Commissioner James Danly Statement
July 29, 2022
Docket No. CP21-470-000
I concur in the decision to grant the request filed by Freeport LNG Development, L.P., FLNG Liquefaction, LLC, FLNG Liquefaction 2, LLC and FLNG Liquefaction 3, LLC (collectively, Freeport LNG) to amend their Natural Gas Act (NGA) section 3[1] authorization to increase the project’s authorized liquefaction production capacity from 782 billion cubic feet per year (Bcf/y) to 870 Bcf/y, to reflect the project’s actual capacity (Capacity Amendment Project). I write separately to restate several points that are relevant to the Commission’s recent NGA sections 3 and 7 authorizations.
First, as I have explained in recently-issued certificate orders,[2] while not fatal to the durability of the order, I would have explicitly repudiated Northern Natural Gas Company[3] and reaffirmed the Commission’s prior position that “[w]ithout an accepted methodology, the Commission cannot make a finding whether a particular quantity of greenhouse gas [(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.”[4] This is because, as the Commission has stated, it is unable to connect a particular project’s GHG emissions to discrete, physical effects on the environment.[5] The Council on Environmental Quality (CEQ) has found similarly.[6] Moreover, there is no standard by which the Commission could, consistent with our obligations under the law, ascribe significance to a particular rate or volume of GHG emissions.[7] And the Commission’s recent attempts to do so, absent the expertise to make such a determination and the statutory authority to impose it, have amounted to little more than picking arbitrary numbers.[8]
In now stating in our orders that “[t]he Commission is not herein characterizing these emissions as significant or insignificant because we are conducting a generic proceeding to determine whether and how the Commission will conduct significance determinations going forward,”[9] the Commission has effectively preserved the ability to expand the use of its flawed “eyeball” test, possibly employing a new number as the threshold. The inclusion of this section in our recent orders shows that my colleagues persist in the belief that we have the authority to establish an arbitrary significance threshold. How will the Commission conduct significance determinations going forward? Or a better question: how exactly can the Commission conduct significance determinations going forward? We have a mess on our hands because of changing, inconstant practice and because the Commission’s seeming policy of picking a number out of thin air and then declaring it the threshold brings significant legal risk.[10] While not done in this case, in several proceedings Commission staff has made significance determinations in a NEPA document[11] published after the issuance of the Commission’s Interim GHG Policy Statement[12] and before that policy statement was retroactively converted to a draft policy statement.[13] In two proceedings, the Commission issued an order that neither acknowledged nor adopted staff’s significance determination.[14] But in one recent proceeding, the Commission did in fact acknowledge that staff previously assessed significance, and declined to adopt that determination.[15] We should stop confusing our practice and we should no longer preserve our ability to establish arbitrary thresholds. The establishment of the 100,000 metric tpy significance threshold was a mistake,[16] and I urge the Commission not to make the same mistake again. Establishment of arbitrary thresholds for the purpose of establishing a level at which mitigation will be required is likely outside our authority[17] and, if the Commission’s choice of an arbitrary number is unsupported by actual reasoning, it will fail under the Administrative Procedure Act.
Moreover, recent Supreme Court case law counsels a cautious and deliberate approach when attempting to regulate subject matters that are not clearly placed within the jurisdiction granted by Congress, especially when the regulation of these fields will have a profound effect on a major industry that is fundamental to the health and prosperity of all Americans. West Virginia v. Environmental Protection Agency (West Virginia)[18] should give the Commission pause before wading further into this territory. This case perfectly mirrors Commissioner Christie’s dissent regarding the major questions doctrine and counsels caution.[19] The Commission is charged under the NGA with “encourag[ing] the orderly development of plentiful supplies of . . . natural gas at reasonable prices.”[20] It is not an environmental statute and to adopt mitigation policies or establish thresholds, the effect of which would be to frustrate the primary purpose of the statute in order to pursue policy goals in an arena not delegated by Congress, invites challenges under West Virginia. “A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”[21] Moreover, given the Supreme Court’s reinvigoration of the major questions doctrine, we should abandon a project that clearly exceeds the boundaries of our delegated authority and proceed by simply terminating Docket No. PL21-3-000 (Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews).
