SUPPLEMENTARY INFORMATION:

1. The Commission is issuing this interim policy statement to explain how the Commission will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA). We seek comment on all aspects of the interim policy statement, including, in particular, on the approach to assessing the significance of the proposed project's contribution to climate change. Although the guidance contained herein is subject to revision based on the record developed in this proceeding, we will begin applying the framework established in this policy statement in the interim. Doing so will allow the Commission to evaluate and act on pending applications under sections 3 and 7 of the NGA without undue delay and with an eye toward greater certainty and predictability for all stakeholders.

I. Introduction

2. Climate change poses a severe threat to the nation's security, economy, environment, and to the health of individual citizens. Human-made greenhouse gas (GHG) emissions, including carbon dioxide and methane, are the primary cause of climate change.^[1] GHG emissions are released in large quantities through the production, transportation, and consumption of natural gas. Accordingly, to fulfill its statutory responsibilities, it is critical that the Commission consider and document how its authorization of infrastructure projects under the NGA, particularly natural gas transportation facilities, will affect emissions of GHGs.^[2]

3. This policy statement describes Commission procedures for evaluating climate impacts under NEPA, both those caused by a project's contribution to climate change and the impacts of climate change on the project, and describes how the Commission will integrate climate considerations into its public interest determinations under the NGA. For purposes of assessing the appropriate level of NEPA review, Commission staff will apply the 100% utilization or “full burn” rate for the proposed project's emissions to determine whether to prepare an Environmental Impact Statement (EIS) or an environmental assessment (EA). Commission staff will proceed with the preparation of an EIS, if the proposed project may result in 100,000 metric tons per year of CO₂ e or more.^[3] As further described below, the Commission believes this estimate is appropriate because it captures Commission projects that may result in incremental GHG emissions that may have a significant effect upon the human environment.^[4] This approach is consistent with the overall goal of NEPA to require a “hard look” at adverse environmental impacts and assess whether those can be minimized or avoided.^[5] To appropriately assess possible mitigation, as further explained below, the Commission will determine a project's reasonably foreseeable GHG emissions based on a projection of the amount of capacity that will be actually used (projected utilization rate), as opposed to assuming 100% utilization, and any other factors impacting the quantification of project emissions. The Commission's NEPA analysis will examine any proposed measures to reduce reasonably foreseeable emissions.

4. When considering under the NGA whether a project is in the public interest, the Commission considers a project's impacts on climate change, and, accordingly, will consider proposals by the project sponsor to mitigate all or a portion of the project's climate change impacts, and the Commission may condition its authorization on the project sponsor further mitigating those impacts.

5. This policy statement does not establish binding rules and is intended to explain how the Commission will consider these issues when they arise.^[6]

( printed page 14105)

II. Background

A. GHG Emissions and Climate Change

6. Climate change is the variation in the Earth's climate (including temperature, precipitation, humidity, wind, and other meteorological variables) over time. Climate change is driven by accumulation of GHGs in the atmosphere due to the increased consumption of fossil fuels ( e.g., coal, petroleum, and natural gas) since the early beginnings of the industrial age and accelerating in the mid- to late-20th century.^[7] The GHGs produced by fossil-fuel combustion are carbon dioxide, methane, and nitrous oxide.

7. In 2017 and 2018, the U.S. Global Change Research Program ^[8] issued its Climate Science Special Report: Fourth National Climate Assessment, Volumes I and II.^[9] This report and the recently released report by the Intergovernmental Panel on Climate Change, Climate Change 2021: The Physical Science Basis, state that climate change has resulted in a wide range of impacts across every region of the country and the globe. Those impacts extend beyond atmospheric climate change and include changes to water resources, agriculture, ecosystems, human health, and ocean systems.^[10] According to the Fourth Assessment Report, the United States and the world are warming, global sea level is rising and oceans are acidifying, and certain weather events are becoming more frequent and more severe.^[11] These impacts have accelerated throughout the end of the 20th century and into the 21st century.^[12]

B. Council on Environmental Quality Guidance on Climate Change

8. In 2010, the Council on Environmental Quality (CEQ) issued its first draft guidance on how federal agencies can consider the effects of GHG emissions and climate change under NEPA.^[13] CEQ revised the draft guidance in 2014,^[14] and issued final guidance in 2016.^[15] Throughout the guidance's evolution, CEQ advised agencies to quantify GHG emissions and to consider both the extent to which a proposed project's GHG emissions would contribute to climate change and how a changing climate may impact the proposed project. The 2016 guidance, however, explicitly declined to establish a quantity or threshold of GHGs for determining whether a proposed project will have a significant impact on climate.^[16]

9. CEQ rescinded the 2016 guidance in April 2017, as directed by Executive Order 13783 Promoting Energy Independence and Economic Growth,^[17] and issued revised draft guidance in June 2019.^[18] In January 2021, Executive Order 13990 Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis revoked Executive Order 13783 and directed CEQ to rescind the 2019 draft guidance and to review, revise, and update the 2016 guidance.^[19] CEQ has not yet issued an update to the 2016 guidance, but, in the interim, has directed agencies to consider all available tools and resources, including the 2016 guidance, in assessing GHG emissions and the climate change effects of proposed actions.^[20]

C. Previous Commission Policy on Consideration of Climate Change Under NEPA

10. Commission staff has addressed climate change in some fashion in its NEPA documents for at least a decade.^[21] Commission staff's NEPA documents have included direct GHG emission estimates from project construction ( e.g., tailpipe emissions from construction equipment) and/or operation ( e.g., fuel combustion at compressor stations and gas venting and leaks).^[22] Starting in late 2016, the Commission began to conservatively estimate indirect downstream GHG emissions by assuming full combustion of the maximum annual volume of gas that could be transported by the project.^[23] For indirect upstream, production-related GHG emissions, Commission orders during that time period relied on Department of Energy studies to calculate broad estimates.^[24] For upstream impacts, the Commission generally indicated that these analyses were not required by NEPA because the Commission lacked detailed information about the precise source of the gas to be transported, but provided estimates for informational purposes.^[25]

11. In 2017, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Sierra Club v. FERC ( Sabal Trail ) ^[26] found that downstream GHG emissions were an indirect effect of the Sabal Trail pipeline project and required the Commission to give a quantitative estimate of the downstream GHG emissions resulting from the burning of the natural gas to be ( printed page 14106) transported by the pipeline or explain why the Commission could not do so, and to discuss the significance of these emissions.^[27] On remand, the Commission compared the estimated downstream GHG emissions from the project to state and national GHG emission inventories.^[28] However, the Commission concluded that it could not determine whether those downstream GHG emissions were significant and rejected the use of the Social Cost of Carbon (SCC) tool to inform the Commission's analysis.^[29]

12. In 2018, the Commission stated in Dominion Transmission, Inc.^[30] that end use consumption of gas and upstream production of gas were generally not reasonably foreseeable or causally related to the project (no party had identified the specific end use of the gas) and thus the Commission was not required to consider upstream or downstream emissions as indirect impacts under NEPA.^[31] The Commission stated it would continue to “analyze upstream and downstream environmental effects when those effects are sufficiently causally connected to and are reasonably foreseeable effects of the proposed action.” ^[32] The Commission reiterated that without an accepted methodology it could not find whether a particular quantity of GHG emissions was significant.^[33]

13. However, in Birckhead, the D.C. Circuit rejected the Commission's position that Sabal Trail is limited to the narrow facts of that case. While the court in Birckhead acknowledged that downstream emissions may not always be a foreseeable effect of natural gas projects, it rejected the notion that downstream GHG emissions are a reasonably foreseeable indirect effect of a natural gas project only if a specific end destination is identified.^[34] The court further noted that the Commission should attempt to obtain information on downstream uses to determine whether downstream GHG emissions are a reasonably foreseeable effect of the project.^[35]

14. In 2021, in Northern Natural Gas Co., the Commission explained that it had reconsidered its position that it was unable to assess the significance of a project's GHG emissions or those emissions' contribution to climate change.^[36] The Commission found that that project's reasonably foreseeable GHG emissions—construction and operation emissions only, as the project proposed no new capacity—would not significantly contribute to climate change.^[37] Later in 2021, the D.C. Circuit further criticized the Commission's stance prior to Northern Natural Gas Co. that it was unable to assess the significance of a project's GHG emissions or those emissions' contribution to climate change, holding that the Commission failed to appropriately analyze the significance of three natural gas projects' contribution to climate change using “theoretical approaches or research methods generally accepted in the scientific community,” such as the SCC tool.^[38]

D. Certificate Policy Statement Notices of Inquiry

15. On April 19, 2018, the Commission issued a Notice of Inquiry (2018 NOI) ^[39] seeking information and stakeholder perspectives to help the Commission explore whether, and if so how, it should revise its approach for determining whether proposed projects are consistent with the public convenience and necessity under the currently effective policy statement on the certification of new interstate natural gas transportation facilities (Certificate Policy Statement).^[40] The 2018 NOI included a background section discussing how the legal standards and historical context informed the creation of the Certificate Policy Statement in 1999, how the Commission's evaluations under the Certificate Policy Statement and under NEPA have evolved, and how changed circumstances since 1999 have required the present review.^[41] Notably, the Commission sought input on whether, and if so how, the Commission should adjust its evaluation of the environmental impacts of a proposed project.

16. In response to the 2018 NOI, the Commission received more than 3,000 comments from stakeholders including landowners; tribal, federal, state, and local government officials; non-governmental organizations; consultants, academic institutions, and think tanks; natural gas producers, Commission-regulated companies, local distribution companies, and industry trade organizations; electricity generators and utilities; and others. Many comments addressed GHG emissions.

17. On February 18, 2021, the Commission issued a new, refreshed Notice of Inquiry (2021 NOI),^[42] seeking comments to build upon the existing record established by the 2018 NOI. The Commission posed several updated questions relating to GHG emissions, including asking: How the Commission could consider upstream impacts from natural gas production and downstream end-use impacts; how the Commission should determine the significance of a project's GHG emissions' contribution to climate change; whether the NGA, NEPA, or another federal statute authorize or mandate the use of the SCC analysis by the Commission; how the Commission could determine whether a proposed project's GHG emissions could be offset by reduced GHG emissions resulting from the project's operations; and how the Commission could impose GHG emission limits or mitigation to reduce the significance of impacts from a proposed project on climate change.^[43]

18. With respect to determining significance, the 2021 NOI sought comment on (1) what type of metrics and models the Commission should consider in determining significance, (2) whether any level of emissions should be considered de minimis, and (3) how the SCC tool or other tools could factor into determining significance.^[44]

19. The public comment period for the 2021 NOI closed on May 26, 2021.^[45] The Commission received over 35,000 comments and approximately 150 ( printed page 14107) unique comment letters from a wide range of stakeholders, as noted above.

20. Comments relevant to this policy statement are addressed in Section III below.

III. Statutory Authority/Obligations

A. NGA

21. Section 7 of the NGA authorizes the Commission to issue certificates of public convenience and necessity for the construction and operation of facilities transporting natural gas in interstate commerce.^[46] The Commission does not have authority to regulate intrastate transportation facilities or other facilities that affect interstate transportation, such as those used for the production, gathering, or local distribution of natural gas. Congress did not displace state authority over such subjects.^[47]

22. Section 3(a) of the NGA provides for federal jurisdiction over the siting, construction, and operation of facilities used to import or export gas.^[48] To date, the Commission has exercised section 3 authority to authorize: (1) LNG terminals located at the site of import or export and (2) the site and facilities at the place of import/export where a pipeline crosses an international border.^[49] Additionally, NGA section 3(e) states that “[t]he Commission shall have the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal.” ^[50]

23. Both NGA sections 7 and 3 authorize the Commission to attach terms and conditions to its authorization.^[51] Courts have interpreted these provisions broadly and given the Commission latitude in deciding what types of mitigation to require.^[52] In issuing authorizations, the Commission has required project sponsors to comply with conditions to prevent or mitigate project impacts on environmental resources.^[53]

B. NEPA

24. NEPA and its implementing regulations require agencies, before taking or authorizing a major federal action that may significantly affect the quality of the human environment, to take a “hard look” at the environmental consequences of the proposed action and disclose their analyses to the public by preparing an EIS.^[54] Alternatively, agencies can first prepare an Environmental Assessment (EA) for a proposed action that is not likely to have significant effects or when the significance is unknown, to determine whether an EIS is necessary for a particular action.^[55] Depending on the outcome of the EA, agencies can either prepare an EIS or issue a finding of no significant impact.^[56]

25. Previous CEQ regulations and court cases have examined a proposed project's “context” and “intensity” or the severity of the impact as factors for determining what constitutes a significant effect.^[57] In assessing significance, Commission staff considers, for each resource, the duration of the impact as well as the geographic, biological, or social context in which the effects would occur, and the intensity ( e.g. severity) of the impact.^[58] This analysis may draw on both qualitative and quantitative information.^[59] Using both types of data, the Commission routinely makes significance determinations for impacts to various resources from natural gas projects.^[60]

26. In evaluating whether an impact is significant, the Commission determines whether “it would result in a substantial adverse change in the physical environment.” ^[61] In making that determination, the Commission considers available evidence, giving that evidence such weight as it deems appropriate using its experience, judgment, and expertise.^[62] Notably, ( printed page 14108) NEPA does not require that the studies, metrics, and models on which an agency relies be universally accepted or otherwise uncontested.^[63] Instead, NEPA permits agencies to rely on the best available evidence, quantitative and qualitative, even where that evidence has certain limitations when assessing the significance of their actions,^[64] and an agency's determination is entitled to deference.^[65]

27. In addition to determining whether its actions may significantly affect the quality of the human environment, NEPA requires the Commission to consider whether there are steps that could be taken to mitigate any adverse environmental consequences.^[66] While NEPA is a procedural statute and does not require a federal agency to reject a proposed project with significant adverse effects or take action to mitigate adverse effects,^[67] an agency may require mitigation of impacts as a condition of its permitting or approval,^[68] and the Commission routinely does so.^[69]

IV. Discussion

A. Quantifying GHG Emissions and Determining Significance

28. Consistent with CEQ regulations,^[70] the Commission will quantify a project's GHG emissions that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action, including those effects that occur at the same time and place as the proposed action and effects that are later in time or farther removed in distance from the proposed action. This will include GHG emissions resulting from construction and operation of the project ^[71] as well as, in most cases, GHG emissions resulting from the downstream combustion of transported gas.^[72]

29. The Commission will consider all evidence in the record relating to a project's estimated GHG emissions,^[73] utilization rate, or offsets: Estimates presented by project sponsors, as well as opposing evidence from other parties. Going forward, in determining the level of GHG emissions attributed to a project, the Commission will estimate a project's GHG emissions based on a projection of what amount of project capacity will be actually used (projected utilization rate), as opposed to assuming 100% utilization.^[74] The Commission will also consider evidence of factors expected to reduce or offset the estimated direct or reasonably foreseeable downstream emissions of the project.

