Court Opinion

ID: 9964607
Source: CourtListenerOpinion
Date Created: 2024-04-30 15:01:39.343189+00
Date Added: 2024-06-11T08:25:36.592084
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 5, 2023             Decided April 30, 2024

                       No. 22-1101

    ALABAMA MUNICIPAL DISTRIBUTORS GROUP, ET AL.,
                   PETITIONERS

                            v.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

    SOUTHERN NATURAL GAS COMPANY, L.L.C., ET AL.,
                  INTERVENORS

       Consolidated with 22-1171, 22-1256, 22-1273

             On Petitions for Review of Orders
       of the Federal Energy Regulatory Commission

    Nathan Matthews argued the cause for petitioners Sierra
Club and Healthy Gulf. With him on the briefs was Rebecca
McCreary.
                               2
     Randolph Lee Elliott argued the cause for Municipal
petitioners.  With him on the briefs were James R.
Choukas-Bradley and Joshua L. Menter.

    Carol J. Banta, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief were Matthew R. Christiansen, General
Counsel, Robert H. Solomon, Solicitor, and Lona T. Perry,
Deputy Solicitor. Matthew W.S. Estes, Attorney, entered an
appearance.

     Brian D. O’Neill argued the cause for respondent-
intervenors Southern Natural Gas Company, L.L.C., et al.
With him on the brief were Michael R. Pincus, Sandra Y.
Snyder, Richard P. Bress, J. Patrick Nevins, and Eric J.
Konopka.

    Before: SRINIVASAN, Chief Judge, WALKER, Circuit
Judge, and GINSBURG, Senior Circuit Judge

    Opinion for the Court filed by Circuit Judge WALKER.

     WALKER, Circuit Judge: Natural gas companies must
obtain “a certificate of public convenience and necessity” from
the Federal Energy Regulatory Commission before they
construct, operate, or expand an interstate natural gas pipeline.
15 U.S.C. § 717f(c)(1)(A). In this case, FERC certified the
Evangeline Pass Expansion Project — a series of expanded
pipelines, compression facilities, and meter stations in the
Southeastern United States. Environmental groups challenge
that certification, alleging that FERC improperly applied the
National Environmental Policy Act. 42 U.S.C. § 4321 et seq.

    FERC’s certification was reasonable and reasonably
explained. So was its decision to deny a windfall to a pipeline
                              3
owner’s existing customers. We therefore deny the petitions
for review.

                       I. Background

    FERC and the Department of Energy share regulatory
authority over natural gas. Section 7 of the Natural Gas Act
allows FERC to issue “a certificate of public convenience and
necessity” to any entity that seeks to construct, operate, or
expand an interstate natural gas pipeline.         15 U.S.C.
§ 717f(c)(1)(A).

     However, Section 7 does not reach foreign commerce. See
15 U.S.C. § 717f. Foreign commerce instead falls under
Section 3 of the Natural Gas Act. See 15 U.S.C. § 717b. That
section grants FERC regulatory authority over the
construction, operation, and expansion of export facilities. 15
U.S.C. § 717b(e).

    But no section of the Natural Gas Act gives FERC
authority over the exported gas itself. Instead, the “exclusive
authority” over exported gas belongs to the Department of
Energy. Sierra Club v. FERC, 827 F.3d 36, 40 (D.C. Cir. 2016)
(“Freeport”) (citing 42 U.S.C. § 7151(b)).

    Thus, we end up with the following distinct scopes of
authority mandated by Congress:

       Interstate Pipelines               FERC
         Export Facilities                FERC
       Natural Gas Exports         Department of Energy

     No matter which scope of authority is invoked, FERC (for
interstate pipelines or export facilities) or the Department of
Energy (for natural gas exports) must consider the National
                                 4
Environmental Policy Act. 42 U.S.C. § 4321 et seq. Among
other things, the Act requires the relevant government entity to
consider a project’s potential environmental impact in one of
two ways — either through an environmental impact statement
(the more onerous analysis) or an environmental assessment
(the less onerous analysis). See 42 U.S.C. § 4332(2)(C). Either
way, the Act requires the relevant government entity to
consider any actions that are “connected” to the proposed
project. See 40 C.F.R. § 1501.9(e)(1).1

    In 2020, Tennessee Gas Pipeline Company and Southern
Natural Gas Company applied under Section 7 of the Natural
Gas Act for approval of the Evangeline Pass Expansion
Project.2 Tennessee Gas wanted to construct and replace
pipelines and compression facilities. Similarly, Southern
wanted to build a compression facility and meter stations.
Although pipelines, compression facilities, and meter stations
serve different functions, the bottom-line goal of the
Evangeline Pass Project was to move more gas.

