Dominion Cove Point @ the D.C. Circuit: Wherever Causation Leads . . .

A matter we profiled in October 2014 was just argued to the D.C. Circuit last week. Here’s why that court now has a big decision to make.

The Federal Energy Regulatory Commission (FERC) licenses the pipeline transport of natural gas pursuant to the Natural Gas Act and other authorities.  Dominion Energy, Cabot Oil & Gas and others petitioned FERC for permission to convert the major liquefied natural gas (LNG) terminal in Lusby, Maryland, from an import-oriented facility to an export-driven one.  America’s surplus of natural gas leaves its domestic prices depressed from a glut even as the rest of the world is angling to get into the ‘unconventional’ gas boom.  If Cabot could only export LNG from the Marcellus play—not too far from Lusby as the pipeline rumbles—to foreign markets, its average profitability would likely increase, maybe significantly.  That is exactly why Cabot and its allies put so much money into so expensive a project as this pipeline and the facility conversion in Lusby.  {This piece from State Impact Pennsylvania describes the contract Cabot already has in place with several Japanese buyers.}

There’s one hitch, though: when FERC issued its approval, it concluded that the action would not have a significant impact on the environment—that no environmental impact statement (EIS) was required—and completed only a summary environmental assessment (EA) and finding of no significant impact (FONSI).  That’s where the Sierra Club, Patuxent Riverkeeper and others focused their challenges when they went to court in mid-2015.

Upstream or Down-: The Impact Caused by a Needed Permission

NEPA lawyers well know that tracing projected impacts back to an agency proposal is vital.  Indeed, with threshold NEPA issues it’s nine-tenths of the law.  Whether an EIS is required instead of the more summary EA/FONSI turns on the theory of causation one employs.  (Whether an EA/FONSI is prudent rather than some categorical exclusion (CATX) turns on the very same thing.)

What may or must be the cause-to-effect result of the subject action, all things considered?  Agencies routinely rule impacts out of bounds that, by so-called “but-for” causal theories, should really be included because, without the agency’s action (permission, assistance, etc.), the effects just would not occur.  They do so for a variety of reasons—some good and some bad.

Take future greenhouse gas (GHG) emissions from the Cabot/Dominion plan to turn Cove Point into an export terminal.  Will the capacity to export Marcellus gas through DCP cause a future GHG emissions increase over the baseline scenario of no DCP conversion?  The so-called “downstream” effect—the end user’s combustion of gas—is matched by corresponding “upstream” effects: the further, faster development of producing wells throughout the Marcellus region.  Both are the intended result of the facility.  Each represents a major environmental concern (upstream, the concerns are more localized and downstream the concerns are more global).  Should they be weighed to any extent by FERC in deciding whether to permit the facility?  That is the question now before the D.C. Circuit.

Judicial Standards on GHGs/Downstream Results Have Yet to Harden

The courts have, for all their effort, only been able to eek out the barest of generalizations on NEPA’s intersection with causation.  The statute itself is silent on causation.  The Council on Environmental Quality (CEQ) is a bit limited in what it can do to fill the gaps.  The aggregate result is that most NEPA precedents are fact-bound, resisting ready generalization, and agency practices fill the void.

For example, when he was a judge on the First Circuit Justice Stephen Breyer (never at a loss for words) said that NEPA’s causation standard should sweep in “all effects that are ‘sufficiently likely to occur that a person of ordinary prudence would take it into account in reaching a decision.’”  Sierra Club v. Marsh, 976 F.2d 763, 767 (1st Cir. 1992).   That court later held that “reasonable forecasting is implicit in NEPA, and we must reject any attempt by agencies to shirk their responsibilities under NEPA by labeling any and all discussion of future environmental effects as ‘crystal ball inquiry.’”  Dubois v. USDA, 102 F.3d 1273, 1286 (1st Cir. 1996).

CEQ’s regulations sweep in all “reasonably foreseeable” effects, whether direct or “indirect.”  See 40 C.F.R. § 1508.8(b).  This “indirect” effect bit in the rules has, however, spurred as much litigation as it has resolved.  How attenuated must a cause be before it is so indirect as to not comprise a relevantly effective cause?  The petitioners’ joint brief points to the record evidence showing that GHG emissions from the expanded market FERC’s permission will enable are a predictable, intended consequence:

The record demonstrates that the Project will induce additional gas production and that, at every stage, gas development and transmission will leak methane, a potent greenhouse gas. Record evidence also confirms that transporting LNG overseas and burning it contributes to climate change. FERC did not rebut this evidence—which shows over 26 million tons per year of lifecycle greenhouse gases from the Project—but rather omitted any consideration of indirect emissions.