1. Categories of Emissions

30. CEQ regulations implementing NEPA require agencies to consider effects or impacts that “are reasonably foreseeable and have a reasonably close causal relationship to the proposed action . . . including those effects that occur at the same time and place as the proposed action . . . and may include effects that are later in time or farther removed in distance for the proposed action . . . .” ^[75] A “but for” causal relationship is insufficient to make an agency responsible for a particular effect,^[76] and effects should not be considered if they are the “product of a lengthy causal chain.” ^[77] Further, effects to be considered do not include those that the agency has no ability to prevent due to its limited statutory authority or would occur regardless of the proposed action.^[78] Regarding reasonable foreseeability, courts have found that an impact is reasonably foreseeable if it is “sufficiently likely to occur that a person of ordinary prudence would take it into account in reaching a decision.” ^[79] Although courts have held that NEPA requires “reasonable forecasting,” ^[80] an agency “is not required to engage in speculative analysis” ^[81] or “to do the impractical, if ( printed page 14109) not enough information is available to permit meaningful consideration.” ^[82]

31. As discussed below, the Commission proposes to:

• Consider direct emissions of a project a reasonably foreseeable effect;
• Find that an NGA section 3 export facility project is not the legally relevant cause of upstream and downstream emissions; ^[83]

• Consider on a case-by-case basis whether downstream emissions are a reasonably foreseeable effect of an NGA section 7 interstate project; and
• Consider on a case-by-case basis whether upstream emissions are a reasonably foreseeable effect of an NGA 7 project.

a. Direct Emissions

32. Several commenters assert that the Commission must consider fugitive emissions from the transportation of gas.^[84] New Jersey Conservation Foundation, Sabin Center for Climate Change Law (Sabin Center), The Watershed Institute, Clean Air Council, PennFuture, and New Jersey League of Conservation Voters (collectively, New Jersey Conservation Foundation) argue that natural gas leakage from both pipeline operation and natural gas production is worse than combustion because methane has a higher global warming potential than carbon dioxide.^[85]

33. As the Commission has long held, direct GHG emissions from the project's short-term construction ^[86] and long-term operational activities ^[87] are an effect of the proposed project. Under current Commission regulations, the project sponsor provides an estimate of construction emissions and an estimate of the project's potential operational emissions, including fugitive emissions from both pipeline and aboveground facilities, in its application for Commission authorization.^[88]

b. Downstream Emissions

34. Some commenters argue that the Commission must consider the downstream emissions of natural gas projects,^[89] including fugitive emissions.^[90] In contrast, other commenters generally assert that the Commission should not consider downstream emissions, or at most, should only do a qualitative assessment of downstream emissions, because they are not reasonably foreseeable impacts or do not have a close causal relationship under NEPA to gas transportation.^[91]

35. As discussed above, in August 2017, the D.C. Circuit issued Sabal Trail, which involved a greenfield pipeline project that would deliver all gas transported by the project to specific gas-fired generating plants. The D.C. Circuit found that downstream emissions from the use of the transported natural gas were an indirect, reasonably foreseeable effect of the proposed pipeline and that in the circumstances of that case—where the vast majority of throughput on the proposed project was destined for a limited number of specifically identified electric generation facilities—the downstream GHG emissions could be reasonably quantified by the Commission.^[92]

36. The D.C. Circuit reiterated this determination in two subsequent cases. First, in Birckhead, the court rejected the claim that downstream emissions are only a foreseeable effect in factual circumstances akin to Sabal Trail, i.e., where all transported gas will be burned at specifically identified destinations, but also rejected the argument that downstream emissions are always a foreseeable effect of a natural gas certificate project.^[93] Then, in Allegheny Defense Project v. FERC,^[94] the court stated that the downstream emissions of a project designed to deliver gas into large interstate pipeline systems, which in turn deliver gas to 16 states, are an indirect effect of the project.^[95]

37. INGAA and others read the Supreme Court's Public Citizen decision as requiring an agency to consider an environmental effect only when the agency has the authority to control the outcome and note that the Commission has no authority to regulate the end use (or production) of natural gas.^[96] INGAA states that attempting to regulate downstream (or upstream) activities would invade the jurisdiction of other regulators, that most projects will not result in reasonably foreseeable downstream GHG emissions like those in Sabal Trail, and thus, downstream emissions should only be considered on a case-by-case basis.^[97] INGAA suggests the Commission look for guidance to Center for Biological Diversity v. U.S. Army Corps of Engineers,^[98] which criticizes Sabal Trail as “breezing past . . . statutory limits and precedents . . . clarifying what effects are cognizable under NEPA.” ^[99]

38. Given that data show that the vast majority of consumed gas is ultimately combusted,^[100] there appears to be a ( printed page 14110) substantial likelihood of GHG emissions from the end-use combustion of transported gas as a result of a natural gas project proposed under NGA section 7.^[101] However, as contemplated by the court in Birckhead, there may be circumstances where downstream emissions are not a foreseeable effect of an authorized project, and the court stated that each project must be analyzed on a case-by-case basis.^[102] Accordingly, project sponsors may submit any evidence they believe indicates that downstream emissions are not a reasonably foreseeable effect of a proposed project.

39. We disagree with commenters' assertions that Public Citizen prohibits the Commission from considering downstream GHG emissions. The question is not whether the Commission has regulatory authority over downstream emissions. Rather, as the Sabal Trail court reasoned in applying Public Citizen, the Commission “has no obligation to gather or consider environmental information [only] if it has no statutory authority to act on that information. ” ^[103] Because the Commission can reject a section 7 certificate based on the project's environmental impacts, including GHG emissions, the court held that the Commission was required to consider downstream emissions resulting from the Sabal Trail project's construction.^[104] For section 7 projects—unlike section 3 projects, described below—there is no independent decision, such as the DOE authorization critical in Freeport, to “break the NEPA causal” chain.^[105] Accordingly, the Commission's authorization for section 7 projects is a “legally relevant cause” of the emissions, meeting Public Citizen' s direction that “NEPA requires `a reasonably close causal relationship' between the environmental effect and the alleged cause,” analogous to the “familiar doctrine of proximate cause from tort law.” ^[106]

40. The Commission finds this and subsequent direction from the D.C. Circuit more instructive than Center for Biological Diversity, which determined that a specific effect was too tenuous to be considered in analysis of a U.S. Army Corps of Engineers discharge permit for mining activities under the Clean Water Act.^[107]

41. However, for proposed export projects under NGA section 3, the Commission will not consider downstream GHG emissions an effect requiring analysis under NEPA regulations. The Department of Energy, not the Commission, has sole authority to license and consider the environmental impacts of the export of any natural gas.^[108] As courts have explained, the Commission need not consider the effects of downstream transportation, consumption, or combustion of exported gas because the Department of Energy's “independent decision to allow exports . . . breaks the NEPA causal chain and absolves the Commission of responsibility to include [these considerations] in its NEPA analysis.” ^[109]

c. Upstream Emissions

42. Some commenters state that the Commission must consider the upstream GHG emissions of natural gas projects, including fugitive emissions from production,^[110] to assess the project's total impact on climate change.^[111] Other commenters argue that upstream emissions are not a reasonably foreseeable effect of a natural gas transportation project, and therefore should not be considered by the Commission.^[112] Some commenters focus on how to obtain sufficient information to account for upstream GHG emissions. For example, EPA recommends that the Commission require project sponsors to provide available information on reasonably foreseeable induced production demand. EPA states that environmental documents under NEPA should disclose this information as well as items such as the proposal's regionally known hydrocarbon accumulations and a decline curve analysis to allow for appropriate regional and local impact analysis.^[113]

43. In various NGA section 7 proceedings, the Commission has considered upstream emissions on a case-by-case basis—sometimes acknowledging it is difficult to quantify upstream emissions due to several unknown factors, including the location of the supply source and whether transported gas will come from new or existing production.^[114] The Commission will continue to consider on a case-by-case basis whether the environmental effects resulting from natural gas production are either likely caused by a proposed NGA section 7 project or reasonably foreseeable consequences of our approval of such projects. To the extent known, project sponsors are encouraged to submit information on the reasonably foreseeable upstream impacts caused by the project or an explanation as to why there are none for Commission consideration.

2. Calculating GHG Emissions

44. To calculate operational emissions, project sponsors should continue to follow the existing guidance outlined in section 4.9.1.3 of the Commission's Guidance Manual for Environmental Report Preparation for ( printed page 14111) Applications Filed under the NGA.^[115] However, under this policy statement, for purposes of assessing the impact of a project's GHG emissions on climate change, the Commission will consider operational GHG emissions calculated based on a projected utilization rate for the project, as described below.^[116]

45. Additionally, the Commission recognizes that there may be other factors that might serve to reduce a proposed project's climate impacts. For example, the installation of emission-reduction technology or purchase of offsets by downstream users would reduce the impacts. Thus, to enable the Commission's use of the best estimate of a project's GHG emissions, project sponsors are encouraged to calculate project GHG emissions using a projected utilization rate and submit evidence of any other factors that might impact a project's net emissions such as the factors identified by commenters below.

46. Commenters recommend that the Commission consider factors that might impact a project's net emissions, such as (1) whether the transported gas will phase out use of a more carbon-intensive energy source, like coal or fuel oil, and will prevent the use of more carbon-intensive energy sources in the future; (2) whether the pipeline will transport gas that would otherwise be transported by vehicles, thereby reducing the emissions from transporting the gas; (3) whether the proposed project will transport gas volumes that would have otherwise been delivered to the same consumers through a different pipeline or may ultimately end up transporting fuel blends including renewable natural gas or hydrogen; (4) whether the project sponsor will purchase offsets to counter project emissions; or (5) whether the project may be backed by a local distribution company serving customer demand in states with established emissions caps.^[117] INGAA states that in the absence of reliable and verifiable predictive models to the contrary, the requirement of reasonable foreseeability arguably dictates that the Commission cannot adopt any default assumption that a natural gas infrastructure project will increase (rather than decrease, or leave unchanged) net global GHG emissions, and that at minimum, the Commission would have to provide a rational justification for any such assumption.^[118] By contrast, New Jersey Conservation Foundation and others contend that the Commission should consider whether the project may be displacing renewable energy sources, thereby increasing GHG emissions.^[119]

47. INGAA and other commenters strongly urge the Commission to calculate a project's downstream emissions, if at all, based on the likely utilization rate of the proposed project, instead of relying on a full-burn estimate.^[120]

48. Conversely, New Jersey Conservation Foundation and others argue the Commission must calculate direct, downstream, and upstream GHG emissions by assuming the maximum authorized operating conditions, unless, some add, the project sponsor can demonstrate otherwise.^[121] Further, other commenters propose their own methods of how to calculate the downstream emissions of a proposed project.^[122] New Jersey Conservation Foundation urges the Commission to recommend or require the use of specified emissions factors to calculate project emissions.^[123] Some commenters argue that the Commission must, beyond asking project sponsors, require certain information to be provided, conduct independent research, or otherwise compile missing information.^[124] Dr. Susan F. Tierney states that the Commission should articulate a default methodology, set of assumptions, and sources of data (suggesting multiple sources including data from the U.S. Department of Energy's National Energy Technology Laboratory's 2019 life-cycle estimates of GHG emissions for the natural gas supply chain) to establish a default maximum emissions rate, which could then be supplemented by an applicant's own estimate or an intervenor's alternative estimate.^[125]

a. Projected Utilization Rate

49. In previous environmental documents and certificate orders, the Commission has disclosed a project's operational emissions ^[126] and estimates ( printed page 14112) of downstream emissions ^[127] by assuming a 100% utilization rate estimate of the project ( e.g., the maximum capacity is transported 365 days per year, 24 hours a day and fully combusted downstream). This represents the maximum potential downstream GHG emissions. However, most projects do not operate at 100% utilization at all times. In fact, many projects are designed to address peak demand. For example, traditionally, in the Northeast, demand for gas is highest in the winter months, resulting in high utilization rates during those months due to heating needs, but lower in the summer, resulting in low annual utilization rates.^[128]

50. Because in most instances a 100% utilization rate estimate does not accurately capture the project's climate impacts, estimated emissions that reflect a projected utilization rate will provide more useful information. The project's projected utilization rate may be calculated using, for example:

• Expected utilization data from project shippers;
• Historical usage data; ^[129]

• Demand projections;
• An estimate of how much capacity will be used on an interruptible basis.

51. The project sponsor is encouraged to file its projected utilization rate, as well as its justification for the rate and any supporting evidence, in its application for authorization under NGA section 3 or 7. The Commission will also consider evidence submitted by commenters and protesters in support of or opposition to the projected utilization rate.

b. Other Evidence Considered

52. Further, the Commission will consider any other evidence in the record that impacts the quantification of the project's reasonably foreseeable emissions. For example, the Commission will consider: Evidence of a net-reduction in GHG emissions where the use of transported gas displaces the use of a higher emitting alternative fuel; ^[130] evidence of anticipated changes in downstream usage rates over time; evidence of any real, verifiable, and measurable reduction efforts taken by the pipeline or downstream users to reduce their GHG emissions or offset their impacts; ^[131] and evidence that a project would displace zero-emissions electric generation. Further, other agencies, notably the EPA, have proposed regulations that may impact the emission of methane from Commission-regulated facilities.^[132] If such regulations are adopted, the Commission will consider them when examining project GHG emissions. Similarly, the Commission will consider evidence from commenters and protestors supporting or challenging such estimates and assumptions.

B. Level of Review and Significance

53. Under NEPA, an agency must prepare an EIS for every “major [f]ederal action[ ] significantly affecting the quality of the human environment.” ^[133] To determine whether an EIS is necessary for a particular action, the agency may prepare an EA,^[134] described as a “concise public document” providing “sufficient evidence and analysis,” to determine whether to prepare an EIS or issue a finding of no significant impact.^[135]

54. To assess significance, the Commission determines whether the impact “would result in a substantial adverse change in the physical environment,” ^[136] which, as discussed, is based on considerations of the severity of adverse environmental impacts. In making that determination, the Commission uses its experience, judgment, and expertise to give record evidence appropriate weight.^[137] The Commission found that “there is nothing about GHG emissions or their resulting contribution to climate change that prevents us from making that same type of significance determination.” ^[138]

55. Specifically, in Northern Natural Gas Co., the Commission explained that:

The U.S. Court of Appeals for the District of Columbia Circuit has explained that a proposed interstate natural gas pipeline's reasonably foreseeable GHG emissions are relevant to whether the pipeline is required by the public convenience and necessity. A rigorous review of a project's reasonably foreseeable GHG emissions is also an essential part of the Commission's responsibility under NEPA to take a “hard look” at a project's environmental impacts. Determining the significance of the impacts from a proposed project's GHG emissions informs the Commission's review in a number of important respects, including its decision whether to prepare an environmental impact statement.^[139]

56. To date, no federal agency, including the Commission, has established a threshold for determining what level of project-induced GHG emissions is significant. The Commission received a number of comments, discussed below, offering perspectives on whether and at what level it should assess the significance of a proposed project's GHG emissions.

1. Comments

57. The Commission received relevant comments in response to both the 2018 and 2021 NOIs on whether the Commission should: Determine ( printed page 14113) significance at all; set a specific significance threshold and at what level; and/or use various inventories, goals, and tools to set the threshold.

a. Whether the Commission Should Determine Significance

58. Numerous commenters (Delaware Riverkeeper, Food and Water Watch, North Carolina Department of Environmental Quality, Sabin Center, and others) argue that the Commission should make a significant impact determination based on a project's GHG emissions, which they argue would include the project's associated upstream and downstream emissions. Some commenters, for example the Sabin Center in 2018, direct the Commission to the NEPA regulation at 40 CFR 1508.27 (that was removed by amendments effective September 14, 2020), which provides that “significantly” as used in NEPA requires considerations of both the context of the action and the intensity of the impacts associated with any proposal.^[140]

59. In contrast, some regulated entities and other commenters express concern about the Commission determining the significance of a project's impacts on the basis of GHG emissions, especially upstream and downstream emissions. For example, INGAA and others (Energy Infrastructure Council, Williams, etc.) argue that the Commission should, at most, engage in a qualitative discussion of downstream GHG emissions because net GHG emissions are not reasonably foreseeable, and that the Commission should not assess the significance of upstream or downstream emissions.^[141] Commenters such as Boardwalk state that the Commission cannot reject a project because of downstream GHG emissions or consider upstream GHG emissions, may only include a general disclosure of downstream emissions in limited circumstances (such as where all end use is known), and should generally decline to assess significance and only engage in a qualitative discussion.^[142]

60. Commenters argue that the Commission lacks the ability to make a significance determination and has no objective basis upon which to evaluate the impacts of GHG emissions associated with any specific proposed project.^[143] Other commenters state that setting any significance threshold would be arbitrary ^[144] and potentially outside of the Commission's authority or jurisdiction.^[145]

61. Finally, commenters state that the Commission should defer to other agencies, such as CEQ or EPA, in setting a significance threshold, citing: The lack of a national energy policy or federal GHG limits; the EPA's existing authority to regulate GHG emissions under the Clean Air Act; the direction of Executive Orders 13990 and 14008, which commenters say direct EPA to examine its own GHG emissions standards; and the ongoing Interagency Work Group efforts on the SCC.^[146] A few industry commenters also caution against creating uncertainty or a moving target for industry while waiting for a significance threshold to be established.^[147]

b. What the Threshold Should Be

62. Some commenters argue that the Commission should consider any net increase in GHG emissions as significant.^[148] Attorneys General of Massachusetts, Connecticut, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, and the District of Columbia (Attorneys General of Massachusetts et al.) argues that any investment in pipeline infrastructure is inconsistent with new national emissions reductions targets and thus, project emissions can be significant on that basis alone, even if they represent a small share of national emissions, or that emissions are significant if they impede the ability of a state to meet its clean energy goals.^[149]

63. A few commenters suggest specific numerical thresholds. The Sabin Center recommends that the Commission assess the magnitude of GHG emissions impacts using EPA's quantification threshold of 25,000 tons per year of CO₂ e to identify major emitters under the Clean Air Act, social cost of GHG tools to assign a dollar value to the potential impacts of the emissions, and EPA's GHG Equivalencies Calculator as a comparison tool.^[150] One commenter cites to EIS examples where the Commission stated that monetized benefits of $8 million and $28 million would be “significant” for local economies and suggests that gross climate damages between roughly $8 and $20 million should be considered significant.^[151]

64. Conversely, a few commenters state that emissions from all individual projects could be considered de minimis and individually too small to impact climate change.^[152] Others urge the Commission away from taking a bright line approach to determining significance,^[153] while Driftwood Pipeline LLC urges that significance, if appropriate, requires the Commission to disclose a clear threshold.^[154]

