United States: FERC Certificate Orders Address Estimates Of Pipeline Impacts On Downstream GHG Emissions

Last Updated: March 21 2018
Article by Russell Kooistra and Christopher Zentz

On March 14, 2018 and March 15, 2018, FERC issued separate orders (1) reinstating the certificate for the Southeast Market Pipelines Project ("SMP Project") and (2) authorizing DTE Midstream Appalachia, LLC's ("DTE") Birdsboro Pipeline Project. In approving the projects, FERC held that determining the significance of the indirect effect of a pipeline on downstream greenhouse gas ("GHG") emissions is not possible for purposes of FERC's National Environmental Policy Act ("NEPA") analysis, and that the Social Cost of Carbon tool is not appropriate for estimating a project's downstream impacts in FERC's NEPA analysis. In partial dissents, Commissioners Cheryl LaFleur and Richard Glick asserted that GHG emissions estimates and the Social Cost of Carbon tool can inform FERC's Natural Gas Act ("NGA") section 7 evaluation.

On August 22, 2017, the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") vacated FERC's order approving the SMP Project in Sierra Club v. FERC, holding that FERC's analysis in the final Environmental Impact Statement ("EIS") for the SMP Project did not meet NEPA's requirements (see March 12, 2018 edition of the WER). Specifically, the D.C. Circuit held that FERC failed to include an estimate of the "reasonably foreseeable" downstream GHG emissions caused by the SMP Project, primarily because all of the natural gas transported through the SMP Project would be delivered to natural gas-fired power plants. In response to the ruling, FERC staff finalized a supplemental EIS ("SEIS") on February 5, 2018, which included an estimate for the increase in GHG emissions resulting from the downstream use of natural gas transported on the SMP Project. However, FERC staff "had no basis for determining the significance of impacts from these emissions." While FERC was still considering the D.C. Circuit's order on remand, the D.C. Circuit granted FERC's request to stay the issuance of the mandate that would have otherwise shut down the SMP Project, thus allowing FERC to first finalize its review of the project and incorporate its revised environmental analysis.

In its order on remand, which reinstated the pipeline certificate for the SMP Project (the "SMP Order"), FERC acknowledged that the downstream use of the project would increase GHG emissions both in Florida – where the power plants were located – and nationally. However, FERC found that there was no benchmark against which to measure these figures to determine their significance. Furthermore, FERC stated that downstream GHG emissions are associated with the end use of the natural gas, not the construction or operation of a pipeline. Accordingly, FERC reasoned that denial of a certificate on the basis of downstream GHG emissions would not be due to a finding that the pipeline is too harmful to the environment, but rather would be due to a finding that the end use of the natural gas is too harmful—an issue that FERC believed would be best addressed by Congress or the Executive Branch. Lastly, FERC agreed with its staff's decision not to use the Social Cost of Carbon tool in its environmental review because (1) FERC's authority under NGA section 7 is not directly connected to natural gas production or end use; (2) FERC does not use a monetized cost-benefit analysis in its NEPA review; and (3) the Social Cost of Carbon tool presents various technical issues.

In a separate proceeding commenced on May 1, 2017, DTE filed an application to construct and operate the Birdsboro Pipeline Project, a 14-mile project with 100 percent of the capacity dedicated to the Birdsboro natural gas-fired power plant in Pennsylvania ("Birdsboro Facility"). On November 15, 2017, FERC staff issued an Environmental Assessment ("EA"). Notably, because all of the natural gas transported by the Birdsboro Pipeline Project will be transported to the Birdsboro Facility, the EA estimated the amount of carbon dioxide expected to be produced by the Birdsboro Facility annually.

In its order authorizing the Birdsboro Pipeline Project, FERC addressed arguments that the EA for the project did not adequately analyze impacts from the downstream combustion of natural gas by concluding that the EA's estimate of annual carbon dioxide emissions met the D.C. Circuit's requirement that FERC "estimate[] the amount of power-plant carbon emissions that the pipelines will make possible." Similar to the conclusion reached in its SMP Order, FERC rejected arguments calling for the use of the Social Cost of Carbon tool to estimate downstream GHG impacts associated with the Birdsboro Pipeline Project. Specifically, FERC concluded that "the Social Cost of Carbon is not an appropriate and meaningful tool for estimating a specific project's impacts or informing our analysis under NEPA."

Commissioners LaFleur and Glick dissented in part from both orders. In particular, in her dissent from the SMP Order, Commissioner LaFleur disagreed with FERC's determination that GHG emission estimates cannot meaningfully inform FERC's NGA section 7 determination. Commissioner LaFleur also disagreed with FERC's determination that the Social Cost of Carbon tool was inappropriate to analyze downstream GHG emissions and called on FERC to develop a more robust record on costs and benefits of a proposed pipeline. In his dissent from the SMP Order, Commissioner Glick argued that FERC failed to take the "hard look" required by NEPA in its downstream GHG analysis and that the Social Cost of Carbon tool "can serve as an indicator of the climate change impact . . . informing the overall qualitative evaluation under NEPA as well as the public interest balancing under the NGA."

In a joint partial dissent from FERC's order authorizing the Birdsboro Pipeline Project, Commissioners LaFleur and Glick both disagreed with FERC's decision not to employ the Social Cost of Carbon tool to analyze the indirect impact on downstream GHG emissions from the Birdsboro Pipeline Project.

A copy of the SMP Order is available here. A copy of the Birdsboro Pipeline Project order is available here.

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.

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Russell Kooistra
Christopher Zentz
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