Originally published for customers August 21, 2024.
What’s the issue?
Since April, the DC Circuit has made five critical decisions on pipeline and LNG projects. The two opinions that resulted in favorable rulings for FERC were penned by Trump-appointed judges, while the three opinions resulting in remand or vacatur were written by judges appointed by Democratic presidents.
Why does it matter?
Because judges at the appellate level are appointed by the administration in power, they can have strong left or right leaning ideologies. These leanings are important to note when litigation arises, particularly if it is possible to argue for a more favorable venue in a different court.
What’s our view?
The political leanings of the judges penning these proceedings, along with their outcomes, might suggest a willingness of Democratic-appointed judges to push the envelope on regulatory interpretations. However, due to the small sample size, mixed panel compositions, and unique aspects of each case, it is challenging to definitively show whether a consistent trend is truly developing.
Since April, the DC Circuit has made five critical decisions on pipeline and LNG projects. The two opinions that resulted in favorable rulings for FERC were penned by Trump-appointed judges, while the three opinions resulting in remand or vacatur were written by judges appointed by Democratic presidents. Because judges at the appellate level are appointed by the administration in power, they can have strong left or right leaning ideologies. These leanings are important to note when litigation arises, particularly if it is possible to argue for a more favorable venue in a different court.
The political leanings of the judges penning these proceedings, along with their outcomes, might suggest a willingness of Democratic-appointed judges to push the envelope on regulatory interpretations. However, due to the small sample size, mixed panel compositions, and unique aspects of each case, it is challenging to definitively show whether a consistent trend is truly developing.
Panel Politics
We start with the two recent cases resulting in vacatur of FERC authorizations because this result is relatively rare and because both had panels composed entirely of Democrat-appointed judges: New Jersey Conservation Foundation v. FERC (New Jersey), which vacated the authorization for Transco’s Regional Energy Access Expansion Project (REAE) and City of Port Isabel v. FERC (City of Port Isabel), which vacated the authorizations for the Texas LNG Brownsville, Rio Grande LNG, and Rio Bravo Pipeline projects. Both panels included judges Garcia and Childs, with Garcia writing the opinion for City of Port Isabel and Childs writing for New Jersey.
Moving up the spectrum, Garcia also wrote the opinion for Healthy Gulf v. FERC, but this case had a mixed panel of two Democrat-appointed judges and one Republican-appointed judge, and resulted in a remand rather than a vacatur. Food and Water Watch v. FERC, also with a mixed panel but with a Trump appointee writing the opinion, resulted in a win for FERC. Similarly, Alabama Municipal Distributors Group v. FERC, with a majority of Republican-appointed judges and a Trump appointee writing the opinion, also favored FERC.
As you can see below, at first glance, this pattern might suggest that FERC's chances of prevailing increases and the severity of adverse rulings decreases with more Republican-leaning panels.
However, a closer examination of the decisions reveals complexities that go beyond simple political affiliations. For instance, as we discussed in Another Significant Ruling From the DC Circuit — Rio Grande and Texas LNG Projects Vacated, the City of Port Isabel opinion faulted the Commission’s analysis on connected actions and alternatives analysis under the National Environmental Policy Act (NEPA). But a major reason for vacatur was FERC’s failure to solicit public comment on critical data and environmental justice analysis — a procedural flaw less tied to political ideology.
Similarly, as we discussed in REAE Rehearing: A Turning Point in FERC's Market Need Analysis?, the New Jersey opinion took issue with FERC’s consideration of state climate laws in market need assessments and “significance” determinations under NEPA for greenhouse gas (GHG) emissions, but a key reason for vacatur was FERC’s misinterpretation of a New Jersey climate law as unenforceable.
So while there may be portions of these cases that are more politically charged than others, the procedural flaws also show objective reasons for the decisions.
Issue Progression
Beyond the panel compositions, it’s crucial to examine how specific controversial issues are evolving in these cases. We’ll focus first on two NEPA issues: FERC’s analysis of GHG emissions and “significance” determinations, and its analyses of connected actions and alternatives. We will then discuss FERC’s market need analysis under its Certificate Policy Statement.
FERC and NEPA: Significance Determinations
Under NEPA, the decision on whether to prepare an Environmental Assessment (EA) or Environmental Impact Statement (EIS) turns on whether an agency action could potentially result in “significant” environmental impacts. If the agency thinks it won’t result in such impacts, the agency can prepare an EA, which will result in a “Finding of No Significant Impact” if it was correct. When conducting the EA, if the agency finds potential significant impacts, it will prepare an EIS.
The recent litigation highlights two main evolving issues with respect to how FERC assesses the “significance” of the downstream impacts of GHG emissions — whether FERC has to make “significance determinations” under NEPA, and how it distinguishes a previous case where it made such a determination.
