Commissioner Cheryl A. LaFleur Dissent on Southeast Market Pipelines (Sabal Trail)

Commissioner Cheryl A. LaFleur
August 10, 2018
Docket Nos. CP14-554-003


Today’s order1 denies rehearing on the Commission’s March 14, 2018 Order on Remand Reinstating Certificate and Abandonment Authorization for the Southeast Market Pipelines Project (SMP Project).2 I dissented in part on the Remand Order because I could not support the Commission’s responses to the U.S. Court of Appeals for the D.C. Circuit (the “Court”) on downstream greenhouse gas (GHG) emissions and the Social Cost of Carbon.33 I dissent today for three primary reasons: (1) I cannot support the majority’s assertion that by providing “context” to a volume of GHG emissions it complied with the Commission’s obligations under the National Environmental Policy Act (NEPA) to assess the significance of downstream GHG emissions; (2) I disagree with the majority’s assessment of the Social Cost of Carbon, and continue to believe that the Social Cost of Carbon is a useful metric to evaluate climate change impacts from a pipeline project; and (3) I believe the majority’s articulation of how a project’s environmental impacts weigh into the Commission’s finding that a project is in the public convenience and necessity under the Natural Gas Act (NGA) fail to comply with our legal obligations under the NGA, NEPA, and relevant precedent.4 For the reasons set forth herein, I respectfully dissent.

Significance Determination of Downstream GHG Emissions

We are required by NEPA to reach a determination regarding the significance of all indirect impacts, including downstream GHG emissions. I agree with the Court in Sierra Club that the downstream GHG emissions that result from burning the natural gas transported the SMP Project are an indirect impact of the project that must be both quantified and considered as part of our responsibilities under NEPA.5 In Sabal Trail, the Commission knew that the SMP Project was going to deliver gas to four downstream power plant customers.6 Even though the Commission did not authorize the construction of power plants that would ultimately burn the gas transported by the SMP Project, there was still a reasonably foreseeable causal relationship between the SMP Project and the end-use emissions generated from the four downstream power plants.7

In Sierra Club, the Court confirmed that, because the downstream GHG emissions constituted indirect impacts, the EIS needed to include a discussion of the “significance” of those impacts.8 However, in response to the Court’s directive, both the SEIS9 and the Remand Order10
find there is no method to discern the significance of GHG emissions. The majority has included this assertion in a number of recent pipeline orders to justify its conclusion that it cannot determine whether a particular quantity of GHG emissions presents a significant impact on the environment.11

In today’s order, however, the majority seems to have taken a new approach to the significance arguments. Now, the majority concludes, notwithstanding the language cited above, that it has been evaluating the significance of downstream GHG emissions all along. The majority states that quantifying the downstream GHG emissions, comparing the project’s emissions to the state and nationwide emissions inventory, and reciting generic information acknowledging that GHGs contribute to climate change, satisfies our obligations to consider their significance under NEPA.12
I disagree. Under NEPA, when evaluating the significance of a particular impact, the Commission must consider both context13 and intensity.14 By evaluating how the emissions from the SMP Project would impact the Florida and nationwide emissions inventories, the majority provides context for the environmental impact. However, the majority fails to reach a determination regarding the intensity of the impact.

I recognize that determining the severity of a particular impact would require thoughtful and complex analysis, and I am confident that the Commission could perform that analysis if it chose to do so; indeed, we routinely grapple with complex issues in many other areas of our work.15
But in order to comply with NEPA, the Commission must go an additional step and determine whether a particular level of emissions is significant.16
The majority argues that the definition of “significantly,” located in Part 1508 (Terminology and Index), in the Council on Environmental Quality’s Regulations For Implementing the Procedural Provisions of the National Environmental Policy Act, serves the singular purpose of “help[ing] determine whether an EIS is required.”17
This assertion is incorrect. The concept of significance in NEPA is not limited to the threshold question of whether to prepare an EIS; rather, the discussion of impacts within the EIS is guided by the concept of significance.18
The term “significant” can be found over 60 times throughout the Council on Environmental Quality’s regulations and the definition would apply to any of those references, including 1502.16(b) (indirect effects and their significance).19

