The (In)significance of Greenhouse Gases in NEPA

When does a regulatory permission *cause* augmented GHG emissions from the expansion of fossil fuel markets? The D.C. Circuit seems to think it never does—at least for NEPA.

In an opinion released late last month, the D.C. Circuit rejected several NEPA challenges brought against the Federal Energy Regulatory Commission’s permissions at Dominion Cove Point.  The climate change claims were the most important and FERC may well count Earthreports, Inc. v. Federal Energy Reg. Comm’n 2016 WL 3853830 (D.C. Cir. 2016) among its most notable NEPA victories for a long time to come.  Had FERC lost, its attention to the climate change impacts of its permissions would’ve had to ramp up dramatically.  But with this victory, as our post explains, FERC can continue, in essence, to ignore climate change as it permits expanded fossil fuel infrastructure in the US.  Of course, with energy infrastructure so vital to the Nation’s greenhouse gas (GHG) emissions future, this raises troubling questions about US fulfillment of its commitments in the Paris Agreement of 2015.

Dominion Cove Point: The Backstory on Emissions Accountancy

The plan seems simple: take a natural gas import terminal on the East Coast and turn it into an export terminal.  Gas prices are depressed here by oversupply, especially in the Marcellus region.  Selling it abroad makes it more profitable.  And converting the facility, while expensive, can be capitalized as a long-term investment.

Our first story on this Lusby, Maryland, facility (known as Dominion Cove Point or DCP) suggested—back when FERC released its “finding of no significant impact” (FONSI) on the proposed approval of their application—that the projected growth in GHG emissions that should be attributed to this changeover should’ve triggered a full NEPA impact statement pursuant to § 102(2)(C).  Of course, it didn’t and that became one claim in the lawsuit.

The plan, after all, can’t go forward without FERC’s permission.  Indeed, Congress has made FERC the “the lead agency for the purposes of coordinating all applicable Federal authorizations and for the purposes of complying with [NEPA]” in most natural gas export applications. See 15 U.S.C. § 717n(b)(1); 42 U.S.C. § 7172(a)(2).

But the Department of Energy retains the authority to permit the export of natural gas “as a commodity,” authority that became very important in the NEPA case decided last month.  More on that in a minute.

Back in 2014, though, FERC decided that, because the plan would be executed mostly inside the footprint of the existing facility, the environmental impact of its action would be less than ‘significant’ within the meaning of § 102(2)(C).  (Hence the FONSI.)

Of course, the Council on Environmental Quality’s (CEQ) rules have long maintained that § 102(2)(C)’s “significant” impact threshold is to include “indirect” effects—effects “which are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable” and that these include “growth inducing effects.”  40 C.F.R. § 1508.8(b).  With that in mind, don’t the impacts of greater Marcellus development belong to the permission to convert Cove Point to an export terminal?  No export terminal in Lusby, no direct path of Marcellus gas to overseas markets.

Now it may be hard to estimate what additional GHGs will result from a project like this, but that shouldn’t mean it escapes any analysis.  And FERC’s argument that its permission wouldn’t be the per se cause of increased Marcellus development shouldn’t have gotten much traction with a reviewing court, either.  And yet it did.

Who/What is the Cause of Export-Bound Marcellus Development?

Our first follow-up story on DCP focused on this issue of causation because it featured heavily in the litigation.  Let’s let the court characterize the contentions, though:

Petitioners contend that the Commission . . . failed to take a hard look at several possible environmental impacts that could result from the Cove Point conversion project. In their view, the Commission’s review should have included the impacts of the increased domestic natural gas production that will result from the exports passing through the converted Cove Point facility, as well as the climate impact of emissions from the production, transport, and consumption of the exported natural gas. . . . The Commission responds that it correctly concluded that the [GHG claims] are not within the scope of NEPA because they are not reasonably foreseeable consequences of the conversion project.

