FERC Responds Quickly and Decisively to D.C. Circuit Remand in Sabal Trail Matter on Downstream GHG Analysis

Michael L. Krancer, Margaret A. Hill, and Stephen C. Zumbrun

The Federal Energy Regulatory Commission (“FERC”) weighed in rapidly and decisively on the Sabal Trail (a/k/a Southeast Market Pipelines or “SMP Project”) case that the D.C. Circuit remanded to it on August 22, 2017.[1] As previously discussed in greater detail by Frederick M. Lowther and Frank Tamulonis, the D.C. Circuit ruled that, in approving the SMP Project, FERC did not but should have considered potential “downstream” greenhouse gas (“GHG”) emissions from power plants burning natural gas supplied by the pipeline when preparing the final environmental impact statement (“FEIS”) pursuant to the National Environmental Policy Act (“NEPA”). In vacating and remanding to FERC, the D.C. Circuit concluded that “at a minimum, FERC should have estimated the amount of power plant carbon emissions that the pipelines will make possible” or if FERC was unable to quantify this amount, FERC should have “explained more specifically why it could not have done so.”

If able to quantify the emissions, the court stated that the FEIS needed to include: 1) “a discussion of the ‘significance’ of this indirect effect;” and 2) “the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions.” Finally, the court stated that FERC should explain whether its position on the “Social Cost of Carbon” (“SCC”) used in EarthReports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016) still holds, and why. The SCC model developed in 2010 by the so-called federal Interagency Working Group on Social Cost of Greenhouse Gases (“IWG”) supposedly attempts, in a very subjective manner, to quantify the comprehensive costs associated with a project’s CO2 emissions. SCC was very controversial off the bat and has been widely and substantially criticized by, among others, Patrick Michaels of the CATO Institute, a past president of the American Association of State Climatologists and the U.S. House Science Subcommittees on Environment and Oversight. President Trump’s March 28, 2017 Executive Order on Promoting Energy Independence and Economic Growth, in fact, basically sidelines the SCC and disbands the IWG. In EarthReports, FERC observed that SCC does not work in any project-level NEPA review.

On September 27, 2017, FERC answered the court’s call and published a draft supplemental environmental impact statement (“SEIS”) for the SMP Project. In directly addressing the D.C. Circuit’s decision, FERC summarized that the draft SEIS “estimates the [GHG emissions] generated by the SMP Project’s customers’ downstream facilities, describes the methodology used to determine these estimates, discusses context for understanding the magnitude of these emissions, and addresses the value of using the [SCC] tool.” The SEIS supplements the FEIS which FERC states discussed the direct GHG emissions of the SMP Project and climate change impacts on Florida, but FERC agreed had not directly addressed GHG emissions associated with use and combustion of the natural gas to be transported by the SMP Project (the downstream emissions).

FERC easily addressed the D.C. Circuit’s problem. To calculate the downstream GHG emissions, FERC combined the potential-to-emit (“PTE”) GHG emissions from the three power plants specifically identified to be served by the SMP Project with the full combustion of the remaining natural gas unused by the power plants. Then, the PTE amount was reduced by the amount of GHG emissions that would be eliminated from a planned decommissioning of a Florida coal power plant and potential switch of another existing Florida power plant from oil to natural gas. Based on this analysis, FERC estimated that the downstream use of the natural gas to be transported by the SMP Project would potentially increase the Florida GHG emission inventory between 3.7 and an unlikely maximum of 9.7 percent.

After calculating the potential GHG emissions, FERC determined that it could not find an appropriate method “to attribute discrete environmental effects to the potential GHG emissions.” This is not surprising since GHGs are not a criteria pollutant under the Clean Air Act and such emissions do not, and never have been, an ambient air quality issue. FERC correctly considered global models, such as those used by the IPCC, EPA, and NASA, as unable to estimate incremental impacts of individual projects, “due both to scale and overwhelming complexity.” FERC determined that less complex models were unable to calculate the effect of the SMP Project on increases in “global CO2 concentrations, heat forcing, or similar global impacts.” Additionally, FERC found these less complex models could not adequately calculate localized or regional impacts from the SMP Project’s GHG emissions.

FERC stuck to its position from EarthReports that the SCC is not appropriate for use in a project-level NEPA review and it restated its strong reasoning why. First, in relying on a statement by the EPA concerning the SCC, FERC reasoned that the SCC can have significant variation in output because no consensus exists on an appropriate discount rate to use for an analysis that spans multiple generations. Also, the SCC “does not measure the actual incremental impacts of a project on the environment.” Finally, FERC stated that “there are no established criteria [in the SCC] identifying the monetized values that are to be considered significant for NEPA reviews.”

FERC concluded that based on the FEIS and the SEIS the construction and operation of the SMP Project would not result in a significant impact on the environment. This is a decisive, well-supported, and welcome action by FERC. FERC’s comments on the deficiencies of the SCC are particularly well reasoned and spot on.

[1] Sierra Club v. Fed. Energy Regulatory Comm’n, 867 F.3d 1357 (D.C. Cir. 2017).

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