65. CEQ points the Commission to its 2016 guidance as an existing resource to help agencies assess GHG emissions and the effects of climate change in NEPA reviews.^[155]

c. Use of Inventories, Climate Goals, Programmatic Analyses, Etc. in Determining Significance

66. Some commenters recommend that the Commission use state, regional, and global GHG reduction goals to provide context and/or define ( printed page 14114) significance of GHG emissions.^[156] For example, Attorneys General of Massachusetts et al. comments that the Commission already analyzes whether a proposed pipeline project is consistent with various energy and climate policies and goals and that this can be used as a metric for evaluating significance.^[157] Others argue that the Commission's analysis of a proposed project's public benefits should weigh the effect of project GHG emissions on states' and the nation's abilities to comply with climate and clean energy laws and policies, such as specific energy and climate change action plans and policies.^[158] The Ohio Environmental Council recommends that the Commission consider the total proposed upstream and downstream GHG emissions of all gas projects pending in any given year, giving weight to the total possible GHG emissions that could be locked in by those projects and comparing this total with international goals.^[159]

67. Other commenters suggest alternative means or tools for assessing significance. For example, commenters suggest that the Commission should use a “Climate Test.” ^[160] Patricia Weber comments that the Commission should use such a test to determine if a project is viable in a scenario where the climate goals of the Paris agreement are met using climate and global energy market models. One commenter urges the Commission to examine acres of wetlands that will be lost due to climate impacts of proposed projects as a proxy for significance.^[161] Some commenters suggest the Commission consider a programmatic or regional analysis of pipelines.^[162]

68. EDF comments that a comparison of a project's emissions to international, state, or regional carbon budgets, or assessing geophysical impacts such as increases in carbon dioxide levels, global temperatures, or sea levels can be misleading and trivialize the project's impacts.^[163]

69. Some industry commenters state that any comparison of direct or indirect emissions should be made to global GHG inventories, not national or state inventories.^[164] However, Williams states that, while the Commission should consider only direct construction and operation emissions, the Commission should compare those emissions against national GHG inventories and not against international agreements or regional targets.^[165] Others oppose use of a regional analysis of GHG emissions from pipeline projects.^[166]

d. Use of the Social Cost of Greenhouse Gases

70. Several commenters generally argue for a monetization of climate damages using the Social Cost of Greenhouse Gas (SC-GHG) tools ^[167] to determine significance.^[168] EDF recommends that the approach should be consistent with the Commission's practices for determining the significance of other monetized effects, such as economic impacts.^[169] Public Interest Organizations comment that an established numerical significance threshold is not necessary, but if one is established, it should be used in tandem with the SCC tool and should not be based solely on one metric, especially not on a comparison to global emissions. Rather, they urge a holistic review of how a proposed project's impacts weigh against any benefits.^[170] EDF states that if the climate damages exceeded monetized project benefits, the Commission could reject the project.^[171]

71. Conversely, other commenters oppose use of the SCC tool in determining significance ^[172] or of using the SCC tool at all.^[173] The Attorneys General of Missouri, Alabama, Alaska, Arizona, Arkansas, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, and West Virginia (Attorneys General of Missouri et al.) contends that the NGA does not allow use of the SCC tool to calculate speculative damages and that its use is contrary to the Commission's public interest responsibilities. Further, they argue that NEPA does not permit the use of the SCC because NEPA does not allow agencies to rely on conclusions that are speculative or reflect substandard or outdated science.^[174]

72. Public Interest Organizations state that, while neither the NGA nor NEPA explicitly reference the SCC tool, there is nothing in these or other federal statutes that would prohibit its use.^[175] New Jersey Conservation Foundation notes that President Biden's Executive Order 13990 supports the use of the SC-GHG tools by agencies to capture the full costs of GHG emissions as accurately as possible.^[176] New Jersey Conservation Foundation states that following issuance of Executive Order 13990, the Interagency Working Group on the Social Cost of Greenhouse Gases (GHG IWG) published interim SC-GHG values, which the Commission should use.^[177]

( printed page 14115)

73. CEQ notes that it was working with representatives on the GHG IWG to develop additional guidance regarding the application of the SC-GHG tools in decision-making processes, including NEPA analysis.^[178] NGSA and API urge the Commission to wait for this review to be completed.^[179] NGSA further states that it would be inappropriate for the Commission to develop a likely conflicting approach for utilizing the SCC tool.^[180] API states that it would violate principles of consistency for the Commission to apply the interim SC-GHG values to current proposals ( i.e., for the remainder of this year), knowing that these values may change and lead to different treatment for future proposals.^[181] EPA states that in cases where the Commission determines that a monetary comparison between benefits and costs is appropriate, the Commission should take into account established practices for benefit-cost analyses ( e.g., the Office of Management and Budget's Circular A-4 and references therein). If the Commission chooses to use the SC-GHG tools, EPA states that it should disclose all assumptions and levels of uncertainty associated with the analysis.^[182]

74. The Public Interest Organizations state that monetizing impacts using the SCC tool provides the public and decisionmakers with accessible figures useful in determining whether a project is in the public interest and allows the Commission to easily compare project harms and economic benefits, whereas other metrics can misleadingly minimize climate impacts due to inadequate contextualization.^[183]

75. Kinder Morgan asserts that the SCC tool relies on inputs or assumptions that introduce too much uncertainty.^[184] Similarly, Attorneys General of Missouri et al. contends that the SCC tool is too speculative and arbitrary to hold up to the hard-look requirement under NEPA.^[185] Rebutting this, EDF emphasizes that the GHG IWG's methodology is rigorous and based on the best available data and economic practices, such as utilizing a 300-year time horizon.^[186] INGAA states that the significant variation in output among GHG IWG's interim values shows that discount rates reflect a high level of uncertainty in the models and that an agency's chosen discount rate wields an outsized influence on the end result.^[187] INGAA states that the Commission should: (1) Only use the SCC tool within the NEPA evaluation, not the NGA evaluation; (2) use the SCC tool as a relative, but not absolute, measure; (3) use the SCC tool only as a threshold indicator; and (4) place any SCC estimates in the proper context.^[188]

76. New Jersey Conservation Foundation recommends that the Commission use all of the GHG IWG's interim values provided for the SC-GHG tools (GHG IWG recommends using a discount rate of 3%, but also provides values associated with discount rates of 2.5% and 5%).^[189]

77. Boardwalk and Kinder Morgan argue that the Commission should only use the SCC tool as a qualitative tool.^[190] Boardwalk further asserts that there should not be any triggering levels that would result in adverse action by the Commission or a significance determination. Boardwalk contends that the use of trigger levels would create substantial regulatory uncertainty. Kinder Morgan and Williams also express concern that the SCC tool yields inherently one-sided GHG data if it is applied to a project in a manner that monetizes only the project's GHG costs and not the corresponding project benefits.^[191] Energy Infrastructure Council asserts that the SCC tool is meaningless without a standard or threshold for significance and its use requires a monetized cost-benefit analysis of an entire project.^[192]

78. Kinder Morgan states that the SCC tool was not designed for project-specific analysis but could be used as a screening tool in a qualitative analysis. If the Commission uses the SCC tool, Kinder Morgan recommends that it should explain why and how it was used.^[193] This explanation should include information about the SCC's function, its mechanism, its embedded limitations and assumptions, and the specific reason for its application in a given circumstance. Kinder Morgan states that this type of explanation is vital to avoid misleading the public about the purpose of the SCC calculation and the meaning of its results.^[194] Spectra Energy Partners, LP and Seneca Resources Corporation contend that the Commission has no basis to designate a particular SCC dollar amount as significant, and any such designation would be arbitrary and could not meaningfully inform the Commission's decision making or the public.^[195] Additionally, Kinder Morgan states that the Commission should not use the SCC tool to determine mitigation measures or conditions because no statute requires that the Commission implement mitigation based on calculations from such a tool.^[196]

2. Appropriate Level of NEPA Review and Significance Determination

79. To determine the appropriate level of NEPA review, the Commission is establishing a significance threshold of 100,000 metric tons or more per year of CO₂ e. In calculating this emissions estimate, Commission staff will apply the 100% utilization or “full burn” rate for natural gas supplies delivered by the proposed project and will prepare an EIS if the estimated emissions from the proposed project may exceed the 100,000 metric tons per year threshold.

80. An emissions threshold of 100,000 metric tons per year of CO₂ e captures the majority of annual emissions generated by Commission authorized projects, including those that may result in incremental GHG emissions over a long duration that may have a significant effect upon the human environment. Establishing a threshold for NEPA purposes also provides Commission staff, industry, and other stakeholders clarity regarding whether a particular project will result in the preparation of either an EA or an EIS. We believe that such clarity ultimately benefits both the regulated community and public by ensuring certainty regarding the Commission's process for reviewing applications for natural gas infrastructure.

81. In its NEPA document, staff will estimate the proposed project's GHG emissions based on all relevant evidence submitted in the record—including the project's utilization rate, offsets, and mitigation. A project with estimated emissions of 100,000 metric tons per year of CO₂ e or greater will be presumed to have a significant effect, unless record evidence refutes that ( printed page 14116) presumption.^[197] While the 100,000 metric ton presumption will serve as a guidepost, facilitating transparent, predictable analysis of a proposed project's contribution to climate change, our analysis will continue to consider all evidence in the record on a case-by-case basis. As part of that analysis, the Commission will continue to consider any emerging tools as well as any forthcoming frameworks or analysis issued by CEQ or other agencies on this issue. Finally, as noted at the outset, we encourage commenters to address this approach to assessing significance—including the 100,000 metric ton CO₂ e threshold.

a. Commission Authority To Establish a Threshold

82. Section 3 of the NGA requires the Commission to approve an application for the exportation or importation of natural gas unless the proposal “will not be consistent with the public interest.” ^[198] Similarly, under section 7, the Commission must find a proposed project is or will be required by the present or future public convenience and necessity.^[199] The Commission has long regarded section 3's “public interest” standard and section 7's “public convenience and necessity” standard as substantially equivalent.^[200] In considering applications under section 3 or section 7, the Commission must “evaluate all factors bearing on the public interest.” ^[201] The Commission has recognized from its earliest decisions that it may consider the end use of gas as a factor in assessing the public interest ^[202] and has long considered the impact of natural gas combustion on air pollution.^[203]

83. As discussed above, the courts have interpreted the Commission's obligations under NEPA to require analysis of downstream GHG emissions for NGA section 7 certificate projects, but do not require an analysis of either downstream or upstream GHG emissions for section 3 export projects.^[204] As also discussed above, the Commission has previously acknowledged that upstream emissions for NGA section 7 certificate projects may be difficult to quantify. However, as noted, the Commission will continue to consider on a case-by-case basis whether GHG emissions from upstream production activities are a reasonably foreseeable and causally connected result of a proposed project.^[205]

84. Contrary to the suggestion of some commenters, the Commission would not intrude into another agency's domain by establishing a significance threshold. The Commission does not propose to set an emissions standard that projects will be expected to meet; rather, the threshold would be an indication of potential significance for purposes of the Commission's review of a project's environmental impacts under NEPA and trigger the preparation of an EIS.^[206]

85. As discussed above, NEPA requires the Commission to take a “hard look” at the environmental consequences of a proposed action and to prepare an EIS disclosing its analysis to the public where its action may significantly affect the quality of the human environment, or to prepare an EA for a proposed action that is not likely to have significant effects or when the significance is unknown to determine if an EIS is necessary. We note that neither EPA nor CEQ raise objections to the Commission determining the significance of GHG emissions; in fact, EPA points to Executive Order 14008, which directs the federal government to prioritize assessment, disclosure, and mitigation of climate pollution and climate-related risks, in response to the Commission's query on how it could determine the significance of a project's GHG emissions.^[207]

86. As discussed above, NEPA requires the Commission to determine whether a project would have any significant effects on the environment, including the effects of GHG emissions on the climate.^[208] Moreover, courts have rejected the claim that under the NEPA framework, the determination of whether an impact is significant must not involve any subjective judgment calls.^[209]

87. We are establishing a uniform GHG emissions threshold because GHG emissions affect climate to the same degree, regardless of the location or specifics of a particular project. Establishing such a threshold will provide the Commission a workable and consistent path forward to analyze proposed projects. Further, a numerical threshold is a clear, consistent standard that can be easily understood and applied by the regulated community and interested stakeholders.

b. Rationale for an Emissions Threshold of 100,000 Metric Tons per Year

88. Human impact on the warming of the global climate system is unequivocal.^[210] Even if deep reductions in GHG emissions are achieved, the planet is projected to warm by at least 1.5 degrees Celsius (°C) by 2050.^[211] This level of warming will present major global consequences. For example, extreme temperature events that may have occurred once in 10 years on average in a climate without human influence will occur 4.1 times as frequently and be 1.9 °C hotter.^[212] Agricultural and ecological drought events that may have occurred once in 10 years on average across drying regions in a climate without human influence will occur twice as frequently.^[213] Warming beyond 1.5 °C presents even more severe consequences. The Intergovernmental Panel on Climate Change states that “[w]ith every additional increment of global warming, changes in extremes continue to become larger.” ^[214] For example, every subsequent 0.5 °C of warming “causes clearly discernible increases in the intensity and frequency of hot extremes, including heatwaves ( very likely), and heavy precipitation ( printed page 14117) ( high confidence), as well as agricultural and ecological droughts in some regions ( high confidence ).” ^[215] Because of the dire effects at stake, even relatively minor GHG emissions pose a significant threat, 100,000 metric tons per year of project GHG emissions will capture all natural gas projects that have what we believe to be the potential for causing significant impacts on climate, given the typical lifespans of authorized projects. For a single natural gas project with a lifespan of 30 years, this threshold represents a total of three million metric tons of GHG emissions.

89. Based on an internal review of natural gas projects from 2008 to 2021, a 100,000 metric tons per year threshold will cover the vast majority of potential GHG emissions from natural gas projects authorized by the Commission. For context, projects that likely have 100,000 metric tons per year or more of GHG emissions include projects transporting an average of 5,200 dekatherms per day and projects involving the operation of one or more compressor stations or LNG facilities.

90. Outside the NEPA context, other federal and state agencies that have established thresholds to evaluate or regulate GHG emissions from an analysis of the emissions from regulated sources. Most notably, in 2012, EPA issued the Tailoring Rule to regulate GHG emissions from stationary sources of air pollution under the Prevention of Significant Deterioration (PSD) ^[216] and Title V ^[217] permitting programs ^[218] and proposed to phase in the regulation of GHG emissions in two steps. Under Step 1, sources already subject to the PSD permitting program for at least one non-GHG pollutant (“anyway” sources) were required to utilize best available control technology (BACT) for GHG emissions ^[219] if they increased net GHG emissions by at least 75,000 tons per year of CO₂ e.

91. Under Step 2, EPA expanded the Tailoring Rule by requiring a new source or a major modification to an existing source to obtain PSD and/or Title V permits based on GHG emissions alone. Sources that had the potential to emit at least 100,000 tons per year of CO₂ e would become newly subject to the PSD and/or Title V requirements, even if they did not exceed the statutory threshold for any other pollutant. Additionally, modifications to an existing source already subject to PSD and/or Title V that increased net GHG emissions by at least 75,000 tons per year of CO₂ e would be subject to PSD requirements regardless of whether there was an increase in the emissions of any other pollutant.^[220]

92. In setting the 75,000 tons and 100,000 tons per year of GHGs thresholds, EPA considered the administrative burden of permitting the estimated number of additional facilities under each threshold and the percentage of total national stationary source GHG emissions that would be covered under the threshold.^[221] For example, under Step 1, EPA estimated a 5% increase in the total annual cost to run the permitting programs and that approximately 65% of GHG emissions would be covered. Under Step 2, EPA estimated that approximately 550 new sources would become subject to the PSD and Title V programs, increasing total annual costs to run the programs by 42% and covering 67% of GHG emissions. EPA further found that lowering the threshold to 50,000 or 25,000 tons per year of CO₂ e would drastically increase both the number of new facilities requiring permits and the cost of administering the programs but would only marginally increase the percentage of GHG emissions covered to 70% and 75%, respectively.

93. In 2014, the Supreme Court invalidated portions of the Tailoring Rule, holding that EPA may not use GHG emissions as the sole basis for determining whether a source is subject to a PSD or Title V permitting requirements.^[222] While the Supreme Court's ruling struck down Step 2 of the Tailoring Rule, it upheld Step 1 and allowed EPA to continue to regulate GHG emissions from “anyway” sources. Notably, the decision did not discuss EPA's methodology for establishing the thresholds; it only ruled that deviating from the 100 and 250 tons per year statutory thresholds in the Clean Air Act when requiring sources to newly obtain PSD or Title V permits based solely on GHG emissions under Step 2 was impermissible.

