D.C. Circuit Denies Challenge to FERC’s Decision to License Cove Point LNG Export Facility

On July 15th, the D.C. Circuit issued a decision in EarthReports, Inc. (DBA Patuxent Riverkeepers), Sierra Club, and Chesapeake Climate Action Network v. FERC, No. 15-1127. Plaintiffs in this case challenged the Federal Energy Regulatory Commission’s (FERC) 2014 authorization of conversion of the Cove Point liquid natural gas plant from an import to an export facility after the agency prepared only an Environmental Assessment (EA) and a Finding of No Significant Impact (FONSI). Plaintiffs alleged that FERC’s decision to approve the conversion  without conducting a full analysis of the project’s environmental impacts violated the agency’s National Environmental Policy Act (NEPA) obligations.  IPR filed an amicus brief on behalf of a coalition of environmental organizations and community groups in support of the plaintiffs’ challenge to FERC’s decision.  IPR’s brief focused in particular on the dramatic ways in which communities and the environment upstream of the project will be injured as a result of natural gas drilling in the Marcellus shale play induced by the increased export capacity at the Cove Point facility.  The brief, more fully described here, highlighted several issues with FERC’s NEPA analysis, including its failure to consider these indirect impacts of increased export capacity, as well as its lack of consideration of the cumulative impacts of the project and the intensity of those impacts for the Chesapeake Bay.

Unfortunately, the Court’s recent decision denied the petition for review on all grounds.  With regard to the sufficiency of the EA as to the indirect effects of induced natural gas drilling, the Court relied on the reasoning set out in its recent opinion in Sierra Club v. FERC (Freeport), No. 14-1275.  In short, the Court found that NEPA does not require FERC to consider indirect effects of increased natural gas production, including climate impacts, where such impacts are attributable to a rise in LNG exports.  The Court held that the Department of Energy (DOE) is responsible for the final determination as to whether such exports will occur, and that FERC is therefore not the “legally relevant cause” of indirect effects of LNG production caused by export-induced demand.  In consequence, under Department of Transportation v. Public Citizen, 541 U.S. 752 (2004), FERC was not required to consider these effects in its NEPA analysis.

The Court also found that FERC gave sufficient consideration to environmental petitioners’ other claims regarding the EA, including the impacts of ballast water on water quality, maritime traffic on the North Atlantic right whale, and the Cove Point facility’s operations on public safety.  Finally, it held the arguments in the amicus brief other than indirect effects were not properly raised by plaintiffs and were therefore not before the Court.  The Court did, however, explicitly leave open the possibility of future challenges to DOE’s NEPA review of its export decisions based on indirect impacts of fracking.

Left undecided was a challenge by BP to FERC’s contract with Dominion regarding the Cove Point facility.  That case, No. 15-1205, was previously consolidated with No. 15-1127.  At the time of its July 15 decision, however, the Court ordered the two cases unconsolidated, and it has not yet issued an opinion in the contract dispute.

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