Petitioners’ Joint Brief at 44.

On that score, the Lab’s original reflections on FERC’s refusal to weigh any but the most immediately localized impacts of its permission in Lusby bear repeating:

It is funny how many action agencies use the unpredictability of future markets to limit the scope of their NEPA analyses while at the same time using the predictability of those same markets to justify the means/ends rationality of their proposed actions.

Think about it: why would FERC find it rational to approve this export terminal, or the one being built in Sabine Pass, Louisiana, or the one in Freeport, Texas, unless they will broaden gas markets by connecting supply with demand?  Of course, today, broadening fossil fuel markets is coming to seem like the functional equivalent of harming future people.  And that may be precisely why so many agencies squirm at the thought of having to discuss their part in the bigger picture.

Indeed, we’ve noted this exact dynamic at work in other recent NEPA cases, especially how several courts—including the D.C. Circuit—have refused to accept agency naïveté about the expected impacts of further fossil fuel development: (1) that mined coal will actually be combusted;  (2) that piped heavy oil will actually be refined and combusted; and (3) that pipeline segments are built on the expectation they will eventually reach a practical terminus.

Unfortunately, all of this boils down to something few generalist judges call home: probabilities, their estimation, and what to do with probabilistic theories of causation.  Once the matter turns to the relative probabilities afoot, few generalist judges will want to contradict the agency.  {Although few does not mean none: see our story about a judge that tore into one agency’s woefully inadequate predictive models.}

Causation: On What Probabilities Matter MostDominoes

Rather than abetting agency naïveté—official insistence that we can’t be expected to weigh every possibility, no matter how remote—whenever the question is about further societal investment in fossil fuels, NEPA should be read going forward to demand a ‘hard look.’  On that precise family of issues, causation, responsibility, and plausible emissions pathways will never be self-evident.  But they are growing immensely important and uniquely germane to NEPA’s purpose: “to promote efforts which will prevent or eliminate damage to the environment and biosphere.”  42 U.S.C. § 4321.  The more our public agencies which have the most influence over future fossil fuel infrastructure are permitted to avoid accounting for their role in it, the worse off we all will be.

At least since Hume’s Treatise, our base notions of cause-to-effect have rejected necessity in favor of warranted induction from experience.   And induction from regularities of experience, at least since Nelson Goodman’s Fact, Fiction, and Forecast, has boiled down to what constitutes “confirmation” of our hypotheses about how things work.  Anyone familiar with Goodman’s little book will know that confirmations of a confident sort are rarer than we often think.  But Goodman was clear that all we will ever have to work with at any time is the record, the stock of our experiences and our best efforts to sort out confirmations from disconfirmations.

Anyone making the case that continued investment in fossil fuel infrastructure won’t further entangle our society with them, won’t perpetuate our reliance upon them, and won’t make them the market superior of other, cleaner sources of energy has one gigantic record to explain away.  They should at least be kept on the hook for that explanation under NEPA § 102(2)(C) and CEQ’s interpretation thereof including “indirect” effects.

N.B.: One Theory That Surely Ought to Fail

For a time, the D.C. Circuit seemed poised to hold that the CEQ rules (Parts 1500-1508) lack any power to “bind” others the way typical agency regulations do.  See, e.g., TOMAC v. Norton, 433 F.3d 852, 861 (D.C. Cir. 2006).  The Ninth Circuit long ago held that FERC is bound by CEQ’s rules (notwithstanding FERC’s own dissembling and statements years ago that it would “voluntarily” comply with those rules).  See The Steamboaters v. FERC, 759 F.2d 1382, 1392-93 (9th Cir. 1985).  And a D.C. Circuit panel in WildEarth Guardians v. Jewell, 738 F.3d 298 (D.C. Cir. 2013), just recently said, without any hint of qualification, that CEQ’s rules “implement NEPA,” treating them exactly like one would rules that are to be followed.  Id. at 309 n.5.  That should nullify anyone’s suggestion that FERC’s choices in the DCP matter need not comply with CEQ’s rules.

The D.C. Circuit must now decide whether FERC takes those rules as CEQ would have them interpreted.  If so, the agency’s intransigent insistence on excluding everything upstream from its permission and everything downstream as well is simply inconsistent with the law.

{Image: Dominion Cove Point from Statoil™ 2009 SEC filing}

I teach environmental, natural resources, and administrative law at Penn State Law. Before teaching I was an enforcement lawyer at U.S. EPA. Along the way I've done work for environmental nonprofits and written a fair bit about NEPA.
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