94. Further, at least two agencies in California that are directed to determine the significance of GHG emissions and climate impacts of proposed projects under the California Environmental Quality Act have also proposed or established thresholds of significance based on an analysis of regulated sources. First, in 2008, the California Air Resources Board (California ARB) proposed finding a less than significant impact for a proposed industrial project that, with mitigation, emits no more than 7,000 metric tons per year of CO₂ e from non-transportation sources, including combustion and fugitive emissions.^[223] Second, the South Coast Air Quality Management District (South Coast AQMD) adopted an interim GHG significance threshold of 10,000 metric tons of CO₂ e per year for stationary ( printed page 14118) sources of air pollution in 2008.^[224] Both California ARB and South Coast AQMD found that their thresholds would capture approximately 90% of emissions from their respective regulated sources.^[225]

95. Like EPA and the California agencies, we are basing our threshold on an analysis of regulated sources. Although we are adopting a conceptually similar methodology in establishing our threshold, we note that our approach will cover a larger number of emissions than the threshold established by EPA in the Tailoring Rule. EPA's thresholds of 75,000 and 100,000 tons per year accounted for only 65% and 67% of emissions from EPA-regulated sources, respectively, whereas our proposed threshold of 100,000 metric tons per year would deem nearly three-quarters of Commission-regulated natural gas project, which collectively account for roughly 99% of GHG emissions from Commission-regulated natural gas projects, to have a significant impact on climate change.

3. Other Metrics

96. As noted above, commenters argue for and against the use of various existing GHG inventories or goals as a comparison tool to determine significance. Comparison to an existing GHG inventory or goal presents substantially different percentages based on the chosen goal (international, state, regional, or local). Because different projects may have different potential purposes and the purpose of a project may be characterized to support or oppose a particular viewpoint, we do not believe that tying the Commission's significance determination for a proposed project's GHG emissions to a particular inventory or goal is appropriate. However, we recognize that this type of comparison can be helpful to inform the Commission's analysis and the public, especially when presented using a consistent metric across proposed projects under consideration by the Commission. We note that many commenters reference the SC-GHG as one tool. To the extent permitted by law,^[226] the Commission could consider the SC-GHG in the future.

C. Mitigation

97. Federal agencies can use mitigation to minimize the potential adverse environmental effects of their actions,^[227] and mitigation is used by the Commission in reviewing NGA sections 3 and 7 proposals.^[228]

98. The NGA grants the Commission broad authority to attach reasonable terms and conditions to NGA section 7 certificates of public convenience and necessity and NGA section 3 authorizations.^[229] The Commission has consistently exercised this authority to attach environmental conditions that mitigate the adverse environmental impacts of a proposed project, and the Commission is not precluded from utilizing this authority to require a project sponsor to mitigate all, or a portion of, the impacts related to a proposed project's GHG emissions. Therefore, consistent with the discussion provided herein, going forward project proponents are encouraged to propose mitigation that will minimize climate impacts. The Commission will consider any mitigation measures proposed by the project sponsor on a case-by-case basis when balancing the need for a project against its adverse environmental impacts and may require additional mitigation as a condition of an NGA section 3 authorization or section 7 certificate.

1. Technical Conference on GHG Mitigation

99. On November 19, 2021, the Commission held a Commission staff-led technical conference to discuss methods project sponsors may use to mitigate the effects of direct and indirect greenhouse gas emissions resulting from Natural Gas Act sections 3 and 7 authorizations.^[230] Representatives from industry, academia, non-governmental organizations, and state regulatory commissions participated as panelists, with discussion topics including: How the Commission could determine the quantity of reasonably foreseeable GHG emissions resulting from a project proposed under section 3 or 7 of the NGA and the appropriate level of mitigation for such emissions; types of mitigation measures a project sponsor could employ to reduce the amount of GHG emissions associated with a proposed project; and methods for the continued verification and accounting of GHG mitigation during project operation, as well as cost impacts to the industry from implementing GHG mitigation measures and how project sponsors might recover those costs.

100. In addition to the panelists' written statements, the Commission received over 20 comments in response to the technical conference. The Commission considered these statements and comments in developing the mitigation policy described below.

2. Authority To Require Mitigation

101. Some commenters state that the Commission has broad authority under the NGA to place conditions in certificate authorizations requiring pipeline companies to mitigate GHG impacts,^[231] while others argue that the Commission does not have authority under the NGA or NEPA to impose mitigation measures,^[232] especially ( printed page 14119) measures to mitigate upstream or downstream GHG emissions.^[233] Specifically, commenters argue that the Commission's authority under NGA section 7(e) to place conditions on a certificate is limited by the statutory purpose to regulate interstate transportation to ensure reliable access to plentiful natural gas at reasonable prices.^[234] Commenters further assert that the Commission has no authority to establish environmental policy and that the Commission cannot use its conditioning authority to indirectly mitigate an effect that it has no authority to directly mitigate.^[235]

102. Commenters also claim that any attempt to mitigate indirect GHG emissions would infringe on the regulatory authority of other federal and state agencies and result in back-door regulation of energy policy.^[236] Specifically, commenters state that any attempt by the Commission to mitigate upstream or downstream GHG emissions would interfere with state resource decisions and usurp issues of national energy and environmental policy that Congress vested in other federal authorities.^[237] For example, commenters argue that Congress has delegated authority to the EPA and state agencies to regulate GHGs under the CAA.^[238] Even if the Commission had the authority to impose mitigation measures for upstream or downstream GHG emissions, commenters argue that the Commission must first establish that those GHG emissions are reasonably foreseeable and have a sufficiently close causal connection (akin to proximate causation under tort law) ^[239] to the authorization of a project under NEPA, and if not, should not be considered for mitigation purposes.^[240] Lastly, commenters question reliance on Sabal Trail to support the Commission's authority to impose mitigation.^[241]

103. We disagree with contentions that the Commission does not have the authority under the NGA or NEPA to require mitigation of GHG emissions by a project sponsor. The D.C. Circuit stated in Sabal Trail, that “the [Commission] has legal authority to mitigate” greenhouse-gas emissions that are an indirect effect of authorizing a pipeline project.^[242] And, as early as 1961, the Supreme Court recognized that the Commission's predecessor, the Federal Power Commission, had the authority to consider downstream uses, and specifically, the impact of end-users combusting transported gas on air quality, as part of its public convenience and necessity determination under the NGA.^[243] Both NGA sections 3 and 7 authorize the Commission to attach “such reasonable terms and conditions as the public convenience and necessity may require.” ^[244] Pursuant to this authority, the Commission has conditioned NGA section 7 certificates and section 3 authorizations on mitigation of impacts of the proposed project.^[245] Moreover, courts have interpreted this provision broadly and given the Commission latitude in deciding what types of mitigation to require.^[246]

104. Regarding claims that the Commission cannot mandate mitigation of downstream emissions because those emissions are outside the Commission's jurisdiction, we recognize, as many commenters assert, that the Commission does not have the statutory authority to impose conditions on downstream users or other entities outside the Commission's jurisdiction, such as production, gathering, and local distribution entities.^[247] Rather, the Commission encourages each project sponsor to propose measures to mitigate the impacts of reasonably foreseeable ( printed page 14120) GHG emissions associated with its proposed project, and will consider such mitigation proposals in assessing the extent of a project's adverse impacts.^[248]

105. We note that the Supreme Court's ruling in Public Citizen does not preclude the Commission from requiring project sponsors to mitigate reasonably foreseeable upstream or downstream emissions. As discussed previously,^[249] the Commission may consider downstream GHG emissions under Public Citizen, which states that “NEPA requires `a reasonably close causal relationship' between [an] environmental effect and the alleged cause,” analogous to the “familiar doctrine of proximate cause from tort law” and does not require an agency to gather or consider information regarding environmental harms if it lacks authority to act on that information.^[250] As directed by Public Citizen, decisionmakers should “look to the underlying policies or legislative intent in order to draw a manageable line between those causal changes that may make an actor responsible for an effect and those that do not.” ^[251] Here, the NGA “broadly instruct[s]” the Commission to consider “the public convenience and necessity” when evaluating proposed interstate pipeline applications, balancing public benefits against adverse effects, including adverse environmental effects,^[252] and we have noted that the Commission has consistently exercised its broad conditioning authority under the NGA to attach environmental conditions that mitigate the adverse environmental impacts of a proposed project.^[253] NEPA requires an agency to consider the environmental impacts of its actions, including steps that could be taken to mitigate adverse environmental consequences,^[254] although it does not require a federal agency to take action to mitigate those adverse effects.^[255] As CEQ recognizes, an agency may, however, require mitigation of impacts under its authority as a condition of its permitting or approval.^[256] Thus, as the D.C. Circuit held in Sabal Trail, the Commission can deny a pipeline certificate on the ground that the pipeline would be too harmful to the environment, because the agency is the “legally relevant cause” of the direct and reasonably foreseeable environmental effects of the pipelines it approves.^[257] Accordingly, the Commission may consider the end use of gas and the impact of natural gas combustion on air pollution as a factor in assessing the public interest.^[258] However, as detailed below, the Commission's priority is for project sponsors to mitigate, to the greatest extent possible, a project's direct GHG emissions. The Commission also encourages project sponsors to propose mitigation of reasonably foreseeable indirect emissions, and will take such proposals into account in assessing the extent of a project's adverse impacts.

3. Mitigation Measures

106. The Commission encourages the project sponsor to propose measures to mitigate the direct GHG emissions of its proposed project to the extent these emissions have a significant adverse environmental impact.^[259] INGAA describes three possible levels of mitigation—to zero, to a level of below significance, and to an amount to be determined by use of the SCC—but dismisses each as unworkable, improperly adopting broad policy judgements, and reliant on a one-sided and imprecise methodology, respectively.^[260] The Commission plans to evaluate proposed mitigation plans on a case-by-case basis and is not mandating a standard level of mitigation. We also encourage project sponsors to proposed measures to mitigate the reasonably foreseeable upstream or downstream emissions associated with their projects.

107. The Commission will consider the project's impact on climate change, including the project sponsor's mitigation proposal, as part of its public interest determination under NGA section 3 or 7.^[261] When making the public interest determination, the Commission will assess the adequacy of the project sponsor's proposed mitigation on a case-by-case basis and will consider the project's impact on climate change as one of many factors.^[262] Further, the Commission may require additional mitigation of a project's direct GHG emissions as a condition of the authorization, should the Commission deem a project sponsor's proposed mitigation inadequate to support the public interest determination.

108. Also we note that NEPA does not preclude the Commission from approving a project with significant adverse impacts.^[263] If a project's emissions equal or exceed the 100,000 ( printed page 14121) metric tons per year significance threshold and the project sponsor's proposed mitigation will reduce the project's GHG emissions below that threshold, the Commission will consider that mitigation in determining whether it can make a finding of no significant impact.

109. While the Commission has broad authority to require mitigation of GHG emissions by a project sponsor, we are not mandating here any particular form of mitigation.^[264] A project sponsor is free to propose any mechanism to mitigate the project's GHG emissions.^[265] However, in order to ensure that any GHG emissions reduction mechanisms achieve real, verifiable, and measurable reductions, any proposed mechanisms should:

a. Be both real and additional—the emissions reductions would not have otherwise happened unless the proposed reduction mechanism was implemented, and the associated reductions occur beyond regulatory requirements; ^[266]

b. be quantifiable—any emissions reductions must be calculated using a transparent and replicable methodology;

c. be unencumbered—seller has clear ownership of or exclusive rights to the benefits of the GHG reduction; and

d. be trackable—the project sponsor must also propose means for the Commission to monitor and track compliance with the proposed mitigation measures for the life of the project.

110. Commenters express concerns with how the Commission will determine whether mitigation measures are verifiable or how the Commission will monitor or track compliance with mitigation measures in a way that avoids double counting emissions reductions.^[267] Commenters point out that other federal agencies and states are already monitoring GHG emissions from certificated projects, such as EPA's GHG Reporting Rule, so a Commission-designed monitoring scheme would be duplicative and unnecessary.^[268] EEI recommends that the Commission explore interagency agreements or memorandums of understanding (MOU) with agencies like EPA and PHMSA to avoid redundancies and clarify mitigation responsibilities,^[269] while INGAA states that such agreements or MOUs would be insufficient.^[270]

111. We believe it best not to mandate mitigation based on a specific volume or proportion of emissions. Encouraging project sponsors to submit proposed mitigation measures as opposed to mandating a certain level of mitigation for all projects allows the Commission to consider a project sponsor's proposed mitigation plan in comparison to the project's benefits, such as fuel switching or providing reliable gas service, when making a public interest determination and allows project sponsors the flexibility to choose what mitigation measures work best for their individual project. Moreover, we recognize that determining an appropriate amount of mitigation, particularly for downstream uses, depends on a variety of complex factors, some of which may not be known at the time of an application, such as state and local climate change policies, the interconnected nature of the natural gas pipeline system, long-term changes in natural gas supply sources, changes in demand for natural gas over time, individual companies' long-term goals to reduce GHG emissions, the availability of renewable energy credits or other carbon offsets, and the potential for future action by other federal agencies.^[271]

112. Similarly, we believe it best to allow project sponsors to demonstrate that their proposed mitigation measures are verifiable and propose means for the Commission to monitor or track the proposed measures through the life of the project. This approach allows project sponsors to take advantage of existing monitoring programs and tailor verification and tracking to their chosen mitigation proposals and prevents the Commission from needing to establish a new monitoring program.

4. Opportunities for Mitigation

113. While project sponsors are free to propose any type of mitigation mechanism, the following are examples of mitigation mechanisms project sponsors may consider.

a. Market-Based Mitigation

114. Project sponsors may mitigate the GHG emissions of a proposed project through participation in one (or more) of the various types of carbon offset markets. Sponsors could, for example, purchase renewable energy credits, participate in a mandatory compliance market (if located in a state that requires participation in such a market), or participate in a voluntary carbon market.

i. Renewable Energy Credits

115. Renewable energy credits (REC) are tradeable, market-based ( printed page 14122) commodities that provide proof that one megawatt hour of electricity was generated from a renewable source and delivered to the grid. RECs legally convey the attributes of renewable electricity generation to their owner. While state or regional RECs may be traded on financial exchanges that typically meet state or regional guidelines, they are not limited by geographic boundaries—RECs can be purchased independently from electricity and can be matched with energy consumption.^[272]

116. Commenters argue that the Commission may not require RECs because unlike offsets, RECs pertain only to the use of electric power and are therefore not appropriate for upstream or downstream mitigation, do not mitigate or compensate for GHG emissions, and are not denominated in carbon dioxide (CO₂) or CO₂ e, thus, they cannot represent any specific amount of avoided or reduced emissions.^[273] Enbridge also states that in most instances, project sponsors will not qualify to purchase RECs under existing state programs.^[274] While RECs may not represent a 100% offset per unit of GHG emitted, RECs do represent a decrease in GHG emissions from overall energy use and production, and we will consider them.

ii. Mandatory Compliance Market Participation

117. The compliance market is a mandatory offset program regulated by national, regional, or provincial law and mandates CO₂ and GHG emission reduction requirements. Under this framework an allowance, which is an authorization for an entity to emit GHG emissions, is created. Allowances are generated and traded for regulatory compliance and are priced as a commodity based on supply and demand, regardless of project type.

118. A prime example of an existing, domestic compliance market is the Regional Greenhouse Gas Initiative (RGGI). RGGI is a cooperative effort by eleven Northeast and Mid-Atlantic states ^[275] to limit CO₂ emissions at certain electric power generators. Each region involved in RGGI has an established emissions budget (cap) and each electric power generator holds allowances covering their GHG emissions. If a generator is below its established cap, it may trade an allowance to other entities ^[276] that exceed their cap. RGGI has an established emissions-based auction and trading system where allowances are bought, sold, and traded.^[277] In addition to allowances, offsets may be used for compliance purposes, which requires a third-party certification of that offset for use. RGGI strictly regulates the quantity and types of offsets. There are five pre-determined types of RGGI offsets:

a. Landfill gas (methane) capture/burning;

b. sulfur hexafluoride capture/recycling;

c. afforestation (the establishment of a forest in an area where there was no previous tree cover);

d. energy efficiency (end use); and

e. agricultural manure management operations (avoided emissions).

119. In addition to RGGI, California participates in the Western Climate Initiative with Quebec and Nova Scotia,^[278] covering industrial production, electricity generation, residential, commercial, and small industrial combustion, and transportation fuel combustion.

