United States: D.C. Circuit Ruling Has Potential Implications For Natural Gas Pipeline And LNG Projects Under FERC Environmental Review

A recent decision by the U.S. Court of Appeals for the District of Columbia Circuit rejected certain portions of an environmental analysis conducted by the Federal Energy Regulatory Commission (FERC or "Commission"). This turn of events is likely to cause anyone with, or planning to have, a natural gas pipeline or liquefied natural gas project before the Commission for an environmental review to take notice and to anticipate a more comprehensive and robust level of scrutiny. The follow-on implications of the decision, while not entirely known, could cause the Commission to take an in-depth look at industry activities—such as those related to natural gas production and processing—that may not upon first glance appear to be part of the proposed project under review.

In Delaware Riverkeeper Network v. FERC1 the court rejected the FERC's segmentation and cumulative impacts analysis in Tennessee Gas Pipeline Company,2 which was performed pursuant to the National Environmental Policy Act (NEPA). In Tennessee Gas, the FERC authorized, under Section 7 of the Natural Gas Act (NGA), the rehabilitation of a section of natural gas pipeline ("Northeast Project"). FERC completed an environmental assessment for the Northeast Project and recommended a finding of no significant impact. The Commission's review of the Northeast Project, however, did not consider any of the three other closely related upgrade projects on the same leg of pipeline, even though the first upgrade project was under construction during the FERC's review of the Northeast Project and the applications for the second and fourth upgrade projects were pending before FERC while it considered the Northeast Project application.

In Delaware Riverkeeper, the court found that the FERC had failed to adequately perform a segmentation and cumulative impacts analysis under NEPA. The court restated the rule concerning segmentation, explaining that "[a]n agency impermissibly 'segments' NEPA review when it divides connected, cumulative, or similar federal actions into separate projects and thereby fails to address the true scope and impact of the activities that should be under consideration."3 The court rejected the FERC's segmentation analysis as flawed, noting that the FERC is obligated to consider all "'connected actions,' 'cumulative actions,' and 'similar actions,'" as required by the NEPA regulations.4

The court then shifted its focus to the FERC's cumulative impacts analysis, the purpose of which is to analyze "the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative impacts can result from individually minor but collectively significant actions taking place over a period of time."5 In the court's view, the FERC's cumulative impacts analysis did not recognize the Northeast Project, along with the three other projects on that same leg of pipeline, as "other actions – past, present, and proposed, and reasonably foreseeable."6 Accordingly, the court remanded Tennessee Gas back to the FERC for further consideration.

While the full impact of Delaware Riverkeeper has not yet been realized, the Commission is likely to focus its attention on the entire environmental review process. Applicants seeking authorization for their projects should anticipate an increased emphasis and broader scope by the Commission regarding not only segmentation and cumulative impacts, but also all aspects of its environmental review.

If you have any questions about this Alert, please contact Sheila Slocum Hollis or Dennis J. Hough, Jr. in the firm's Washington, D.C. office, any of the attorneys in our Energy, Environment and Resources Practice Group or the attorney in the firm with whom you are regularly in contact.

Footnotes

1.No. 13-1015 (D.C. Cir. June 6, 2014).

2.139 FERC ¶ 61,161 (2012).

3. No. 13-1015 at 15.

4. Id. at 17 (citing 40 C.F.R. § 1508.25(a)).

5. Id. at 27 (citing 40 C.F.R. § 1508.7)).

6. Id. at 28.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

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