Sierra Club v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 18, 2017 Decided August 22, 2017

No. 16-1329

SIERRA CLUB, ET AL.,

PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

DUKE ENERGY FLORIDA, LLC, ET AL.,

INTERVENORS

Consolidated with 16-1387

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Elizabeth F. Benson argued the cause for petitioners Sierra

Club, et al. With her on the briefs was Eric Huber. Keri N.

Powell entered an appearance.

Jonathan Perry Waters argued the cause and filed the brief

for petitioners G.B.A. Associates, LLC, et al.

Ross R. Fulton, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With him on the

2

brief were David L. Morenoff, General Counsel, Robert H.

Solomon, Solicitor, and Nicholas M. Gladd, Attorney. Anand

Viswanathan, Attorney, entered an appearance.

Jeremy C. Marwell argued the cause for respondent-

intervenors. With him on the brief were Michael B. Wigmore,

James D. Seegers, Gregory F. Miller, P. Martin Teague, James

H. Jeffries, IV, Charles L. Schlumberger, Sid J. Trant, Anna M.

Manasco, Brian D. O’Neill, Michael R. Pincus, and William

Lavarco. Marc J. Ayers and Emily M. Ruzic entered

appearances.

Mohammad O. Jazil and David W. Childs were on the brief

for amicus curiae The Florida Reliability Coordinating

Council, Inc. in support of respondent.

Before: ROGERS, BROWN, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

Opinion concurring in part and dissenting in part filed by

Circuit Judge BROWN.

GRIFFITH, Circuit Judge: Environmental groups and

landowners have challenged the decision of the Federal Energy

Regulatory Commission to approve the construction and

operation of three new interstate natural-gas pipelines in the

southeastern United States. Their primary argument is that the

agency’s assessment of the environmental impact of the

pipelines was inadequate. We agree that FERC’s

environmental impact statement did not contain enough

information on the greenhouse-gas emissions that will result

from burning the gas that the pipelines will carry. In all other

respects, we conclude that FERC acted properly. We thus grant

3

Sierra Club’s petition for review and remand for preparation of

a conforming environmental impact statement.

I

The Southeast Market Pipelines Project comprises three

natural-gas pipelines now under construction in Alabama,

Georgia, and Florida. The linchpin of the project is the Sabal

Trail pipeline, which will wend its way from Tallapoosa

County in eastern Alabama, across southwestern Georgia, and

down to Osceola County, Florida, just south of Orlando: a

journey of nearly five hundred miles. Sabal Trail will connect

the other two portions of the project. The first—the Hillabee

Expansion—will boost the capacity of an existing pipeline in

Alabama, which will feed gas to Sabal Trail’s upstream end for

transport to Florida. At the downstream end of Sabal Trail will

be the Florida Southeast Connection, which will link to a power

plant in Martin County, Florida, 120 miles away. Shorter spurs

will join Sabal Trail to other proposed and existing power

plants and pipeline networks. By its scheduled completion in

2021, the project will be able to carry over one billion cubic

feet of natural gas per day.

The three segments of the project have different owners, 1

but they share a common purpose: to serve Florida’s growing

demand for natural gas and the electric power that natural gas

can generate. At present, only two major natural-gas pipelines

serve the state, and both are almost at capacity. Two major

utilities, Florida Power & Light and Duke Energy Florida, have

1

Sabal Trail is owned by Spectra Energy Partners, NextEra

Energy, and Duke Energy; the Hillabee Expansion is owned by the

Williams Companies; and Florida Southeast Connection is owned by

NextEra. Duke Energy, and NextEra’s subsidiary Florida Power &

Light, will also be the project’s primary customers.

4

already committed to buying nearly all the gas the project will

be able to transport. Florida Power & Light claims that without

this new project, its gas needs will begin to exceed its supply

this year. But the project’s developers also indicate that the

increased transport of natural gas will make it possible for

utilities to retire older, dirtier coal-fired power plants.

Despite these optimistic predictions, the project has drawn

opposition from several quarters. Environmental groups fear

that increased burning of natural gas will hasten climate change

and its potentially catastrophic consequences. Landowners in

the pipelines’ path object to the seizure of their property by

eminent domain. And communities on the project’s route are

concerned that pipeline facilities will be built in low-income

and predominantly minority areas already overburdened by

industrial polluters.

Section 7 of the Natural Gas Act places these disputes into

the bailiwick of the Federal Energy Regulatory Commission

(FERC), which has jurisdiction to approve or deny the

construction of interstate natural-gas pipelines. See 15 U.S.C.

§ 717f. Before any such pipeline can be built, FERC must grant

the developer a “certificate of public convenience and

necessity,” id. § 717f(c)(1)(A), also called a Section 7

certificate, upon a finding that the project will serve the public

interest, see id. § 717f(e). FERC is also empowered to attach

“reasonable terms and conditions” to the certificate, as

necessary to protect the public. Id. A certificate holder has the

ability to acquire necessary rights-of-way from unwilling

landowners by eminent domain proceedings. See id. § 717f(h).

FERC launched an environmental review of the proposed

project in the fall of 2013. The agency understood that it would

need to prepare an environmental impact statement (EIS)

5

before approving the project, as the National Environmental

Policy Act of 1969 (NEPA) requires for each “major Federal

action[] significantly affecting the quality of the human

environment.” See 42 U.S.C. § 4332(2)(C). FERC solicited

public comment and held thirteen public meetings on the

project’s environmental effects, and made limited

modifications to the project plan in response to public

concerns, before releasing a draft impact statement in

September 2015 and a final impact statement in December

2015. In the meantime, the pipeline developers formally

applied for their Section 7 certificates in September and

November 2014.

In the Certificate Order, issued on February 2, 2016, FERC

granted the requested Section 7 certificates and approved

construction of all three project segments, subject to

compliance with various conditions not at issue here. Order

Issuing Certificates and Approving Abandonment, Fla. Se.

Connection, LLC, 154 FERC ¶ 61,080 (2016) (Certificate

Order). This order recognized a number of parties as

intervenors in the agency proceedings, among them three

environmental groups (Sierra Club, Flint Riverkeeper, and

Chattahoochee Riverkeeper) and two Georgia landowners

whose land Sabal Trail will cross (GBA Associates and K.

Gregory Isaacs). These parties timely sought rehearing and a

stay of construction; FERC agreed to entertain their arguments

but denied a stay. Construction on the pipelines began in

August 2016. On September 7, 2016, FERC issued its

Rehearing Order, denying rehearing and declining to rescind

the pipelines’ certificates. Order on Rehearing, Fla. Se.

Connection, LLC, 156 FERC ¶ 61,160 (2016) (Rehearing

Order).

6

Both the environmental groups (collectively, “Sierra

Club”) and the landowners timely petitioned our court for

review of the Certificate Order and the Rehearing Order. Sierra

Club argues that FERC’s environmental impact statement

failed to adequately consider the project’s contribution to

greenhouse-gas emissions and its impact on low-income and

minority communities. Sierra Club also contends that Sabal

Trail’s service rates were based on an invalid methodology.

The landowners allege further oversights in the EIS, dispute the

public need for the project, and assert that FERC used an

insufficiently transparent process to approve the pipeline

certificates. Their petitions were consolidated before us.

II

We have jurisdiction to hear these petitions under the

Natural Gas Act. See 15 U.S.C. § 717r(b). Any party to a

proceeding under the Act who is “aggrieved” by a FERC order

may petition for review of that order in our court, provided that

they first seek rehearing before FERC. Id. § 717r(a)-(b). Sierra

Club was an intervenor in the proceedings on all three pipeline

applications, see Certificate Order App. A, and the landowner

petitioners were intervenors in the Sabal Trail proceedings, see

id.