120. If an applicant proposes any method of market-based mitigation of GHG emissions, such as those described in this section, we encourage the applicant to inform the Commission of any state or regional compliance goals or initiatives that may be relevant to our consideration of such mitigation proposal.

iii. Voluntary Carbon Market Participation

121. If a project sponsor is not located in a state that participates in a mandatory compliance market, the voluntary carbon market offers an opportunity to mitigate project emissions. The voluntary carbon market transacts with offsets, which are the instrument representing the reduction, avoidance, or sequestration of one metric ton of GHG.^[279] The voluntary market funds additional, external projects that avoid or reduce GHG emissions.^[280] The voluntary carbon market is open to project sponsors regardless of location and is more flexible than compliance markets, although each market has its own standards, registries, and project types. Offset allowances are issued to project sponsors of qualifying CO₂ emissions offset projects.

122. Typically, an independent third party qualifies offset projects and establishes standards to verify offsets; however, not all offsets available in the voluntary market are certified by a third party. In order to ensure the additionality and permanence of offsets, the use of unverified offsets is discouraged. If a project sponsor proposes to mitigate project emissions through participation in a voluntary carbon market, the sponsor is encouraged to seek Commission approval of the third party that would verify the offsets prior to participation. Examples of existing, acceptable third-party certifiers include:

a. Climate Action Reserve; ^[281]

b. Verified Carbon Standard; ^[282] and

c. American Carbon Registry.^[283]

123. Some commenters support allowing project sponsors to purchase emissions offsets while others oppose it as a mitigation method. For example, Policy Integrity recommends that the ( printed page 14123) Commission require certificate holders to purchase emission offsets from a third party.^[284] Policy Integrity states that carbon offsets are: (1) Consistent with compensatory mitigation requirements employed by other federal agencies, such as the Bureau of Land Management, U.S. Fish and Wildlife Service, and EPA; and (2) included and supported in CEQ's NEPA regulations and guidance.^[285] Policy Integrity also recommends that the Commission develop a carbon offset program as opposed to relying on third-party programs; ^[286] however, the Commission lacks statutory authority to create such a program and believes that the existing programs and certifiers mentioned above are sufficient.

124. Conversely, some commenters oppose the Commission requiring project sponsors to purchase offsets from third parties because it is difficult to ensure that carbon offsets have the necessary traits of additionality (the reduction would not have happened but for the purchased offset), permanence (the reduction persists for the entire certification period of the offset), absence of leakage (the offset does not trigger some other activity elsewhere that adds GHG emissions), and rigorous third-party verification.^[287] INGAA further comments that it would be difficult or impossible for the Commission to choose an appropriate level of offsetting because of the variability in emissions over the life of a project and the risk of over-counting for a given quantity of gas that might move over multiple jurisdictional transportation projects, and that not enough high-qualify offsets are available.^[288] Commissioner Kelliher cautions that the Commission would have to verify offsets given concerns about fraud and environmental and accounting integrity.^[289] As previously stated, the Commission is not requiring project sponsors to purchase offsets or mandating a certain level of offsetting, and while the Commission acknowledges the challenges with third-party offsets, we believe the certifiers mentioned above will sufficiently account for them.

b. Physical Mitigation

125. In addition to purchasing RECs or emissions offsets, project sponsors could also propose to mitigate and/or offset GHG emissions through the use of physical, on- or off-site mitigation measures. Physical mitigation measures could include smaller-scale efforts including reducing a project's fugitive methane emissions or incorporating renewable energy or other energy efficient technologies to reduce a project's GHG emissions from compressor stations, or larger-scale undertakings such as carbon capture and storage, or direct air CO₂ capture. Project sponsors could also propose environmentally based measures, such as planting trees along the right-of-way or in other locations to offset carbon emissions or restoring wetlands to provide additional carbon storage; however, the scale needed for such measures to meaningfully mitigate GHG emissions may render them impractical. In addition, project sponsors could propose to reduce GHG emissions from their existing facilities, including those with no direct connection to the proposed project, as mitigation for project-related emissions.

126. Commenters detail a host of mitigation measures they are currently undertaking or propose to implement to reduce direct project emissions, such as: Installing vent gas recovery systems and optimizing operations to reduce venting and blowdowns, replacing cast iron/unprotected steel pipes with polyethylene or protected steel pipes to minimize leaks, employing a variety of technologies and methods to identify and reduce leaks, and replacing natural gas-fired horsepower at compressor stations.^[290] Other commenters echo some of those suggestions ^[291] and recommend operational limits on construction equipment, such as limited idle time when engines are not in use.^[292] Other commenters criticize any mitigation measures, especially carbon capture and sequestration and offsets, and recommend that the Commission achieve “real zero” emissions that accounts for air and water pollution and focuses on environmental justice communities and workers impacted by the negative externalities associated with project operation and jobs that are being phased out.^[293] Some commenters assert that direct emissions are already substantially mitigated pursuant to the regulatory authority exercised by other agencies.^[294] With regard to methane leaks, Dr. Anna Scott explains that its independent certification and measurement program verifies that a company's operations meet regulatory standards and incentivize companies to go beyond the standards by using an engineering-based review process that assesses development through to operations, as well as continuous monitoring of emissions along the supply chain.^[295] On a policy level, Gary ( printed page 14124) Choquette of Pipeline Research Council International (PRCI) argues for a centralized funding mechanism for pipeline research to establish gas quality requirements with the aim of maximizing supply and reducing emissions and notes that PRCI has developed a tool that provides a method for prioritizing alternatives to reduce emissions based on effectiveness and associated capital and operating costs.^[296]

127. Commenters also recommend that the Commission consider a project sponsor's participation in programs that help shippers voluntarily reduce emissions and other voluntary emissions reductions programs when evaluating mitigation measures, such as the ONE Future Coalition, Oil and Gas Climate Initiative, Climate and Clean Air Coalition Oil and Gas Methane Partnership, EPA Natural Gas STAR Program and Natural Gas STAR Methane Challenge Program, Methane Guiding Principles, the Natural Gas Sustainability Initiative, and The Environmental Partnership.^[297] The Commission encourages project sponsors to detail their participation in such programs and any other voluntary measures as part of their mitigation plan for the Commission to consider as part of its public interest determination.

c. Cost Recovery

128. Commenters request that the Commission allow full cost recovery for any GHG mitigation measures through either the section 7 process or a general section 4 rate case for capitalized mitigation costs but caution the Commission to ensure that mitigation efforts are verified and the consumer's interest in low prices are balanced with a project sponsor's right to recover costs and earn a fair rate of return under the NGA.^[298] Alternatively, for periodic purchases of market-based mitigation measures specifically, commenters state that pipelines could propose a tracker through a limited section 4 filing.^[299] Conversely, other commenters oppose passing mitigation costs along to shippers, especially if it would increase rates for end-users, particularly low-income communities, who may not directly reap any local environmental benefits.^[300] In the event mitigation costs are passed to shippers, American Forest supports establishing a baseline from which to judge emissions reductions and supports having an independent entity monitor and measure those reductions.^[301] The Commission has previously considered and approved a proposal by a pipeline proponent to recover the costs of purchasing carbon offsets. In 2010, Ruby Pipeline, L.L.C., proposed to voluntarily purchase GHG offsets for the direct emissions associated with its compressor units (approximately 523,000 metric tons of GHG per year).^[302] Going forward, project sponsors wishing to purchase offsets or proposing other measures to mitigate their project's GHG emissions may propose to recover the costs of these measures through their proposed rates. Applicants are encouraged to submit detailed cost estimates of GHG mitigation in their application and to clearly state how they propose to recover those costs. Pipelines may seek to recover GHG emissions mitigation costs through their rates, similarly to how they seek to recover other costs associated with constructing and operating a project, such as the cost of other construction mitigation requirements or the cost of fuel. Additionally, the Commission's process for section 7 and section 4 rate cases is designed to protect shippers from unjust or unreasonable rates and will continue to do so with respect to the recovery of costs for mitigation measures.

D. Application of Policy Statement

129. We will apply this interim policy statement to both pending and new NGA section 3 and 7 applications.^[303] As noted above, doing so will allow the Commission to evaluate and act on such applications without undue delay. Applicants with pending applications will be given the opportunity to supplement the record and explain how their proposals are consistent with this policy statement, and stakeholders will have an opportunity to respond to any such filings. A project sponsor for any new natural gas infrastructure project is encouraged to include the following in its NGA section 3 or 7 application:

• The project's projected utilization rate and supporting information;
• an estimate of reasonably foreseeable project GHG emissions;
• if upstream and downstream emissions are not quantified, evidence to support why those emissions are not reasonably foreseeable project emissions;
• evidence, if any, that impacts the quantification of the project's reasonably foreseeable GHG emissions;
• a description of its proposed GHG mitigation measures, including the percent of the project's direct and indirect GHG emissions that will be mitigated and, if applicable, a tracking mechanism for tracking mitigation of GHG emissions; and
• a detailed cost estimate of its proposed GHG mitigation and a proposal for recovering those costs.

130. As explained above, the Commission will then consider the project's impact on climate change, including the project sponsor's mitigation proposal to reduce direct GHG emissions and, to the extent practicable, to reduce any reasonably foreseeable project emissions, as part of its determination under NEPA and its public interest determination under NGA section 3 or 7.^[304]

( printed page 14125)

V. Information Collection Statement

131. The collection of information discussed in the Policy Statement is being submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the Paperwork Reduction Act of 1995 ^[305] and OMB's implementing regulations.^[306] OMB must approve information collection requirements imposed by agency rules.^[307] Respondents will not be subject to any penalty for failing to comply with a collection of information if the collection does not display a valid OMB control number.

132. The Commission solicits comments from the public on the Commission's need for this information, whether the information will have practical utility, the accuracy of the burden estimates, recommendations to enhance the quality, utility, and clarity of the information to be collected, and any suggested methods for minimizing respondents' burden, including the use of automated information techniques. PUBLIC COMMENTS ARE DUE May 10, 2022. The burden estimates are focused on implementing the voluntary information collection pursuant to this Policy Statement. The Commission asks that any revised burden estimates submitted by commenters include the details and assumptions used to generate the estimates.

133. The following estimate of reporting burden is related only to this Policy Statement.

134. Public Reporting Burden: The collection of information related to this Policy Statement falls under FERC-577 and impacts the burden estimates associated with the “Gas Pipeline Certificates” component of FERC-577. The Policy Statement will not impact the burden estimates related to any other component of FERC-577. The estimated annual burden ^[308] and cost ^[309] follow.

135. Title: FERC-577, Natural Gas Facilities: Environmental Review and Compliance

136. Action: Proposed revisions to an existing information collection.

137. OMB Control No.: 1902-0128

138. Respondents: Entities proposing natural gas projects.

139. Frequency of Information Collection: On occasion.

140. Necessity of Voluntary Information Collection: The Commission's existing FERC-577 information collection pertains to regulations implementing NEPA and reporting requirements for landowner notifications. The information collected pursuant to this Policy Statement should help the Commission in assessing natural gas infrastructure projects.

141. Internal Review: The opportunity to file the information conforms to the Commission's plan for efficient information collection, communication, and management within the natural gas pipeline industry. The Commission has assured itself, by means of its internal review, that there is specific, objective support for the burden estimates associated with the opportunity to file the information.

142. Interested persons may provide comments on this information-collection by one of the following methods:

• Electronic Filing (preferred): Documents must be filed in acceptable native applications and print-to-PDF, but not in scanned or picture format.
• USPS: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street NE, Washington, DC 20426
• Hard copy other than USPS: Federal Energy Regulatory Commission, Office of the Secretary, 12225 Wilkins Avenue, Rockville, Maryland 20852.

VI. Comment Procedures

143. The Commission invites comments on the interim policy statement by April 4, 2022. Comments must refer to Docket No. PL21-3-000 and must include the commenter's name, the organization they represent, if applicable, and their address in their comments.

144. The Commission encourages comments to be filed electronically via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word processing formats. Documents created electronically using word processing software should be filed in native applications or print-to-PDF format and not in a scanned format. Commenters filing electronically do not need to make a paper filing.

145. Commenters that are not able to file comments electronically must send an original of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE, Washington, DC 20426.

146. All comments will be placed in the Commission's public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters.

VII. Document Availability

147. In addition to publishing the full text of this document in the Federal Register , the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the internet through the Commission's Home Page ( http://www.ferc.gov). At this time, the Commission has suspended access to the Commission's Public Reference Room due to the President's March 13, 2020 proclamation declaring a National ( printed page 14126) Emergency concerning the Novel Coronavirus Disease (COVID-19).

148. From the Commission's Home Page on the internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.

149. User assistance is available for eLibrary and the Commission's website during normal business hours from the Commission's Online Support at 202-502-6652 (toll free at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference Room at public.referenceroom@ferc.gov.

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews

Docket No. PL21-3-000

DANLY, Commissioner, dissenting:

1. I dissent in full from today's Interim Greenhouse Gas (GHG) Policy Statement which purports to set forth the Commission's procedures to evaluate the climate change impacts of proposed natural gas projects under the National Environmental Policy Act (NEPA) and to incorporate climate change considerations into the Commission's determinations under sections 3 and 7 of the Natural Gas Act (NGA).^[1]

2. This policy statement is irredeemably flawed. It is practically unworkable because it establishes a standardless standard. Its universal application to all projects, both new and pending (some for over two years), is an affront to basic fairness and is unjustifiable, especially in light of the many unnecessary delays already suffered by applicants. It is unlawful because it is illogical, it arrogates to the Commission power it does not have, and it violates the NGA, NEPA and the Commission's and the Council on Environmental Quality's (CEQ) regulations. It is also deliberately drafted so as to evade judicial review. Lastly, it will sow confusion throughout an industry that already suffers profound uncertainty. This issuance does not know what it is and neither will affected entities: It is immediately applicable, but also seeks comments, and it is allegedly not a draft policy statement, but an “interim” one. How can stakeholders have any confidence in its contents at all? ^[2]

3. When reading this policy statement, it is nearly impossible to credit the majority with actually believing that “minimiz[ing] our litigation risk,” making Commission decisions “legally durable,” and “increas[ing], not reduc[ing], customer and investor confidence,” are truly the goals of this proceeding.^[3] Rather, the purpose of this Interim Policy Statement, like several of the Commission's other recent Natural Gas Act issuances, appears to be to actively discourage the submission of section 3 or section 7 applications by intentionally making the process more expensive, more time-consuming, and riskier.^[4]

I. Overview of the Interim Policy Statement's Contents

4. The Interim Policy Statement begins by explaining it will apply upon issuance while at the same time being subject to comment and revision.^[5] The majority explains this is necessary to “act on pending applications under sections 3 and 7 of the NGA without undue delay and with an eye toward greater certainty and predictability for all stakeholders.” ^[6]

5. Next, it provides a historical background on past court, Commission, and CEQ issuances. For the sake of brevity, I will not describe this background discussion other than to note it is frequently misleading.^[7]

6. Then the Interim Policy Statement announces that “the Commission will quantify a project's GHG emissions that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action.” ^[8] This, it seems, will be fairly broad: the majority goes on to say that “[t]his will include GHG emissions resulting from construction and operation of the project as well as, in most cases, GHG emissions resulting from the downstream combustion of transported natural gas.” ^[9]

7. The majority also states that it will continue to consider whether upstream emissions are a reasonably foreseeable effect for NGA section 7 projects on a case-by-case basis.^[10] Notably missing, though, is any discussion of how upstream emissions could have a reasonably close causal relationship to an NGA section 7 project.^[11]

( printed page 14127)

8. The Interim Policy Statement then describes how the quantity of project's emissions will be determined: By using a projected utilization rate for the project and considering “other factors that might impact a project's net emissions.” ^[12] This raises more questions than it answers. Do these other factors include consideration of whether the natural gas being transported will actually reduce overall emissions or simply replace existing emissions; for example by powering natural gas generation that permits the retirement of higher-emitting generation or by serving an end use need that will turn to a different—and perhaps higher emitting—energy source if the pipeline is not constructed? ^[13] What does this mean for projects where the end use is unknown? Does the Commission have the expertise to evaluate a project sponsor's evidence and resolve any factual disputes? Will the majority send these issues to an Administrative Law Judge as it recently did to resolve a dispute over what constituted appropriate post-construction right-of-way restoration (a subject matter with which the Commission presumably has some expertise)? ^[14]

9. I would suspect most attentive readers would have been interested to then learn how, having determined the means by which to arrive at these numbers, the Commission plans to weigh emissions among all of the other factors to be considered in its NGA determination. But the majority does not say.

