Exports, Eminent Domain, and the “Public Convenience and Necessity”: FERC Weighs In

Mark R. Haskell, Brett A. Snyder, and Jane Thomas

On September 3, 2020, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an Order on Remand from the U.S. Court of Appeals for the District of Columbia Circuit, providing a more robust explanation regarding how the NEXUS Gas Transmission, LLC (“NEXUS”) pipeline project, which relied in part on precedent agreements that would export natural gas to Canada, merits authorization under section 7(c) of the Natural Gas Act (“NGA”), thus giving NEXUS eminent domain authority.

Background

On August 25, 2017, the Commission had issued a certificate of public convenience and necessity under section 7(c) to NEXUS. The Certificate Order approved the Project, which allowed for the use of eminent domain to build an approximately 250-mile-long pipeline in Ohio and Michigan. NEXUS had executed eight precedent agreements, accounting for 59 percent of the capacity of the Project, and the Commission found that these agreements demonstrated a need for the Project. Two of the eight precedent agreements were with Canadian companies.

Protesters argued that NEXUS should not be permitted to use eminent domain because some of the project’s capacity would be used to export gas and exports are subject to NGA section 3 authorization, rather than section 7, which does not allow for eminent domain. The Commission affirmed its underlying decision on rehearing and stated that Commission policy did not require FERC to look beyond precedent or service agreements to make judgments about the needs of individual shippers.

Protesters appealed to the D.C. Circuit. In September 2019, the D.C. Circuit, in City of Oberlin v. FERC, 937 F.3d 599, remanded the case to FERC and directed the Commission to supply an explanation for why it allowed the crediting of export precedent agreements with foreign shippers when analyzing market need for a domestic pipeline project. The D.C. Circuit also asked FERC for more robust explanation for why eminent domain was needed or appropriate.

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