    The Sierra Club protested the applications.3 Although it
asserted different arguments at different stages of the

1
 When certification for the Evangeline Pass Expansion Project was
sought — February 2020 — the definition of “connected actions”
was listed in 40 C.F.R. § 1508.25(a)(1). The definition was later
moved to, and remains under, 40 C.F.R. § 1501.9(e)(1). In this
opinion, we cite to the regulation as it is today.
2
  Although Tennessee Gas and Southern’s projects were listed as
separate projects in the FERC order, both involved the same pipeline.
For simplicity, we refer to both projects as the Evangeline Pass
Expansion Project.
3
 Healthy Gulf joined the Sierra Club in its protest. For simplicity,
we will refer to both petitioners as the Sierra Club.
                                 5
certification process, Sierra Club ultimately said FERC
violated the National Environmental Policy Act by (1) not
considering the environmental effects of four other natural-gas
projects it thinks are connected to the Evangeline Pass Project;
(2) not considering the indirect environmental effects of gas
from the Evangeline Pass Project after that gas is exported; and
(3) not relying on an analytical tool known as the social cost of
carbon metric.4

     In addition, a municipal customer of Southern — the
Alabama Municipal Distributors Group — argued that a new
lease from Southern to Tennessee Gas may mean more profits
for Southern, so Alabama Municipal should receive a portion
of those profits.5 The new lease was made possible by the
Evangeline Pass Project.

    FERC unanimously issued a Certificate Order to
Tennessee Gas and Southern, denying all objections.
Tennessee Gas Pipeline Co., LLC, 178 FERC ¶ 61,199, at 46-
48 (Mar. 25, 2022). It reaffirmed its determination on
rehearing. Tennessee Gas Pipeline Co., LLC, 180 FERC
¶ 61,205, at 43 (Sept. 29, 2022).

     The Sierra Club and Alabama Municipal timely petitioned
for review. We now deny those petitions.

4
  The Sierra Club’s initial “protest” contained only the last two of
these three arguments, and that protest came as comments to the draft
EIS published in the Federal Register. Sierra Club only later made
its connected actions argument after FERC issued its certification
decision.
5
 Other customers of Southern also raise this challenge. Because they
make the same arguments as Alabama Municipal and are similarly
situated, we will refer simply to Alabama Municipal.
                                6
         II. The Sierra Club’s Petition Lacks Merit

     The Sierra Club raises the same three challenges that it
made before FERC on rehearing. Each challenge arises under
the National Environmental Policy Act and its implementing
regulations. We review such “challenges under the familiar
standards of the Administrative Procedure Act to determine
whether the agency action was arbitrary and capricious or
contrary to law.” Center for Biological Diversity v. FERC, 67
F.4th 1176, 1181 (D.C. Cir. 2023) (cleaned up); see 5 U.S.C.
§ 706(2)(A). Our deferential review does “not ask whether
record evidence could support the petitioner’s view of the
issue, but whether it supports [FERC’s] ultimate decision.”
Florida Gas Transmission Co. v. FERC, 604 F.3d 636, 645
(D.C. Cir. 2010).

