Special Topics in Environmental Management

Two D.C. Circuit Rulings Create Uncertainty on NEPA’s ‘Foreseeable’ Effects

Two recent decisions by the U.S. Court of Appeals for the D.C. Circuit have created uncertainty about the degree to which federal agencies must include indirect environmental effects from projects in environmental analyses required by the National Environmental Policy Act (NEPA).

In the first case (Sierra Club v. Department of Energy (DOE)), a three-judge panel unanimously found that the DOE did not have to engage in “highly speculative” environmental-effects forecasting associated with its approval of an application to export liquefied natural gas (LNG) from a terminal in Freeport, Texas. Only 1 week later, in a majority opinion, a different panel ruled that the Federal Energy Regulatory Commission (FERC) was required by NEPA to consider the indirect environmental effects—specifically emissions of greenhouse gases (GHGs) that contribute to climate change—before approving three pipelines supplying natural gas to Florida (Sierra Club et al., v. FERC).

In the two cases, the judges addressed the question of whether NEPA requires federal agencies to consider an environmental effect they have no legal authority to prevent. In the second case, which we describe here, the court also ruled on whether the indirect environmental effects of the pipeline project were reasonably foreseeable.

Natural gas for Florida

Sierra Club v. FERC concerns three natural gas pipelines now under construction in Alabama, Florida, and Georgia, which are intended to serve Florida’s growing demand for electric power. FERC completed its NEPA Environmental Impact Statement (EIS) in December 2015 and approved the project several months later. The Sierra Club, other environmental groups, and several Florida landowners requested that FERC stop construction. FERC denied the request, and the plaintiffs appealed to the D.C. Circuit.

The majority notes that a NEPA EIS has two purposes: (1) It forces the agency to take a “hard look” at the environmental consequences of its actions, including alternatives to its proposed course; and (2) it also ensures that these environmental consequences and the agency’s consideration of those are disclosed to the public. Importantly, though, NEPA directs agencies only to look hard at the environmental effects of their decisions and not to take one type of action or another.

An EIS is deficient and the agency action it undergirds is arbitrary and capricious if the EIS does not contain sufficient discussion of the relevant issues and opposing viewpoints or if it does not demonstrate reasoned decision making, said the majority. “The overarching question is whether an EIS’s deficiencies are significant enough to undermine informed public comment and informed decisionmaking,” the majority added.

Reasonable forecasting

The majority goes on to say that it is reasonably foreseeable that natural gas conveyed by the pipelines will be both combusted for energy in Florida and that one consequence of that combustion will be GHGs emitted into the atmosphere. FERC argued that it did not consider the GHG indirect impact because it is impossible to know exactly what quantity of GHGs will be emitted as a result of its approval of the project. The majority agreed that quantification depends on several uncertain variables, including the operating decisions of individual plants and the demand for electricity in the region.

“But we have previously held that NEPA analysis necessarily involves some ‘reasonable forecasting,’ and that agencies may sometimes need to make educated assumptions about an uncertain future,” wrote the majority. “Indeed, FERC has already estimated how much gas the pipelines will transport: about one million dekatherms (roughly 1.1 billion cubic feet) per day. The EIS gave no reason why this number could not be used to estimate greenhouse-gas emissions from the power plants, and even cited a Department of Energy report that gives emissions estimates per unit of energy generated for various types of plants.”

The majority also responded to FERC’s argument that NEPA does not require an agency to consider environmental effects it has no power to act on. But the majority points out that the Natural Gas Act broadly instructs FERC to consider “public convenience and necessity” when evaluating applications to construct and operate interstate pipelines. This phrase has been interpreted by the courts to mean that agencies must balance the public benefits against the adverse effects of the project, including adverse environmental effects.

“Because FERC could deny a pipeline certificate on the ground that the pipeline would be too harmful to the environment, the agency is a legally relevant cause of the direct and indirect environmental effects of pipelines it approves,” the majority concludes.

Reasonably declined

In a forceful dissent, Judge Janice Rogers Brown states that FERC reasonably declined to engage in an in-depth examination of downstream GHG emissions. According to Brown, FERC has no control over whether the power plants that will emit GHGs will come into existence or remain in operation. That power rests with the Florida Power Plant Siting Board (Board), Brown reminded the majority. Under Florida law, no power plant is built or expanded in the state—and consequently no GHGs are emitted from Florida power plants—without the Board’s approval.

“This breaks the chain of causation,” writes Brown. “NEPA does not require FERC to address indirect environmental effects resulting from the Board’s licensing decision.”

Freeport ruling

Both the majority and the dissent discuss the relevance of the Freeport ruling. The majority’s view is that, in the Freeport case, FERC’s EIS did not have to consider the environmental effects of LNG exports because it was only responsible for licensing the construction of the Freeport terminal while the DOE bore responsibility for approving LNG exports. Thus, said the majority, the Freeport case was not a determining factor in the pipeline case, and the cases depend on different points of law.

Not so, responded Brown, who states that the actual distinction between the two cases is “doctrinally invisible.”

“[The majority’s] attempt to explain why NEPA operates more expansively when applied to pipelines compared to export terminals, as well as its arguments as to why the Florida Board should be treated differently than DOE under NEPA, are both ultimately unpersuasive,” Brown writes.