A party is “aggrieved” by a FERC order if it challenges the

order under NEPA and asserts an environmental harm. See

Gunpowder Riverkeeper v. FERC, 807 F.3d 267, 273-74 (D.C.

Cir. 2015). A landowner forced to choose between selling to a

FERC-certified developer and undergoing eminent domain

proceedings is also “aggrieved” within the meaning of the Act.

See B&J Oil & Gas v. FERC, 353 F.3d 71, 75 (D.C. Cir. 2004);

Moreau v. FERC, 982 F.2d 556, 564 n.3 (D.C. Cir. 1993).

7

Sierra Club falls into the former camp, and the Georgia

landowners into the latter.

We also have an independent duty to ensure that at least

one petitioner has standing under Article III of the Constitution.

See Ams. for Safe Access v. DEA, 706 F.3d 438, 442-43 (D.C.

Cir. 2013). A petitioner invoking federal-court jurisdiction has

the burden to establish that she has suffered an injury in fact

that is fairly traceable to the challenged action of the defendant

and “likely” to be redressed by a favorable judicial decision.

WildEarth Guardians v. Jewell, 738 F.3d 298, 305 (D.C. Cir.

2013). And an association, like Sierra Club, can sue on behalf

of its members if at least one member would have standing to

sue in her own right, the organization is suing to vindicate

interests “germane to its purpose,” and nothing about the claim

asserted or the relief requested requires an individual member

to be a party. Sierra Club v. FERC, 827 F.3d 36, 43 (D.C. Cir.

2016). On direct review of agency action, an association can

establish its standing by having its individual members submit

affidavits to accompany the association’s opening brief. See

Pub. Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489

F.3d 1279, 1289 (D.C. Cir. 2007).

Several individual Sierra Club members submitted such

affidavits, explaining how the pipeline project would harm

their “concrete aesthetic and recreational interests.” WildEarth,

738 F.3d at 305. For example, one member, Robin Koon,

explained that the Sabal Trail pipeline will cross his property

(on an easement taken by eminent domain), that construction

noise will impair his enjoyment of his daily activities, and that

trees shading his house will be permanently removed. Other

Sierra Club members similarly averred that the pipeline project

will affect their homes and daily lives. “Such credible claims

of exposure to increased noise and its disruption of daily

8

activities, backed up by specific factual representations in an

affidavit or declaration, are sufficient to satisfy Article III’s

injury-in-fact requirement.” Sierra Club, 827 F.3d at 44. And

nobody disputes that the prevention of this sort of injury is

germane to Sierra Club’s conservation-oriented purposes, or

cites any reason why these individual members would need to

join the petition in their own names.

Because they allege concrete injury from FERC’s order

certifying the pipeline project, and because that certification

was based on an allegedly inadequate environmental impact

statement, these Sierra Club members, and therefore Sierra

Club itself, have standing to object to any deficiency in the

environmental impact statement. 2 See WildEarth Guardians,

738 F.3d at 306-08. The deficiency need not be directly tied to

the members’ specific injuries. For example, Sierra Club may

argue that FERC did not adequately consider the pipelines’

contribution to climate change. See id. The members’ injuries

are caused by the allegedly unlawful Certificate Order, and

would be redressed by vacatur of that order on the basis of any

defect in the environmental impact statement. See id. at 308. 3

2

Though GBA Associates and Isaacs raise different arguments

as to why the Certificate and Rehearing Orders are unlawful, the

standing analysis does not differ for them, as they seek the same

remedy and allege similar injuries to their property interests.

3

The same reasoning goes for Sierra Club’s argument that

FERC used an arbitrary and capricious methodology in determining

Sabal Trail’s initial rates. A finding that FERC failed to justify its

approach to this issue would lead us to “hold unlawful and set aside”

Sabal Trail’s certificate, see 5 U.S.C. § 706(2), which would in turn

redress the Sierra Club members’ environmentally based injuries in

fact. See Ctr. for Biological Diversity v. U.S. Dep’t of Interior, 563

F.3d 466, 479 (D.C. Cir. 2009) (finding Article III standing on the

9

Transco, owner of the Hillabee Expansion, argues that no

Sierra Club member has alleged an injury caused by Transco’s

section of the overall project, which would suggest that Sierra

Club lacks standing to seek the vacatur of Hillabee’s certificate.

Transco thus implicitly argues that the Certificate Order is

severable. Under this view, if Sierra Club succeeds on the

merits, but has standing to challenge only Sabal Trail’s

certificate, we could vacate only the portion of the Certificate

Order pertaining to Sabal Trail, and leave the rest intact.

The question whether an agency order is severable turns

on the agency’s intent. See Epsilon Elecs., Inc. v. U.S. Dep’t of

Treasury, 857 F.3d 913, 929 (D.C. Cir. 2017). “Where there is

substantial doubt that the agency would have adopted the same

disposition regarding the unchallenged portion if the

challenged portion were subtracted, partial affirmance is

improper.” Id. (quoting North Carolina v. FERC, 730 F.2d 790,

795-96 (D.C. Cir. 1984)). Since the beginning of its

environmental review, FERC has treated the project as a single,

integrated proposal. See Notice of Intent to Prepare an

Environmental Impact Statement for the Planned Southeast

Market Pipelines Project, 79 Fed. Reg. 10,793, 10,794 (Feb.

26, 2014) (explaining that FERC would prepare a single EIS

for the three pipelines, to help the agency determine “whether

the SMP Project is in the public convenience and necessity”).

That characterization carried through to the Certificate Order.

See J.A. 1075 (describing the pipelines as “separate but

connected” and noting that the Hillabee Expansion’s purpose

grounds that an agency’s “irrationally based” permitting program

threatened the arctic animals that the petitioners wanted to observe,

and that “setting aside and remanding” the program would redress

this threat).

10

is to give Sabal Trail’s customers access to upstream gas

supplies); J.A. 1096 (explaining that in the absence of Sabal

Trail, existing pipelines will not be able to deliver the gas that

the Florida Southeast Connection requires).

We substantially doubt that FERC would have approved

the Southeast Market Pipelines Project only in part, and we

especially doubt that the agency would have certified either of

the other two segments if Sabal Trail were not part of the

project. Because Sierra Club and the landowners have alleged

injury-in-fact caused by Sabal Trail, and because the

Certificate Order is not severable, both sets of petitioners have

standing to challenge the Certificate Order as a whole.

Having concluded that we have jurisdiction to entertain all

of petitioners’ claims, we turn to the merits of those claims.

III

Both sets of petitioners rely heavily on the National

Environmental Policy Act of 1969, Pub. L. No. 91-190, 83 Stat.

852 (1970). NEPA “declares a broad national commitment to

protecting and promoting environmental quality,” and brings

that commitment to bear on the operations of the federal

government. Robertson v. Methow Valley Citizens Council,

490 U.S. 332, 348 (1989). The statute “commands agencies to

imbue their decisionmaking, through the use of certain

procedures, with our country’s commitment to environmental

salubrity.” Citizens Against Burlington, Inc. v. Busey, 938 F.2d

190, 193-94 (D.C. Cir. 1991). One of the most important

procedures NEPA mandates is the preparation, as part of every

“major Federal action[] significantly affecting the quality of the

human environment,” of a “detailed statement” discussing and

11

disclosing the environmental impact of the action. 42 U.S.C.

§ 4332(2)(C).

