Citing Seven County, DC court upholds FERC on gas pipeline challenge

By Kennedy Maize

The U.S. Court of Appeals for the D.C. Circuit has applied a controversial May 29 Supreme Court environmental decision, Seven County Infrastructure Coalition v. Eagle County, to a Federal Energy Regulatory Commission gas pipeline case that has national and international aspects.

In an August 1 ruling, Sierra Club v. FERC, the appeals court rejected a Sierra Club and Public Citizen challenge to FERC’s approval of a proposed ONEOK 1000-mile gas pipeline, the Saguaro Pipeline, running from the oil-and-gas rich Permian Basin in Texas to Mexico. A Mexican pipeline would then move it to an LNG export terminal.

The environmental groups challenged a 157-mile segment of the proposed line that runs from a gas price-reporting point, the “Waha Hub,” to the border, known as the “Collector Pipeline.”

While the pipeline runs only in Texas, which means that FERC does not have authority to regulate it, the agency does have authority to regulate pipelines in international commerce and FERC gave the pipeline a green light.

The opponents argued that the Connector Pipeline could be used in the future to transport gas in interstate commerce and FERC should have considered its environmental impacts under the 1969 National Environmental Policy Act. In an appeal, FERC initially rejected that argument and again in rehearing. The club and Public Citizen sued in the D.C. Circuit.

A three-judge appeals court panel rejected the opponents’ argument. Writing for the panel, Judge Justin Walker wrote, “While FERC had the authority to exercise jurisdiction over the Connector Pipeline under § 3 of the Natural Gas Act, it also had authority to decline to do so. Here, FERC reasonably declined to exercise jurisdiction over the Connector Pipeline.”

Walker also brought up the Seven County decision. In that case, which came not long after the SCOTUS overturned the venerable Chevron decision holding that courts should give administrative agencies with technical expertise deference. In overturning Chevron, the high court said it was the law, not agency expertise, that should rule. In Seven County the 8-0 court, in an about face, said the appeals court should have given deference to a federal agency – the independent Surface Transportation Board – that in 2021 ruled in favor of a rail line to move heavy crude oil from the Uinta Basin in the Colorado Plateau to the main rail line and then to Gulf Coast refineries.

In the Saguaro case, the pipeline opponents argued that FERC should have looked at the environmental impacts of the upstream portion of the pipeline because it would and could provide a connection point for interstate deliveries.

Walker derided that argument: “Short of showing that the Connector Pipeline will transport interstate gas upon commencing service, the Petitioners purport to divine that Saguaro’s ‘primary purpose’ or ‘ultimate intent’ is transport interstate gas sometime in the future. Perhaps it is. Perhaps it isn’t.”

If that occurs, he said, then it could again be litigated. “Nothing in our decision precludes the Petitioners or another party from bringing a challenge in the future should the Petitioners’ prediction bear out.”

He then brought up Seven County. Walker wrote, “Seven County pared back NEPA’s jurisprudential growth from a “’legislative acorn . . . into a judicial oak that has hindered infrastructure development under the guise of just a little more process.’ The Court made clear that in considering the effects of a ‘proposed action’ under NEPA, an ‘agency may draw what it reasonably concludes is a manageable line — one that encompasses the effects of the project at hand, but not the effects of projects separate in time or place’…. Here, FERC drew the line….”

An analysis by Washington law firm Akin noted, “The ruling marks the first time a panel of judges on the D.C. Circuit embraced Seven County as applied to FERC pipeline reviews conducted under the [Natural Gas Act]. It is a marked departure from prior D.C. Circuit decisions that curtailed NGA permits on NEPA sufficiency grounds, which Akin explained in a prior client alert on Seven County.”

The analysis concluded, “The decision indicates that going forward, environmental groups will face a higher bar in challenging FERC’s environmental documents. Unless they can show that FERC’s scoping decisions fall outside a ‘broad zone of reasonableness’ or ignore impacts with a ‘reasonably close causal relationship’ to the federal action, their claims may not overcome this reinforced deference standard.”

The three appeals court judges in the Saguaro Pipeline case were Walker, a Trump appointee; Gregory Katsas, a Trump appointee; and Patricia Millett, an Obama appointee.

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