In Food and Water Watch, when analyzing FERC’s decision to prepare an EIS for the East 300 Upgrade Project after initially publishing an EA, the court stated that FERC doesn’t have to label effects as “significant” or “insignificant,” but making a “finding of no significant impact” is “essential” if an agency chooses not to prepare an EIS. The more recent New Jersey opinion by Judge Childs potentially mischaracterized Food and Water Watch and takes it a step further stating it’s “essential” for FERC to make a “significance determination” if it has a material effect on a case, such as when it has to prepare an EIS.
There are some nuances here, but they are important. First, a “finding of no significant impact” is required for an EA, and while an EA may uncover potential significant impacts necessitating the preparation of an EIS, there is no corresponding “finding of significant impact” for an EIS. It is enough that an agency believes an action “may” result in significant impacts for it to justify its decision to prepare an EIS. Additionally, making a “significance determination” under the NEPA regulations is not a binary process necessarily resulting in a yes or no determination as to whether each individual category of impacts is significant. Rather, the regulations spell out a process for how to conduct analysis regarding whether an adverse impact is significant. In conducting that analysis, it is possible to conclude, as FERC has in the past, that it cannot determine whether GHG emissions are significant.
But in the court’s eyes in both Healthy Gulf and in New Jersey, because FERC “did not dispute the premise” that it generally has to determine whether impacts of GHG are significant, it must do so. As it corrects its analysis in these various proceedings, FERC may dispute this premise and assert that it need not make a significance determination on every underlying impact to justify its decision to prepare an EIS.
FERC is also on the hook in both of these cases to distinguish its approach in the Northern Natural case, where it determined GHG emissions of a project would be de minimis and therefore under a significance threshold. The court in Healthy Gulf provided guidance on how FERC could approach this issue, suggesting it could “distinguish between insignificance determinations … for which there is a logical lower bound of comparison (zero), and significance determinations, for which no comparable upper bound of comparison exists.” Ultimately it remains to be seen how this issue will resolve once FERC supplements its analysis, or as litigation challenging these opinions unfolds.
NEPA Connected Actions and Alternatives Analysis
We discussed connected actions under NEPA at length in the aforementioned article on Rio Grande LNG’s vacated certificate, where the court determined that FERC should have analyzed its proposed Carbon Capture and Storage (CCS) facility as a connected action and as an alternative. But before that case, in Alabama Municipal, the court analyzed the independent utility and temporal overlap of potential connected actions to the Evangeline Pass project, each with its own nuance:
- A new LNG terminal that exports natural gas and an amendment to increase the amount of gas it could export were not connected actions because the terminal could receive gas in many different ways.
- A new pipeline hub serving the terminal was not a connected action because it also connected to several spokes, providing different gas supply options on different pipeline systems, and no temporal overlap.
- Two pipeline spokes on that hub were not connected actions because they also had a different gas supply, and although there was some temporal overlap, would proceed even if Evangeline Pass did not.
Similar to connected actions, recent cases have refined the requirements for alternatives analysis under NEPA. As stated in Healthy Gulf, while NEPA regulations require the Commission to “evaluate reasonable alternatives to the proposed action,” it “need not provide the same level of detailed analysis ... that it provides for the action under review.” The discussion of alternatives “need not be exhaustive” as long as there is “information sufficient to permit a reasoned choice.”
Both Healthy Gulf and City of Port Isabel analyzed CCS as an alternative, but came to notably different conclusions. In Healthy Gulf, the court found that FERC reasonably rejected CCS as infeasible. It considered a proposed CCS facility for the CP2 LNG terminal, but found it too early to determine if Commonwealth could use that CCS facility, as it was not yet approved or constructed. In contrast, the City of Port Isabel case did not mention the Healthy Gulf decision, but it found that the proposed CCS facility to be attached to the Rio Grande LNG terminal needed to be analyzed as both a connected action and as an alternative. Particularly noteworthy was the court’s statement that even if Rio Grande decides not to proceed with the CCS project on remand, it would still need to analyze the project as an alternative because the CCS proposal signaled that it was feasible. Just yesterday, NextDecade requested that FERC terminate the CCS proceeding, so we will see how this changes FERC’s analysis.
Conclusion
The evolution of these issues may point to a willingness of Democratic-appointed judges to push the envelope on regulatory interpretation, particularly if the related issues involve climate change. Ultimately we will need to wait for FERC to correct the flaws in its analysis and for the litigation to unfold to determine if any new standards arise. It will also be revealing to see how the new commissioners tackle some of these thorny issues on remand. We will be watching both the Commission and judicial panels closely to see if future decisions show more definitive ideological bias.