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June 9, 2014

D.C. Circuit Strikes Down FERC Pipeline Approval

In a decision issued on June 6, 2014, the U.S. Court of Appeals for the District of Columbia Circuit ordered the Federal Energy Regulatory Commission (“FERC”) to reconsider its environmental assessment and approval of the Tennessee Gas Pipeline Co.’s Northeast Upgrade Project (“Project”).  Under the National Environmental Policy Act (“NEPA”) FERC is required to assess the potential environmental impacts of a proposed project and consider mitigation measures to ensure that the project does not result in significant environmental impacts.  FERC pipeline approvals are frequently challenged by environmental groups, as the Delaware Riverkeeper Network, New Jersey Highlands Coalition, and Sierra Club did, but such challenges rarely prevail.  That is why the D.C. Circuit’s decision comes as a surprise and its consequences could be far-reaching.

The Court ruled that FERC had not adequately considered the cumulative impacts of the Project and had improperly considered impacts in isolation of three other closely-related, interdependent projects, a practice referred to as “segmentation” that is prohibited by NEPA.  All of the projects were proposed along the same leg of the pipeline.  Based on this finding, the court determined that the projects were physically, functionally, and financially connected and should have been considered and evaluated jointly by FERC.  The Court also ruled that FERC’s Environmental Assessment provided only conclusory statements regarding cumulative impacts of the Project without considering impacts from the other upgrade projects.  Accordingly, the Court ordered FERC to reconsider its approval in light of the segmentation and cumulative impacts issues.

The consequence of the Court’s decision may be to embolden challengers of FERC-approved pipeline projects, many of which like the Northeast Upgrade Project from western Pennsylvania to New Jersey, are being built to supply natural gas from shale producing states to areas with growing demand for natural gas for heat and electric generation.  The result could be a more lengthy and costly FERC approval process which in turn may slow-down efforts to convert more carbon intensive electric generating units, which burn coal and oil, to natural gas.

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