FERC

KIRK MORGANBORIS SHKUTA SAM LOMBARDO
— Reporters —

Natural Gas Infrastructure Approvals Provide Updated Framework for GHG Accounting; Exhibit Ongoing Disagreements Between Commissioners
                Among the most vexing issues at the Federal Energy Regulatory Commission (FERC) is FERC’s approach to greenhouse gas (GHG) emissions in the context of reviewing proposed interstate natural gas infrastructure projects. Recent orders issued by FERC exhibit ongoing disagreement among FERC Commissioners regarding the role of GHG analysis in certificate proceedings, indicating continued uncertainty for pipeline projects in the future.

                As brief context, section 7(c) of the Natural Gas Act (NGA), 15 U.S.C. § 717f, vests FERC with authority to issue “certificates of public convenience and necessity” (Section 7 Certificates) to construct or operate interstate natural gas facilities, such as pipelines. As part of its Section 7 Certificate review process, FERC must analyze the environmental impacts of approving proposed projects to comply with the National Environmental Policy Act of 1969 (NEPA). The extent to which NEPA requires FERC to evaluate GHG emissions associated with a particular project has been directly at issue in FERC’s recent Section 7 Certificate orders.

                Two recent Section 7 Certificate orders apply a basic framework for calculating and accounting for GHG emissions in connection with a Section 7 Certificate application: (1) FERC will assess the construction and operating emissions of a proposed project and the emissions from downstream combustion of the gas that will be transported by the project, and (2) FERC will generally not assess the GHG emissions from upstream production of the transported gas. Transcont’l Gas Pipe Line Co., 184 FERC ¶ 61,066 (2023); N. Nat. Gas Co., 184 FERC ¶ 61,186 (2023). FERC reasoned that the facts surrounding downstream distribution and combustion of transported gas are reasonably foreseeable and therefore subject to NEPA review. In contrast, FERC reasoned that the environmental circumstances in which natural gas is produced upstream of a transportation project are generally not reasonably foreseeable, especially where the specific natural gas supply source is unknown.

                Although a majority of the Commissioners were able to agree on the foreseeability analysis related to GHG emissions in both Transcontinental and Northern Natural, there remain several points of disagreement regarding what FERC should (or legally must) do with the quantified GHG emissions that are established for each project under review. One key issue is whether FERC must determine the significance of the GHG emissions attributed directly or indirectly to a proposed project. Under NEPA, significant impacts must be reviewed in the more expansive (and onerous) environmental impact statement, not in a less expansive environmental assessment. FERC has previously noted that “determining whether a project’s reasonably foreseeable GHG emissions and contribution to climate change are significant furthers [the purpose of NEPA] by disclosing to the public and the relevant decisionmakers the extent of a project’s adverse environmental impacts.” N. Nat. Gas Co., 174 FERC ¶ 61,189, at P 31 (2021). However, the Commissioners are deeply divided on whether a significance determination is even possible for the climatic impacts from the GHG emissions attributed to a project.

                Commissioner Clements continues to write that FERC must evaluate the significance of a project’s GHG emissions in order to comply with the requirements of NEPA. She argues that FERC “has no reasoned justification for finding emissions insignificant.” Transcont’l, 184 FERC ¶ 61,006, at P 8 (Clements, Comm’r, concurring). In contrast, Chairman Phillips and Commissioners Danly and Christie have expressed that (1) FERC need not characterize the significance of GHG emissions because there are no accepted methods to do so, and (2) the Social Cost of Carbon algorithm is unsuitable for project-specific analysis. Id. at P 4 (Phillips and Christie, Comm’rs, concurring); id. at P 13 (Danly, Comm’r, dissenting). Commissioner Clements in turn maintains that there is no accepted method to determine significance because FERC has never “seriously studied” the issue. N. Nat., 184 FERC ¶ 61,186, at P 3 (Clements, Comm’r, dissenting in part).

                Another divergence among the Commissioners is FERC’s analysis of upstream and downstream GHG emissions. For instance, while Chairman Phillips and Commissioner Clements agree that relevant information about emissions from gas production upstream of pipeline transportation projects is not reasonably foreseeable (as set forth in the holdings of Transcontinental and Northern Natural), Commissioners Danly and Christie assert that FERC has no legal obligation under NEPA or the NGA to estimate upstream GHG emissions at all. N. Nat., 184 FERC ¶ 61,186, at P 9 (Christie, Comm’r, concurring); id. at P 13 (Danly, Comm’r, concurring in part and dissenting in part). Going further, Commissioner Danly maintains that FERC also lacks any legal obligation to estimate GHGs from downstream combustion of transported gas, given FERC’s lack of jurisdiction over the local distribution companies. Id. at P 20 (Danly, Comm’r, concurring in part and dissenting in part).

                In sum, the Commissioners clearly differ over the appropriate GHG analysis in Transcontinental and Northern Natural. While some express concern over FERC’s refusal to engage in the “significance” discussion, others question FERC’s legal obligation to determine GHG emissions from natural gas infrastructure projects at all. However, in both orders, a majority at FERC applied a basic analytical framework in which (1) construction emissions, operational emissions, and downstream combustion emissions are reasonably foreseeable and therefore analyzed; (2) upstream emissions attributable to the proposed project are not reasonably foreseeable and are therefore excluded from analysis; and (3) the significance of GHG-related impacts is not assessed.