On February 19, 2019, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an unpublished opinion in Appalachian Voices v. FERC, No. 17-1271, denying petitions for review filed by Appalachian Voices, Chesapeake Climate Action Network, and the Sierra Club, among others (“Petitioners”), that challenged FERC’s issuance of a certificate of public convenience and necessity (“certificate”) for the 300-mile natural gas Mountain Valley Pipeline extending from Wetzel County, West Virginia to Pittsylvania County, Virginia. The D.C. Circuit’s order rejected all sixteen of the Petitioners’ challenges to FERC’s approval of the certificate, and notably concluded that: (1) market need for the project was demonstrated by long-term precedent agreements, even though the agreements were with affiliates, and (2) FERC’s estimate of emissions resulting from the end-use combustion of natural gas and explanation why the Social Cost of Carbon is not an appropriate measure of project-level climate change impacts were all that was required by the National Environmental Policy Act (“NEPA”).
Among the sixteen challenges was Petitioners’ argument that FERC should have used a Social Cost of Carbon metric in considering the climate change impacts of downstream greenhouse gas emissions resulting from end-use combustion of gas transported by the pipeline. The court dismissed this argument, concluding that FERC had satisfied the requirements of both NEPA and the Natural Gas Act (“NGA”) by providing an estimate of the upper bound of emissions resulting from end-use combustion, and adequately explaining its conclusion that the Social Cost of Carbon tool is not an appropriate measure of project-level climate change impacts. Since FERC issued the certificate for the Mountain Valley project, it has determined that it is not required to analyze the upstream and downstream impacts of a proposed pipeline project unless those impacts are considered cumulative or indirect effects within the meaning of NEPA (see May 29, 2018 edition of the WER).
The court also rejected Petitioners’ Takings Clause and due process challenges to Mountain Valley’s exercise of eminent domain authority under the NGA, holding that FERC’s issuance of the certificate satisfied the Fifth Amendment’s public use requirement, and that “the obligation to guarantee Mountain Valley’s ability to pay just compensation for any future takings under the [NGA] does not belong to FERC,” but would be determined by an order of condemnation and a trial prior to the taking of public property. The court went on to find that Mountain Valley’s use of its eminent domain authority is consistent with the Fifth Amendment due process clause, because landowners would be entitled to just compensation through a hearing process if the company acquired a right of way through that landowner’s property.
Petitioners also challenged FERC’s conclusion that there was a market need for the project because Mountain Valley’s precedent agreements (preconstruction contracts for gas transportation service) are with corporate affiliates, but the court held that FERC’s decision to rely on those precedent agreements was reasonable and supported by substantial evidence. The court noted that long-term precedent agreements accounted for one hundred percent of the project’s capacity, and that FERC had reasonably concluded that “an affiliated shipper’s need for new capacity and its obligation to pay for such service under a binding contract are not lessened just because it is affiliated with the project sponsor.” Finally, the court (i) found that FERC’s approval of Mountain Valley’s requested fourteen percent return on equity was reasonable given the project’s status as a new market entrant and (ii) rejected Petitioners’ National Historic Preservation Act challenges.
A copy of the D.C. Circuit’s opinion is available here.