Second, I wanted to take a moment to highlight Commission staff’s recent June 30, 2022 letter to Freeport LNG.[22] As the letter notes, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration’s recent correspondence requires Freeport LNG to take certain measures in response to an incident involving a failure of LNG piping at its facilities on June 8, 2022 and the U.S. Coast Guard’s recent issuance suspends all transfer operations to or from any vessel.[23] Further, the letter provides that “Freeport must receive written authorization before restarting any non-emergency operations in existing facilities, constructing new or modified facilities, and commissioning and placing any facilities back into service” and “[s]uch authorization will only be granted following a determination that the facilities are fit for service and acceptable measures have been put into place to safely return facilities to operation.”[24] And today’s order states that “[t]he Commission will require implementation of any measures it finds necessary to assure safe operation of the Liquefaction Project as determined by the Director of OEP following the root cause investigation of the explosion and fire.”[25] As I have stated in other proceedings, including another order also voted on at the July 28, 2022 Commission meeting, I have continued misgivings regarding the Commission’s claim of ongoing jurisdiction over the safety of liquefied natural gas facilities.[26]
Third, I object to staff’s inclusion of a Social Cost of Carbon calculation based on the estimated emissions from the project’s operation in this proceeding’s Environmental Assessment.[27] The Commission has often—and extensively—discussed why the Social Cost of Carbon is ill-suited to project-level NEPA review, and why the Social Cost of Carbon cannot meaningfully inform the Commission’s decision to approve or disapprove natural gas infrastructure projects under the NGA.[28] No valuable information can be gleaned from the numbers included in the Environmental Assessment and they serve merely to confuse the matter—they should be omitted from future issuances.[29]
For these reasons, I respectfully concur in the judgment.
[1] 15 U.S.C. § 717b.
[2] See, e.g., Columbia Gulf Transmission, LLC, 178 FERC ¶ 61,198 (2022) (Danly, Comm’r, concurring in the judgment at PP 2-4) (Columbia Gulf).
[3] N. Nat. Gas Co., 174 FERC ¶ 61,189 (2021) (Northern). In Northern, a majority of my colleagues established what has been referred to (by some) as the “eyeball” test. See Catherine Morehouse, Glick, Danly spar over gas pipeline reviews as FERC considers project’s climate impacts for first time, Util. Dive, Mar. 19, 2021, https://www.utilitydive.com/news/glick-danly-spar-over-gas-pipeline-reviews-as-ferc-considers-projects-cli/597016/ (“‘We essentially used the eyeball test,’ [Chairman Glick] said, adding that based on that analysis, ‘it didn’t seem significant in terms of the impact of those emissions on climate change.’”).
[4] Dominion Transmission, Inc., 163 FERC ¶ 61,128, at P 67 (2018) (footnote omitted).
[5] See, e.g., Nat’l Fuel Gas Supply Corp., 158 FERC ¶ 61,145, at P 188 (2017).
[6] See CEQ, Draft [National Environmental Policy Act (NEPA)] Guidance on Consideration of the Effects of Climate Change and Greenhouse Gas Emissions, at 3 (Feb. 18, 2010), https://obamawhitehouse.archives.gov/sites/default/files/microsites/ceq/20100218-nepa-consideration-effects-ghg-draft-guidance.pdf (“it is not currently useful for the NEPA analysis to attempt to link specific climatological changes, or the environmental impacts thereof, to the particular project or emissions, as such direct linkage is difficult to isolate and to understand.”).
[7] See, e.g., Mountain Valley Pipeline, LLC, 163 FERC ¶ 61,197, at P 292 (2018).
[8] See Consideration of Greenhouse Gas Emissions in Nat. Gas Infrastructure Project Revs., 178 FERC ¶ 61,108, at PP 79-81 (2022) (establishing a significance threshold of 100,000 metric tons per year (tpy) of CO2e) (Interim GHG Policy Statement); id. (Danly, Comm’r, dissenting at PP 32-36) (explaining why the majority’s presumptive significance threshold is illogical); see also Northern, 174 FERC ¶ 61,189 (Danly, Comm’r, concurring in part and dissenting in part at P 16) (comparing the Northern test to “like posting a speed limit sign with a question mark instead of a number, leaving it to the police officer to decide arbitrarily whether you were speeding”).
[9] Freeport LNG Development, L.P., 180 FERC ¶ 61,055, at P 26 (2022) (Freeport).
[10] The Commission is authorized to make a “‘rational legislative-type judgment’” but may not “pluck a number out of thin air when it promulgates rules.” WJG Tel. Co., Inc. v. FCC, 675 F.2d 386, 388-89 (D.C. Cir. 1982) (quoting FCC v. Nat’l Citizens Comm. for Broad., 436 U.S. 775, 814 (1978)); see also LeMoyne-Owen Coll. v. NLRB, 357 F.3d 55, 61 (D.C. Cir. 2004) (“In the absence of an explanation, the ‘totality of the circumstances’ can become simply a cloak for agency whim—or worse.”) (citation omitted).
