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Commissioner Richard Glick
August 6, 2018
Docket Nos.
CP15-115-002, CP15-115-003
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Dissent on National Fuel Gas Supply Corporation Empire Pipeline, Inc.

Today’s order denies rehearing of the Commission’s decision to authorize the Northern Access 2016 Project (Project) under section 7 of the Natural Gas Act (NGA).1 I dissent from the order because it fails to comply with our obligations under the NGA and the National Environmental Policy Act (NEPA).2 First, I disagree with the majority’s finding that the Project is needed. The majority relies exclusively on the existence of an affiliate precedent agreement to make its determination. The Commission cannot rely on this evidence alone to find need. Second, the majority maintains that it need not consider the harm from the Project’s contribution to climate change. While the Commission has quantified the Project’s upstream greenhouse gas (GHG) emissions, the majority nonetheless concludes that these emissions are not reasonably foreseeable.3 I do not believe the Commission can find that the Project is in the public interest without determining the significance of the Project’s contribution to climate change.

The Commission Has Not Demonstrated that the Project Is Needed

Section 7 of the NGA requires that, prior to issuing a certificate for new pipeline construction, the Commission must find both a need for the pipeline, and that, on balance, the pipeline’s benefits outweigh its harms.4 In today’s order, the majority relies exclusively on the existence of a precedent agreement with the applicant’s affiliate to conclude that the Project is needed.5 While I agree that precedent and service agreements are one of several measures for assessing the market demand for a pipeline,6 contracts among affiliates are less probative of that need because they are not necessarily the result of an arms-length negotiation.7 By itself, the existence of a precedent agreement between the pipeline developer and its affiliate is insufficient to carry the developer’s burden to show that the pipeline is needed.

Under these circumstances, I believe that the Commission must consider additional evidence regarding the need for a pipeline. As the Commission explained in the Certificate Policy Statement, this additional evidence might include, among other things, projections of the demand for natural gas, analyses of the available pipeline capacity, and an assessment of the cost savings that the proposed pipeline would provide to consumers.8 The majority, however, did not consider any such evidence in finding that there is a need for the Northern Access 2016 Project, instead relying entirely on the existence of a precedent agreement between the pipeline developer and its affiliate. Accordingly, I do not believe that today’s order properly concludes that the Project is needed.

The Order Does Not Adequately Evaluate the Project’s Environmental Impact

The majority contends that it is not required to consider the Project’s contribution to climate change from upstream GHG emissions because the record in this proceeding does not demonstrate that the emissions are indirect effects of the Project.9 Unlike many of the challenges that our society faces, we know with certainty what causes climate change: It is the result of GHG emissions, including carbon dioxide and methane, which can be released in large quantities through the production and the consumption of natural gas. Accordingly, it is critical that the Commission carefully consider the Project’s contribution to climate change, both in order to fulfill NEPA’s requirements and to determine whether the Project is in the public interest under the NGA.

While the Commission quantified the annual upstream GHG emissions from the Project in the Certificate Order,10 the majority refuses to consider these emissions as indirect effects. The majority claims that only where it has definitive information about the specific location and timing of upstream production can it conclude that GHG emissions from these activities are reasonably foreseeable.11 But this definition of indirect effects is overly narrow and circular.12 Under this view, even if the Commission knows that new pipeline facilities would have an environmental impact—in this case, causing GHG emissions by facilitating additional production—the Commission is not obligated to consider those impacts unless the Commission knows definitively that the production would not occur absent the pipeline.13 NEPA, after all, does not require exact certainty. Instead, it requires that the Commission engage in reasonable forecasting and estimation of possible effects of a major federal action where doing so would further the statute’s two-fold purpose: (1) ensuring that the relevant agency will “have available, and will carefully consider, detailed information concerning significant environmental impacts;” and (2) that this information will be “available to the larger audience that may also play a role in both the decisionmaking process and the implementation of that decision.”14 The fact that an agency may not know the exact location and amount of GHG emissions to attribute to the federal action is no excuse for assuming that impact is zero.15 Instead, the agency must engage in a case-by-case inquiry into what effects are reasonably foreseeable and estimate the potential emissions associated with that project—making assumptions where necessary—and then give that estimate the weight it deserves. The record here is sufficient to demonstrate that the nature of the effect is GHG emissions from producing the natural gas that the Project is designed to transport.

