A federal appeals court Monday appeared unlikely to require the Federal Energy Regulatory Commission to revamp how it approves the timeline for building fossil fuel projects.
In back-to-back oral arguments in two separate cases, the Sierra Club pressed for a three-judge panel to require more analysis from the commission before it approves deadline extensions for energy project construction.
If the court rules in FERC’s favor, the agency wouldn’t have new requirements before advancing natural gas infrastructure that is running behind schedule, making it more likely that projects get finished.
Specifically, the U.S. Court of Appeals for the District of Columbia Circuit seemed unconvinced that the commission had acted outside its discretion in assessing challenged certificate extensions for the 99-mile Northern Access natural gas pipeline from Pennsylvania to New York, and the third phase of Cheniere Energy Inc.’s Corpus Christi liquefied natural gas terminal in Texas.
Senior Judge Judith Rogers said one way to look at the issue is that a developer should not be able to get an extension unless they are doing “absolutely everything” to advance a project.
However, Rogers questioned during the first hearing what standard the court could set for FERC to apply in reviewing extension requests.
“We are obviously not going to say, there are eight things you have to do, and you have to do at least six of them,” said Rogers, a Clinton pick.
“But the sort of judgment call that you are asking for is, that’s not enough,” she said to the Sierra Club.
Judge Florence Pan, a Biden pick, also questioned how much FERC should be reviewing projects again when companies seek extensions of construction deadlines.
“Every petition to extend is not a reopening of the certification process,” she said. “That seems really unwieldy and not required at all.”
Sierra Club attorney Nathan Matthews said the environmental group’s concern in the pipeline case was FERC’s “failure to confront evidence” about the developer’s commitment to complete the project and other factors. The environmental group asked the court to toss out the certificate extension.
As for the Cheniere LNG project, Matthews said FERC did not explain why it granted an extension in 2021 when the developer cited the Covid-19 pandemic as a rationale for needing more time to complete construction.
Matthews argued that when circumstances change — such as moving out of a pandemic — FERC should reassess whether its original approval of a project still makes sense.
“FERC sets deadlines because it recognizes findings can grow stale, and there can be market disruptive effects of having approved pipelines that aren’t built,” he said.
In the case of the Northern Access pipeline, FERC did not consider whether the New York-based project developer National Fuel Gas Co. had shown progress toward renewing key permits for the project, such as the Section 404 permit under the Clean Water Act or an Endangered Species Act permit, Matthews said.
The project was originally supposed to complete construction by February 2022, but National Fuel had not yet begun construction by that point, according to court documents.
Matthews also argued that New York passed a climate law aimed at reducing natural gas use in the state after the initial approval of the Northern Access pipeline, which would carry the fuel to Northeastern states and Canada. Yet, he claimed FERC had not accounted for how that law would change demand for the pipeline.
“We are not arguing that it would be impossible for FERC to build a record that this pipeline remains a public necessity,” he said. “FERC has to confront that.”
Pan questioned whether Matthews had properly raised the argument about the climate law’s implications for gas demand before the court.
When extending the project, FERC relied on 2017 precedent agreements to determine its need. “You can’t attack that now,” Pan said to Matthews.
FERC attorney Susanna Chu, also noted that National Fuel had not taken action to renew its water and Endangered Species Act permit because it was in the midst of four years of litigation with the Sierra Club over the water permit.
“There is no commission order requiring developers to go out on a limb and keep permits current during a litigation delay,” she said.
Chu described FERC’s evaluation process as including a degree of “business judgment.”
“This is a flexible standard, the commission is looking at these case by case,” Chu continued, “It doesn’t grant extensions just to those that get an A+ on diligence.”
‘Just some facts’
In the oral argument challenging the certificate extension for construction of the LNG terminal in Texas, Public Citizen joined the Sierra Club in challenging FERC’s approval of the new deadline due to project delays associated with the Covid-19 pandemic.
The project developer originally was required to finish building in November 2024. The 2021 extension gave the company until June 2027 to complete construction.
At the time of the extension, FERC provided no facts about why Cheniere could not continue work on the project during the pandemic, such as a stay-at-home order that prevented workers from getting the site, said Matthews, who argued both cases on behalf of the challengers before the D.C. Circuit.
But Pan pushed back, noting the company had said it was not able to make a timely final investment decision securing financing for the project because of the pandemic.
“It seems to me you are asking for a super clear statement rule,” said Pan of Matthews’ argument. “You are refusing to just look at what this means more broadly, but you are picking apart the words.”
Catherine Stetson, an attorney for Cheniere and partner at the firm Hogan Lovells, said the company had to halt work on the project in March 2020, which precluded the company from making a final investment decision.
Even so, Matthews said FERC did not delve into why the company could not make a final investment decision.
“I think there are few different types of facts they could have presented, anything other than markets are in a slump and we’d like more time,” he said.
Judge Karen Henderson, a George H.W. Bush pick, asked FERC attorney Matthew Glover whether the commission had ever denied a certificate extension request.
Glover pointed to one case: the Chestnut Ridge gas storage project. The commission has also granted shorter extensions than what developers have requested, he said.
The commission’s extension approval for Cheniere considered factors like the company’s preconstruction work and the fact that it put a compressor station into service.
“We haven’t required them to provide a long laundry list of how Covid affected their final investment decision,” Glover said.
Matthews said the Sierra Club was looking for a causal chain to explain what it would have taken for Cheniere to make a decision about financing sooner.
“We are not asking for a long treatise on this,” he said. “Just some facts.”