DC Circuit faults FERC's environmental analysis in two LNG project orders

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The US Court of Appeals for the District of Columbia Circuit has found fault with the Federal Energy Regulatory Commission's climate and environmental justice reviews for the Rio Grande LNG and Texas LNG projects, planned in the Brownsville, Texas, area, and has remanded to FERC the orders authorizing the projects.

The Aug. 3 decision, marking the second blow the court delivered to FERC's gas project orders, could have broader implications going forward for the commission's approach to considering climate impacts. It arrives as FERC has remained split on the extent of its legal requirements to assess climate impacts of projects.

The orders remanded by the court Aug. 3 include applications for the 7 million mt/year Rio Grande project and the 4 million mt/year Texas LNG project. The court dismissed as moot a similar petition challenging the certificate for the now-scrapped 6 million mt/year Annova LNG project, once proposed in the same area along the Brownsville Ship Channel. FERC first approved the projects in 2019, with rehearing orders issued in early 2020.

In one benefit for the projects, the court agreed not to vacate the FERC authorizations, acknowledging the LNG developers' concerns that such a remedy could "imperil the intervenors' ability to obtained funding necessary to complete the projects in a timely fashion."

CLIMATE RULING

The three-judge panel of the DC Circuit agreed with petitioners that FERC failed to adequately assess the impact of the projects' greenhouse gas emissions because it neglected to respond to the argument that it was required to use the social cost of carbon or some other generally accepted method to assess the GHG emissions' effects.

FERC did not discuss or even cite the relevant Council on Environmental Quality regulation in its rehearing order that would have seemed to require it to evaluate the impacts based on theoretical approaches or research methods generally accepted by the scientific community, said the ruling Judge Robert Wilkins filed. The panel also included Chief Judge Sri Srinivasan and Judge Douglas Ginsburg.

While the court did not rule on what method FERC should have applied on GHGs, it held that FERC was required to address the petitioners' argument concerning the significance of a CEQ regulation and that its failure to do so rendered its analysis of the projects' GHG emissions deficient.

"On remand, the commission must explain whether 40 C.F.R. 1502.21(c) calls for it to apply the social cost of carbon protocol or some other analytical framework, as 'generally accepted in the scientific community" within the meaning of the regulation, and if not, why not,'" the court said.

ENVIRONMENTAL JUSTICE

The panel also found FERC's environmental justice analysis for the two projects to be flawed. It agreed with petitioners that the decision to analyze the impact on environmental justice communities only in census blocks within two miles of the projects was arbitrary, given FERC's determination that environmental effects would extend well beyond two miles. FERC determined air quality impacts could occur within 31 miles, the court said (Vecinos Para el Bienestar de la Comunidad Costera, et al., v. FERC, 20-1045, 20-1093).

"The commission has offered no explanation as to why, in light of that finding, it chose to delineate the area potentially affected by the projects to include only those census blocks within two miles of the project sites for the purposes of its environmental justice analyses," it said.

On remand, FERC must explain why it chose the two-mile radius or else select a different radius, the ruling said. FERC also must revisit its finding that all project-affiliated populations are minority or low income, and revisit the conclusion that there would not be disproportionate impacts on such people.

Given the flaws, the court found in FERC's analyses on climate change and environmental justice, the court said FERC must revisit its determinations on public interest and convenience for the projects.

In deciding to remand, rather than vacate, the FERC orders, the decision called it "reasonably likely" that, on remand, FERC could address its failures to explain its approach on climate change and environmental justice while reaching the same result.

A representative for Texas LNG said in a statement the ruling "does not vacate Texas LNG nor impact its ability to continue commercial development." The company added, "we look forward to assisting FERC to complete the necessary analysis while we continue to bring the project to a final investment decision."

Petitioners in the case included the group Vecinos Para el Bienestar de la Comunidad Costera, Sierra Club, City of Port Isabel, Save RGV from LNG, and others.

Sierra Club Senior Attorney Nathan Matthews said he was hopeful the decision would cement changes already occurring at FERC. He credited Chairman Richard Glick with recognizing FERC needs to do a better job on climate change and environmental justice. Having the court precedent could be important as the composition at FERC changes, he said.

Gary Kruse of ArboIQ said it would have been better for the LNG projects had the decision come down while there was a working Republican majority at FERC. "It is impossible to tell what standard Glick and [Commissioner Allison] Clements will apply to either of these key issues -- GHGs and EJ. Throw in the wildcard of an unknown replacement for [Commissioner Neil] Chatterjee and there is a substantial risk that the rebalancing of the public interest will not be in their favor," he added.