The D.C. Circuit Court of Appeals recently issued an opinion holding that the Federal Energy Regulatory Commission (FERC) violated the National Environmental Policy Act (NEPA) when it segmented its evaluation of the environmental impact of four separately proposed but connected projects to upgrade the “300 Line” on the Eastern Leg of Tennessee Gas Pipeline Company’s natural gas pipeline system.  Going forward, the court’s ruling will likely compel proponents of interrelated or complimentary pipeline projects to seek their certification on a consolidated basis and will require FERC to evaluate their cumulative impact.

Tennessee Gas’s challenged Northeast Project was the third of four proposed upgrade projects to expand capacity on the existing Eastern Leg of the 300 Line.  The Northeast Project added only 40 miles of pipeline, while the four proposed projects combined to add approximately 200 miles of looped pipeline.  FERC approved Tennessee Gas’s first proposed upgrade, the “300 Line Project,” in May 2010.  While that project was under construction, Tennessee Gas proposed three additional projects to fill gaps left by the 300 Line Project, one of which was the Northeast Project.   As part of its review of the Northeast Project, FERC issued an Environmental Assessment (EA) required by NEPA that recommended a Finding of No Significant Impact.  The EA for the Northeast Project, however, addressed only the Northeast Project’s environmental impact without reviewing the cumulative impact of all four projects.

The D.C. Circuit held that FERC was in error for failing to consider the cumulative impact.  Under NEPA, the D.C. Circuit explained, FERC must consider all connected and cumulative actions.  The D.C. Circuit found no “logical termini,” or rational endpoints to divide the four projects and found the projects were not financially independent.  Rather, the court found the Northeast Project was “inextricably intertwined” with the other three improvement projects that, taken together, upgraded the entire Eastern Leg of the 300 Line.  The court held that FERC must analyze the cumulative impact of the four projects and remanded the case to FERC for consideration.

The Court emphasized that in this case, “FERC was plainly aware of the physical, functional, and financial links between the two projects.”  Regardless of whether an interstate pipeline initially plans to embark on a series of related upgrades, once FERC is aware of the interrelatedness of proposed expansion projects, it must take care to review any cumulative environmental impacts that may arise.

The D.C. Circuit’s decision may also be a warning that FERC must pay greater attention to the NEPA review in pipeline construction projects.  The D.C. Circuit also has before it this term a case alleging that FERC did not sufficiently consider the environmental review of the siting of a new pipeline compressor station in light of less environmentally intrusive alternatives.  See Minisink Residents for Environmental Preservation and Safety v. FERC, Case No. 12-1481.  Both cases take issue with the rigor of FERC’s environmental review under NEPA, and the D.C. Circuit’s decisions may signal a new era of increased focus on the environmental review process.