10. Next, the Interim Policy Statement explains “the Commission is establishing a significance threshold of 100,000 metric tons or more per year [(tpy)] of CO₂ e” ^[15] and will presume that the impact of a proposed project exceeding that threshold is significant unless refuted by record evidence.^[16] According to Commission staff, of the 214 projects with direct ^[17] and downstream emissions authorized from January 2017 through June 2021, this policy would have applied to 72% of them. This means that, as of the issuance of this Interim Policy Statement, the EIS is now our default environmental document.^[18]

11. The Interim Policy Statement says the Commission has authority to impose GHG mitigation for both direct emissions and downstream emissions.^[19] This is a sweeping claim of jurisdiction and one that drastically departs from the Commission's historic employment of its conditioning authority. But right on the heels of that jurisdictional declaration, instead of ordering mitigation, the majority “encourages” project sponsors to “propose measures to mitigate the direct GHG emissions of its proposed project to the extent these emissions have a significant adverse environmental impact” and “to mitigate the reasonably foreseeable upstream or downstream emissions associated with their projects.” ^[20] The majority states the Commission will consider these mitigation measures in its public interest determinations.^[21] This whole maneuver is odd—how often does one declare hitherto unasserted jurisdiction and then not employ it? Be warned: this is not restraint, it is foreshadowing.^[22]

12. The majority tells project sponsors they are “free to propose any mechanism to mitigate the project's GHG emissions” ^[23] and offers some suggestions. Plant trees.^[24] Incorporate renewable energy or other energy efficiency technologies.^[25] And, with the faint echo of Johann Tetzel, the majority also suggests purchasing ^[26] renewable energy offsets.^[27]

13. The majority's guidance ends there, leaving the project sponsor to figure out how much they should mitigate by these measures,^[28] some of which, it ought be pointed out, do not appear to have a discernable connection to the reduction of carbon emissions.^[29] Nor does the majority explain how the Commission can verify and track any such mitigation throughout the life of the project.^[30] The majority offers no general framework but says only that it wants project sponsors to mitigate “to the greatest extent possible.” ^[31] One wonders why no mechanism is set forth. Could it be that we learned nothing of value from soliciting comments on GHG mitigation,^[32] holding a technical conference on the subject,^[33] and soliciting a second round of comments following that technical conference? ^[34] And think of where this leaves project sponsors. Often, they seek guidance from Commission staff. But for the 30 applications that are currently pending, such communication is potentially barred by the Commission's ex parte rules.^[35] And even for those who are not so disadvantaged, absent direction from the Commission, staff can offer no more than this: You must roll the dice and cross your fingers that the Commission will act on, and maybe even grant, the requested authorization.^[36]

( printed page 14128)

14. But the mitigation requirements may not end there. The majority states it “may require additional mitigation as a condition of an NGA section 3 authorization or section 7 certificate.” ^[37] Using what standard? Not stated. Perhaps, it will become a good-behavior approach akin to how the Commission has considered landowner impacts, stating: “We are satisfied that [project sponsor] has taken appropriate steps to minimize [GHG emissions].” ^[38] And this encumbrance is perpetual: Mitigation, the majority says, will span “the life of the project.” ^[39] That is long time. Ample opportunity for invasive oversight, enforcement actions, and novel, as yet unpredictable, employments of the Commission's authority.^[40]

15. Next, we reach the majority's guidance on cost recovery. The majority states “[p]ipelines may seek to recover mitigation costs through their rates,” and are “encouraged to submit detailed cost estimates of GHG mitigation in their application and to clearly state how they propose to recover those costs.” ^[41] Pipelines may recover costs? On what possible basis could the Commission deny recovery? The majority declines to say. Then, presumably in response to comments about increasing rates for low-income communities and requests to balance the cost of mitigation with its environmental benefit, the majority states that “the Commission's process for section 7 and section 4 rate cases is designed to protect shippers from unjust or unreasonable rates and will continue to do so with respect to the recovery of costs for mitigation measures.” ^[42] How can that be true when the Commission will issue a certificate only when it determines that proposed mitigation measures are required for a pipeline project to be deemed in the public convenience and necessity? Is the Commission really suggesting that it will deny the recovery of costs that it determines are necessary to satisfy the public interest?

16. The Interim Policy Statement concludes by informing project sponsors with pending applications that they “will be given the opportunity to supplement the record and explain how their proposals are consistent with this policy statement” and that those filings will be subject to a reply comment period.^[43] Future applicants are also “encouraged” to include a list of information in their filings.^[44] What happens if a project sponsor supplements its record and the Commission revises the Interim Policy Statement once again before acting on that project sponsor's application? I can imagine that occurring as the comment deadline is six weeks away. And how can future applicants reasonably rely on interim guidance that may or may not change? What “certainty and predictability” ^[45] does this policy provide?

17. In sum, the Commission will weigh direct GHG emissions and, in most cases, downstream emissions in its NGA determinations. It will not tell you how these emissions will be assessed other than to say that project sponsors are encouraged to mitigate them. It will not tell you how project shippers will be protected from imprudently incurred costs. This is the tyranny of vagueness. It is also a threat. Imagine the fear that will animate the mitigation “voluntarily” proposed by those project sponsors with pending applications who are facing millions of dollars in sunk costs and with shippers that have relied on projects being placed into service and now only have higher cost and less reliable options available. This policy statement cannot rightly be described as “encouraging” anything.^[46]

II. Interim Policy Statement Proposes, and Takes, Unlawful Actions

A. The Interim Policy Statement, in Its Entirety, Is Based on the Wrong Premise

18. It is worth pausing to consider the underlying premise of the majority's policy for considering GHG emissions, establishing a GHG emission threshold for preparing EISs, and requiring GHG emission mitigation. All are based on the presumption that GHG emissions are an “effect” of the proposed action.

19. In order to constitute an “effect,” three elements must be met: (1) There is a “change[ ] in the human environment,” that change (2) is “reasonably foreseeable,” and (3) it “has a reasonably close causal relationship to the proposed action or alternatives.” ^[47] The majority, however, does not allege that the change in the human environment at issue is the release of GHG emissions themselves. That makes sense, given that it would be like the Commission saying, in the hydropower context, that the flow of water from the powerhouse is a change in the human environment. While this would be an effect, it is not the kind of effect that is at issue in an environmental review. Instead, the effect we would care about would be the change to the quality or quantity of the body of water through which the water flows and any resultant further changes caused to species, vegetation, etc.

20. No, the majority is concerned about the changes in the human environment caused, not by the existence of GHG emissions themselves, but by climate change. The Interim Policy Statement is absolutely clear that this is its animating purpose: “The Commission is issuing this interim policy statement to explain how the Commission will assess the impacts of natural gas infrastructure projects on climate change”; ^[48] “Climate change is the variation in the Earth's climate (including temperature, humidity, wind, and other meteorological variables) over time”; ^[49] “[C]limate change has resulted in a wide range of impacts across every region of the country and the globe. Those impacts extend beyond atmospheric climate change and include changes to water resources, agriculture, ecosystems, human health, and ocean systems.” ^[50]

21. The question therefore is not whether GHG emissions are reasonably foreseeable but whether climate change and its resulting effects are reasonably foreseeable and have a reasonably close causal relationship to the proposed action. And if so, whether those effects are significant and can be mitigated by the Commission.

22. While determining the environmental impacts of a project is done on a case-by-case basis, the ( printed page 14129) construction of a natural gas pipeline and transportation of natural gas in that pipeline are unlikely, on a project-by-project basis, to have a reasonably foreseeable (which is to say traceable and calculable) effect on climate change “in most cases.” ^[51] Were climate change a reasonably foreseeable effect (as this term is used in environmental reviews) of a particular project, we would be able to examine the cause (here, the construction and the transportation of gas) and then determine some articulable and quantifiable effect (here, the amount of additional climate change) for which the project itself is causally responsible. We have never been able to do that. And while it is not acknowledged at all in the Interim Policy Statement's procedural history, the Commission has repeatedly stated that “it cannot determine a project's incremental physical impacts on the environment caused by GHG emissions,” ^[52] and CEQ has made similar statements.^[53] Nothing in the Interim Policy Statement suggests this has changed nor has any new reasoning been offered to explain how we can better determine a quantifiable connection between the two.

23. The chain of causation is too attenuated for the cause and effect in this case to be considered to have a “reasonably close causal relationship.” The reasoning goes as follows: “Changes to water resources, agriculture, ecosystems, human health, and ocean systems” occurring throughout the world result from global atmospheric changes that themselves result from the warming that itself results from increases in the world-wide concentration of GHGs that enter the atmosphere as the emissions released by using natural gas, that in the case of end uses (that is, not pipeline operational uses), results from the transportation of natural gas. The logical sequence is clear, but the causation is quite attenuated. And this attenuation cannot be shortened through the ploy of employing GHG emissions as a proxy for climate change.

B. Consideration of Effects on Climate Change From Non-Jurisdictional Entities Violates the NGA and CEQ Regulations

24. The consideration of effects resulting from the upstream production or downstream use of natural gas violates the NGA and CEQ's regulations.

25. The NGA authorizes the Commission to consider only those factors bearing on the “public convenience and necessity.” ^[54] The phrase “public convenience and necessity” is not “a broad license to promote the general public welfare.” ^[55] It does not permit the majority to conjure up its own meanings. As a “`creature of statute,' ” ^[56] the Commission must “look to the purposes for which the [Natural Gas Act] was adopted” to give it content and meaning.^[57]

26. As the Court explained in NAACP v. FPC, “public convenience and necessity” means “a charge to promote the orderly production of plentiful supplies of electric energy and natural gas at just and reasonable rates.” ^[58] Simply put, the production and use of natural gas were not only presumed but were presumed to be in the public interest. Congress put its thumb on the scale in favor of gas and charged the Commission with ensuring that there would be adequate infrastructure in place to provide an abundant supply of natural gas available at reasonable prices for all Americans to use. The purpose of the NGA is narrow and clear. And it is a mousehole through which the elephant of addressing the climate change impacts of the entire natural-gas industry cannot pass.^[59]

27. And while there were “subsidiary purposes” for the passage of the Natural Gas Act,^[60] addressing the effects of climate change caused by using natural gas could not have been one of them. And even if it were, it is obvious that something that is “subsidiary” cannot, definitionally, override that which is primary. The majority cannot flip the NGA's presumptions and consider the use of natural gas as intrinsically harmful, thus requiring mitigation. And it certainly cannot abandon our charge under the NGA to “ promote the orderly production of plentiful supplies of . . . natural gas at just and reasonable rates” ^[61] by then weighing their determination that natural gas is harmful against the public interest when adjudicating section 3 and section 7 applications. This is directly contrary to the purpose Congress established the Commission to serve and supplants the judgment of Congress with that of the Commission. If that were not reason enough, it also invades jurisdictional territory that the courts have repeatedly held that Congress has reserved to the States.^[62]

28. The majority cannot turn to the Supreme Court's holding in Transco as authority.^[63] In that case, the Court held that the Federal Power Commission lawfully denied a certificate based on two factors: First, that using natural gas to alleviate air pollution from burning coal was an inferior use, and second, the ( printed page 14130) proposal would increase future prices.^[64] It does not stand for the proposition that the Commission can consider adverse effects of air pollution, and thus climate change impacts, of using natural gas as the majority implies.^[65]

29. Nor is the D.C. Circuit's outlier opinion, Sabal Trail, as instructive as the majority seems to believe. It is very much in tension with prevailing Supreme Court precedent in Public Citizen, which held that agencies are only obligated to consider environmental effects to which their actions are the proximate cause. ^[66] Public Citizen explained that courts must look to the “underlying policies or legislative intent” of an agency's organic statute to determine whether an agency is obligated to consider environmental effects.^[67] The D.C. Circuit has also characterized Public Citizen as “explicit” that an agency is “not obligated to consider those effects . . . that could only occur after intervening action” by some other actor “and that only [that] actor[ ] . . . had the authority to prevent.” ^[68] In other words, when any potential effects are the result of the actions of third parties such as retail consumers, upstream production companies, and power generators, who may be several degrees of separation removed from the jurisdictional pipeline, those effects are outside the scope of what the agency must consider.

30. Thus, we should not rest too much weight upon Sabal Trail. Not only is the holding narrower than the majority seems to believe and was roundly criticized by the accompanying dissent,^[69] its reasoning has since been called into question by another appellate court and I expect it will soon be challenged in the Supreme Court.^[70]

31. In sum, environmental effects resulting from the upstream production and downstream use of gas are not factors bearing on the public convenience and necessity under the Natural Gas Act. Further, the CEQ's regulations affirmatively prohibit those effects from being considered in an agency's compliance with NEPA.^[71]

C. The Significance Threshold Is Illogical and Violates Regulations

32. In addition, the majority's presumption that project emissions exceeding 100,000 tpy of CO₂ e will have a significant effect on the human environment is illogical and inconsistent with CEQ and Commission regulations.

33. The majority offers three irrelevant rationales for this presumption: ^[72] first, the threshold is administratively workable; ^[73] second, other agencies have established thresholds under different statutory schemes that are not based on a project's effect on the climate; ^[74] and third, the threshold will “capture” ^[75] “99% of GHG emissions from Commission-regulated natural gas projects.” ^[76] It is worth noting that according to Commission staff, a 1 million tpy threshold would have covered 98.909% of emissions from natural gas projects authorized from 2017 through 2021, making the unsupported selection of the lower threshold both arbitrary and capricious.

34. The majority also states “even relatively minor GHG emissions pose a significant threat” “[b]ecause of the dire effects at stake.” ^[77] This rationale, however, is not supported by the evidence offered. The Commission does not explain how minor GHG emissions could lead to “dire effects.” We cannot just assume—this is administrative law—we must show evidence. More importantly, the rationale does not link a proposed project to effects on climate change. And for good reason. As CEQ declared: “it is not currently useful for the NEPA analysis to attempt to link specific climatological changes, or the environmental impacts thereof, to the particular project or emissions, as such direct linkage is difficult to isolate and to understand.” ^[78] The Commission has repeatedly agreed.^[79]

35. On top of being illogical, the Interim Policy Statement effectively amends the Commission's NEPA regulations without undergoing notice-and-comment procedures as required by the Administrative Procedure Act.^[80] The Interim Policy Statement provides that an EIS will be prepared when the threshold is exceeded at full burn.^[81] The Commission's NEPA regulations, however, set forth specific categories of projects where an EA and EIS “will normally be prepared,” ^[82] with no mention of GHG emissions. And in a case where an EA is normally prepared, the Commission “may in specific circumstances”—meaning a case-by-case determination—decide whether to prepare an EIS “depending on the location or scope of the proposed action, or resources affected.” ^[83]

36. Given these fatal flaws, it is no wonder the majority seeks comment “in particular, on the approach to assessing the significance of the proposed project's contribution to climate change.” ^[84]

D. GHG Mitigation

1. Claims of Authority To Mitigate

37. Next, the majority states that the Commission's conditioning power gives it authority to require a pipeline to mitigate GHGs emitted by its operations ( printed page 14131) and reasonably foreseeable indirect effects.^[85] The majority is incorrect.

38. As commenters explain,^[86] without any response from the majority, the Supreme Court has held that “Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions” from stationary sources.^[87] By claiming the authority to mitigate these same emissions as part of the Natural Gas Act certification process, the majority are attempting to usurp the statutory authority the Court found Congress has delegated to EPA and which cannot be reassigned absent Congressional action.^[88] If the EPA were to regulate GHG emissions from pipeline facilities, which it is contemplating doing,^[89] the Commission could possibly require project sponsors to comply with those requirements. But one would not say that the Commission could on its own require project sponsors to mitigate, for example, sulfur dioxide because the EPA had chosen not to do so, or the Commission believed its regulations to be inadequate.

39. The Commission's conditioning authority also does not allow the Commission to mitigate GHG emissions from upstream or downstream users. The commenters make the point,^[90] also sidestepped by the majority,^[91] that the Commission's conditioning authority cannot be used to indirectly do what the Commission cannot do directly. That is, the Commission may not indirectly rely on the Natural Gas Act to impose conditions on non-jurisdictional entities.^[92]

40. Further, the Commission's conditioning authority cannot be used in ways that would be directly contrary to the purpose of the NGA—to promote the production of plentiful supplies of natural gas at reasonable rates. The majority may not rewrite the purpose of the NGA to instead charge the Commission with the mission of discouraging the production and use of natural gas.

2. Encouraging Project Sponsors To Mitigate GHG Emissions

41. The Interim Policy Statement's encouragement that project sponsors mitigate GHG emissions is in practical effect a requirement,^[93] and is not in accordance with the NGA. The NGA only empowers the Commission to impose terms and conditions in two contexts: (1) Pursuant to NGA section 3 when it finds such terms “necessary or appropriate” ^[94] to ensure a proposed export or import facility is not inconsistent with the public interest, and (2) pursuant to NGA section 7, when it finds such terms are “reasonable” and “require[d]” by the “public convenience and necessity.” ^[95] Only after making these findings, can the Commission require mitigation.

