Two recent cases, Food & Water Watch et al. v. FERC, decided June 14, 2024, and Healthy Gulf et al. v. FERC, decided July 16, 2024, illustrate both consistencies and divergences in judicial approaches to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) (NEPA) compliance and environmental impact assessments. Sponsors of liquid natural gas (LNG) and gas pipeline projects should monitor these and other NEPA-related decisions carefully, as they may impact project timing, cost, and likelihood of success.

Food & Water Watch v. FERC, 104 F.4th 336 (D.C. Cir. 2024)

In Food & Water Watch et al. v. FERC, the court addressed whether NEPA and Council on Environmental Quality (CEQ) regulations require the Federal Energy Regulatory Commission (FERC) to formally label greenhouse gas (GHG) emissions and their ensuing costs as either significant or insignificant in its Environmental Impact Statement (EIS). The court held, “NEPA and the CEQ regulation cited above do not require an agency to formally label GHG emissions and their ensuing costs ‘as either significant or insignificant’ so long as the agency prepares an EIS and adequately discusses the emissions and their significance.” Id. This ruling clarifies that while agencies must consider the environmental impacts of their actions, they are not obligated to make a binary significance determination regarding GHG emissions, provided that they adequately discuss the potential impacts in their analyses.

Healthy Gulf, et al. v. FERC (23-1069) (D.C. Cir. July 16, 2024)

One month later, a different panel of the D.C. Circuit found that FERC failed to determine the significance of a project’s GHG emissions. In Healthy Gulf et al. v. FERC (23-1069), the court examined FERC’s authorization for Commonwealth LNG LLC’s LNG facilities in Louisiana. Healthy Gulf and other environmental groups challenged this authorization, citing inadequate environmental impact analysis. The court focused on three main issues: The significance of greenhouse gas emissions, cumulative effects of nitrogen dioxide (NO₂) emissions, and the consideration of alternatives. The court found that FERC’s failure to determine the significance of GHG emissions was insufficient and required further explanation on remand. Similarly, the court agreed with the petitioners that FERC’s analysis of the cumulative effects of NO₂ emissions was arbitrary and did not comply with NEPA requirements, noting that “[s]imply measuring the Project’s own emissions against the SIL (Significant Impact Level) fails to satisfy that requirement.” Id. However, the court upheld FERC’s evaluation of project alternatives as reasonable. Ultimately, the court remanded the case for FERC to address the deficiencies in the GHG and NO₂ analyses. However, the court refused to vacate FERC’s orders based on the likelihood that FERC could successfully address the court’s concerns on remand.

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The differing outcomes in the Food & Water Watch and Healthy Gulf cases reveal inconsistencies in judicial expectations for NEPA compliance. In Healthy Gulf, the court demanded a more explicit determination of GHG significance and a thorough cumulative effects analysis, whereas in Food & Water Watch, the court accepted broader emissions comparisons and found the environmental analyses sufficient. The panel in Healthy Gulf distinguished the Food & Water Watch case on the ground that FERC in Healthy Gulf did not dispute the premise that it must make a significance determination, provided there is no sufficient explanation for not doing so in a particular proceeding.

In contrast, the court’s 2023 decision in Ctr. for Biological Diversity v. FERC, 67 F.4th 1176 (D.C. Cir. 2023) provides an example of the court upholding FERC’s approach regarding GHG emissions analysis. The court found that FERC did not need to use the social cost of carbon for determining the significance of GHG emissions due to a lack of a reliable methodology. In the Healthy Gulf case, the court rejected the petitioners’ argument for using the social cost of carbon test based on the precedent set by Center for Biological Diversity and EarthReports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016) (cited in Healthy Gulf for rejecting the social cost of carbon as an adequate method for NEPA analysis). However, the Healthy Gulf court found that FERC failed to explain why it had not used another measure of significance—a comparison of the project’s emission with total U.S. emissions—and remanded the case to FERC for such an explanation. These cases serve as reminders of the ongoing debate over whether FERC must determine the significance of GHG emissions, and if so, what constitutes an appropriate measure for doing so.

These differing judicial approaches underscore the variability in interpreting NEPA requirements. Agencies like FERC should consider handling these complexities with detailed, transparent, and consistent environmental analyses to withstand judicial scrutiny. The rulings in these cases reinforce the importance of comprehensive environmental reviews to support public interest determinations.