LNG Global Impacts Not FERC’s Problem

Posted on July 11, 2016 by Rick Glick

In companion cases, on June 28 the DC Circuit Court of Appeals held that the Federal Energy Regulatory Commission, in its environmental impacts analysis of two Gulf Coast LNG terminals, need not assess the potential for increased natural gas extraction and use, or market effects.  The first case deals with the Freeport project in Texas, and the second the Sabine Pass project in Louisiana; the court considered these cases in parallel with each other, and the Sabine Pass case follows the reasoning in the Freeport case.

 The Sierra Club and other national NGOs have attacked LNG facilities (1) for their potential to cause an increase in fracking to extract natural gas and the attendant emission of greenhouse gases, and (2) for increasing the use of U.S.- produced natural gas in world markets, which they assert will drive up the price of natural gas domestically, thus making coal more competitive and its use more prevalent in the U.S.  On this basis the Freeport and Sabine Pass plaintiffs argued that FERC’s failure to consider these potential effects violates the National Environmental Policy Act.  The court disagreed, finding that these effects are too attenuated for FERC to have to evaluate. 

Central to the cases is the fact that the Natural Gas Act confers exclusive authority over the export of natural gas on the Department of Energy, whereas FERC is only responsible for the siting of LNG facilities.  The court reasoned that FERC’s approval of LNG facilities are not the proximate cause of gas exports, which only DOE can approve.  Therefore, FERC need not consider environmental impacts related to market forces that could increase domestic production of gas and the use of gas outside of the United States.

 These same projects face challenges brought by the same NGOs against DOE in which the issue is whether DOE complied with NEPA in authorizing exports of LNG.  The Freeport and Sabine Pass courts “express no opinion” on the merits of the DOE cases.  Still, it seems that the relationship between export approvals and operation of global gas markets is at least as attenuated as FERC’s authorization to construct facilities.  My sense is that DOE will likely prevail there as well.



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