FERC Takes a Step Forward on Environmental Impacts

The Federal Energy Regulatory Commission took an important and positive step forward regarding its consideration of a gas project’s climate impacts. In a FERC order published today, the commission for the first time assessed whether a proposed pipeline project’s greenhouse gas emissions would be a “significant” environmental impact. This is a major change from FERC’s prior position that it either lacked the legal authority or the tools to assess the significance of a project’s greenhouse gas emissions. The historic move indicates a dedication by Chairman Rich Glick to take climate seriously—something that FERC has failed to do for years.

The background

This change has been a long time coming. In 2017, in the landmark Sabal Trail case, the D.C. Circuit vacated FERC’s approval of the Southeast Market Pipelines project because the agency had failed to analyze the project’s downstream greenhouse gas emissions.

Following Sabal Trail, FERC briefly expanded its discussion of both upstream (when the gas is produced) and downstream (when the gas is burned for heat or electricity production) emissions in its orders. Then, in 2018, FERC retreated, issuing its controversial New Market decision, which restricted FERC’s interpretation of Sabal Trail to cases that exactly matched the facts of Sabal Trail. In practice, New Market excludes from FERC’s consideration almost all upstream and downstream greenhouse gas emissions associated with a pipeline project.

In 2019, the D.C. Circuit chastised FERC’s New Market policy as a “decidedly less-than-dogged” approach, and affirmed FERC’s core legal obligation to analyze the significance of the reasonably foreseeable emissions of gas projects.

Since that time, however, FERC has continually refused to consider and assess the significance of a proposed gas project’s emissions. For upstream and downstream emissions, it has disclaimed its authority, citing New Market. For a project’s direct emissions—the emissions associated with the physical construction and operation of a gas facility—FERC has claimed that it is incapable of assessing the significance of these emissions due to the lack of an established methodology for doing so. Glick has issued fiery dissents in response, noting the existence of tools like the Social Cost of Carbon, as well as the commission’s tendency to use “logical hopscotch” to dance around its core legal obligations.

FERC’s decision

At its core, FERC’s latest decision establishes that the agency is, in fact, capable of doing a significance assessment of greenhouse gas emissions and that FERC recognizes its legal obligation to do so. It also suggests that FERC will be conducting a similar analysis in future orders.

The project being evaluated in today’s order is the Northern Natural replacement project, which would abandon and replace approximately 80 miles of pipeline in South Dakota and Nebraska. In the order, FERC disclosed that the project’s construction will emit a total of 19,655 metric tons of carbon dioxide equivalent and that its operation will emit 351 metric tons annually. These types of disclosures have appeared in previous FERC orders, but rather than assigning any meaning to these numbers, the analysis had stopped there.

But the Northern Natural order is the beginning of a new day. In the order, the commission acknowledged its prior position, but unequivocally rejected it: “In previous orders, the Commission has concluded that it was unable to assess the significance of a project’s greenhouse gas (GHG) emissions or those emissions’ contribution to climate change. Upon reconsideration, we no longer believe that to be the case.”

Specifically, in determining whether a project’s environmental impacts are significant, FERC noted that it regularly uses its “experience, judgment, and expertise” to weigh the evidence and to make a significance determination, and “that there is nothing about GHG emissions or their resulting contribution to climate change that prevents [FERC] from making that same type of significance determination.”

Based on that reversal, FERC then compared the project’s direct emissions to both national and state-level inventories. Based on that assessment, FERC determined that Northern Natural’s emissions impacts were not significant. The commission also indicated that it would incorporate other evidence, including state-specific greenhouse gas reduction targets, in further analyses (neither South Dakota nor Nebraska have such targets).

FERC is sharply divided

This shift does not, however, come without division. While Commissioner Neil Chatterjee, who was in the majority in New Market, joined Glick and Commissioner Allison Clements in Northern Natural, Commissioners Mark Christie and James Danly dissented. Christie noted that he would have waited to announce this “major question of law” in a separate proceeding, including potentially FERC’s pending inquiry into whether to update its 22-year-old Policy Statement—its lodestar for pipeline reviews.

Danly, who previously served as FERC’s general counsel and defended New Market in court, criticized the timing of FERC’s reversal and called the new approach a “black box.” During FERC’s March 18 open meeting, he characterized Northern Natural as a warning that will create nervousness among pipeline companies about FERC’s future policy intentions.

This change in policy may very well be unsettling to those in the industry. New Market was unsettling to landowners and environmental groups. But if FERC’s future policy intention is to follow the law and fully consider a project’s climate impacts, that should be celebrated by everyone. As noted by Glick during the March 18 meeting, pipeline applicants do not benefit from the increased litigation risk that results from FERC’s faulty reviews, and landowners and environmental groups do not benefit from having the true costs of these projects repeatedly ignored.

Next steps

The Northern Natural decision lays the groundwork, but it is far from the end of the road. Going forward, FERC needs to abandon the New Market policy and incorporate all of a project’s emissions—including its upstream and downstream emissions—into its reviews. But this is an important first step. For years, FERC deliberately ignored the most important environmental impact of our time. If Northern Natural is any indication, those days are now behind us.