Social Cost of Carbon

I do not agree with the majority’s argument that Social Cost of Carbon is not a useful metric to inform the Commission’s public interest determination or its environmental review. By translating the GHG emissions from a particular project into monetized climate damages using the Social Cost of Carbon, the Commission would be able to provide context to the quantified rate or volume of GHG emissions of a pipeline project and ascribe significance as part of our NEPA review.20

The thrust of the majority’s argument on Social Cost of Carbon is that NEPA does not require that the Commission conduct a cost-benefit analysis of natural gas infrastructure projects, and that the Commission may instead perform a qualitative analysis of the climate impacts of GHG emissions. In support of this view, the majority asserts that “Commission staff lacks quantified information about all of the costs and benefits of the SMP Project to fairly compare alternatives, and in some cases such information would be nearly impossible or infeasible to obtain.”21
But in fact, the Commission does not exclusively perform a qualitative assessment of all project benefits and costs; rather, it monetizes certain impacts, such as a project’s long-term socioeconomic effects, including direct, indirect, and induced benefits from employment and local taxes that are measurable in dollar terms.22
Given this hybrid approach, I believe the Commission cannot selectively monetize benefits and costs where there is evidence that a particular impact, like GHG emissions, can properly be measured in dollar figures.23
Not all benefits and all costs need to be quantified in dollars, but similar to socioeconomic effects, GHG emissions are readily monetized to provide the appropriate context and ascribe significance.24

In support of its flawed interpretation of its NEPA responsibilities, the majority adopts what is, in my view, an overly narrow reading of High Country25
that ignores key holdings in the opinion.26
While the court did find BLM’s decision to quantify only the potential benefits, and not the costs, of the federal action to be arbitrary and capricious, High Country certainly does not stand for the proposition that impacts of climate change can effectively be ignored so long as the agency elects not to quantify the benefits of the proposed action.27
Indeed, the High Country court explicitly questioned rationales presented by BLM that are similar to those made by the majority in the Remand Order and today on rehearing, including: (1) that a general discussion of the effects of global climate change is sufficient under NEPA;28
(2) the difficulty of measuring and assessing the climate impacts from a particular source of emissions;29
(3) Social Cost of Carbon is better used for rulemaking proceedings than under NEPA;30
and (4) there is a lack of scientific consensus on discount rate.31
The High Country Court ultimately concluded

I do not believe the majority has given the Social Cost of Carbon the requisite “hard look” contemplated by NEPA and the High Country Court.
Much of the majority’s criticism of the Social Cost of Carbon simply reflects the fact that consideration of climate change in our pipeline reviews is difficult. As I have observed before, I acknowledge that it is difficult. But rather than accepting the responsibility to make a significance determination, as I believe NEPA requires, the majority relies on the alleged absence of an external litmus test that would determine the significance of GHG emissions to justify its conclusion that the Commission is unable to do so.32
I simply disagree. We could use Social Cost of Carbon to assess the significance a project’s GHG emissions since that is precisely the use for which it was developed: a scientifically-derived metric to translate tonnage of carbon dioxide or other GHGs to the cost of long-term climate harm.

Commission’s responsibilities to consider environment impacts under the NGA and NEPA

The Commission has broad authority under Section 7 of the NGA, including the discretion not to issue a certificate for a proposed pipeline if the Commission finds that a particular project would not be in the public interest.33
As articulated in NAACP v. FPC, the Commission review under Section 7 of the NGA allows for consideration of many factors in determining whether a project is in the public interest.34
Therefore, the Commission can act on whatever information is included in its environmental review, including the downstream GHG emissions resulting from the combustion of the transported natural gas. As the Sierra Club Court noted, the Commission could deny a pipeline certificate on the grounds that the pipeline would be too harmful to the environment.35
In the Remand Order, the majority disagrees with the Sierra Club Court, finding “were we to deny a pipeline certificate on the basis of impacts stemming from the end use of the gas transported, that decision would rest on a finding not ‘that the pipeline would be too harmful to the environment,” but rather that the end use of the gas would be too harmful to the environment.”36
The majority continues to rely on similar arguments in today’s order. I agree with the Sierra Club Court that denying a certificate application based on a finding that the GHG emissions are too harmful to the environment is within the Commission’s authority under both NEPA and the NGA.