This environmental impact statement, as it has come to be

called, has two purposes. It forces the agency to take a “hard

look” at the environmental consequences of its actions,

including alternatives to its proposed course. See id.

§ 4332(2)(C)(iii); Balt. Gas & Elec. Co. v. Nat. Res. Def.

Council, Inc., 462 U.S. 87, 97 (1983). It also ensures that these

environmental consequences, and the agency’s consideration

of them, are disclosed to the public. See WildEarth Guardians,

738 F.3d at 302. Importantly, though, NEPA “directs agencies

only to look hard at the environmental effects of their

decisions, and not to take one type of action or another.”

Citizens Against Burlington, 938 F.2d at 194. That is, the

statute is primarily information-forcing.

The role of the courts in reviewing agency compliance

with NEPA is accordingly limited. Furthermore, because

NEPA does not create a private right of action, we can entertain

NEPA-based challenges only under the Administrative

Procedure Act and its deferential standard of review. See

Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d

497, 507 (D.C. Cir. 2010). That is, our mandate “is ‘simply to

ensure that the agency has adequately considered and disclosed

the environmental impact of its actions and that its decision is

not arbitrary or capricious.’” WildEarth Guardians, 738 F.3d

at 308 (quoting City of Olmsted Falls v. FAA, 292 F.3d 261,

269 (D.C. Cir. 2002)). We should not “‘flyspeck’ an agency’s

environmental analysis, looking for any deficiency no matter

how minor.” Nevada v. Dep’t of Energy, 457 F.3d 78, 93 (D.C.

Cir. 2006) (citation omitted).

12

But at the same time, we are responsible for holding

agencies to the standard the statute establishes. An EIS is

deficient, and the agency action it undergirds is arbitrary and

capricious, if the EIS does not contain “sufficient discussion of

the relevant issues and opposing viewpoints,” Nevada, 457

F.3d at 93 (quoting Nat. Res. Def. Council v. Hodel, 865 F.2d

288, 294 (D.C. Cir. 1988)), or if it does not demonstrate

“reasoned decisionmaking,” Del. Riverkeeper Network v.

FERC, 753 F.3d 1304, 1313 (D.C. Cir. 2014) (quoting Found.

on Econ. Trends v. Heckler, 756 F.2d 143, 154 (D.C. Cir.

1985)). The overarching question is whether an EIS’s

deficiencies are significant enough to undermine informed

public comment and informed decisionmaking. See Nevada,

457 F.3d at 93. This is NEPA’s “rule of reason.” See Dep’t of

Transp. v. Pub. Citizen, 541 U.S. 752, 767 (2004).

With those principles in mind, we direct our attention to

the specific deficiencies the petitioners have alleged in the EIS

for the Southeast Market Pipelines Project. As noted above,

FERC prepared a single unified EIS for the project’s three

pipelines, and no party has challenged that approach. Thus, for

purposes of our NEPA analysis, we will consider the project as

a whole.

A

The principle of environmental justice encourages

agencies to consider whether the projects they sanction will

have a “disproportionately high and adverse” impact on low-

income and predominantly minority communities. 4 See J.A.

1353-54. Executive Order 12,898 required federal agencies to

4

Like petitioners, we refer to these two types of community

collectively as “environmental-justice communities.”

13

include environmental-justice analysis in their NEPA reviews,

and the Council on Environmental Quality, the independent

agency that implements NEPA, see 42 U.S.C. § 4344, has

promulgated environmental-justice guidance for agencies, see

J.A. 1369-78.

Sierra Club argues that the EIS failed to adequately take

this principle into account. Like the other components of an

EIS, an environmental justice analysis is measured against the

arbitrary-and-capricious standard. See Cmtys. Against Runway

Expansion, Inc. v. FAA, 355 F.3d 678, 689 (D.C. Cir. 2004).5

The analysis must be “reasonable and adequately explained,”

but the agency’s “choice among reasonable analytical

methodologies is entitled to deference.” Id. As always with

NEPA, an agency is not required to select the course of action

that best serves environmental justice, only to take a “hard

look” at environmental justice issues. See Latin Ams. for Social

& Econ. Dev. v. Fed. Highway Admin., 756 F.3d 447, 475-77

(6th Cir. 2014). We conclude that FERC’s discussion of

environmental justice in the EIS satisfies this standard.

The EIS explained that 83.7% of the pipelines’ proposed

route would cross through, or within one mile of,

environmental-justice communities (defined as census tracts

where the population is disproportionately below the poverty

line and/or disproportionately belongs to racial or ethnic

minority groups). That percentage varied from 54 to 80 percent

for the alternative routes proposed by stakeholders and

5

Because FERC voluntarily performed an environmental-

justice review, we need not decide whether Executive Order 12,898

is binding on FERC. See Runway Expansion, 355 F.3d at 689

(explaining that arbitrary-and-capricious analysis applies to every

section of an EIS, even sections included solely at the agency’s

discretion).

14

commenters, albeit with only one option below 70 percent.

This type of data appeared not only in the section of the EIS

specifically dedicated to environmental justice, but also in the

chapter that compared the various alternative routes. That later

chapter weighed environmental-justice statistics alongside

factors like total route length, wetlands impact, and the number

of homes near the route. It also discussed one additional

proposed route, which would cross the Gulf of Mexico and

avoid Georgia completely. This option would affect far fewer

environmental-justice communities, but in FERC’s assessment

would be infeasible because it would cost an additional two

billion dollars.

FERC concluded that the various feasible alternatives

“would affect a relatively similar percentage of environmental

justice populations,” and that the preferred route thus would not

have a disproportionate impact on those populations. See J.A.

836. The agency also independently concluded that the project

would not have a “high and adverse” impact on any population,

meaning, in the agency’s view, that it could not have a

“disproportionately high and adverse” impact on any

population, marginalized or otherwise. 6

Sierra Club contends that FERC misread

“disproportionately high and adverse,” the standard for when a

particular environmental effect raises an environmental-justice

concern. By Sierra Club’s lights, any effect can fulfill the test,

regardless of its intensity, extent, or duration, if it is not

beneficial and falls disproportionately on environmental-

6

Sierra Club argues that the project will in fact have “high and

adverse” impacts, but does so only in a brief and cursory fashion. See

CTS Corp. v. EPA, 759 F.3d 52, 64 (D.C. Cir. 2014) (explaining that

we need not address cursory arguments).

15

justice communities. But even if we assume that understanding

to be correct, we cannot see how this EIS was deficient. It

discussed the intensity, extent, and duration of the pipelines’

environmental effects, and also separately discussed the fact

that those effects will disproportionately fall on environmental-

justice communities. Recall that the EIS informed readers and

the agency’s ultimate decisionmakers that 83.7% of the

pipelines’ length would be in or near environmental-justice

communities. The EIS also evaluated route alternatives in part

by looking at the number of environmental-justice

communities each would cross, and the mileage of pipeline

each would place in low-income and minority areas. FERC

thus grappled with the disparate impacts of the various possible

pipeline routes. Perhaps Sierra Club would have a stronger

claim if the agency had refused entirely to discuss the

demographics of the populations that will feel the pipelines’

effects, and had justified this refusal by pointing to the limited

intensity, extent, and duration of those effects. However, as the

EIS stands, we see no deficiencies serious enough to defeat the

statute’s goals of fostering well-informed decisionmaking and

public comment. See Nevada, 457 F.3d at 93.

