On July 30, 2024, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an opinion vacating and remanding FERC’s order approving Transcontinental Gas Pipe Line Company’s (“Transco”) Regional Energy Access Expansion Project (“Project”) determining that FERC failed to consider environmental consequences and evidence suggesting a lack of market need for the additional capacity created by the Project.

In January 2023, FERC granted Transco a certificate of public convenience and necessity to construct and operate the Project (“Certificate Order”).  The Project will expand Transco’s natural gas delivery capacity by 829,400 dekatherms per day to customers in New Jersey, New York, Delaware, Maryland, and Pennsylvania.  In the Certificate Order, FERC determined that the Project satisfied the requirements of Section 7 of the Natural Gas Act because Transco had precedent agreements with shippers for all of the Project’s capacity and the Project’s public benefits outweighed its harm.  Several environmental organizations, such as the New Jersey Conservation Foundation, New Jersey League of Conservation Voters, Aquashicola Pohopoco Watershed Associated, Delaware Riverkeeper Network, and the Sierra Club (collectively the “Petitioners”) subsequently sought rehearing of the Certificate Order, arguing that FERC arbitrarily and capriciously found a market need for the Project, inappropriately credited evidence proffered by Transco while ignoring contrary evidence, relied on a deficient Environmental Impact Study, and performed an impermissibly skewed balancing of the Project’s benefits and adverse impacts.  On rehearing, FERC confirmed its findings and authorized all construction activities related to the Project (“Rehearing Order”).  Thereafter, Petitioners sought review of the Certificate Order and the Rehearing Order before the D.C. Circuit, arguing that FERC acted arbitrarily by overlooking significant environmental consequences and failed to adequately consider evidence suggesting a lack of market need for the Project’s additional capacity.

In its opinion, the D.C. Circuit determined that FERC failed to adequately explain its decision not to make a significance determination regarding the environmental impact of the Project’s greenhouse gas emissions and failed to discuss possible mitigation measures.  In its reasoning, the D.C. Circuit explained that its decision was consistent with its recent opinion in Healthy Gulf et al. v. FERC, which also criticized FERC’s failure to assess GHG emissions’ environmental significance adequately. Additionally, the D.C. Circuit held that FERC provided “no justification for why it cannot determine significance here,” when FERC had acknowledged its ability to make such significant determinations as recently as the D.C. Circuit’s 2021 decision in Northern Natural Gas Co. v. FERC. As the D.C. Circuit explained, “even if FERC is not required to make a significance determination, choosing not to do so on the basis of an arbitrary and capricious explanation is nevertheless a violation of the [Administrative Procedure Act].” (emphasis in original). Furthermore, the D.C. Circuit then distinguished its Opinion here to another recent case, Food & Water Watch v. FERC, in which the D.C. Circuit determined that FERC did not have to make a significance determination, but that when it opted not to make a significance determination, as in this case, that FERC must provide a clear and reasoned explanation.

Next, the D.C. Circuit reviewed FERC’s conclusion of determining a market need for the Project. The D.C. Circuit determined that FERC failed to address why it discredited the findings of two market studies showing that current pipeline capacity would be sufficient to meet New Jersey’s natural gas demands beyond 2030.  The D.C. Circuit determined that precedent agreements signed by local distribution companies were insufficient to establish market need for the Project. Lastly, the D.C. Circuit found that FERC failed to “give weight to New Jersey state-law requirements of sizeable and continuous reductions to natural gas usage by public utilities, and instead described those requirements as unenforceable.”

Notably, the D.C. Circuit vacated the Certificate Order, finding that it was unlikely that FERC would be able to substantiate its decision on remand. This outcome was atypical for these types of proceedings. Generally, when the court determines that FERC’s National Environmental Policy Act (“NEPA”) analysis is insufficient, it will remand the case to FERC to perform the required analysis without vacating the order, which allows for the project to proceed while additional reviews are being conducted.

As a result of the vacatur of the Certificate Order, once the D.C. Circuit issues its mandate to FERC, Transco will not be allowed to operate the Project and a corresponding 2,000,000 dekatherms per day heading into the winter season. Currently, the D.C. Circuit has yet to issue its mandate to FERC, which is typical to allow FERC and Transco the opportunity to seek an appeal by requesting a petition for rehearing en banc or petition for rehearing. Transco filed a petition for rehearing en banc on September 13, 2024.  Responses to Transco’s petition for rehearing are due November 1, 2024.  Furthermore, in response to the vacatur of the Certificate Order, on September 6, 2024, Transco filed with FERC a request for a temporary emergency certificate, which would allow for Transco to continue to operate the Project until the Commission issues an order on remand. FERC has not issued an order on its request as of the publication of this article.

The D.C. Circuit’s Opinion, issued in Case No. 23-1064, can be found here.

Transco’s request for a temporary emergency certificate, in Docket No. CP21-94-000, can be found here.