FERC, greens spar over 'cursory' reviews of gas projects

Climate change activists have opened a new front in their fight against fossil fuels at the Federal Energy Regulatory Commission.

They are pressing the agency to examine the impact of projects tied to the U.S. natural gas boom on global warming. They say the National Environment Policy Act, or NEPA, requires such assessments before projects move on.

FERC disagrees.

The commission says there's no reliable formula for weighing the impacts on the environment of emissions from any pipeline, compressor station or export terminal. The agency also says it can't measure a project's indirect effects, such as how one pipeline might spur more drilling for gas. The courts, it adds, are on its side.

At issue: NEPA, the landmark 1970 law that requires federal agencies to weigh environmental concerns in their planning and decisionmaking by preparing detailed assessments of project impacts and alternatives.


Both sides claim NEPA's with them. Who's right?

Steven Weissman, director of the University of California, Berkeley, School of Law's energy program, argued in a recent paper he wrote with researcher Romany Webb that the law requires FERC to evaluate "all factors bearing on the public interest" before giving companies permission to build and operate new gas projects. That, he wrote, could include emissions from building and operating pipelines and producing and using gas.

"The question is really whether NEPA provides a latitude to ask these type of questions. We say it does," Weissman said in an interview. "FERC has never refuted that. They've only said they can't do it."

The agency's review of climate effects from gas projects has been "cursory at best," he said. And it's been reluctant, he added, to analyze the environmental implications of proposed projects on gas production or consumption.

"If the objective here is to never do anything to deal with the problem, maybe that's the approach you want," he said. "It's very much their interpretation of NEPA."

Liberal Democrats have seized on the argument to push FERC to examine climate impacts of new gas projects. Rep. Henry Waxman (D-Calif.) urged the five FERC commissioners at a hearing last summer to read Weissman and Webb's paper and play a role in the Obama administration's climate change effort. "FERC," he said, "should make its own contribution."

How FERC approaches climate change under NEPA has yet to be tested in court, Weissman said.

But Weissman cautioned that courts tend to give discretion to regulatory agencies following a precedent established in 1984's Chevron v. Natural Resources Defense Council, which holds that courts must defer to an agency's interpretation if a statute's language is ambiguous. That precedent has played in U.S. EPA's favor in recent court fights over Clean Air Act regulations (Greenwire, July 24).

"The court's not going to reverse it, even if they think there's a better interpretation," Weissman said. "They're going to refer to the agency's interpretation as long as it's one that's sound under the law."

But Michael Gerrard, a professor at Columbia University, said cases involving NEPA and climate change are on the rise. The FERC challenge, he said, might not be far off.

"I think FERC has considerably broader discretion to analyze greenhouse gases than they have exercised," Gerrard said. "An agency that has a central role in regulating energy should look systematically at the impacts of the energy it's regulating."

'Permitting statute'

NEPA requires agencies to take a "hard look" at the environmental effects of an action and consider those effects in their final decision.

But what's a "hard look" is open to interpretation.

FERC examines projects using regulations based on NEPA. Those rules require FERC to estimate the effect the project will have on air quality and how existing regulatory standards will be met. The commission must also identify cumulative effects from "existing or reasonably foreseeable projects."

When asked about cumulative greenhouse gas emissions, FERC pointed to its recent approval of Dominion Resources Inc.'s $3.8 billion liquefaction project for Cove Point, Md., about 60 miles northeast of Washington, D.C.

In that decision, FERC reiterated it was unable to determine whether the terminal's emissions would be "significant" because there's no formula for analyzing a project's "incremental" contributions to climate change and how they would affect the environment.

FERC said its hands were also tied on upstream and downstream effects.

"The future development of upstream production is speculative and not reasonably foreseeable," the commission wrote. "Upstream production is therefore outside the scope of our environmental analysis. The same principle holds true for potential downstream GHG emissions."

Furthermore, the commission argued, the "end use is not part of the project before us," and it opted not to assess emissions -- or the climate effect of those emissions -- from the ultimate consumption of gas leaving the Maryland terminal. While FERC looked at the project's direct effect on air quality, the agency determined that leaks of methane -- a greenhouse gas multiple times stronger than carbon dioxide -- would be "minimal."

In reaching its decision, FERC considered -- but didn't follow -- EPA's recommendations that it examine emissions from gas drilling and combustion.

In November 2012, EPA urged the commission to consider the project's footprint "when combined with other past, present and reasonably foreseeable future actions, regardless of whether these actions are energy related or not, or whether or not FERC has jurisdiction over them."

FERC Chairwoman Cheryl LaFleur, a lawyer and former utility executive, defended her agency's approach to project reviews during a recent interview, arguing FERC looks at the direct effects of a project. NEPA, she said, doesn't require the commission to analyze life-cycle emissions from gas production or consumption (Greenwire, Aug. 18).

NEPA, she said, is a "permitting statute."

But Weissman said LaFleur's explanation reflects what the agency opts to do -- not what the agency can or must do.

"Right now it's just a matter of the agency interpreting NEPA on its own and then that's it; you can't say that the law allows them to do it, it just hasn't been closely tested yet," he said. "They're not saying they do or don't have the legal authority to do it, they're just saying they looked at the circumstances and the cases before them, and concluded it was too speculative upstream, no need to look downstream, and overall impacts would be too small compared to the overall global problem to bother with."

Weissman argues that cumulative emissions, although difficult to measure, cannot be disregarded as insignificant. NEPA requires agencies to assess the significance of environmental effects in light of both their context and intensity, and that could include cumulative greenhouse gas emissions, he said.

Columbia Law School professors in an August 2013 paper argued that "in light of the potentially catastrophic impacts of global climate change, a numerically small contribution to atmospheric concentrations of [greenhouse gases] could still be considered significant."

The Columbia report also found that downstream events, such as exports of coal, are reasonably foreseeable and would fit within the scope of NEPA review.

'Commission has to set bounds'

The Columbia authors, moreover, conclude that any "final guidance" from the White House to help agencies make such determinations would be extremely valuable.

The Obama administration in 2010 issued draft guidance to require agencies to consider greenhouse gas emissions and climate change effects when carrying out NEPA reviews and said it would take public comment for 90 days on the proposal.

But there's still no final guidance document. Last February, outgoing White House Council on Environmental Quality Chairwoman Nancy Sutley said uniform guidance wasn't urgent because agencies were already including climate impacts in their NEPA reviews (Greenwire, Aug. 11).

"What really ought to happen is there should be centralized guidance from CEQ, that's really CEQ's job," Gerrard said. "In the absence of it, all the different agencies are left to flounder on their own."

Weissman argued that FERC could take a more programmatic approach by collecting and publishing information regarding greenhouse gas emissions resulting from activities. The commission could also require natural gas companies to reduce their greenhouse gas emissions by, for example, mandating the use of emissions control technologies, Weissman added.

"We're not trying to take shots at the agency, we're trying to understand, well, what things could they do if they were so inclined," Weissman said. "They haven't said they couldn't do it."

Former FERC officials say the agency is striking the right balance, citing the need to balance environmental protection with the need for new infrastructure given the commission's workload.

"As a regulatory agency, the commission has to set bounds on what it should and shouldn't spend their time," said Richard Hoffmann, a former division leader within FERC's Office of Energy Projects who now serves as executive director of the Interstate Natural Gas Association of America Foundation Inc.

"If they try to look at everything with a project, the process will grind to a halt."

Former FERC Chairman Jon Wellinghoff warns the agency would face legal trouble if it slogged into analyzing cumulative climate effects.

"If FERC extended itself to that more expansive interpretation" he said, "it could be subject [to] reversal in court."

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