[11] See, e.g., Commission Staff, Environmental Assessment for Golden Pass LNG Terminal LLC Variance Request No. 15, Docket No. CP14-517-001, at 25 (Mar. 22, 2022) (“In order to assess impacts on climate change associated with the Project, we applied the Commission’s Interim Policy Statement on ‘Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews’ issued on February 18, 2022 in Docket No. PL21-3-000 that established a significance threshold of 100,000 metric tpy of CO2e. The Amendment’s construction emissions of 93,642 metric tpy of CO2e would not exceed the Commission’s presumptive significance threshold.”) (citing Interim GHG Policy Statement, 178 FERC ¶ 61,108); Commission Staff, Environmental Assessment for Equitrans L.P. Truittsburg Well Conversion Project, Docket No. CP22-24-000, at 29 (Mar. 7, 2022) (finding that the “Project’s construction and operation emissions would fall below the Commission’s presumptive [100,000 metric tpy] significance threshold”); Commission Staff, Final Environmental Impact Statement for Kern River Transmission Company Delta Lateral Project, Docket No. CP21-197-000, at 4-75 (Feb. 25, 2022) (finding that “[t]he Project operations and downstream combustion of gas transported by the Project could potentially increase emissions by over 2.7 million metric tpy of CO2e, which exceeds the Commission’s presumptive threshold of significance”).
[12] Interim GHG Policy Statement, 178 FERC ¶ 61,108.
[13] See Certification of New Interstate Nat. Gas Facilities, 178 FERC ¶ 61,197, at P 2 (2022) (converting the two policy statements issued on February 18, 2022, Certification of New Interstate Nat. Gas Facilities, 178 FERC ¶ 61,107 (2022) (Updated Certificate Policy Statement) and Interim GHG Policy Statement, 178 FERC ¶ 61,108, to “draft” policy statements) (Order on Draft Policy Statements).
[14] Compare ANR Pipeline Co., 179 FERC ¶ 61,122, at P 35 (2022) (“The Commission is not herein characterizing these emissions as significant or insignificant because we are conducting a generic proceeding to determine whether and how the Commission will conduct significance determinations going forward”), and id. P 35 n.42 (“Although we acknowledge that the Commission has previously assessed the ‘significance’ of GHGs, see N. Nat. Gas Co., 174 FERC ¶ 61,189 (2021), we do not do so here. The Commission is considering approaches for assessing significance in a pending proceeding.”) (citing Order on Draft Policy Statements, 178 FERC ¶ 61,197), with Commission Staff, Final Environmental Impact Statement for ANR Pipeline Co. Wisconsin Access Project, Docket No. CP21-78-000, at 53-54 (Mar. 18, 2022) (“In order to assess impacts on climate change associated with the Project, Commission staff applied the Commission’s Interim Policy Statement on ‘Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews’ issued on February 18, 2022 in Docket No. PL21-3-000 that established a significance threshold of 100,000 metric tpy of CO2e. The Project’s operational and downstream emissions would exceed the Commission’s presumptive significance threshold based on 100 percent utilization.”) (citing Interim GHG Policy Statement, 178 FERC ¶ 61,108). See also Rover Pipeline LLC, 179 FERC ¶ 61,043, at P 18 (2022) (stating that “[t]he Commission is not herein characterizing these emissions as significant or insignificant because we are conducting a generic proceeding to determine whether and how the Commission will conduct significance determinations going forward” and failing to acknowledge that Commission staff determined in the environmental assessment issued on February 24, 2022 that the project’s construction, operation, and downstream emissions would fall below the Commission’s presumptive 100,000 tpy significance threshold based on 100 percent utilization).
[15] See Spire Storage W. LLC, 179 FERC ¶ 61,123, at P 52 n.106 (2022) (“acknowledg[ing] that the Commission has previously assessed the ‘significance’ of GHGs, see N. Nat. Gas Co., 174 FERC ¶ 61,189 (2021), and Commission staff assessed the significance of GHGs for the project in the final EIS by applying the Commission’s February 17, 2022 Interim Policy Statement”).