A. The Environmental Impact Statement Did Not Exclude
  Actions “Connected” To The Evangeline Pass Project

     The Sierra Club first argues that FERC failed to consider
the full scope of environmental effects of the Evangeline Pass
Project because FERC’s environmental impact statement did
not include four other natural-gas projects that the Sierra Club
says are “connected actions.” As described by FERC, those
projects are (1) a new terminal that exports natural gas; (2) an
amendment to increase the amount of gas that terminal can
export; (3) a new pipeline that serves as a hub for that terminal,
connecting to several spokes; and (4) two new pipelines that
are spokes on that hub.6 See JA 90-91. Gas from the
Evangeline Pass Project will reach the hub through a different

6
 The four projects are called (1) the Plaquemines LNG Terminal; (2)
the Plaquemines LNG Terminal Amendment; (3) the Gator Express
Pipeline; and (4) the East Lateral XPress and Venice Extension
projects.
                               7
spoke and then flow through the hub to the terminal, where it
will be exported.

     The standard for whether projects are connected for
purposes of the National Environmental Policy Act is laid out
by agency regulations that the Sierra Club does not challenge.
“Actions are connected if they: (i) Automatically trigger other
actions that may require environmental impact statements;
(ii) Cannot or will not proceed unless other actions are taken
previously or simultaneously; or (iii) Are interdependent parts
of a larger action and depend on the larger action for their
justification.” 40 C.F.R. § 1501.9(e)(1).

     Because challenges to pipeline certifications are common,
this court has “developed a set of factors that help clarify when
natural gas infrastructure projects — which frequently involve
some degree of interconnection with other projects in the
area — may be considered separately under” the National
Environmental Policy Act. Food & Water Watch v. FERC, 28
F.4th 277, 291 (D.C. Cir. 2022) (cleaned up). In particular, we
examine “the projects’ degree of physical and functional
interdependence, and their temporal overlap.” Id. (cleaned up).

     Projects lack a “physical and functional interdependence”
when each has “substantial independent utility.” City of Boston
Delegation v. FERC, 897 F.3d 241, 252 (D.C. Cir. 2018)
(cleaned up). And projects lack a “temporal overlap” when
they occur “on separate timelines.” Food & Water Watch, 28
F.4th at 292 (cleaned up). Timelines are, of course, separate
when they do not significantly overlap. But even when projects
occur “near in time to one another,” we still do not consider
them “connected actions” so long as the timing “does not
undermine the functional independence of the projects.” Id.
After all, most events that occur near in time are independent
                                8
of each other — like a hockey game played on the same day as
a basketball game.

    Here, substantial evidence supports FERC’s finding that
the various projects identified by the Sierra Club were not
“connected actions.” See 40 C.F.R. § 1501.9(e)(1).

     To begin with, there’s substantial evidence that each
project is physically and functionally independent of the
Evangeline Pass Project. The terminal (first project), through
its hub (third project), can receive “upstream sources of supply
gas in many different ways” — not just from the Evangeline
Pass Project. JA 101. That will remain true even if FERC
amends the terminal’s certificate to allow additional export
capacity (second project). And the two spokes on the
terminal’s hub (fourth project) are “different gas supply options
on different pipeline systems” that do not receive gas from the
Evangeline Pass Project. JA 97. Plus, none of the projects
share ownership with the Evangeline Pass Project.

    There’s also substantial evidence that three of the four
projects proceeded on quite different timelines than the
Evangeline Pass Project, which was proposed in February 2020
and approved by FERC in March 2022. The first and third
projects do not overlap with that timeline at all, while the
second barely overlaps.7

   True, the Evangeline Pass Project’s timeline overlaps
more with the timelines for the fourth project’s two pipelines.8

7
 The first and third projects were proposed in 2017 and approved in
2019. The second was proposed in 2022, just two weeks before
FERC’s approval of the Evangeline Pass Project.
8
  One part of the fourth project was proposed in September 2020
(seven months after the Evangeline Pass Project’s proposal) and the
                               9
But projects “near in time to one another” may not be
“connected actions.” Food & Water Watch, 28 F.4th at 292.
Because FERC reasonably found that the fourth project will
proceed even if the Evangeline Pass Project does not, the
timing “does not undermine the functional independence of the
projects.” Id. That’s especially true here where the fourth
project constructs two spokes on a hub, neither of which is the
spoke that receives gas from the Evangeline Pass Project.

    We therefore hold that the record “adequately supports
[FERC’s] ultimate decision” that the Evangeline Pass Project
was not “connected” to the other projects. Florida Gas
Transmission Co., 604 F.3d at 645.