The same goes for Sierra Club’s other arguments. The

agency’s methodology was reasonable, even where it deviated

from what Sierra Club would have preferred. See Runway

Expansion, 355 F.3d at 689. Take the agency’s decision to

compare the demographics along the various proposed routes

to each other instead of “the general population.” Sierra Club

Opening Br. 18. An EIS is meant to help agency heads choose

among the relevant alternatives, including the alternative of

taking no action, and to help the public weigh in. Thus, FERC’s

decision to directly compare the proposed alternatives to one

another, rather than to some broader population, was

reasonable under the circumstances. See id. (approving an

16

environmental-justice review that compared “the population

predicted to be affected by . . . [a] project to the demographics

of the population that otherwise might conceivably be affected”

by the project). Another methodology might be more

appropriate in a case where some feasible alternative, with a

lower environmental-justice impact, has been left out of the

analysis. However, no party has offered any such alternative

here.

Sierra Club is particularly concerned about Sabal Trail’s

plan to build a compressor station (a facility that helps “pump”

gas along the pipeline, and gives off air and noise pollution

while doing so) in an African American neighborhood of

Albany, Dougherty County, Georgia. The agency identified

environmental-justice communities by looking at the

demographics of census tracts, which are county subdivisions

created to organize census data. The neighborhood in question

is a 100% African American census block, an even smaller

census subdivision, but because it sits in the midst of a

majority-white census tract, FERC did not designate it an

environmental-justice community. Sierra Club’s objection to

this omission elevates form over substance. The goal of an

environmental-justice analysis is satisfied if an agency

recognizes and discusses a project’s impacts on predominantly-

minority communities, even if it does not formally label each

such community an “environmental justice community.”

FERC did recognize the existence and demographics of the

neighborhood in question, and discussed the neighborhood

extensively. The EIS listed community features, including

subdivisions, schools, and churches, along with their distances

from the proposed compressor station, and explained that the

station’s noise and air-quality effects on these locations were

expected to remain within acceptable limits.

17

More persuasive is Sierra Club’s argument that FERC

disregarded the extent to which Dougherty County is already

overburdened with pollution sources. A letter to FERC from

four members of Georgia’s congressional delegation cites the

grim statistics: southern Dougherty County has 259 hazardous-

waste facilities, 78 air-polluting facilities, 20 toxic-polluting

facilities, and 16 water-polluting facilities. The EIS did not

mention these existing polluters in its discussion of Dougherty

County. Sierra Club thus argues that FERC inadequately

considered the project’s “cumulative impacts,” that is, its

effects taken in combination with existing environmental

hazards in the same area. See 40 C.F.R. § 1508.7; Del.

Riverkeeper, 753 F.3d at 1319-20.

Perhaps FERC could have said more, but the discussion it

undertook of the cumulative impacts of the proposed route

fulfilled NEPA’s goal of guiding informed decisionmaking.

The EIS acknowledged that the Sabal Trail project will

generate air pollution and noise pollution in Albany, and it

projected cumulative levels of both of these types of pollution

from all sources in the vicinity of the compressor station,

finding that both would remain below harmful thresholds. 7 We

are sensitive to Sierra Club’s broader contention that it is unjust

to locate a polluting facility in a community that already has a

high concentration of polluting facilities, even if those older

7

FERC appropriately relied on EPA’s national ambient air

quality standards (NAAQS) as a standard of comparison for air-

quality impacts. By presenting the project’s expected emissions

levels and the NAAQS standards side-by-side, the EIS enabled

decisionmakers and the public to meaningfully evaluate the project’s

air-pollution effects by reference to a generally accepted standard.

See Runway Expansion, 355 F.3d at 689 (explaining that in an

environmental-justice analysis, the agency’s “choice among

reasonable analytical methodologies is entitled to deference”).

18

facilities produce pollution of a different type or in different

locations. We note, however, that FERC took seriously

commenters’ concerns about locating Sabal Trail facilities in

Dougherty County. The agency reopened the comment period

on the EIS to seek input on relocating the compressor station,

and then actually secured Sabal Trail’s agreement to relocate

the station, moving it in part to mitigate effects on

environmental-justice communities. The EIS also considered

four route alternatives proposed by Sierra Club and its fellow

environmental petitioners that would have partially or

completely avoided Albany, but rejected them all, mainly on

the ground that they would have had a greater overall impact

on residences and populated areas.

To sum up, the EIS acknowledged and considered the

substance of all the concerns Sierra Club now raises: the fact

that the Southeast Market Pipelines Project will travel

primarily through low-income and minority communities, and

the impact of the pipeline on the city of Albany and Dougherty

County in particular. The EIS also laid out a variety of

alternative approaches with potential to address those concerns,

including those proposed by petitioners, and explained why, in

FERC’s view, they would do more harm than good. The EIS

also gave the public and agency decisionmakers the qualitative

and quantitative tools they needed to make an informed choice

for themselves. NEPA requires nothing more.

B

It’s not just the journey, though, it’s also the destination.

All the natural gas that will travel through these pipelines will

be going somewhere: specifically, to power plants in Florida,

some of which already exist, others of which are in the planning

stages. Those power plants will burn the gas, generating both

19

electricity and carbon dioxide. And once in the atmosphere,

that carbon dioxide will add to the greenhouse effect, which the

EIS describes as “the primary contributing factor” in global

climate change. J.A. 915. The next question before us is

whether, and to what extent, the EIS for this pipeline project

needed to discuss these “downstream” effects of the pipelines

and their cargo. We conclude that at a minimum, FERC should

have estimated the amount of power-plant carbon emissions

that the pipelines will make possible.

An agency conducting a NEPA review must consider not

only the direct effects, but also the indirect environmental

effects, of the project under consideration. See 40 C.F.R.

§ 1502.16(b). “Indirect effects” are those that “are caused by

the [project] and are later in time or farther removed in

distance, but are still reasonably foreseeable.” Id. § 1508.8(b).

The phrase “reasonably foreseeable” is the key here. Effects

are reasonably foreseeable if they are “sufficiently likely to

occur that a person of ordinary prudence would take [them] into

account in reaching a decision.” EarthReports, Inc. v. FERC,

828 F.3d 949, 955 (D.C. Cir. 2016) (citation omitted).

What are the “reasonably foreseeable” effects of

authorizing a pipeline that will transport natural gas to Florida

power plants? First, that gas will be burned in those power

plants. This is not just “reasonably foreseeable,” it is the

project’s entire purpose, as the pipeline developers themselves

explain. See Intervenor Br. 4-5 (explaining that the project

“will provide capacity to transport natural gas to the electric

generating plants of two Florida utilities”). It is just as

foreseeable, and FERC does not dispute, that burning natural

gas will release into the atmosphere the sorts of carbon

compounds that contribute to climate change.

20

The pipeline developers deny that FERC would be the

legally relevant cause of any power plant carbon emissions, and

thus contend that FERC had no obligation to consider those

emissions in its NEPA analysis. They rely on Department of

Transportation v. Public Citizen, 541 U.S. 752 (2004), a case

involving the Federal Motor Carrier Safety Administration’s

development of safety standards for Mexican trucks operating

in the United States. The agency had proposed those standards

because the President planned to lift a moratorium on Mexican

motor carriers operating in this country. These standards would

require roadside inspections, which had the potential to create

adverse environmental effects. The agency’s EIS discussed the

effects of these roadside inspections, but Public Citizen

contended that the EIS was also required to address the

environmental effects of increased truck traffic between the

two countries. See id. at 765.