The majority’s interpretation of the NGA and our role in determining whether a proposed project is “environmentally acceptable,” raises fundamental questions about the very purpose of the Commission’s review of pipeline applications. The majority articulates a narrow reading of the NGA, suggesting that because the NGA encourages that consumption of gas,37
the Commission could not deny a project based on a finding that the consumption of gas is environmentally unacceptable. I fundamentally disagree; I do not believe the NGA is so limiting. In fact, the Certificate Policy Statement lists a number of qualitative benefits of pipeline project the Commission can consider that “meeting unserved demand, eliminating bottlenecks, access to new supplies, lower costs to consumers, providing new interconnects that improve the interstate grid, providing competitive alternatives, increasing electric reliability, or advancing clean air objectives.”38
Each of these benefits by its very nature depends on the use of natural gas transported by the pipeline. I believe the Commission should be equally responsible for considering the adverse consequences of that use, not just the benefits.

While the current legal and policy debates relate to considering downstream climate impacts of pipeline projects, the majority’s view, taken to its logical conclusion, the majority seems to suggest that the Commission could not reject a pipeline for any environmental reason.39
In my view this position is inconsistent with our responsibilities under NEPA and the NGA. NEPA is the backbone of federal environmental law and requires that an agency take a “hard look” at a project’s direct, indirect, and cumulative environmental consequences.40
NEPA is not just an academic exercise but is a vehicle for informed decision making and informed public comment. Deciding whether a project is required by the public convenience and necessity, and assessing the public interest, is not simply a matter of checking the boxes to ensure evidence of need and providing context to the potential environmental impacts before approving a proposed project. I believe finding a project is in the public interest requires thoughtful review and consideration of all environmental impacts, and that could very well mean deciding not to authorize certain projects based on those impacts.41

Finally, I believe that considering climate impacts is not tantamount to establishing climate policy. The fact that the NGA was passed before we understood the climate impact of combusting natural gas does not relieve the Commission of its obligation to consider those impacts. I believe the broad wording of the NGA provides the Commission the flexibility to adapt its public interest determination to account for the environmental impacts of climate change.42
In my view, the law, the courts, and our responsibility as regulators compel us to do so.

Accordingly, I respectfully dissent.