 B. FERC Did Not Need To Evaluate The Environmental
          Effects Of Exported Natural Gas

     The Sierra Club next argues that FERC erred by failing to
account for the environmental impact of two ongoing
authorizations (by the Department of Energy) to export gas that
may include some of the gas flowing through the Evangeline
Pass pipeline system. FERC determined it was not required to
evaluate indirect effects of the exported gas when it authorized
the Evangeline Pass Project.

    We agree.

    FERC’s decision relied on the limits of its authority under
the Natural Gas Act and on our precedents. The Natural Gas
Act excludes authority over foreign transport from FERC’s
authority over interstate transport. 15 U.S.C. § 717f(c); see
also City of Oberlin v. FERC, 39 F.4th 719, 725-26 (D.C. Cir.

other was proposed in November 2021 (a year and nine months after
the Evangeline Pass Project’s proposal).
                                10
2022). And as we explained in Freeport, “the Department of
Energy, not [FERC], has sole authority to license the export of
any natural gas.” Sierra Club v. FERC, 827 F.3d 36, 47 (D.C.
Cir. 2016) (“Freeport”). So FERC does “not have to address
the indirect effects of the anticipated export of natural gas.” Id.;
see also Center for Biological Diversity, 67 F.4th at 1185
(FERC need not “consider the indirect effects of actions
beyond its delegated authority”).9

     The Sierra Club responds to a precedent that’s on point
(Freeport) with a precedent that’s not (Sabal Trail). It reads
Sabal Trail to say that FERC must consider intrastate
consumption when authorizing transportation across state
lines. It then argues that FERC here must likewise consider
export consumption when authorizing transportation across
state lines. See Sierra Club v. FERC, 867 F.3d 1357, 1371-73
(D.C. Cir. 2017) (“Sabal Trail”). But as Sabal Trail explains,
there’s a difference between intrastate gas effects and exported
gas effects.

     If anything, Sabal Trail cuts against the Sierra Club. It
reaffirmed that an “agency has no obligation to gather or
consider environmental information if it has no statutory
authority to act on that information” — and here FERC has no
statutory authority over exported gas. Sabal Trail, 867 F.3d at
1372; see also id. (“when the agency has no legal power to
prevent a certain environmental effect, there is no decision to
inform, and the agency need not analyze the effect in its
[National Environmental Policy Act] review”).10

9
  For the same reason, FERC did not have to analyze any of the
Department of Energy’s export authorizations as “connected
actions.”
10
  Admittedly, Freeport, Sabal Trail, and Center for Biological
Diversity involved certifications of exports under Section 3 of the
                                 11

    In short, Congress gave export authorization to the
Department of Energy — not FERC. So FERC did not err
when it declined to consider the environmental effects of
exported gas that flows through Evangeline Pass.

 C. FERC Was Not Required To Use The Social Cost Of
                  Carbon Tool

     The Sierra Club’s final challenge to FERC’s
environmental impact statement faults FERC for not using an
environmental metric known as the “social cost of carbon” — a
tool that puts a dollar figure on every ton of emitted greenhouse
gases. Instead, FERC analyzed the Evangeline Pass Project’s
greenhouse gas emissions by conducting a comparative
analysis. That analysis estimated the volume of direct
emissions, compared those projections against state and
national emissions, and then calculated the percentage amount
that the Evangeline Pass Project would add to state and national
emissions.

     FERC did not ignore the social cost of carbon tool. Rather,
FERC explained that it was not relying on the tool because of
pending litigation challenging it, and because FERC had “not
determined which, if any, modifications are needed to render
that tool useful for project-level analyses.” JA 42 n.141. But

Natural Gas Act, whereas this case concerns the certification of an
interstate pipeline under Section 7. But in those cases, as here, the
key question was, “What factors can FERC consider when regulating
in its proper sphere?” Sabal Trail, 867 F.3d at 1373. And Congress
was clear about FERC’s Section 7 scope of authority: It specifically
“define[d] ‘interstate commerce’ in a way that excludes foreign
commerce.” City of Oberlin, 39 F.4th at 726. So FERC’s
considerations of exports falls “outside FERC’s Section 7 authority.”
Id.
                               12
even though FERC did not rely on the tool, FERC staff still
estimated the social cost of carbon, publicly disclosed those
estimates, and shared them in the environmental impact
statement.