In adopting an overly narrow definition of indirect effects, the majority disregards the Project’s central purpose—to facilitate natural gas production and consumption.16 The majority claims that it cannot conclude that the Project causes natural gas production because “[m]any factors drive new drilling, including production costs and market prices for natural gas”17 and “alternate pipelines and other modes of transportation exist.”18 But the evidence in the record plainly demonstrates that this Project “will provide needed pipeline capacity” for Seneca Resources Corporation—the Project’s only shipper, a natural gas production company and the applicant’s affiliate—and is specifically designed “to deliver its shale gas produced in Appalachia to markets in New York and Canada.”19 The majority also claims, without support, that the “opposite causal relationship is more likely, i.e., once production begins in an area, shippers or end uses will support the development of a pipeline to move the produced gas.”20 But, once again, evidence in the record contradicts this. As Seneca explains in its comments, it “has made significant investments in developing its oil and gas assets in Pennsylvania that require timely completion of the Project so that Seneca’s produced natural gas can be transported . . . to markets in the United States and Canada in accordance with Seneca’s business plan.”21 Therefore, it is entirely foreseeable that the Project has resulted in investment in significant new natural gas production and will continue to facilitate additional production in the future, emitting GHGs that contribute to climate change.

The majority contends that it need not consider GHG emissions because “the effects of partially-induced natural gas development are not sufficiently likely to occur.”22 But the Commission cannot ignore the fact that adding transportation capacity is likely to “spur demand” and, for that reason, it must, at the very least, examine the effects that an expansion of pipeline capacity might have on production.23 Indeed, if a proposed pipeline neither increases the supply of natural gas available to consumers nor decreases the price that those consumers would pay, it is hard to imagine why that pipeline would be “needed” in the first place.

Even where exact information regarding the source of the gas to be transported is not available to the pipeline developer, the Commission will often be able to produce comparably useful information based on reasonable forecasts of the GHG emissions associated with production.24 Forecasting environmental impacts is a regular component of NEPA reviews and a reasonable estimate may inform the federal decisionmaking process even where the agency is not completely confident in the results of its forecast.25 Similar forecasts can play a useful role in the Commission’s evaluation of the public interest, even in those instances when the Commission must make a number of assumptions in its forecasting process.26

Congress determined under the NGA that no entity may transport natural gas interstate, or construct or expand interstate natural gas facilities, without the Commission first determining the activity is in the public interest. This requires the Commission to find both a public need for the Project and that, on balance, that the Project’s benefits outweigh the harms, including the environmental impacts associated with the harm from the Project’s contribution to climate change.

Because I disagree with the majority’s conclusion that it has fulfilled its responsibilities under the NGA and NEPA, I respectfully dissent.

                                               