Earthreports, Inc., Slip Op. at *3.  Notice how blinkered to the consequences of its action the agency becomes when NEPA is the governing statute.  An interesting wrinkle, of course, is DoE’s shared jurisdiction—what the court called a “but for” causal connection that wasn’t adequate for NEPA.  Reasonable people can disagree about FERC’s causal responsibility in a private applicant’s plans that require multiple government permissions (including FERC’s).  It certainly is the case that failure to garner any one of them would preclude the project.  But that can just as easily count against FERC’s being considered the “cause” as it can count for the conclusion.

Big Problems @FERC: Ignoring NEPA

The bigger problem is the pattern at FERC.  As we’ve noted here over and over, FERC has systematically marginalized NEPA from its decision-making.  An agency that must decide whether a project makes economic sense—and to do so in the DCP case, FERC had to decide whether export would be sufficiently profitable—shouldn’t be able to perform those calculations and form expectations about the future in one part of its proceeding, only to turn around and play dumb about the very calculability of the same expected future events elsewhere in its proceeding.

Even the FERC EA/FONSI on this project—which assumed a full EIS wasn’t required—could’ve estimated and weighed some likely future export scenarios.  This is, after all, the most significant environmental question of the Marcellus boom over which FERC has presided.

FERC is even under fire lately from Massachusetts Senators Warren and Markey who are wondering about its use of an interest-conflicted consultant Natural Resource Group in the troubled Atlantic Bridge project.  Which brings us to PennEast, another pipeline proposal designed to move Marcellus-produced gas to larger domestic and international markets.  (The Natural Resources Group, while they were delivering FERC its environmental assessment of Atlantic Bridge, was at the very same time working on the PennEast project with Spectra—who needed FERC’s permission to build Atlantic Bridge.)

This is why it seems like a wider schism at FERC.  As EPA complained in another, similar case, leaving gas in the ground now will almost certainly mean that if it is ever accessed, the technology employed will allow less methane to vent to the atmosphere during well completion and production.  As EPA’s new production rules go into effect, indeed, the technology curve on emissions controls is certain to slant upward.the future

So what of the argument that rejecting DCP’s application will leave gas prices depressed and thereby encourage more operators to leave more of the gas in the ground?  How does that impact (global) GHG emissions overall?  Estimates here are admittedly tricky.  Very low natural gas prices will eventually mean doom for the wind and solar industries in their region.   Production tax credits are currently helping wind/solar producers to add capacity in Pennsylvania.  Eventually, though, competition with natural gas will be the limiting factor.  And if over-supply means dirt-cheap gas, wind and solar will surely suffer.  Should we then welcome the export boom—which will very likely raise gas prices?

Hard questions, to be sure.  But ignoring them shouldn’t be an option under NEPA.  So let’s assume that both DCP and PennEast projects are approved, built and put into operation by, say, January 2018.  Spiking gas prices from increased conflict in the Middle East, newly expanded ‘Panamax’ tankers that cut shipping costs, and sagging domestic demand as years of electricity conservation and increased renewables supply all conspire to ship record volumes of Marcellus-produced gas abroad.  Marcellus well drilling explodes yet again, this time with improved well construction/control techniques that substantially reduce methane loss to the atmosphere from well completions compared to those of the 2008-14 boom.  If that is a possible future where export-oriented projects like PennEast and DCP are approved, why shouldn’t FERC be devoting much more attention to these scenarios than it seems to be?

Let us recall what § 102(2)(C) expects in the most basic terms: a hard look at the environmental consequences and those of the alternatives to the agency’s intended course of conduct.  See Balt. Gas & Elec. Co. v. NRDC, Inc., 462 U.S. 87, 97-98 (1983). All of the above is to say that FERC seems to be falling way behind on NEPA and climate change.

The US made serious pledges to mitigate its own emissions, to adapt to expected climate change here at home, and to help other, poorer nations adapt and mitigate as well in the Paris Agreement of 2015.  FERC’s supposed “independence” as an agency shouldn’t exempt it from taking those commitments seriously.

{Image: the VLCC Sirius Star c.2008  ©Wikipedia}

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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