From an Article by Maya Weber, S & P Global (Platts) News Service, February 19, 2019

Summary: **Reliance on affiliate contracts ‘reasonably explained; **GHG considerations upheld; **Eminent domain challenges rebuffed

The DC US Circuit Court of Appeals tossed aside a host of environmental groups’ objections to the Federal Energy Regulatory Commission’s natural gas pipeline reviews, in a case involving the 300-mile, 2 Bcf/d Mountain Valley Pipeline.

The quick-turnaround ruling by a three-judge panel is mostly welcome news for the industry, as the court nixed several arguments recurring in multiple challenges to pipelines being built to move Appalachian gas to market. As an unpublished decision, the ruling has limited impact in other circuits, but sheds light on the thinking of the critical DC panel.

The ruling backed FERC’s reliance on precedent agreements with project affiliates to demonstrate the need for the project and upheld the use of eminent domain even before all permits are in place.

FERC “reasonably explained” that an affiliated shipper’s need for new capacity and its obligation to pay for service are not lessened just because the shipper is affiliated with the project sponsor, the court said (Appalachian Voices, et al., v FERC, 17-1271).

GHG CONSIDERATIONS

On greenhouse gas considerations, a major matter now dividing FERC commissioners, the court also backed the agency’s approach.

The DC Circuit found FERC satisfied the court’s recent mandate in a decision involving the Sabal Trail pipeline by providing an upper bound estimate of emissions resulting from end-use combustion and by giving several reasons why the petitioners’ preferred metric, the Social Cost of Carbon tool, is not an appropriate tool to assess the significance of climate change impacts. “That is all that is required for National Environmental Policy Act,” the ruling said.

“Not only do petitioners offer no alternative to the Social Cost of Carbon tool for assessing the incremental climate change impacts of downstream [GHG] emissions, but their opening brief also fails to address several of the reasons FERC gave for rejecting the Social Cost of Carbon tool,” it added.

While that helps MVP, FERC midyear last year pulled back from including in its environmental reports such upper bound estimates for downstream emissions, except in cases where the end use of the gas was clear.

QUESTIONS FOR OTHER PROJECTS

William Scherman, a partner with Gibson, Dunn & Crutcher, called the ruling a “good win for the FERC” and said the court is giving a lot of deference to FERC on the GHG issue given that the agency explained its reasoning. He and others found it significant that the panel issued an unpublished decision quickly after the January 28 oral argument. “The panel thought the outcome was quite clear cut and they weren’t breaking any new ground,” he said.

Several analysts saw some downside risks for other projects, however.

There is some risk of successful challenges in cases where the majority at FERC stopped short of calculating a maximum burn GHG estimate and doing a qualitative assessment of impacts, said Gary Kruse of LawIQ, suggesting nine or 10 projects may fall into that category.

“[T]he outcomes may not be as rosy for the two cases that are ahead at the DC Circuit — Dominion New Market and Broad Run, where the commission declined to quantify the GHG emissions for these projects,” added Christi Tezak, of ClearView Energy Partners.

On the other hand, Kruse suggested the decision may put to rest legal debate over whether FERC must use the Social Cost of Carbon, as environmentalists have argued.

The 300-mile MVP pipeline would send about 2 Bcf/d of Appalachian Shale gas to Mid-Atlantic markets. Much of the project is under construction, although some portions have been held up by litigation, including national forest crossings and water crossings. Virginia has also decided to hold hearings on whether to reconsider the water quality certification for the project.

https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/021919-dc-circuit-knocks-down-green-groups-challenge-to-ferc-order-on-mvp-gas-pipeline