    1 15 U.S.C. § 717f (2012).
    2 National Environmental Policy Act of 1969, Pub. L. No. 91-190, 83 Stat. 852. Section 7 of the NGA requires that, before issuing a certificate for new pipeline construction, the Commission must find both a need for the pipeline and that, on balance, the pipeline’s benefits outweigh its harms. 15 U.S.C. § 717f (2012). Furthermore, NEPA requires the Commission to take a “hard look” at the environmental impacts of its decisions. See 42 U.S.C. § 4332(2)(C)(iii); Balt. Gas & Elec. Co. v. Nat. Res. Def. Council, Inc., 462 U.S. 87, 97 (1983).
    3 See Nat’l Fuel Gas Supply Corp., 164 FERC ¶ 61,084, at PP 94, 102 (2018) (Rehearing Order).
    4 See Pub. Utils. Comm’n of Cal. v. FERC, 900 F.2d 269, 281 (D.C. Cir. 1990) (The public interest standard under the NGA includes factors such as the environment and conservation, particularly as decisions concerning the construction, operation, and transportation of natural gas in interstate commerce “necessarily and typically have dramatic natural resource impacts.”).
    5 Rehearing Order, 164 FERC ¶ 61,084 at P 19 (explaining that “it is current Commission policy to not look beyond precedent or service agreements to make judgments about the needs of individual shippers”).
    6 Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC ¶ 61,227, at 61,747 (1999) (Certificate Policy Statement) (“[T]he Commission will consider all relevant factors reflecting on the need for the project.  These might include, but would not be limited to, precedent agreements, demand projections, potential cost savings to consumers, or a comparison of projected demand with the amount of capacity currently serving the market.”).
    7 Certificate Policy Statement, 88 FERC at 61,744.
    8 Id. at 61,747.
    9 Rehearing Order, 164 FERC ¶ 61,084 at PP 97, 99, 102.
    10 Nat’l Fuel Gas Supply Corp., 158 FERC ¶ 61,145, at P 189 (2017) (Certificate Order) (estimating “upstream GHG emissions as: 410,000 tpy CO2e from extraction, 790,000 tpy CO2e from processing, and 250,000 tpy CO2e from the non-project pipelines (both upstream and downstream to the delivery point in Chippawa)”).  The Commission calculated these estimates using a methodology published by the U.S. Department of Energy’s National Energy Technology Laboratory: Environmental Impacts of Unconventional Natural Gas Development and Life Cycle Analysis of Natural Gas Extraction and Power GenerationSee id. P 189 n.264 (citing National Energy Technology Laboratory, Life Cycle Analysis of Natural Gas Extraction and Power Generation, DOE/NETL-2015/1714 (2016)).
    11 Rehearing Order, 164 FERC ¶ 61,084 at P 97.
    12 See WildEarth Guardians v. U.S. Bureau of Land Mgt., 870 F.3d 1222, 1228–29 (2017) (holding that it was arbitrary and capricious for an agency to rely on a “perfect substitution assumption . . . because the assumption itself is irrational (i.e., contrary to basic supply and demand principles)”); see also San Juan Citizens All. et al. v. U.S. Bureau of Land Mgmt., No. 16-CV-376-MCA-JHR, 2018 WL 2994406, at *10 (D.N.M. June 14, 2018) (holding that it was arbitrary for the Bureau of Land Management to conclude “that consumption is not ‘an indirect effect of oil and gas production because production is not a proximate cause of GHG emissions resulting from consumption’” as “this statement is circular and worded as though it is a legal conclusion”).  The Commission must use its “best efforts” to identify and quantify the full scope of the environmental impacts and, as the U.S. Court of Appeals for the District of Columbia found in Sierra Club v. FERC, educated assumptions are inevitable in the process of emission quantification.  See 867 F.3d 1357, 1374 (D.C. Cir. 2017) (Sabal Trail).
    13See Rehearing Order, 164 FERC ¶ 61,084 at PP 97, 99.
    14 Dep’t of Transp. v. Pub. Citizen,541 U.S. 752, 768 (2004) (quoting Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 349 (1989)).  In order to evaluate circumstances in which upstream impacts of a pipeline facility are reasonably foreseeable results of constructing and operating the proposed facility, I am relying on precisely the sort of “reasonably close causal relationship” that the Supreme Court has required in the NEPA context and analogized to proximate cause.  See id. at 767 (“NEPA requires a ‘reasonably close causal relationship’ between the environmental effect and the alleged cause.  The Court [has] analogized this requirement to the ‘familiar doctrine of proximate cause from tort law.’”) (quoting Metropolitan Edison Co. v. People Against Nuclear Energy, 460 U.S. 766, 774 (1983)); see also Paroline v. United States, 134 S. Ct. 1710, 1719 (2014) (“Proximate cause is often explicated in terms of foreseeability or the scope of the risk created by the predicate conduct.”); Staelens v. Dobert, 318 F.3d 77, 79 (1st Cir. 2003) (“[I]n addition to being the cause in fact of the injury [the but for cause], the plaintiff must show that the negligent conduct was a proximate or legal cause of the injury as well.  To establish proximate cause, a plaintiff must show that his or her injuries were within the reasonably foreseeable risks of harm created by the defendant’s negligent conduct.”) (internal quotation marks and citations omitted).
