FERC Not Required to "Second Guess" State Energy Choices Under NEPA

Yesterday the U.S. Court of Appeals for the D.C. Circuit, in Citizens Action Coalition of Indiana v. FERC, rejected Citizens Actions claim that FERC had to consider alternatives to state-approved natural gas turbines before approving a natural gas pipeline. The opinion, written by Judge Rao, explains why such a requirement would impose far broader environmental review obligations than can be justified, and may represent a trimming of the D.C. Circuit’s unduly expansive approach to NEPA (an approach currently under review by the Supreme Court in Seven County Infrastructure Coalition v. Eagle County, Colorado).

Here’s how Judge Rao summarizes the opinion:

As night follows day, an environmental challenge follows the approval of a natural gas pipeline. In this case, the State of Indiana approved a plan that would retire a coal-fired facility and replace it with wind and solar energy sources. To ensure grid reliability with the move to renewable energy, the plan also included two new natural gas turbines. The Federal Energy Regulatory Commission approved a natural gas pipeline to serve those turbines. The Citizens Action Coalition of Indiana petitions for review, alleging that FERC’s environmental analysis and order were unreasonable and inconsistent with the National Environmental Policy Act and the Natural Gas Act.

Citizens Action alleges numerous errors, but its core claim is that FERC was required to analyze non-gas alternatives before approving the natural gas pipeline. We disagree. Congress gave FERC authority to promote the development of interstate natural gas pipelines, but it left the choice of energy generation to the States. The purpose of the pipeline was to support Indiana’s energy plan, and FERC has no statutory authority to consider non-gas alternatives already rejected by the State. Because FERC acted lawfully and reasonably when conducting the environmental analysis and assessing the public convenience and necessity for the pipeline, we deny the petition for review.

From later in the opinion:

In its first set of NEPA challenges, Citizens Action broadly argues that FERC should have assessed alternatives to natural gas, instead of focusing only on the mix of generation sources chosen by CenterPoint and the Indiana Commission. But NEPA does not require FERC to consider non-gas alternatives that are outside of FERC’s jurisdiction and would fail to serve the purpose of the Project. We hold that FERC properly identified the Project’s purpose as supporting CenterPoint’s new natural gas units and reasonably considered alternatives that would satisfy that purpose.

The court also rejected other challenges, including claims that FERC was obligated to characterize predicted effects on greenhouse gas emissions, instead of merely reporting them in quantitative terms.

The opinion ends:

In its challenge to the Texas Gas Project, Citizens Action in effect seeks a judicial directive exhorting FERC to promote general environmental concerns. But such a directive would far exceed our review under the APA as well as FERC’s authority under the NGA and NEPA. Congress charged FERC with the development of natural gas pipelines, not with making local energy decisions or setting national environmental policy. For the foregoing reasons, we deny the petition for review.

Of note, the opinion also included a footnote addressing the D.C. Circuit’s recent decision (since taken en banc) that the Council on Environmental Quality lacks the authority to adopt binding regulations governing NEPA review, noting that since FERC complied with CEQ’s “guidance,” making the question a non-issue for this case.

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