[16] But see Columbia Gulf, 178 FERC ¶ 61,198 (Glick, Chairman, concurring at P 5 n.14) (“I recognize the now-draft GHG policy statement proposes 100,000 metric tons as a threshold over which a project’s GHG emissions would be presumed significant. In my view, that is a deliberately conservative number intended to ensure that the Commission did not lead projects developers down the path of an environmental assessment, only to subsequently change course and require an environmental impact statement in the event that the Commission were to establish a lower threshold in a final GHG policy statement than it did in the then-interim, now-draft policy statement. I remain open to reviewing the comments submitted in response to that draft statement, as well as guidance we may receive from other federal agencies, in considering what threshold would be appropriate in a final policy statement.”) (emphasis added) (citation omitted).
[17] See Atl. City Elec. Co. v. FERC, 295 F.3d 1, 8 (D.C. Cir. 2002) (“As a federal agency, FERC is a ‘creature of statute,’ having ‘no constitutional or common law existence or authority, but only those authorities conferred upon it by Congress.’”) (quoting Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001)) (emphasis in Atl. City Elec. Co.); see Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988) (“It is axiomatic that an administrative agency’s power to promulgate legislative regulations is limited to the authority delegated by Congress.”); see also Senate Energy & Nat. Res. Committee, Full Committee Hearing To Review FERC’s Recent Guidance On Natural Gas Pipelines, https://www.energy.senate.gov/hearings/2022/3/full-committee-hearing-to-review-ferc-s-recent-guidance-on-natural-gas-pipelines, at 00:58:30 (Mar. 3, 2022) (questioning by Chairman Manchin regarding the recent policy statements: “The Commission, you all acknowledge, that . . . no federal agency, including this Commission has established a threshold for determining what level of project-induced greenhouse gas emissions is significant. Why do you all think that FERC, whose primary purpose is to regulate efficient and reliable energy, should be the first agency, the first to set such a standard rather than the environmental agencies?”) (March 2022 Senate Hearing); see generally Interim GHG Policy Statement, 178 FERC ¶ 61,108 (Danly, Comm’r, dissenting).
[18] No. 20-1530, 2022 WL 2347278 (U.S. June 30, 2022).
[19] See Interim GHG Policy Statement, 178 FERC ¶ 61,108 (Christie, Comm’r, dissenting at PP 3, 22-28); Updated Certificate Policy Statement, 178 FERC ¶ 61,107 (Christie, Comm’r, dissenting at PP 3, 22-28).
[20] NAACP v. FPC, 425 U.S. 662, 669-70 (1976) (citations omitted); accord Myersville Citizens for a Rural Cmty., Inc. v. FERC, 783 F.3d 1301, 1307 (D.C. Cir. 2015) (quoting NAACP, 425 U.S. at 669-70).
[21] West Virginia v. EPA, 2022 WL 2347278, at *18.
[22] See Commission Staff, Letter Discussing LNG Terminal Operation, Docket Nos. CP03-75-002, et al (June 30, 2022).
[23] Id. at 1.
[24] Id.
[25] Freeport, 180 FERC ¶ 61,055 at P 31 (emphasis added).
[26] See EcoEléctrica, L.P., 180 FERC ¶ 61,054 (2022) (Danly, Comm’r, concurring); EcoEléctrica, L.P., 179 FERC ¶ 61,038 (2022) (Danly, Comm’r, concurring); EcoEléctrica, L.P., 177 FERC ¶ 61,164 (2021) (Danly, Comm’r, concurring); EcoEléctrica, L.P., 176 FERC ¶ 61,192 (2021) (Danly, Comm’r, concurring).
[27] See Commission Staff May 12, 2022 Environmental Assessment for Freeport LNG Capacity Amendment Project at 9-10.
[28] See, e.g., Mountain Valley Pipeline, LLC, 161 FERC ¶ 61,043, at P 296 (2017), order on reh’g, 163 FERC ¶ 61,197, at PP 275-97 (2018), aff’d sub nom. Appalachian Voices v. FERC, No. 17-1271, 2019 WL 847199, at *2 (D.C. Cir. 2019) (“[The Commission] gave several reasons why it believed petitioners’ preferred metric, the Social Cost of Carbon tool, is not an appropriate measure of project-level climate change impacts and their significance under NEPA or the Natural Gas Act. That is all that is required for NEPA purposes.”).
[29] Because the Social Cost of Carbon was not developed for project-level review, its use is not required for the evaluation of impacts under section 1502.21 of the CEQ’s regulations. 40 C.F.R. § 1502.21(c). This reasoning is consistent with Florida Southeast Connection, LLC where the Commission stated, “[a]nd we do not dispute that [the Social Cost of Carbon] is generally accepted in the scientific community and can play an important role in different contexts, such as rulemaking proceedings.” 164 FERC ¶ 61,099, at P 35 (2018) (emphasis added) (footnote omitted).