{"id":7490,"date":"2021-06-22T16:45:37","date_gmt":"2021-06-22T21:45:37","guid":{"rendered":"http:\/\/blogs.law.columbia.edu\/climatechange\/?p=7490"},"modified":"2021-06-25T10:19:38","modified_gmt":"2021-06-25T15:19:38","slug":"d-c-circuit-decision-pipeline-developers-cant-self-deal-in-the-public-interest","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2021\/06\/22\/d-c-circuit-decision-pipeline-developers-cant-self-deal-in-the-public-interest\/","title":{"rendered":"D.C. Circuit Decision: Pipeline Developers Can\u2019t Self-Deal in the Public Interest"},"content":{"rendered":"
<\/div>

By Jennifer Danis<\/p>\n

In a major decision, Environmental Defense Fund v. FERC<\/u>, et. al (here)<\/a> the D.C. Circuit ruled in favor of the Environmental Defense Fund in its challenge to the Federal Energy Regulatory Commission\u2019s decision making on the Spire Pipeline, holding that FERC requires more than private, self-dealing contracts to find public need to build fossil fuel pipelines<\/u>.<\/p>\n

The Natural Gas Act, which is aimed at regulating the gas industry to protect the public interest, requires FERC to find that new gas infrastructure is required by the public convenience and necessity.\u00a0 Enter Spire: a pipeline company that proposed a new interstate gas pipeline whose capacity would be contracted for by one entity: its own regulated utility affiliate.\u00a0 If Spire acquired a Section 7 certificate, it would condemn over 200 acres of land to build its gas transmission line, wreaking environmental havoc on lands it crossed.\u00a0 But there was a catch \u2013 the regulated utility affiliate turned back capacity on existing pipelines, citing safety, cost, and reliability benefits to its contracting for new capacity. This affiliate-supported gas pipeline project model was one of several across the country, in which state-regulated utilities got together and created new gas pipeline companies solely for the purpose of building new capacity —\u00a0 on which the average return on equity garnered hovered around 14%.\u00a0 And even if the capacity contracts cost more than ones the regulated-affiliates already held, their ratepayers would foot the bill: win-win for the corporate entities and private shareholders, but lose-lose for the ratepayers, the environment, and landowners along the route.<\/p>\n

Like all the other projects of this genre, FERC approved the Spire project.\u00a0 Based on one self-dealing contract between the pipeline company and its affiliated shipper, and attendant vague assertions of public benefit (but acknowledged flat demand) by the project proponent, FERC found that the project served the public interest, and that there was public need for this gas infrastructure.\u00a0 When challengers brought the case to the D.C. Circuit, FERC maintained that it had protected the public interest and appropriately discharged its obligations under its Gas Act mandate.[1]<\/p>\n

Vacating Spire\u2019s Section 7 Certificate, the D.C. Circuit stated unequivocally<\/a> that, \u201cthere is a difference between saying that precedent agreements are always important versus saying that they are always sufficient to show that construction of a proposed new pipeline \u2018is or will be required by the present or future public convenience and necessity.\u2019\u201d Describing the federal commission\u2019s approach as \u201costrich-like,\u201d the court found that evidence of \u201cmarket need\u201d is easily manipulated when a pipeline builder contracts with its affiliates for its project\u2019s capacity \u2013 and that the Natural Gas Act requires FERC to protect the public interest by ensuring that there is, in fact, a public<\/strong> need for more gas transmission.\u00a0\u00a0 It distinguished prior caselaw that FERC and pipeline companies alike argued stood for the idea that private contracts for capacity are enough to show that there is market demand, and that market demand is a corollary for public necessity.<\/p>\n

The impact of today\u2019s opinion is potentially enormous \u2013 FERC has operated under a court-approved regime of insisting that it is never required to \u201clook behind\u201d private contracts to independently assess whether or not new gas infrastructure is needed.\u00a0 With Spire<\/em>, the D.C. Circuit disabused FERC of this idea, just in time for FERC\u2019s reconsideration of its own policy<\/a> for authorizing Section 7 infrastructure. Ironically, its existing Certificate Policy Statement quite literally commands it to do just that – consider more than just precedent agreements when determining public need, but FERC had been insisting otherwise. \u00a0In its policy revision inquiry docket, Docket No. PL18-1, the Sabin Center and New Jersey Conservation Foundation filed extensive and detailed recommendations focusing on precisely what data and analyses FERC must require from pipeline applicants in order to determine whether a proposed project satisfies the stringent Natural Gas Act requirement that it only authorize projects serving the public interest. See<\/u> FERC Docket # PL18-1 recommendations<\/a> (May 26, 2021). When revisiting its certification process, FERC now has some baseline guidance from the D.C. Circuit about how it must steward the public interest when deciding whether to approve new fossil fuel pipelines conjured up by self-dealing affiliates. It must look beyond precedent agreements when analyzing whether such projects meet the statutory standard, particularly where such proposals are heavily affiliate-driven.<\/p>\n

This decision will also have important bearing on challenges to FERC\u2019s Certificate Order for the PennEast Pipeline project, which the D.C. Circuit is currently holding in abeyance pending the outcome of a related Supreme Court case (which the Court will decide before the end of June). The PennEast project is also predicated on self-dealing private contracts, and its litigation record contains significant evidence demonstrating that those contracts do not reflect market need for that new gas pipeline. Given the enormous climate impacts of gas pipeline infrastructure, and its other adverse impacts on water resources and landowners along pipeline routes, this opinion is a warning to fossil fuel infrastructure developers that the days of FERC\u2019s rubber stamping are over.<\/p>\n

[1] The author was counsel to Dr. Susan Tierney, an Amicus in this D.C. Circuit challenge. (Amicus brief available here<\/a>).<\/p>\n","protected":false},"excerpt":{"rendered":"

By Jennifer Danis In a major decision, Environmental Defense Fund v. FERC, et. al (here) the D.C. Circuit ruled in favor of the Environmental Defense Fund in its challenge to the Federal Energy Regulatory Commission\u2019s decision making on the Spire Pipeline, holding that FERC requires more than private, self-dealing contracts to find public need to […]<\/p>\n","protected":false},"author":2325,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5673,9338,9473],"tags":[],"class_list":{"0":"post-7490","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-litigation","7":"category-natural-gas","8":"category-pipelines","9":"czr-hentry"},"yoast_head":"\nD.C. 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