42. The majority does not attempt to make either of these required findings. It simply leaps from stating that the Commission has the discretion to mitigate GHG emissions to “expecting” applicants to mitigate their emissions. This amounts to no more than “because I said so.” More is required.^[96]

III. Intent of the Interim Policy Statement

43. One cannot help but notice the lengths to which the majority goes in order to make this policy statement “non-binding,” using words like “propose,” “wish,” “opportunity,” and even insisting, in response to this dissent, that it does not “impose[] an obligation, deny[y] a right, or fix[ ] some legal relationship,” ^[97] for what appears to have no purpose other than to avoid notice-and-comment procedures (that is, public participation) and judicial review. For without judicial review as a check, there is no need to engage in reasoned decision-making or be limited by the purposes of the statute.

44. In this way, the majority appears to believe it can do whatever it wants. Arrogate to the Commission authority it does not have. Disregard regulations that are currently in force. Flout prevailing Supreme Court precedent. Make threats to manipulate project sponsors into “voluntarily” subjecting themselves to unnecessary processes and proposing mitigation of the “harm” resulting from the proposed use or transportation of natural gas to provide a service that Congress declared to be in the public interest.

45. If an entity requests rehearing of today's policy statement, the majority can simply reject it—either by notice or order (without any discussion of the merits)—stating that rehearing does not lie for policy statements. And if a petition for review follows, the Commission can argue that the Interim Policy Statement is not subject to review because it is not a substantive rule. And if some project sponsor suggests it is proposing mitigation under duress and it reserves the right to challenge the mitigation requirement in court, the Commission can argue the project sponsor cannot be aggrieved because it voluntarily proposed the mitigation and accepted the certificate and its terms.^[98]

( printed page 14132)

46. This is not good governance. Nor do I think it likely the majority will be successful. In my view, the Interim Policy Statement is a substantive, binding rule that is subject to judicial review. Despite the Interim Policy Statement's hortatory verbiage, “there are sinews of command beneath the velvet words.” ^[99] Perhaps the best illustration of this is the list of six items project sponsors are “encouraged” to include in their applications in light of the new policy statement.^[100] This list includes estimates of the proposal's cumulative direct and indirect emissions and what mitigation measures the project sponsors propose, as well as a “detailed cost estimate” of the proposed mitigation and a “proposal for recovering those costs.” ^[101]

47. This is not encouragement. This is command. The project sponsors will know that if they want to win approval for their projects this is what they must do ^[102] even if they must guess at what will ultimately satisfy the Commission's new policies. Certainly, no project sponsor will believe that mitigation is optional or that submitting an application exceeding the Interim Policy Statement's 100,000 tpy threshold without a mitigation proposal would be anything other than a waste of time and money. And what other reason could the majority have for delaying action on those projects that have effectively twice completed the NEPA process? ^[103]

48. There is, however, no ambiguity in this: The Commission has changed the requirements for obtaining project approvals and applicants need to come before the Commission acknowledging that it is so.^[104] The effect of this change is immediate. Even applicants whose projects have been pending with the Commission for upwards of two years will be subjected to the Commission's new rules.

49. The interim policy statement also determines that emissions over 100,000 tpy of CO₂ e are significant (and emissions which fall below, not significant), a determination from which legal consequences flow under NEPA.^[105] And it binds Commission staff.^[106] While I acknowledge the courts have given the Commission's characterization of issuances deference in the past,^[107] whether a court will do so in in this instance is far from certain.

For these reasons, I respectfully dissent.

James P. Danly, Commissioner

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Consideration of Greenhouse Gas Emissions in Natural Gas Infrastructure Project Reviews

Docket No. PL21-3-000

CHRISTIE, Commissioner, dissenting:

1. Last year I voted to re-issue this Notice of Inquiry (NOI) for another round of comment ^[1] because I believed—and still do—that there are reasonable updates to the 1999 policy statement that would be worthwhile.^[2] For example, I agree that precedent agreements between corporate affiliates, because of the obvious potential for self-dealing, should not, in and of themselves and without additional evidence, prove need.^[3] I also believe that the Commission's procedures for guaranteeing due process to affected property owners, which, as Justice Frankfurter taught, consists of the two core elements of notice and opportunity to be heard,^[4] could be strengthened.

2. Unfortunately, the new certificate policy the majority approves today ^[5] does not represent a reasonable update to the 1999 statement. On the contrary, what the majority does today is arrogate to itself the power to rewrite both the Natural Gas Act (NGA) ^[6] and the National Environmental Policy Act (NEPA),^[7] a power that only the elected legislators in Congress can exercise. Today's action represents a truly radical departure from decades of Commission practice and precedent implementing the NGA.

3. The fundamental changes the majority imposes today to the Commission's procedures governing certificate applications are wrong as both law and policy. They clearly exceed the Commission's legal authority under the NGA and NEPA and, in so doing, violate the United States Supreme Court's major questions doctrine.^[8]

( printed page 14133)

4. The new policy also threatens to do fundamental damage to the nation's energy security by making it even more costly and difficult to build the infrastructure that will be critically needed to maintain reliable power service to consumers as the generation mix changes to incorporate lower carbon-emitting resources such as wind and solar. And as recent events in Europe and Ukraine graphically illustrate, America's energy security is an inextricable part of our national security.^[9] The majority's proposal on GHG impacts is obviously motivated by a desire to address climate change, but will actually make it more difficult to expand the deployment of low or no-carbon resources, because it will make it more difficult to build or maintain the gas infrastructure essential to keep the lights on as more intermittent resources are deployed.^[10] In addition to the essential need for natural gas to keep our power supply reliable, a dependable and adequate natural gas supply is critically needed for our manufacturing industries and the millions of jobs for American workers in those industries.^[11]

5. And while I agree that reducing carbon emissions that impact the climate is a compelling policy goal,^[12] this Commission—an administrative agency that only has the powers Congress has explicitly delegated to it—has no open-ended license under the U.S. Constitution or the NGA to address climate change or any other problem the majority may wish to address.

I. Legal Questions

6. The long-running controversy over the role and use of GHG analyses in natural-gas facility certificate cases raises two central questions of law and a third that flows from the first two:

7. First, whether the Commission can use a GHG analysis to reject a certificate—or attach conditions (including the use of coercive deficiency letters) amounting to a de facto rejection by rendering the project unfeasible—based on the NGA's “public convenience and necessity” ^[13] provision, even when the evidence otherwise supports a finding under the NGA that the facility is both “convenient and necessary” to provide the public with essential gas supply? Today's orders assume that the answer is yes.^[14]

8. Second, whether the Commission can, or is required to, reject a certificate—or attach conditions (including the use of coercive deficiency letters) amounting to a de facto rejection by rendering the project unfeasible—based on a GHG analysis conducted as part of an environmental review under NEPA,^[15] when the certificate application would otherwise be approved as both “convenient and necessary” under the NGA? Again, today's orders assume the answer is yes.^[16]

9. Third, which, if any, conditions related to a GHG analysis may be attached to a certificate under NGA § 7(e),^[17] or demanded through the use of deficiency letters? Today's orders seem to assume that there is essentially no limit to the conditions the Commission can impose.^[18]

10. As discussed below, today's orders get each of these questions wrong.

A. The “Public Interest” in the Natural Gas Act

11. The starting point for answering all of these questions must be what “public interest” analysis the NGA empowers the Commission to make. Can the Commission's statutory responsibility to determine the “public convenience and necessity” be used to reject a project otherwise needed by the public based solely on adverse impacts to “environmental interests” ^[19] (a term today's orders leave undefined but which could be reduced to an unspecified level of GHG emissions) as the Commission today asserts? ^[20] Or can the Commission reject a project solely due to “the interests of landowners and environmental justice communities” as the majority also asserts? ^[21] The short ( printed page 14134) answer is no. There is nothing in the text or history of the NGA to support such a claim about, or application of, the Commission's public interest responsibilities under the NGA.

12. As discussed herein, any claim that a “public interest” analysis under the NGA gives FERC the authority to reject a project based solely on GHG emissions is specious and ahistorical. The history of the NGA indicates that Congress intended the statute to promote the development of pipelines and other natural-gas facilities. As one federal judge has observed, “nothing in the text of [the NGA] . . . empowers the Commission to entirely deny the construction of an export terminal or the issuance of a certificate based solely on an adverse indirect environmental effect regulated by another agency.” ^[22]

13. I recognize that the Commission and the courts have construed “public convenience and necessity” to require the Commission to consider “all factors bearing on the public interest,” ^[23] but the Supreme Court has been very clear that any public interest analysis undertaken in the course of determining “public necessity and convenience” is constrained by the purposes and limitations of the statute.^[24] It is not an open-ended license to use this Commission's certificating authority to promote whatever a majority of Commissioners from time to time may happen to view as the “public interest.”

14. With regard to GHG emissions that may be associated with upstream production activities or downstream distribution to, or consumption by, retail consumers, the Commission simply has no authority over such activities. That authority was left to the states.^[25] Congress intended for the NGA to fill “a regulatory gap” over the “ interstate shipment and sale of gas.” ^[26]

15. Even if the Commission were to undertake some estimate of the indirect GHG impacts of third-party activities that it has no authority to regulate, it does not follow that the Commission can then reject a certificate based on those impacts.^[27] To do so would be to ignore the undeniable purpose of the NGA, which was enacted to facilitate the development and bringing to market of natural gas resources. The Commission's role under the NGA is to promote the development of the nation's natural gas resources and to safeguard the interests of ratepayers.^[28] Any consideration of environmental impacts, while important, is necessarily subsidiary to that role.^[29]

16. It is a truism that FERC is an economic regulator, not an environmental regulator. This Commission was not given certification authority in order to advance environmental goals; ^[30] it was given certification authority to ensure the development of natural gas resources and their availability—this includes pipeline infrastructure—at just and reasonable rates. To construe the Commission's analysis of the public convenience and necessity as a license to prohibit the development of needed natural gas resources using the public interest language in the NGA would be to negate the very legislative purpose of the statute.^[31] Put another way, the premise of the NGA is that the production and transportation of natural gas for ultimate consumption by end users is socially valuable and should be promoted, not that the use of natural gas (which inevitably results in some discharge of GHGs) is inherently destructive and must be curbed, mitigated, or discouraged.

17. To those who say “well, times have changed and Congress was not ( printed page 14135) thinking about climate change when it passed the NGA,” here's an inconvenient truth: If Congress wants to change the Commission's mission under the NGA it has that power; FERC does not.

18. Any authority to perform a public interest analysis under the NGA must be construed with reference to the animating purposes of the Act. It is not a free pass to pursue any policy objective—however important or compelling it may be—that is related in some way to jurisdictional facilities.^[32] As the Court of Appeals for the D.C. Circuit has explained:

Any such authority to consider all factors bearing on “the public interest” must take into account what “the public interest” means in the context of the Natural Gas Act. FERC's authority to consider all factors bearing on the public interest when issuing certificates means authority to look into those factors which reasonably relate to the purposes for which FERC was given certification authority. It does not imply authority to issue orders regarding any circumstance in which FERC's regulatory tools might be useful.^[33]

19. Whereas the Commission's role in certificating facilities under the NGA is explicit,^[34] any purported authority for the Commission to regulate GHGs is conspicuously absent. The claim that the Commission can reject a needed facility due to GHG emissions using the public interest component in the NGA seems to be based on the following logic: To ascertain whether a facility serves the public convenience and necessity, the Commission must first determine whether the facility is in “the public interest,” which in turn entails considering factors such as “environmental” impacts from construction and operation of the proposed facility, as well as estimating and quantifying greenhouse gas emissions from the proposed facility, including both upstream emissions associated with gathering the gas and downstream emissions associated with its use, which the Commission is somehow empowered to deem to be too excessive to grant the certificate.^[35] Suffice it to say, this tortured logic breaks apart in multiple places.^[36]

20. Surely if Congress had any intention that GHG analyses should (or could) be the basis for rejecting certification of natural-gas facilities, it would have given the Commission clear statutory guidance as to when to reject on that basis. Instead, those who want the Commission to conjure up a standard on GHG emissions for deciding how much is too much are advocating for a standard resembling Justice Stewart's famous method for identifying obscenity, to wit, that he could not describe it, but “I know it when I see it.” ^[37] And the Supreme Court eventually had the good sense to abandon that ocular standard.^[38]

21. Using GHG analysis to reject a certificate implicates an important judicial doctrine used in evaluating just how far an administrative agency can go in essentially creating public policy without clear textual support in statutory law. Now let's turn to that doctrine in this context.

B. The Major Questions Doctrine and the NGA

22. The Commission's actions today implicate the “major questions doctrine,” which Justice Gorsuch has recently explained as follows:

The federal government's powers . . . are not general, but limited and divided. Not only must the federal government properly invoke a constitutionally enumerated source of authority to regulate in this area or any other, it must also act consistently with the Constitution's separation of powers. And when it comes to that obligation, this Court has established at least one firm rule: “We expect Congress to speak clearly” if it wishes to assign to an executive agency decisions “of vast economic and political significance.” We sometimes call this the major questions doctrine.^[39]

In short, the major questions doctrine presumes that Congress reserves major issues to itself, so unless a grant of authority to address a major issue is explicit in a statute administered by an agency, it cannot be inferred to have been granted.

23. Whether this Commission can reject a certificate based on a GHG analysis—a certificate that otherwise would be approved under the NGA—is undeniably a major question of public policy. It will have enormous implications for the lives of everyone in this country, given the inseparability of energy security from economic security. Yet the Supreme Court has made it clear that broad deference to administrative agencies on major questions of public policy is not in order when statutes are lacking in any explicit statutory grant of authority.^[40] “ When much is sought from a statute, much must be shown. . . . [B]road assertions of administrative ( printed page 14136) power demand unmistakable legislative support.” ^[41]

24. There is no “unmistakable legislative support” for the powers the Commission asserts today. A broad power to regulate upstream and downstream GHG emissions and their global impacts has simply not been delegated to this Commission.^[42] To the extent the federal government has such power, it has been delegated elsewhere. “Of necessity, Congress selects different regulatory regimes to address different problems.” ^[43] The U.S. Environmental Protection Agency (EPA) is charged with regulating greenhouse gas emissions under the Clean Air Act.^[44] By contrast, Congress established in the NGA a regulatory regime to address entirely different problems, namely, the need to develop the nation's natural gas resources and to protect ratepayers from unjust and unreasonable rates for gas shipped in the flow of interstate commerce. If it chose, Congress could enact legislation that would invest the Commission with authority to constrain the development and bringing to market of natural gas resources, but the fact is that Congress has chosen not to do so. On the contrary, every time Congress has enacted natural gas legislation, it has been to promote the development of natural gas resources, not throw up barriers to them.^[45]

25. The fact that the NGA requires the Commission to make some form of public interest determination in the course of a certificate proceeding does not furnish a basis for the Commission to arrogate to itself the authority to constrain the development of natural gas resources on the grounds of their potential greenhouse gas emissions. As now-Justice Kavanaugh has explained: “If an agency wants to exercise expansive regulatory authority over some major social or economic activity . . . regulating greenhouse gas emitters, for example —an ambiguous grant of statutory authority is not enough. Congress must clearly authorize an agency to take such a major regulatory action.” ^[46] Congress has not “clearly authorize[d]” this Commission to regulate greenhouse gas emitters, nor to deny certificates to facilities whose construction and operation would be in the public convenience and necessity, simply because the construction and operation of such infrastructure may result in some amount of greenhouse gas emissions.^[47] “Even if the text were ambiguous, the sheer scope of the . . . claimed authority . . . would counsel against” such an expansive interpretation.^[48]

26. The fact that the Commission has absolutely no standard against which to measure the impact of natural gas production upstream or use downstream of the facilities it certificates is also important. In order for Congress to delegate any authority to an executive agency, it must legislatively set forth an intelligible principle for the agency to follow.^[49] There is no such “intelligible principle” for the Commission to follow when it comes to greenhouse gas emissions.

27. Although the NGA requires the Commission to determine whether a proposed facility is in the “public convenience and necessity,” the term “has always been understood to mean `need' for the service. To the extent the environment is considered, such consideration is limited to the effects stemming from the construction and operation of the proposed facilities.” ^[50] The term “public convenience and necessity” has long been understood to refer most essentially to the public's need for service on terms that are just and reasonable, i.e., that are low enough for the public to pay the rates and high enough for the provider to maintain a profitable business.^[51] That understanding was reflected in various statutes employing the term, including the Natural Gas Act.^[52] And it was further reflected in the earliest “public convenience and necessity” analyses under the NGA.^[53]

28. To summarize: Whether and how to regulate GHG emissions is a major question of vast economic and political significance. Congress has not explicitly authorized the Commission to regulate in this area as required under the major questions doctrine, nor has it laid down an intelligible principle for the Commission to follow as required by the non-delegation doctrine. Moreover, ( printed page 14137) EPA, in coordination with the states, already has authority to regulate in this area as specified in federal statutes, which is far removed from this Commission's core expertise and traditional responsibilities.