The Supreme Court sided with the agency. The Court

noted that the agency would have no statutory authority to

exclude Mexican trucks from the United States once the

President lifted the moratorium; it would only have power to

set safety rules for those trucks. See id. at 766-67. And because

the agency could not exclude Mexican trucks from the United

States, it would have no reason to gather data about the

environmental harms of admitting them. The purpose of NEPA

is to help agencies and the public make informed decisions. But

when the agency has no legal power to prevent a certain

environmental effect, there is no decision to inform, and the

agency need not analyze the effect in its NEPA review. See id.

at 770.

We recently applied the Public Citizen rule in three

challenges to FERC decisions licensing liquefied natural gas

(LNG) terminals. See Sierra Club v. FERC (Freeport), 827

21

F.3d 36 (D.C. Cir. 2016); Sierra Club v. FERC (Sabine Pass),

827 F.3d 59 (D.C. Cir. 2016); EarthReports, Inc. v. FERC, 828

F.3d 949 (D.C. Cir. 2016). Companies can export natural gas

from the United States through an LNG terminal, but such

natural gas exports require a license from the Department of

Energy. See Freeport, 827 F.3d at 40. They also require

physical upgrades to a terminal’s facilities. The Department of

Energy has delegated to FERC the authority to license those

upgrades. See id. A question presented to us in all of these cases

was whether FERC, in licensing physical upgrades for an LNG

terminal, needed to evaluate the climate-change effects of

exporting natural gas. Relying on Public Citizen, we answered

no in each case. FERC had no legal authority to consider the

environmental effects of those exports, and thus no NEPA

obligation stemming from those effects. See Freeport, 827 F.3d

at 47; accord Sabine Pass, 827 F.3d at 68-69; EarthReports,

828 F.3d at 956.

An agency has no obligation to gather or consider

environmental information if it has no statutory authority to act

on that information. That rule was the touchstone of Public

Citizen, see 541 U.S. at 767-68, and it distinguishes this case

from the LNG-terminal trilogy. Contrary to our dissenting

colleague’s view, our holding in the LNG cases was not based

solely on the fact that a second agency’s approval was

necessary before the environmental effect at issue could

occur. 8 Rather, Freeport and its companion cases rested on the

8

We also note that Florida Power & Light, which expects to be

one of the pipelines’ two primary customers, represented to FERC

that “its commitments on Sabal Trail’s and Florida Southeast’s

systems are to provide gas to existing natural gas-fired plants.”

Certificate Order ¶ 85, J.A. 1100. So even if the dissent were correct

that Florida regulators’ authority over power-plant construction

excuses FERC from considering emissions from new or expanded

22

premise that FERC had no legal authority to prevent the

adverse environmental effects of natural gas exports. See

Freeport, 827 F.3d at 47.

This raises the question: what did the Freeport court mean

by its statement that FERC could not prevent the effects of

exports? After all, FERC did have legal authority to deny an

upgrade license for a natural gas export terminal. See Freeport,

827 F.3d at 40-41. And without such an upgrade license,

neither gas exports nor their environmental effects could have

occurred.

The answer must be that FERC was forbidden to rely on

the effects of gas exports as a justification for denying an

upgrade license. Cf. Motor Vehicle Mfrs. Ass’n of U.S. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (explaining

that an agency acts arbitrarily and capriciously if it makes a

decision based on “factors which Congress had not intended it

to consider”). The holding in Freeport, then, turned not on the

question “What activities does FERC regulate?” but instead on

the question “What factors can FERC consider when regulating

in its proper sphere?” In the LNG cases, FERC was acting not

on its own statutory authority but under a narrow delegation

from the Department of Energy. See Freeport, 827 F.3d at 40-

41. Thus, the agency would have acted unlawfully had it

refused an upgrade license on grounds that it did not have

delegated authority to consider. See State Farm, 463 U.S. at 43.

Here, FERC is not so limited. Congress broadly instructed

the agency to consider “the public convenience and necessity”

power plants, that argument would not apply to the significant

portion of these pipelines’ capacity that is earmarked for existing

plants.

23

when evaluating applications to construct and operate interstate

pipelines. See 15 U.S.C. § 717f(e). FERC will balance “the

public benefits against the adverse effects of the project,” see

Minisink Residents for Envtl. Pres. & Safety v. FERC, 762 F.3d

97, 101-02 (D.C. Cir. 2014) (internal quotation marks omitted),

including adverse environmental effects, see Myersville

Citizens for a Rural Cmty. v. FERC, 783 F.3d 1301, 1309 (D.C.

Cir. 2015). Because FERC could deny a pipeline certificate on

the ground that the pipeline would be too harmful to the

environment, the agency is a “legally relevant cause” of the

direct and indirect environmental effects of pipelines it

approves. See Freeport, 827 F.3d at 47. Public Citizen thus did

not excuse FERC from considering these indirect effects. 9

FERC next raises a practical objection, arguing that it is

impossible to know exactly what quantity of greenhouse gases

will be emitted as a result of this project being approved. True,

that number depends on several uncertain variables, including

the operating decisions of individual plants and the demand for

electricity in the region. But we have previously held that

NEPA analysis necessarily involves some “reasonable

forecasting,” and that agencies may sometimes need to make

educated assumptions about an uncertain future. See Del.

Riverkeeper, 753 F.3d at 1310. Indeed, FERC has already

estimated how much gas the pipelines will transport: about one

9

The dissent contends that if FERC refused to approve these

pipelines, Florida utilities would find a way to deliver an equivalent

amount of natural gas to the state regardless. See Dissenting Op. 7.

This argument, however, does not bear on the question whether

FERC is legally authorized to consider downstream environmental

effects when evaluating a Section 7 certificate application. In any

case, the record suggests that there is no other viable means of

delivering the amount of gas these pipelines propose to deliver. See

J.A. 920-25.

24

million dekatherms (roughly 1.1 billion cubic feet) per day.

The EIS gave no reason why this number could not be used to

estimate greenhouse-gas emissions from the power plants, and

even cited a Department of Energy report that gives emissions

estimates per unit of energy generated for various types of

plant.

We conclude that the EIS for the Southeast Market

Pipelines Project should have either given a quantitative

estimate of the downstream greenhouse emissions that will

result from burning the natural gas that the pipelines will

transport or explained more specifically why it could not have

done so. As we have noted, greenhouse-gas emissions are an

indirect effect of authorizing this project, which FERC could

reasonably foresee, and which the agency has legal authority to

mitigate. See 15 U.S.C. § 717f(e). The EIS accordingly needed

to include a discussion of the “significance” of this indirect

effect, see 40 C.F.R. § 1502.16(b), as well as “the incremental

impact of the action when added to other past, present, and

reasonably foreseeable future actions,” see WildEarth

Guardians, 738 F.3d at 309 (quoting 40 C.F.R. § 1508.7).

Quantification would permit the agency to compare the

emissions from this project to emissions from other projects, to

total emissions from the state or the region, or to regional or

national emissions-control goals. Without such comparisons, it

is difficult to see how FERC could engage in “informed

decision making” with respect to the greenhouse-gas effects of

this project, or how “informed public comment” could be

possible. See Nevada, 457 F.3d at 93; see also WildEarth

Guardians, 738 F.3d at 309 (accepting an agency’s contention

that the “estimated level of [greenhouse-gas] emissions can

serve as a reasonable proxy for assessing potential climate

change impacts, and provide decision makers and the public

25

with useful information for a reasoned choice among

alternatives”).

We do not hold that quantification of greenhouse-gas

emissions is required every time those emissions are an indirect

effect of an agency action. We understand that in some cases

quantification may not be feasible. See, e.g., Sierra Club v. U.S.

Dep’t of Energy, --- F.3d ---, No. 15-1489, slip op. at 22 (D.C.