• 11 164 FERC ¶ 61,099 (2018) (Rehearing Order).
• 22 162 FERC ¶ 61,233 (2018) (LaFleur, Comm’r, dissenting in part) (Remand Order).
• 33 The Court vacated and remanded the Commission’s authorization of the SMP Project, directing the Commission to address two issues: first, the Commission was directed to both quantify and consider the project’s downstream GHG emissions or explain in more detail why it cannot do so; and second, the Commission was directed to explain whether it still adheres to its prior position that the Social Cost of Carbon tool is not useful in performing its NEPA review. Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017) (Sierra Club). The Commission issued a final Supplemental Environmental Impact Statement (SEIS) on February 5, 2018. As directed by the Court, the SEIS quantified the net, gross, and full burn of downstream GHG emissions. In the SEIS, Commission staff concluded that it could not determine whether the downstream GHG emissions are significant. The SEIS also concluded that the additional analysis does not alter the conclusion that the SMP Project is an environmentally acceptable action. The Remand Order affirmed these findings.
• 44 Rehearing Order at PP 54-57.
• 55 Sierra Club, 867 F.3d at 1374.
• 66 Remand Order at P 22.
• 77 40 C.F.R. § 1508.8(b) (2017) (Indirect impacts are “caused by the action and are later in time or farther removed in distance, but still are reasonably foreseeable.” Indirect impacts “may include growth inducing effects and other effects related to induced changes in the pattern of land use, population density or growth rate, and related effects on air and water and other natural systems, including ecosystems.” (italics added)). More broadly, pipelines are driving the throughput of natural gas, connecting increased upstream resources to downstream consumption. With respect to downstream impacts, I believe it is reasonably foreseeable, in the vast majority of cases, that the gas being transported by pipelines we authorize will be burned for electric generation or residential, commercial, or industrial end uses. In those circumstances, there is a reasonably close causal relationship between the Commission’s action to authorize a pipeline project that will transport gas and the downstream GHG emissions that result from burning the transported gas. Dominion Transmission, Inc., 163 FERC ¶ 61,128 (2018) (LaFleur, Comm’r, dissenting in part) (New Market).
• 88 Sierra Club, 867 F.3d at 1374 (citing the NEPA regulations, 40 C.F.R. § 1502.16(b), and indirect effects and their significance (40 C.F.R. § 1508.8)).
• 99 SEIS at 9 (explaining that staff “cannot identify a suitable method to attribute discrete environmental effects to the quantified downstream emissions. Thus, the SEIS cannot make a finding whether the quantified downstream GHG emissions pose a significant impact on the environment.”).
• 1010 Remand Order at P 27 (agreeing “with the conclusion in the SEIS that there is no widely accepted standard to ascribe significance to a given rate or volume of GHG emissions”).
• 1111 E.g., Columbia Gas Transmission, LLC, 164 FERC ¶ 61,036, at P 57 (2018) (finding that “no standard methodology, including the Social Cost of Carbon tool, exists to determine how a project’s contribution to greenhouse gas emissions would translate into physical effects on the environment for the purposes of evaluating the project’s impacts on climate change. In the absence of an accepted methodology, the Commission is unable to make a finding as to whether a specific quantify of greenhouse gas emissions presents a significant impact on the environment […].”); Tennessee Gas Pipeline Company, LLC, 163 FERC ¶ 61,190, at P 67 (2018) (“We continue to find that no standard methodology exists. Without an accepted methodology, the Commission cannot make a finding whether a particular quantity of GHG emissions poses a significant impact on the environment, whether directly or cumulatively with other sources, and how that impact would contribute to climate change.”). See also New Market, 163 FERC ¶ 61,128 at P 67; Florida Southeast Connection, L.L.C., 162 FERC ¶ 61,233, at PP 26-27, 30-51 (2018).
• 1212 Rehearing Order at P 25.
• 1313 40 C.F.R. § 1508.27(a) (2017) (Context means “that the significance of an action must be analyzed in several contexts such as society as a whole (human, national), the affected region, the affected interests and the locality.”).
• 1414 40 C.F.R. § 1508.27(b) (2017) (Intensity refers to “the severity of the impact”).
• 1515 Many of the core areas of the Commission’s work have required the development of analytical frameworks, often a combination of quantitative measurements and qualitative assessments, to fulfill the Commission’s responsibilities under its broad authorizing statutes. This work regularly requires that the Commission exercise judgment, based on its expertise, precedent, and the record before it. For example, to help determine just and reasonable returns on equity (ROEs) under the Federal Power Act, NGA, and Interstate Commerce Act, the Commission identifies a proxy group of comparably risky companies, applies a discounted cash flow method to determine a range of potentially reasonable ROEs (i.e., the zone of reasonableness), and then considers various factors to determine the just and reasonable ROE within that range. See also, e.g., Promoting Transmission