    15 As the U.S. Court of Appeals for the Eighth Circuit explained in Mid States—a case that involved the downstream GHG emissions from new infrastructure for transporting fossil fuels—when the “nature of the effect” is reasonably foreseeable, but “its extent is not,” an agency may not simply ignore the effect.  Mid States Coal. for Progress v. Surface Transp. Bd., 345 F.3d 520, 549 (8th Cir. 2003).  The majority cites Sierra Club v. U.S. Dep’t of Energy, 867 F.3d 189, 199 (D.C. Cir. 2017) to support its narrow definition of indirect effects in this case, but the facts here are readily distinguishable.  In Sierra Club, the Department of Energy concluded that it was not possible to identify local environmental impacts resulting from natural gas production induced by anticipated exports of liquefied natural gas (LNG), and the court deferred to the agency’s “reasonable explanation as to why it believed the indirect effects pertaining to increased gas production were not reasonably foreseeable.”  Sierra Club, 867 F.3d at 198.  The majority’s reasoning in today’s order deserves no such deference.  Despite repeated statements in the record from the Project’s only shipper that it “has made significant investments in developing its oil and gas assets in Pennsylvania that require timely completion of the Project,” the majority maintains that it cannot determine whether the Project will cause any upstream production, because, while the Project may “partially” induce natural gas development, somehow “the opposite causal relationship is more likely.”  See infra notes 19 & 21; see also Certificate Order, 158 FERC ¶ 61,145 at P 150 (acknowledging that “Seneca Resources entered into a Joint Development Agreement with another producer to develop specific shale resources in the Clermont/Rich Valley area (within Seneca Resources’ Western Development Area) that will use the transportation capacity created by the [Project]”).  The majority’s blanket assertion that the record does “not reveal that transportation infrastructure causes production” is arbitrary and capricious and not the product of reasoned decisionmaking. 
    16 EA at 2 (explaining that, according to the applicant, the “Project Purpose and Need” is to “provide incremental firm transportation to markets in the northeastern United States and Canada . . . and other interconnections with local gas distribution companies, power generators, and other interstate pipelines available on both the National Fuel and Empire systems”).
    17 Rehearing Order, 164 FERC ¶ 61,084 at P 101.
    19 Seneca December 22, 2017 Comments at 2; Seneca May 1, 2015 Comments at 3.
    20 Rehearing Order, 164 FERC ¶ 61,084 at P 101.
    21 Seneca December 22, 2017 Comments at 3 (emphasis added); see also Seneca May 1, 2015 Comments at 3.
    22 Rehearing Order, 164 FERC ¶ 61,084 at P 102.
    23 Barnes v. U.S. Dep’t of Transp., 655 F.3d 1124, 1138 (9th Cir. 2011) (holding that it “is completely inadequate” for an agency to ignore a project’s “growth inducing effects” where the project has a unique potential to spur demand); id. at 1139(distinguishing City of Carmel-by-the-Sea v. U.S. Dep’t of Transp., 123 F.3d 1142 (9th Cir. 1997), which the majority relies on in today’s order) (“[O]ur cases have consistently noted that a new runway has a unique potential to spur demand, which sets it apart from other airport improvements, like changing flight patterns, improving a terminal, or adding a taxiway, which increase demand only marginally, if at all.”); id. at 1139 (“[E]ven if the stated purpose of [a new airport runway project] is to increase safety and efficiency, the agencies must analyze the impacts of the increased demand attributable to the additional runway as growth-inducing effects.”); see Rehearing Order, 164 FERC ¶ 61,084 at P 102 & n.235.  Although sales price and production costs are, undoubtedly, factors that influence natural gas production, that fact is no answer to the argument that the Commission must at least consider the demand-inducing effects of new capacity.  After all, surely the sales prices and production costs associated with air travel and coal mining affected demand in Barnes and Mid States, respectively. 
    24 Del. Riverkeeper Network v. FERC, 753 F.3d 1304, 1310 (2014) (quoting Scientists’ Inst. for Pub. Info., Inc. v. Atomic Energy Comm’n, 481 F.2d 1079, 1092 (D.C. Cir. 1973)); see Sierra Club, 867 F.3d at 198 (“In determining what effects are ‘reasonably foreseeable,’ an agency must engage in ‘reasonable forecasting and speculation.’”) (quoting Del. Riverkeeper, 753 F.3d at 1310).
    25 In determining what constitutes reasonable forecasting, it is relevant to consider the “usefulness of any new potential information to the decisionmaking process.”  Sierra Club, 867 F.3d at 198 (citing Pub. Citizen, 541 U.S. at 767).
    26 In comments recently submitted in the Commission’s pending review of the natural gas certification process, the current Administration’s Environmental Protection Agency identified a number of tools the Commission can use to quantify the reasonably foreseeable “upstream and downstream GHG emissions associated with a proposed natural gas pipeline.”  These include “economic modeling tools” that can aid in determining the “reasonably foreseeable energy market impacts of a proposed project.”  U.S. Environmental Protection Agency, Comments, Docket No. PL18-1-000, at 3–4 (filed June 21, 2018) (explaining that the “EPA has emission factors and methods” available to estimate GHG emissions—from activities upstream and downstream of a proposed natural gas pipeline—through the U.S. Greenhouse Gas Inventory and the Greenhouse Gas Reporting Program); see Certification of New Interstate Natural Gas Facilities, Notice of Inquiry, 163 FERC ¶ 61,042 (2018).
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