Cir. Aug. 15, 2017). But FERC has not provided a satisfactory

explanation for why this is such a case. We understand that

“emission estimates would be largely influenced by

assumptions rather than direct parameters about the project,”

see J.A. 916, but some educated assumptions are inevitable in

the NEPA process, see Scientists’ Inst. for Pub. Info. v. Atomic

Energy Comm’n, 481 F.2d 1079, 1092 (D.C. Cir. 1973). And

the effects of assumptions on estimates can be checked by

disclosing those assumptions so that readers can take the

resulting estimates with the appropriate amount of salt. See

WildEarth Guardians, 738 F.3d at 309 (approving an EIS that

took this approach).

Nor is FERC excused from making emissions estimates

just because the emissions in question might be partially offset

by reductions elsewhere. We thus do not agree that the EIS was

absolved from estimating carbon emissions by the fact that

some of the new pipelines’ transport capacity will make it

possible for utilities to retire dirtier, coal-fired plants. The

effects an EIS is required to cover “include those resulting from

actions which may have both beneficial and detrimental

effects, even if on balance the agency believes that the effect

will be beneficial.” 40 C.F.R. § 1508.8. In other words, when

an agency thinks the good consequences of a project will

outweigh the bad, the agency still needs to discuss both the

good and the bad. In any case, the EIS itself acknowledges that

26

only “portions” of the pipelines’ capacity will be employed to

reduce coal consumption. See J.A. 916. An agency

decisionmaker reviewing this EIS would thus have no way of

knowing whether total emissions, on net, will be reduced or

increased by this project, or what the degree of reduction or

increase will be. In this respect, then, the EIS fails to fulfill its

primary purpose.

We also recognize that the power plants in question will

be subject to “state and federal air permitting processes.” J.A.

917. But even if we assume that power plants’ greenhouse-gas

emissions will be subject to regulation in the future, see Exec.

Order No. 13,783, § 4(a), 82 Fed. Reg. 16,093, 16,095 (Mar.

28, 2017) (instructing the EPA administrator to consider

“whether to revise or withdraw” federal regulation of these

emissions), the existence of permit requirements overseen by

another federal agency or state permitting authority cannot

substitute for a proper NEPA analysis. See Calvert Cliffs’

Coordinating Comm. v. Atomic Energy Comm’n, 449 F.2d

1109, 1122-23 (D.C. Cir. 1971). In any event, FERC quantified

the project’s expected emissions of other air pollutants, despite

the fact that the project will presumably comply with the

requirements of the Clean Air Act and state air-pollution laws.

Our discussion so far has explained that FERC must either

quantify and consider the project’s downstream carbon

emissions or explain in more detail why it cannot do so. Sierra

Club proposes a further analytical step. The EIS might have

tried to link those downstream carbon emissions to particular

climate impacts, like a rise in the sea level or an increased risk

of severe storms. The EIS explained that there is no standard

methodology for making this sort of prediction. Cf. WildEarth

Guardians, 738 F.3d at 309 (“[C]urrent science does not allow

for the specificity demanded” by environmental challengers.).

27

In its rehearing request, Sierra Club asked FERC to convert

emissions estimates to concrete harms by way of the Social

Cost of Carbon. This tool, developed by an interagency

working group, attempts to value in dollars the long-term harm

done by each ton of carbon emitted. But FERC has argued in a

previous EIS that the Social Cost of Carbon is not useful for

NEPA purposes, because several of its components are

contested and because not every harm it accounts for is

necessarily “significant” within the meaning of NEPA. See

EarthReports, 828 F.3d at 956. We do not decide whether those

arguments are applicable in this case as well, because FERC

did not include them in the EIS that is now before us. On

remand, FERC should explain in the EIS, as an aid to the

relevant decisionmakers, whether the position on the Social

Cost of Carbon that the agency took in EarthReports still holds,

and why.

C

GBA Associates alleges two further flaws in the EIS, but

we find neither charge persuasive.

First, the landowners contend that “FERC has erroneously

limited the scope of its examination of alternatives” to the

proposed project. GBA Assocs. Br. 21. However, GBA

provides no arguments in support of this claim, nor does it cite

any reasonable alternatives that FERC failed to consider. As

the agency explained, the EIS considered, and ultimately

rejected, twelve major route alternatives, as well as the “no

action” alternative. We defer to the agency’s discussion of

alternatives, and uphold it “so long as the alternatives are

reasonable and the agency discusses them in reasonable detail.”

Citizens Against Burlington, 938 F.2d at 196. GBA has given

us no reason to reach any other conclusion here.

28

GBA also accuses FERC of giving too little consideration

to the safety risks involved in the construction of the pipeline,

and specifically to the fact that in some places, new pipeline

will cross, or run alongside, existing pipeline. As GBA’s own

brief recognizes, though, the EIS recognized and discussed the

risk of pipeline crossings, ultimately concluding that some

crossings were necessary to minimize impacts on natural

resources and homes. GBA’s only response is that commenters,

including the owner of one of the existing pipelines, submitted

letters to FERC expressing safety concerns. But the EIS

responded to those comments, and GBA does not explain why

the responses were insufficient. Again, NEPA does not require

a particular substantive result, like the elimination of all

pipeline crossings; it only requires the agency to take a “hard

look” at the problem. This FERC has done.

IV

All of these pipelines, of course, are being built for a

reason: to make a profit for their shareholders, and their

shareholders’ shareholders. But the profits they can make are

constrained by the Natural Gas Act, the “fundamental purpose”

of which “is to protect natural gas consumers from the

monopoly power of natural gas pipelines.” Nat’l Fuel Gas

Supply Corp. v. FERC, 468 F.3d 831, 833 (D.C. Cir. 2006).

FERC carries out that purpose by, among other duties,

regulating the rates that a newly authorized pipeline can charge

its customers. See Atl. Ref. Co. v. Pub. Serv. Comm’n, 360 U.S.

378, 388-91 (1959). The rate derives from a complicated

calculation that boils down to three elements: (1) the pipeline’s

cost of doing business; (2) the “rate base,” which is roughly the

total value of the pipeline’s assets; and (3) a rate of return,

calculated as a percentage of the rate base, that is “sufficient to

29

ensure that pipeline investors are fairly compensated.” See N.C.

Utils. Comm’n v. FERC (NCUC), 42 F.3d 659, 661 (D.C. Cir.

1994). These three factors, together, determine the total amount

of revenue that a pipeline is entitled to earn through the rates it

charges its customers. See id. 10

Drilling down further, we can see that the rate of return

itself has two main components. Like most businesses, a

pipeline company is funded by both equity (i.e., investments

made by shareholders) and debt. See NCUC, 42 F.3d at 661. A

pipeline’s ratio of equity financing to debt financing is called

its “capital structure.” See id. Typically, equity investors will

earn a higher rate of return than debt investors (i.e., creditors)

because an equity investment is riskier. See id. at 664;

MarkWest Pioneer, LLC, 125 FERC ¶ 61,165, at ¶ 27 (2008).

Therefore, all else being equal, the more a pipeline’s financing

takes the form of equity, the greater the total amount the

pipeline will pay its investors, and the higher its rates will be.

See MarkWest, 125 FERC ¶ 61,165, at ¶ 27. At the same time,

the more indebted a pipeline is, the greater the risk to its equity

investors, and the greater the return they will expect. See

NCUC, 42 F.3d at 664. So, deciding on the capital structure,

rate of return on equity, and rate of return on debt for a pipeline

becomes a delicate balancing act.

