United States: D.C. Circuit Upholds DOE's Authorization Of LNG Exports From The Freeport LNG Terminal

Last Updated: August 23 2017
Article by Mark R. Haskell, Lamiya Rahman and Brett Snyder

Most Read Contributor in United States, September 2017

On Tuesday, August 15, 2017, the U.S. Court of Appeals for the District of Columbia Circuit rejected Sierra Club's petition for review of a U.S. Department of Energy ("DOE") order authorizing long-term exports of liquefied natural gas ("LNG") to Non-Free Trade Agreement ("non-FTA") nations from the Freeport LNG terminal.1  This decision marks the first time the D.C. Circuit has addressed challenges to DOE's review of long-term, non-FTA LNG export applications under the National Environmental Policy Act ("NEPA").  The court also addressed related arguments under the Natural Gas Act ("NGA").  

Last year, the D.C. Circuit rejected challenges that the Federal Energy Regulatory Commission ("FERC") violated NEPA by, among other things, failing to adequately consider the indirect environmental effects of increased natural gas exports (e.g., induced domestic natural gas production and increased use of coal-fired electric generation) when approving applications to construct and operate LNG facilities.2  The D.C. Circuit held that, because DOE has the legal authority to approve natural gas exports, FERC is not required in its NEPA review to consider the possible environmental effects of increased natural gas exports.3  The court directed that such effects should be addressed instead in a proceeding challenging DOE's authorization.4

DOE's NEPA Analysis

In its August 15 decision, the court first considered Sierra Club's challenges to DOE's NEPA review.  Sierra Club made three "indirect effects" arguments, each of which the court rejected.5

First, Sierra Club challenged DOE's review of the indirect effects of induced domestic natural gas production that may result from increased exports.  While the DOE has commissioned a generalized study of the potential effects of increased gas production,6 Sierra Club faulted DOE for declining to consider the indirect effects that the specific level of exports from the Freeport LNG facility will have on induced production and, in turn, on specific environmental resources.  The D.C. Circuit upheld DOE's determination that such indirect effects are not "reasonably foreseeable" for purposes of a NEPA analysis.  The DOE noted as a preliminary matter that it is difficult to predict the quantity of natural gas that may be produced in response to an incremental increase in exports from the Freeport LNG terminal.  Moreover, DOE argued, it could not determine where exactly gas production would occur, given the interconnected nature of the U.S. pipeline system.  As a result, DOE concluded that the localized environmental effects of increased gas production are not reasonably foreseeable, and, therefore, analysis of specific levels of exports is not warranted under NEPA.7

Next, Sierra Club contended that DOE failed to consider the indirect effects that might arise if increased exports raise gas prices and ultimately cause the electric power sector to switch from gas-fired to coal-fired generation.  The court rejected this argument, agreeing with DOE's assessment that the causal chain between the authorized exports and the potential effects of increased coal usage was "even more attenuated" than the effects of induced gas production.

Finally, Sierra Club challenged DOE's review of potential greenhouse gas emissions.  With respect to upstream emissions, Sierra Club argued that DOE failed to discuss greenhouse gases that may result from export-induced gas production as part of the Environmental Impact Statement for the project.  The court pointed out, however, that this information was, in fact, disclosed in DOE's Life Cycle Report.  Regarding downstream emissions, Sierra Club argued that DOE should have evaluated additional variables in its methodology, such as the potential for LNG to compete with renewable energy sources in certain markets.  The court affirmed DOE's determination that, for foreseeability and feasibility reasons, an analysis of the effects on each fuel source in every LNG-importing nation is not required under NEPA.

DOE's Public Interest Analysis

After upholding DOE's NEPA analysis, the court turned to the adequacy of DOE's "public interest" analysis under NGA section 3.  Sierra Club's only contention here was that DOE failed to conduct an adequately thorough analysis of environmental effects.  Having already rejected Sierra Club's environmental arguments with respect to NEPA, the court found no basis for reevaluating these issues under the NGA.  Moreover, given the NGA's presumption in favor of exports, the court found that DOE is well within its statutory discretion to conclude that the non-environmental benefits of the application outweigh the potential environmental harms:

. . . [E]ven if the Department determined the [environmental] impacts were significant, it could still find that the public interest weighs in favor of allowing the exports.  "[I]t is . . . well settled that NEPA itself does not mandate particular results, but simply prescribes the necessary process." Thus, "[i]f the adverse environmental effects of the proposed action are adequately identified and evaluated, the agency is not constrained by NEPA from deciding that other values outweigh the environmental costs."8

Other Pending Petitions

This decision is positive precedent for the LNG industry, but some additional challenges remain pending.  Sierra Club has filed four other petitions for review of DOE LNG export authorization orders, all of which are currently pending before the D.C. Circuit.9  These petitions repeat similar NEPA-related arguments, which the court likely will decide consistently with its August 15 decision.  However, they also include certain additional challenges to DOE's public interest analysis, including that DOE ignored the disproportionate economic effects of increased exports, which will benefit a minority of Americans and leave a majority of the population worse off.10

Footnotes

1 See Sierra Club v. U.S. Department of Energy, No. 15-1489 (D.C. Cir. Aug. 15, 2017).  Sierra Club challenged the DOE Office of Fossil Energy's November 14, 2014 order granting Long-Term Multi-Contract Authorization to Export LNG from the Freeport LNG Terminal to Non-Free Trade Agreement Nations, as well as its December 4, 2015 order denying requests for rehearing.

2 See Sierra Club v. FERC, 827 F.3d 36 (D.C. Cir. 2016); Sierra Club v. FERC, 827 F.3d 59 (D.C. Cir. 2016); EarthReports v. FERC, 828 F.3d 949 (D.C. Cir. 2016).

3 Under section 3 of the NGA, authority to approve exports of natural gas lies with the DOE.  FERC, on the other hand, is charged with authorizing the siting, construction, operation, or expansion of LNG terminals.

4 See Sierra Club v. FERC, 827 F.3d at 46.

5 The court noted that its analysis applies equally to DOE's cumulative effects analysis.

6 The DOE has issued two environmental reports examining the environmental effects of LNG exports: (1) the Addendum to Environmental Review Documents Concerning Exports of Natural Gas from the United States ("Addendum"), which examines the impacts of export-induced natural gas production in the United States; and (2) the Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the United States ("Life Cycle Report"), which evaluates the indirect effects of LNG exports on global greenhouse gas emissions.  Although the DOE argued that these environmental reports are supplemental to its NEPA review, the court considered these materials to be part of DOE's environmental review.

7 Similarly, DOE responded that the shale play-level regional analysis requested by Sierra Club would not be meaningful due to the expansive size of the various shale plays and the local nature of the environmental issues associated with unconventional gas production.

8 Sierra Club v. DOE, Case No. 15-1489, slip op. at 24 (citations omitted).

9 See Sierra Club v. DOE, Case No. 16-1186; Sierra Club v. DOE, Case No. 16-1252; Sierra Club v. DOE, Case No. 16-1253; and Sierra Club v. DOE, Case No. 16-1426.

10 See, e.g., Final Opening Brief of Petitioner Sierra Club, Sierra Club v. DOE, Case No. 16-1253 (D.C. Cir. Mar. 31, 2017) (challenging DOE's May 12, 2015 order granting authorization to export LNG from the Corpus Christi Liquefaction Project).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.