacts associated with LNG pipelines—toward increased scrutiny of indirect environmental impacts. But it is too soon to celebrate environmental victory; 2018 will see some major court decisions leading to potential Supreme Court review in the future.

FERC and Consideration of Environmental Impacts in Approving Pipelines

Click on the photo to watch a video on this issue with article co-author Gina Volpe.

FERC reviews proposals to build interstate LNG pipelines and terminals pursuant to Section 7 of the Natural Gas Act. To approve an LNG pipeline project, FERC must find that the project is required by the present or future public convenience and necessity. This process includes an environmental review under the National Environmental Policy Act (NEPA), pursuant to which FERC must consider both direct and indirect environmental effects associated with the proposed project. Indirect effects “are caused by the [project] and are later in time or father removed in distance, but are still reasonably foreseeable.”

Environmental advocates assert that FERC should consider upstream environmental impacts from the production of gas by hydraulic fracturing and downstream environmental impacts from the combustion in power plants. FERC, however, has consistently said that it is not legally responsible for such impacts and that, in any case, they are too speculative.

With respect to upstream environmental impacts from the production of gas by hydraulic fracturing, FERC says that building LNG pipelines does not cause LNG production, but rather gas production causes pipelines to be built to move the produced gas. FERC also says that it is not the “legally relevant cause” of upstream or downstream environmental impacts because FERC does not regulate gas production or its combustion at power plants unless federal lands are involved. Instead, other agencies are responsible for those environmental impacts because it is those agencies that authorize gas production and combustion at power plants. As a consequence, FERC’s environmental review is largely limited to the pipeline infrastructure itself. FERC’s decision in the Northern Access 2016 Project is illustrative of this approach. Until this year, the United States Court of Appeals for the District of Columbia Circuit had upheld FERC’s approach. Environmentalists fear that this approach to permitting LNG pipelines fails to adequately prevent or mitigate potentially significant greenhouse gas emissions associated with LNG production and use, with dire climate change implications.

A number of noteworthy regulatory and judicial developments in 2017 signal a potential shift in FERC’s evaluation of upstream and downstream environmental impacts. In February 2017, in his final official order before stepping down as FERC chairman, Norman Bay penned a “separate statement” to FERC’s order approving the Northern Access 2016 Project. In that statement, Bay encouraged FERC to explore indirect impacts as a policy matter in light of the heightened public interest in LNG pipeline projects, noting that other federal agencies have already taken this approach. Six months later, in August 2017, the D.C. Circuit Court in Sierra Club v. FERC found that FERC’s environmental impact statement for the Southeast Market Pipelines was inadequate with respect to downstream environmental effects because it did not contain enough information on the greenhouse gas emissions that will result from burning the gas. Notably, the Circuit Court found that FERC’s action in permitting the project is the legally relevant cause of downstream environmental effects because FERC could deny a pipeline certificate on the grounds that the pipeline would be too harmful to the environment. Following the D.C. Circuit Court decision, the New York Department of Environmental Conservation relied on this new legal precedent to deny a state water quality certification for Millennium Pipeline Co.’s Valley Lateral Project, in part because FERC failed to consider or quantify the downstream greenhouse gas emissions from the combustion of natural gas transported by the planned pipeline.

While these developments may seem to indicate a major change in the way pipelines are evaluated, the reality is that they may not change the ultimate outcome of FERC’s decision making. In September 2017, FERC issued its draft supplemental environmental impact statement for the Northern Access 2016 Project, including the analysis required by the D.C. Circuit Court. The additional analysis did not change FERC’s conclusion that the project is required by the present or future public convenience and necessity. This demonstrates NEPA’s inability, as a procedural tool, to guarantee environmentally robust outcomes. Further, given the D.C. Circuit Court’s departure from past decisions, commentators speculate that FERC may seek an en banc review and potentially appeal to the Supreme Court. 2018 will be an important year to look out for how FERC maintains or changes the way in which it assesses environmental impacts of natural gas pipelines.