In its original application for a Section 7 certificate, Sabal

Trail sought to design its rates based on a capital structure with

60% equity and 40% debt. It anticipated that the interest rate

10

For a highly simplified illustration, suppose that the rate base

is $1 billion and the rate of return allowed is 10%. In that case, the

pipeline can earn a total annual return of $100 million. Thus, if the

pipeline’s annual costs are $150 million, then the pipeline can collect

total annual revenues of $250 million, and can set its rates

accordingly.

30

on its debt would be 6.2%, and proposed to pay a 14% return

to its equity investors. The weighted average of those two rates

would yield an overall rate of return of 10.88%.

FERC, however, felt that a 14% rate of return on equity

was too high for a pipeline with only 40% debt. (Recall that a

high rate of return must be justified by a high investment risk,

and that pipelines with less debt are less risky for equity

investors.) The agency explained that Sabal Trail could design

its rates around a 14% return on equity if it wanted to, but only

if it also changed the proposed capital structure. With a 50%

equity/50% debt capital structure, FERC explained, a 14% rate

of return on equity would be reasonable.

Sierra Club objects to FERC’s decision to allow Sabal

Trail to base its rates on a “hypothetical capital structure.” It

argues that, having concluded that Sabal Trail’s proposed

return on equity was too high, FERC should have either cut the

rate of return or denied the pipeline a certificate altogether. We

review FERC’s capital-structure decision under the deferential

standard of the Administrative Procedure Act, and may disturb

that decision only if it is “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.” See

NCUC, 42 F.3d at 663 (quoting 5 U.S.C. § 706(2)(A)).

We think that FERC adequately explained its decision to

allow Sabal Trail to employ a hypothetical capital structure.

FERC’s job, when evaluating a proposed rate for a new

pipeline, is to see that the pipeline’s investors receive a

reasonable, but not excessive, return on their investment. See

id. at 661. The returns must be proportionate to the business

and financial risk the investors take on: more risk, more reward.

See id.; MarkWest, 125 FERC ¶ 61,165, at ¶ 27. In the case of

pipeline financing, as discussed above, the “risk” for investors

31

depends in part on the pipeline’s level of indebtedness, and the

“reward” is the return on equity. If the risk and reward are out

of alignment, there are two ways to fix the problem: decrease

the reward by lowering the return on equity, or increase the risk

by increasing the pipeline’s debt level. FERC determined that

with a 14% return on equity, and only 40% debt, the risk and

reward would be out of alignment. As FERC explained, by

imposing a hypothetical capital structure that raised the debt

level to 50%, the agency brought the risk and reward into sync.

Sierra Club’s objection stems, in part, from a

misunderstanding of FERC’s role in the rate-setting process.

FERC does not directly control either the pipeline’s return on

equity or its capital structure. FERC merely approves the initial

rates the pipeline will charge, a price that is based in part on an

anticipated return on equity and an anticipated debt level. See

NCUC, 42 F.3d at 661, 664; MarkWest, 125 FERC ¶ 61,165, at

¶¶ 26-27. So whichever methodology FERC chooses for

ensuring that risk matches reward—lowering the hypothetical

return on equity, or raising the hypothetical debt—the practical

effect is the same: FERC requires the pipeline to charge a lower

rate than it had originally requested.

Nothing in our precedent is to the contrary. Sierra Club

claims that in NCUC we disapproved FERC’s use of a

hypothetical capital structure. That’s true, but our reasoning

there is inapposite here. In that case FERC had used a

hypothetical capital structure to increase, rather than decrease,

the rates the pipeline could charge, and to “mask an otherwise

anomalous[ly high] return as something more appealing.” See

42 F.3d at 664. We expressly recognized, however, that FERC

is allowed to do the opposite: use a hypothetical capital

structure to decrease a pipeline’s proposed rates, in the interest

of consumer protection. See id. FERC has done just that here.

32

FERC also acted consistently with its own precedent. Its

approach in this case was identical to its order in MarkWest.

See 125 FERC ¶ 61,165, at ¶¶ 26-27. There, too, a pipeline

proposed a 14% return on equity and a capital structure with

60% equity and 40% debt. FERC saw the proposed return on

equity as too high, and rectified the situation by applying a

hypothetical capital structure with 50% equity and 50% debt.

See id. Sierra Club also points to Panhandle Eastern Pipe Line

Co., 71 FERC ¶ 61,228 (1995), where FERC explained that its

“policy is to use the actual capital structure of the entity that

does the financing for the regulated pipeline,” id. at 61,827

(emphasis added). But in Panhandle Eastern FERC promoted

a flexible approach, noting that it “may use a different capital

structure where the actual capital structure is not representative

of the pipeline’s risk profile.” See id. at 61,828. Panhandle

Eastern was also decided under section 4 of the Act (which

governs existing pipelines), rather than section 7 (new

pipelines), and so is silent on what to do when a pipeline does

not yet have an “actual capital structure.” Id. at 61,822, 61,827-

28. Pine Needle LNG Co., 77 FERC ¶ 61,229 (1996), is also

cited by Sierra Club but supports FERC’s position, because it

confirms that FERC has the option to “resort to a hypothetical

capital structure if the equity ratio of the actual capitalization is

abnormally high,” id. at 61,916.

Though we see nothing arbitrary or capricious in FERC’s

choice to use a hypothetical capital structure in rate-setting,

substantial evidence must support the capital structure FERC

ultimately uses in the rate calculation, hypothetical or not. See

NCUC, 42 F.3d at 663. FERC explained that a 14% return on

equity, combined with a 50% equity/50% debt capital structure,

was justified because FERC had approved the same

combination of capital structure and return on equity in prior

33

cases. We confess to being skeptical that a bare citation to

precedent, derived from another case and another pipeline,

qualifies as the requisite “substantial evidence.” See NCUC, 42

F.3d at 664 (citing Maine Pub. Serv. Co. v. FERC, 964 F.2d 5,

9 (D.C. Cir. 1992), for the proposition that “FERC’s use of a

particular percentage in a ratemaking calculation was not

adequately justified by citation of a prior use of the same

percentage without further reasoning or explanation”).

However, Sierra Club does not make this argument in its

opening brief, confining itself to attacking the use of a

hypothetical capital structure more generally. See Sierra Club

Opening Br. 43 (“FERC has not stated an adequate explanation

for allowing a high rate of return based upon a hypothetical

capital structure.”); see also, e.g., Fox v. Gov’t of Dist. of

Columbia, 794 F.3d 25, 30 (D.C. Cir. 2015) (“[W]here a

litigant has forfeited an argument by not raising it in the

opening brief, we need not reach it.”). On the arguments

presented to us, we see no basis for setting aside FERC’s

ratemaking determination.

V

We turn to GBA’s two remaining arguments, both of

which we find unavailing.

The landowners challenge FERC’s conclusion that the

Southeast Market Pipelines Project will serve the public

convenience and necessity. As mentioned previously, a finding

that a proposed natural-gas pipeline “is or will be required by

the present or future public convenience and necessity” is a

prerequisite for FERC certification. See 15 U.S.C. § 717f(e).

The “public convenience and necessity” analysis has two

components. First, the applicant must show that the project will

34

“stand on its own financially” because it meets a “market

need.” See Myersville, 783 F.3d at 1309 (internal quotation

marks omitted). The applicant can make this showing by

presenting evidence of “preconstruction contracts” for gas

transportation service. If FERC finds market need, it will then

proceed to balance the benefits and harms of the project, and

will grant the certificate if the former outweigh the latter. See

id.