     FERC’s process here is indistinguishable from the
environmental analysis we recently upheld in Center for
Biological Diversity. 67 F.4th at 1183-84. There, FERC also
analyzed the significance of a project’s greenhouse gas
emissions. Id. FERC considered using the social cost of
carbon tool, but it ultimately rejected the approach because
FERC had not yet identified a workable means of applying the
tool. Id. So FERC instead provided a comparative analysis by
estimating the volume of direct emissions, comparing those
projections against state and national emissions, and
calculating the percentage amount that the project would add
to state and national emissions — just as FERC did here. Id.;
see also EarthReports, Inc. v. FERC, 828 F.3d 949, 956 (D.C.
Cir. 2016) (FERC acted reasonably in finding the social cost of
carbon tool “inadequately accurate to warrant inclusion”).

     To be sure, after FERC’s action in Center for Biological
Diversity but before its action in this case, FERC issued a
policy statement on measuring the significance of greenhouse
gas emissions. Under that 2022 policy statement, projects
expected to emit 100,000 or more metric tons of greenhouse
gases per year would be presumed to have a significant
environmental impact. See Consideration of Greenhouse Gas
Emissions in Natural Gas Infrastructure Project Reviews, 178
FERC ¶ 61,108, at 79-81 (Feb. 18, 2022). The policy statement
served, to some extent, as an alternative to the use of the social
cost of carbon tool to assess whether a project’s emissions
would be environmentally significant.
                                13
     But later that year, FERC withdrew the policy statement
by demoting it to “draft” form — which means FERC might
never adopt the policy. And in this case, FERC cited the
policy’s “draft” status as a reason why it chose not to apply it.
See Sierra Club Br. 59 (conceding that the policy was merely
“draft guidance”).

     In light of the policy statement’s conversion to draft status,
the Sierra Club has not identified a meaningful distinction
between this case and Center for Biological Diversity. As in
that case, there is no final policy statement for FERC to apply
here. And as there, FERC here has “not acted unreasonably in
finding the social cost of carbon tool inadequately accurate to
warrant inclusion under [the National Environmental Policy
Act] analysis.” Center for Biological Diversity, 67 F.4th at
1184 (cleaned up).

      III. Alabama Municipal’s Petition Lacks Merit

     We turn at last to Alabama Municipal’s separate petition.
It does not object to the Evangeline Pass Project itself. Rather,
Alabama Municipal wants FERC to give it a future credit on
the existing rates it pays.

     The crux of Alabama Municipal’s argument is as follows.
As an owner of the Evangeline Pass Project, Southern expects
to make money from the expansion project by leasing the
increased transportation capacity to the Tennessee Gas Pipeline
Company. The new revenue Southern receives from the
increased leasing is “excessive” revenue for Southern, says
Alabama Municipal. So FERC should prevent the excess by
granting Alabama Municipal a future credit that would, in
effect, revise customer rates downward.
                              14
     FERC’s decision to deny Alabama Municipal’s requested
credit was both “reasonable and reasonably explained.” FCC
v. Prometheus Radio Project, 592 U.S. 414, 423 (2021). As
FERC noted when rejecting the argument, Alabama Municipal
exists outside the scope of the new lease capacity. It will not
pay for the capacity. It will not use the capacity. And it will
not bear any risks associated with the capacity — a finding
consistent with established FERC policy. See Gulf South
Pipeline Co., 119 FERC ¶ 61,281 (2007).

     Because Alabama Municipal will bear none of the new
lease capacity’s costs or risks, it is entitled to none of the
benefits. To hold otherwise would provide a windfall to
Alabama Municipal. And Alabama Municipal has identified
no legal authority that requires FERC to award it such a
windfall. Cf. Florence White Williams, The Little Red Hen
(1918).

                           * * *

     All of FERC’s decisions in this case were reasonable and
reasonably explained. We therefore deny the petitions for
review.

                                                   So ordered.