FERC declines to weigh climate in LNG decision, draws dissent from Democrat

The majority at the US Federal Energy Regulatory Commission resisted arguments that it should have weighed the significance of an LNG project's climate impacts -- drawing a sharply worded dissent from Democratic Commissioner Allison Clements.

At issue is FERC's June 9 rehearing order upholding the commission's approval of the 8.4 million mt/year Commonwealth LNG facility in Cameron Parish, Louisiana -- in the face of objections from a coalition of environmental groups including Sierra Club and Natural Resources Defense Council (CP19-502-002).

Among a long list of legal defects alleged by the environmentalists, the groups asserted that FERC's failure to make a significance determination for the project's foreseen operational and construction-related GHG impacts violates the National Environmental Policy Act and "poisons" FERC public interest balancing under Section 3 of the Natural Gas Act.

Environmentalists long have sought to prod FERC to consider climate impacts among a range of interests when it determines whether to approve gas projects, but the commission has struggled to solidify its position or finalize a long-pending draft policy.

In the rehearing order, the FERC majority defended its balancing of interests in the November 2022 Commonwealth LNG order, and asserted that FERC's NGA and NEPA authorities are distinct.

"In conducting its public interest analysis under NGA Section 3, the commission is not required to characterize the project's estimated GHG emissions as significant or insignificant; no court has held to the contrary," the majority said. The NGA sets out a favorable presumption that a Section 3 project is in the public interest, unless there is an affirmative showing of inconsistency, the majority emphasized.

Clements dissent

Clements contended that FERC's position on the public interest determination was "incomprehensible" and thus violated the Administrative Procedure Act. It was unclear whether climate factored into the determination at all and whether encouraging plentiful supplies of gas was the primary driving consideration, she said.

To the extent the rehearing order was meant to suggest that FERC does not need to consider environmental impacts of a project's GHG emissions in its public interest determination under NGA Section 3, it is "plainly wrong," the Democrat asserted, citing a 50-year-old US Supreme Court precedent in NAACP v. Federal Power Commission.

Separately, the majority asserted that there were "no accepted tools or methods to determine significance" of climate impacts;" it pointed toward a recent ruling on FERC's Alaska LNG orders supporting the commission's decision not to use the social cost of carbon tool.

In the 2022 order authorizing Commonwealth LNG, issued when Richard Glick was chairman, FERC said it was not characterizing the emissions as significant or insignificant because it was conducting a generic proceeding to determine how to do so. Instead, FERC said it had quantified and contextualized the emissions impacts.

In her dissent to the new rehearing order, Clements said she "cannot countenance the majority's refusal" to seriously consider how FERC should assess significance.

By her reading, the rehearing order indicates FERC has "definitively concluded that it is impossible for it to assess the significance of GHG emissions." She argued FERC failed to respond to the environmental coalition's argument that there is an alternative method available -- a model submitted by the Natural Resources Defense Council for FERC's consideration.

The commission now "appears effectively to decide some of the central issues raised in the GHG policy statement docket" (PL21-3), she said.

Commissioner James Danly, for his part, issued a concurring statement underscoring a Supreme Court finding that the purpose of the NGA is to encourage the orderly development of plentiful gas supplies at reasonable prices.

"The commission need not confect complicated rubrics or analytical frameworks to arrive at its determinations; such acrobatics are unnecessary," he said.

Debate over the rehearing highlights the commission's difficulty resolving differences over how to address climate impacts, with Clements recently at one end of the debate and Republican members on the other.

Republican FERC commissioners June 8 faulted FERC for failing to answer directly -- through a rehearing order in a case involving Texas Gas Transmission's Henderson County Expansion Project -- environmental groups' contention that FERC consider climate impacts of a project using the social cost of carbon when deciding whether to authorize a project. In the Republican commissioners' view, FERC could have directly stated that it lacked authority. Texas Gas had been pressing for a rehearing order on the merits, but FERC issued a notice June 8 stating it would not be issuing a future order.

Of note, Texas Gas on June 9 asked FERC for a notice to proceed with full construction of the facility.

The Commonwealth LNG case will likely be hashed out in court. Sierra Club, NRDC and Healthy Gulf have already filed petitions challenging the FERC authorization in the US Court of Appeals for the District of Columbia Circuit.