29. Let's now turn to the second major question.

C. GHG Analysis Under NEPA

30. Is this Commission required or allowed by NEPA ^[54] to reject a certificate for a natural gas facility— one that would otherwise be approved under the NGA —based on a GHG analysis conducted as part of the NEPA environmental review? And rejection includes attaching mitigation conditions so onerous (or coercing through deficiency letters) that they render the project unfeasible.^[55]

31. Again, the short answer is no. NEPA does not contain a shred of specific textual authority requiring or allowing the Commission to reject based on a NEPA review of estimated GHG impacts (indirect or direct) a certificate application for a facility that otherwise would be found necessary to serve the public under the NGA. Nor would it: As an information-forcing statute, NEPA imposes no substantive obligations.^[56]

32. Even conducting an analysis of indirect GHG effects under NEPA goes too far. The Supreme Court has explicitly rejected the idea that an “an agency's action is considered a cause of an environmental effect [under NEPA] even when the agency has no statutory authority to prevent that effect.” ^[57] Rather, NEPA “requires a reasonably close causal relationship between the environmental effect and the alleged cause,” that is analogous to “the familiar doctrine of proximate cause from tort law.” ^[58] While this might leave some difficult judgments at the margins, estimates of the potential global impacts of possible non-jurisdictional upstream or downstream activity—as today's orders purport to require ^[59] —is not a close call.

33. First off, in determining how far an agency's NEPA responsibilities run, one “must look to the underlying policies or legislative intent in order to draw a manageable line between those causal changes that may make an actor responsible for an effect and those that do not.” ^[60] As discussed at length above, there is no way of drawing a plausible line, much less a manageable one, from the Commission's certificating responsibilities under the NGA and the possible consequences of global climate change—consequences which, however potentially grave, are remote from this agency's limited statutory mission under the NGA.

34. Second, speculating about the possible future impact on global climate change of a facility's potential GHG emissions does not assist the Commission in its decision-making and therefore violates the “rule of reason”: Where an agency lacks the power to do anything about the possible environmental impacts, it is not obligated to analyze them under NEPA.^[61] Again, the Supreme Court has explained, “inherent in NEPA and its implementing regulations is a `rule of reason,' which ensures that agencies determine whether and to what extent to prepare an EIS based on the usefulness of any new potential information to the decision-making process. Where the preparation of an EIS would serve `no purpose' in light of NEPA's regulatory scheme as a whole, no rule of reason worthy of the title would require an agency to prepare an EIS.” ^[62]

35. This conclusion becomes even more obvious when considered alongside the undeniable fact that neither NEPA nor any other statute contains a scintilla of guidance as to which specific metrics are to be used to determine when the Commission can or must reject a project based on a GHG analysis. The Commission today establishes a threshold of 100,000 metric tons of CO₂ e of annual project emissions for purposes of its analysis of natural gas projects under NEPA.^[63] The rationale for establishing this threshold has literally nothing to do with the ( printed page 14138) Commission's NGA obligations, or even with its NEPA obligations. It consists of little more than piggybacking on EPA's approach to regulating stationary sources.^[64] Today's order boasts that this new threshold will capture projects “transporting an average of 5,200 dekatherms per day and projects involving the operation of one or more compressor stations or LNG facilities” ^[65] and that this threshold “will capture over 99% of GHG emissions from Commission-regulated natural gas projects.” ^[66]

36. These are just arbitrarily chosen numbers. A proliferation of quantification does not constitute reasoned decision-making. All of the important questions about the creation and application of this threshold remain unanswered: Is there anything in either the NGA or NEPA to indicate how much is too much and should be rejected? Or how little is low enough to get under the red line? No. If the Commission is attempting to quantify indirect global GHG impacts, as EPA now suggests we do,^[67] how much global impact is too much and requires rejection of the certificate? How much impact is not too much? Should rejection only be based on impacts on the United States? North America? The Western Hemisphere? The planet? Where is the line? Again, there is absolutely no statutory provision that answers these questions as to the application of GHG metrics in a certificate proceeding brought under the NGA. The complete absence of any statutory guidance on the seminal question of “how much is too much? ” would render any action by the Commission to reject a certificate based on any metric as “arbitrary and capricious” in the fullest sense.^[68]

37. I recognize that the 100,000 metric tons marker adopted in today's orders is not a threshold for rejecting a proposed project but only for subjecting it to further scrutiny in the form of an EIS. But this is no small matter—completion of an EIS is extremely cost-intensive and time-consuming and, in addition, creates a plethora of opportunities for opponents of the project who otherwise lack meritorious objections to it, to run up the costs, to cause delays, and to create new grounds for the inevitable appeals challenging the certificate even if the applicant does manage to obtain it.^[69]

38. NEPA provides no statutory authority to reject a gas project that would otherwise be approved under the NGA. How could it? As is well-known, the duties NEPA imposes are essentially procedural and informational.^[70] The Commission's regulations implementing NEPA reflect its limits by noting that, “[t]he Commission will comply with the regulations of the Council on Environmental Quality except where those regulations are inconsistent with the statutory requirements of the Commission .” ^[71]

39. It's not actually very difficult to see how the approach the majority adopts today is “inconsistent with the statutory requirements of the Commission.” ^[72] I will repeat that the purpose of the NGA is to promote the development, transportation, and sale at reasonable rates of natural gas. I will repeat that the NGA conveys only limited jurisdictional authority; that NEPA conveys no jurisdictional authority; that a different agency is responsible for regulating GHGs; and that such regulation is a major issue that Congress would have to speak to unambiguously, which it clearly has not done. And yet under the analysis embraced by the majority today, this Commission purports to impose onerous—possibly fatal—regulatory requirements on certificate applicants in order to generate reams of highly speculative data that have no meaningful role to play in the execution of this agency's statutory duties.^[73] In fact, it contravenes the purposes of the NGA in at least two obvious ways: First, by bringing extrinsic considerations to bear on the Commission's decision-making, and second, by causing needless delay in the process.^[74]

40. There is no meaningful way of evaluating any of the critical issues, and no statutory authority to actually do anything about upstream or downstream emissions,^[75] but unlimited ways to find fault with any analysis. Even though they aren't supposed to “flyspeck” an agency's NEPA analysis, judges who wish to impose their own policy preferences will be tempted to do exactly that. And once the agency undertakes to address an issue in its NEPA analysis, it is subject to the APA's “reasoned decision-making” standard of ( printed page 14139) review.^[76] Thus the effect is to ramp up dramatically the legal uncertainties and costs facing any certificate applicant.

D. The Policy Statements Rest on Inadequate Legal Authority

41. Today's orders rely to a remarkable degree on a smattering of statements from a handful of recent orders. Simply put, these authorities are simply “too slender a reed” ^[77] to support the great weight today's orders place on them.

42. Neither Sabal Trail  ^[78] nor Birckhead,^[79] nor the more recent Vecinos  ^[80] opinion from the D.C. Circuit changes any of the analysis above. Indeed, to the extent language from those cases is interpreted as requiring the Commission to exercise authority not found in statutes—and these opinions are more confusing than clear, as well as inconsistent with the D.C. Circuit's own precedent—then such an interpretation would be contrary to the Supreme Court's major question doctrine. Be that as it may, while I recognize that Sabal Trail and Vecinos are presently applicable to this Commission, neither of those cases individually nor both of them together provide a lawful basis for rejecting a certificate for a facility that is otherwise found to be needed under the NGA solely because of its estimated potential impacts on global climate change.^[81]

43. Virtually the entire structure of the majority's fundamental policy changes rests on a single line from Sabal Trail.^[82] That statement is itself predicated on an idiosyncratic reading of Public Citizen and the D.C. Circuit's own precedents. ^[83] Sabal Trail rather facilely distinguished existing D.C. Circuit precedent on the grounds that, in contrast to those cases, the same agency that was performing the EIS was also authorized to approve or deny the certificate.^[84] It reasoned that because the Commission could take “environmental” issues into account in its public interest analysis, and GHG emissions raise “environmental” issues, it must therefore follow that the Commission could deny a certificate based on projected GHG emissions estimates.

44. Sabal Trail acknowledged that “ Freeport and its companion cases rested on the premise that FERC had no legal authority to prevent the adverse environmental effects of natural gas exports.” ^[85] Specifically, “FERC was forbidden to rely on the effects of gas exports as a justification for denying an upgrade license.” ^[86] In contrast with those cases—all of which addressed certification of LNG facilities under NGA § 3 as opposed to interstate transportation facilities under NGA § 7—the court in Sabal Trail concluded that, under NGA § 7, by contrast, “FERC is not so limited. Congress broadly instructed the agency to consider `the public convenience and necessity' when evaluating applications to construct and operate interstate pipelines.” <sup>[87]</sup> It thus concluded that, “[b]ecause FERC could deny a pipeline certificate on the ground that the pipeline would be too harmful for the environment, the agency is a `legally relevant cause' of the direct and indirect environmental effects of pipelines that it approves. See Freeport, 827 F.3d at 47. Public Citizen thus did not excuse FERC from considering these indirect effects.” ^[88]

45. But the Sabal Trail court never considered with reference to the Commission's statutory authority the proper scope of that public interest analysis or the extent to which “environmental” issues could be considered in that context. It simply assumed the Commission's authority to be unlimited. But as discussed above, Congress drafted the NGA for the purpose of filling a specific gap in regulatory authority. The only way Sabal Trail would be correct is if Congress had “clearly authorized” the Commission to evaluate geographically and temporally remote impacts of non-jurisdictional activity in its “public convenience and necessity” determinations. As discussed above, that conclusion is clearly, irredeemably, wrong.^[89]

46. As for Vecinos, there, the court compounds that error both by relying uncritically on Sabal Trail and by finding fault with the Commission for failing to connect its decision not to use the Social Cost of Carbon to Petitioners' argument that it was required to do so under 40 CFR. § 1502.21(c).^[90] That regulation sets forth an agency's obligations when “information relevant to reasonably foreseeable significant adverse impacts cannot be obtained.” ^[91] But global climate change is only a “foreseeable significant adverse impact” of the Commission's action if the Commission's authority extends as far ( printed page 14140) as the Sabal Trail court said it does. For the reasons set out in this statement, I respectfully disagree. Nor am I alone in my disagreement.^[92]

47. Finally, as to the contention that the Commission is bound to follow Sabal Trail notwithstanding its errors, I would simply point out that intervening Supreme Court precedents—such as NFIB  ^[93] and Ala. Ass'n.  ^[94] —have not just significantly weakened, but utterly eviscerated the conceptual underpinnings of Sabal Trail' s limitless construction of the Commission's public interest inquiry under the NGA's “public convenience and necessity” analysis.^[95] It is folly for this Commission to proceed heedless of the Supreme Court's recent rulings that agencies may not use ambiguous or limited grants of statutory authority in unprecedented ways to make policy on major questions that Congress has reserved for itself. But that's exactly what the Commission does today.^[96]

48. We are indeed bound to follow judicial precedent, but we don't get to “cherry pick” one precedent such as Sabal Trail because we like that particular opinion, while ignoring the many other conflicting precedents, especially those more recent rulings from the Supreme Court itself applying the major question doctrine. These more recent opinions light up Sabal Trail as a clear outlier.

II. The Real Debate Is About Public Policy not Law

49. Preventing the construction of each and every natural gas project is the overt public-policy goal of many well-funded interest groups working to reduce or eliminate natural gas usage.^[97] Today's orders, whatever the intent, will have the undeniable effect of advancing that policy goal, and we should not deny the obvious. Rather than bringing legal certainty to the Commission's certificate orders,^[98] today's orders will greatly increase the costs and uncertainty associated with this Commission's own handling of certificate applications. In fact, by purporting to apply today's new policy retroactively on applications that have already been submitted (and in many instances pending for years), today's action is deeply unfair: It judges by an entirely new set of standards applications that were prepared and submitted to meet the old standards and essentially opens all of them to be relitigated.^[99] The undoubted effect of these orders will be to interpose additional months or years of delay on project applicants and to increase exponentially the vulnerability on appeal of any Commission orders that do approve a project.

50. Recently I said the Commission's new rule on unlimited late interventions in certificate cases was “not a legal standard, but a legal weapon.” ^[100] The new certificate policy approved today is the mother of all legal weapons. There is no question that it will be wielded against each and every natural gas facility both at the Commission and in the inevitable appeals, making the costs of even pursuing a natural gas project insuperable.

51. Let me emphasize that every person or organization pursuing the policy goal of ending the use of natural gas by opposing every natural gas facility has an absolute right under the First Amendment to engage in such advocacy. However, whether to end the use of natural gas by banning the construction of all new natural gas projects is a public policy question of immense importance, one that affects the lives and livelihoods of tens of millions of Americans and their communities, as well as the country's national security. In a democracy, such a huge policy question should only be decided by legislators elected by the people, not by unelected judges or administrative agencies.^[101]

52. This public-policy context is absolutely relevant to these orders because it illustrates that the long-running controversy at this Commission over the use of GHG analyses in natural-gas certificate cases, whether it's a demand to quantify indirect impacts from upstream production and downstream use,^[102] or a demand to apply an administratively-constructed ( printed page 14141) metric such as the Social Cost of Carbon ^[103] —and then use GHG analyses to reject (or mitigate to death, or impose costly delays on) a gas project—has far less to do with the law itself and far more to do with promoting preferred public policy goals.

53. EPA admits as much in a remarkably (perhaps unwittingly) revealing passage in a letter to this Commission:

EPA reaffirms the suggestion that the Commission avoid expressing project-level emissions as a percentage of national or state emissions. Conveying the information in this way inappropriately diminishes the significance of project-level GHG emissions. Instead, EPA continues to recommend disclosing the increasing conflict between GHG emissions and national, state, and local GHG reduction policies and goals . . .^[104]

54. So according to EPA, this Commission—which is supposed to be independent of the current (or any) presidential administration, by the way—should literally manipulate how it presents GHG data in order to avoid “inappropriately” diminishing the impact. As EPA reveals, this is really not about data or any specific GHG metric at all, but is really about pursuing public policy goals, especially those of the current presidential administration that runs EPA.^[105]

55. The EPA's purported guidance to this Commission illustrates that the real debate here is not over the minutiae of one methodology versus another, or whether one methodology is “generally accepted in the scientific community” and another is not,^[106] or whether one particular esoteric formula is purportedly required by a regulation issued by the CEQ ^[107] and another does not meet the CEQ's directives.

56. The real debate over the use of GHG analyses in certificate proceedings is about public policy, not law, and ultimately comes down to these questions: Who makes major decisions of public policy in our constitutional system? Legislators elected by the people or unelected administrative agencies or judges? Who decides?  ^[108]

III. Conclusions

57. Based on the analysis above the following legal conclusions can be drawn:

58. First, the Commission may not reject a certificate based solely on an estimate of the impacts of GHG emissions, indirect or direct. Nor, on the basis of such GHG estimates, may the Commission attach to a certificate (or coerce through deficiency letters) conditions that represent a de facto rejection by rendering the project financially or technically unfeasible.

59. Second, the Commission can consider the direct GHG impacts of the specific facility for which a certificate is sought, just as it analyzes other direct environmental impacts of a project, and can attach reasonable and feasible conditions to the certificate designed to reduce or minimize the direct GHG impacts caused by the facility, just as it does with other environmental impacts.

60. Third, the conditions the Commission can impose are, like its other powers, limited to the authorities granted to it by Congress and the purposes for which they are given. So, no, the Commission may not impose conditions on a certificate to mitigate upstream or downstream GHG emissions arising from non-jurisdictional activity.

61. These legal conclusions do not mean that responding to climate change is not a compelling policy necessity for the nation. In my view it is, as I stated above.^[109]

62. However, neither my policy views—nor those of any other member of this Commission—can confer additional legal authority on FERC.^[110] For in our democracy, it is the elected legislators who have the exclusive power to determine the major policies that respond to a global challenge such as climate change. Further, the argument that administrative agencies must enact policies to address major problems whenever Congress is too slow, too polarized, or too prone to unsatisfying compromises, must be utterly rejected.^[111] That is not how it is supposed to work in a democracy.

( printed page 14142)

63. For if democracy means anything at all, it means that the people have an inherent right to choose the legislators to whom the people grant the power to decide the major questions of public policy that impact how the people live their daily lives. Unelected federal judges and executive-branch administrators, no matter how enlightened they and other elites may regard themselves to be, do not have the power to decide such questions; they only have the power to carry out the duly-enacted laws of the United States, including the most important law of all, the Constitution. That is the basic constitutional framework of the United States and it is the same for any liberal democracy worth the name.

For these reasons, I respectfully dissent.

87 FR 14104