Investment through Pricing Reform, Order No. 679, FERC Stats. & Regs. ¶ 31,222 (2006), order on reh’g, Order No. 679-A, FERC Stats. & Regs. ¶ 31,236 (2006), order on reh’g, 119 FERC ¶ 61,062 (2007) (establishing Commission regulations and policy for reviewing requests for transmission incentives); Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, FERC Stats. & Regs. ¶ 31,323 (2011), order on reh’g, Order No. 1000-A, 139 FERC ¶ 61,132, order on reh’g and clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (requiring, among other things, the development of regional cost allocation methods subject to certain general cost allocation principles); BP Pipelines (Alaska) Inc., Opinion No. 544, 153 FERC ¶ 61,233 (2015) (conducting a prudence review of a significant expansion of the Trans Alaska Pipeline System).
• 1616 See, e.g., Sierra Club v. U.S. Dept. of the Interior, Opinion No. 18-1082 at *17 (4th Cir. Aug. 6, 2018) (finding that an agency “cannot escape its statutory and regulatory obligations by not obtaining accurate scientific information”).
• 1717 Rehearing Order at 25.
• 1818 40 CFR 1502.2(b) ("Impacts shall be discussed in proportion to their significance.").
• 1919See 40 C.F.R. §§ 1500.1(b), 1500.4(g), 1501.1(d), 1501.7(a)(3), 1502.1, 1502.2(b).
• 2020 Millennium Pipeline Company, L.L.C., 164 FERC ¶ 61,039 (2018) (LaFleur, Comm’r, concurring in part and dissenting in part).
• 2121 Rehearing Order at P 28.
• 2222 See, e.g., Final EIS 3.10; id. 3-202–3-207.
• 2323 See, e.g., Montana Environmental Information Center v. U.S. Office of Surface Mining, 274 F. Supp. 3d 1074 (D. Mont. 2017) (explaining the circumstances in which an agency should use the Social Cost of Carbon as part of a NEPA review to give context to projected GHG emissions by considering the cost of those GHG emissions), amended in part, adhered to in part sub nom. Montana Envtl. Info. Ctr. v. U. S. Office of Surface Mining, No. CV 15-106-M-DWM, 2017 WL 5047901 (D. Mont. Nov. 3, 2017).
• 2424 See Mountain Valley Pipeline, LLC, 163 FERC ¶ 61,197 at n.779 (“Although the Final EIS did quantify some of the project’s direct socioeconomic benefits (e.g., employment and tax payments), the Final EIS did so because those benefits occur in units of dollars and are directly comprehensible in units of dollars. However, because Commission staff lacked quantified information about all of the costs and benefits of the project, and in some cases such information would be nearly impossible or infeasible to obtain, the Final EIS did not use the limited available quantified benefits in a cost-benefit analysis to inform Commission staff’s comparison of alternatives.”).
• 2525 High Country Conservation Advocates v. United States Forest Service, 52 F. Supp. 3d 1174 (D. Colo. 2014) (High Country).
• 2626 Rehearing Order at P 32.
• 2727 In High Country, BLM did not dispute that it was required to analyze the indirect effects of GHG emissions in some fashion, but it argued that its general discussion of the effects of global climate change was sufficient under NEPA. High Country, 52 F. Supp. 3d at 1190. Thus, BLM quantified the amount of emissions relative to state and national emissions and provided a general discussion to the impacts of global climate change. BLM did not discuss the impacts caused by the GHG emissions. Instead, it offered a categorical explanation that such an analysis is impossible. Id. This is essentially the scenario presented by the majority here.
• 2828 Id.; Rehearing Order at PP 19-21.
• 2929 High Country, 52 F. Supp. 3d at 1190; Rehearing Order at PP 35-37.
• 3030 High Country, 52 F. Supp. 3d at 1192; Rehearing Order at n. 104.
• 3131 High Country, 52 F. Supp. 3d at 1192; Florida Southeast Connection, LLC, 162 FERC ¶ 61,233 at P 49 (2018). The High Country court further states that “neither the BLM economists nor anyone else in the record appears to suggest that the cost is as low as $0 per unit. Yet by deciding not to quantify the costs at all, the agencies effectively zeroed out the cost in its quantitative analysis.” High Country, 52 F. Supp. 3d at 1192.
• 3233 Rehearing Order at n.80.
• 3334 15 U.S.C. § 717f(c) (2012).
• 3435 See NAACP v. FPC, 425 U.S. 662, 670 & n.6 (1976) (noting that, in addition to “encourag[ing] the orderly development of plentiful supplies of electricity and natural gas at reasonable prices,” the Commission has the authority to consider “conservation, environmental, and antitrust” concerns).
• 3536 Sierra Club, 867 F.3d at 1373.
• 3637 Remand Order at P 29.
• 3738 The majority says that “the public interest that the Commission must protect always includes the interest of consumers in having access to an adequate supply of gas at reasonable price.” Rehearing Order at P 56.
• 3839 Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC ¶ 61,227, at 61,748 (1999).
• 3940 However, I am heartened that the majority acknowledges they can reject a project on environmental grounds. Rehearing Order at P 54 and n.174.
• 4041 40 C.F.R. § 1500.1 (Purpose) (NEPA is the “basic national charter for protection of the environment.”).
• 4142 NAACP v. FPC, 425 U.S. 662; Atlantic Coast Pipeline, LLC, 161 FERC ¶ 61,042 (2017) (LaFleur, Comm’r, dissenting); Mountain Valley Pipeline, LLC, 161 FERC ¶ 61,043 (2017) (LaFleur, Comm’r, dissenting).
• 4243 As the Supreme Court observed in Massachusetts v. E.P.A., concerning the Clean Air Act,