The landowner petitioners take issue with FERC’s market-

need analysis, alleging that this project serves only the profit

motive of the pipeline developers, rather than any public need.

See GBA Opening Br. 28. That argument misunderstands our

test. The criterion is “market need”—whether the pipelines will

be self-supporting—which the applicants here satisfied by

showing that 93% of their capacity has already been contracted

for. The landowners also assert that the pipeline will be

“redundant as it largely parallels existing pipelines,” see GBA

Opening Br. 29, but as FERC found, and the petitioners do not

refute, the “expansion of existing pipelines will not satisfy the

identified need,” see J.A. 1101.

The landowner petitioners also assert that FERC violated

the Government in the Sunshine Act, 5 U.S.C. § 552b, by

approving the pipelines’ certificates via notational voting, a

procedure where the members of a multimember agency cast

their votes individually and separately, rather than at a public

meeting. But we have expressly approved of notational voting,

and held it to be consistent with the Sunshine Act, on multiple

occasions. See R.R. Comm’n of Tex. v. United States, 765 F.2d

221, 230-31 (D.C. Cir. 1985) (citing cases). “The Sunshine Act

does not require that meetings be held in order to conduct

agency business; rather, that statute requires only that, if

meetings are held, they be open to the public.” Id. at 230

35

(emphasis added). GBA also suggests that there should be a

presumption that meetings are required when controversial

issues are under consideration, but we have rejected that exact

argument as well. See id.

VI

The petition for review in No. 16-1329 is granted. The

orders under review are vacated and remanded to FERC for the

preparation of an environmental impact statement that is

consistent with this opinion. The petition for review in No. 16-

1387 is denied.

So ordered.

BROWN, Circuit Judge, concurring in part and dissenting

in part: I join today’s opinion on all issues save the Court’s

decision to vacate and remand the pipeline certificates on the

issue of downstream greenhouse emissions. Case law is clear:

When an agency “‘has no ability to prevent a certain effect due

to’ [its] ‘limited statutory authority over the relevant action[],’

then that action ‘cannot be considered a legally relevant

cause’” of an indirect environmental effect under the National

Environmental Policy Act (“NEPA”). Sierra Club (Freeport)

v. FERC, 827 F.3d 36, 47 (D.C. Cir. 2016) (quoting Dep’t of

Transp. v. Pub. Citizen, 541 U.S. 752, 770 (2004)). Thus, when

the occurrence of an indirect environmental effect is contingent

upon the issuance of a license from a separate agency, the

agency under review is not required to address those indirect

effects in its NEPA analysis. Although this case seems

indistinguishable from earlier precedent, the Court now insists

the action taken by the Federal Energy Regulatory Commission

(“FERC” or “the Commission”) is the cause of an

environmental effect, even though the agency has no authority

to prevent the effect. But see Pub. Citizen, 541 U.S. at 767

(holding “but for” causation is insufficient to make an agency

responsible for a particular effect under NEPA). More

significantly, today’s opinion completely omits any discussion

of the role Florida’s state agencies play in the construction and

expansion of power plants within the state—a question that

should be dispositive. Because the Court’s holding is legally

incorrect and contravenes our duty to examine all arguments

presented, I respectfully dissent.

When examining a NEPA claim, our role is limited to

ensuring the relevant agency took a “hard look at the

environmental consequences” of its decisions and “adequately

considered and disclosed the environmental impact of its

actions.” Balt. Gas & Elec. Co. v. Nat. Res. Def. Council, 462

U.S. 87, 97–98 (1983). We examine the agency’s

determinations under the “deferential rule of reason,” which

governs which environmental impacts the agency must discuss

2

and the “extent to which it must discuss them.” WildEarth

Guardians v. Jewell, 738 F.3d 298, 310 (D.C. Cir. 2013).

FERC thus has broad discretion to determine “whether and to

what extent to [discuss environmental impacts] based on the

usefulness of any new potential information to [its]

decisionmaking process.” Pub. Citizen, 541 U.S. at 767. Here,

FERC declined to engage in an in-depth examination of

downstream greenhouse gas emissions because there is no

causal relationship between approval of the proposed pipelines

and the downstream greenhouse emissions; and, even if a

causal relationship exists, any additional analysis would not

meaningfully contribute to its decisionmaking. Both

determinations were reasonable and entitled to deference.

Regarding causation, the Court is correct that NEPA

requires an environmental analysis to include indirect effects

that are “reasonably foreseeable,” Freeport, 827 F.3d at 46, but

it misunderstands what qualifies as reasonably foreseeable.

The Court blithely asserts it is “not just the journey,” it is “also

the destination.” Maj. Op. at 18. In fact, NEPA is a procedural

statute that is all about the journey. It compels agencies to

consider all environmental effects likely to result from the

project under review, but it “does not dictate particular

decisional outcomes.” Sierra Club v. U.S. Army Corps of

Engineers, 803 F.3d 31, 37 (D.C. Cir. 2015) (emphasis added).

The statute therefore “requires a reasonably close causal

relationship between the environmental effect and the alleged

cause” that is “akin to proximate cause in tort law.” Pub.

Citizen, 541 U.S. at 754, 767. Thus, the fact that the

Commission’s action is a “but for” cause of an environmental

effect is insufficient to make it responsible for a particular

environmental effect. Id. Instead, the effect must be

“sufficiently likely to occur that a person of ordinary prudence

would take it into account in reaching a decision.” Freeport,

827 F.3d at 47. There is a further caveat: An effect the agency

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is powerless to prevent does not fall within NEPA’s ambit.

Here, the Commission explained in its denial of rehearing that

any “environmental effects resulting from end use emissions

from natural gas consumption are generally neither caused by

a proposed pipeline (or other natural gas infrastructure) project

nor are they reasonably foreseeable consequences of our

approval of an infrastructure project.” JA 1330. FERC’s

conclusion is both logical and consistent with this Court’s

precedent. While the Court concludes FERC’s approval of the

proposed pipelines will be the cause of greenhouse gas

emissions because a significant portion of the natural gas

transported through the pipeline will be burned at power plants,

see Maj. Op. at 19, the truth is that FERC has no control over

whether the power plants that will emit these greenhouse gases

will come into existence or remain in operation.

In several recent cases, petitioners sought review of a

downstream environmental effect that fell within the oversight

of another agency. We held the occurrence of a downstream

environmental effect, contingent upon the issuance of a license

from another agency with the sole authority to authorize the

source of those downstream effects, cannot be attributed to the

Commission; its actions “cannot be considered a legally

relevant cause of the effect for NEPA purposes.” See Freeport,

827 F.3d at 47; Sierra Club (Sabine Pass) v. FERC, 827 F.3d

59, 68 (D.C. Cir. 2016); EarthReports, Inc. v. FERC, 828 F.3d

949, 952 (D.C. Cir. 2016); see also Sierra Club v. FERC, 672

F. App’x 38, 39 (D.C. Cir. 2016). In Freeport, for example,

the petitioners argued the Commission failed to adequately

consider the downstream greenhouse gas emissions that would

result from increased exports of natural gas because the

Commission authorized construction of a natural gas export

facility. We said the Commission’s NEPA analysis did not

have to address these downstream effects because the

Department of Energy (“DOE”) had the “sole authority to

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license the export of any natural gas going through [the export

facility].” See Freeport, 827 F.3d at 47; see also EarthReports,

828 F.3d at 955. Relying on binding precedent from the

Supreme Court, we reasoned causation could not exist where

an agency “‘has no ability to prevent a certain effect due to’

that agency’s ‘limited statutory authority over the relevant

action.’” Freeport, 827 F.3d at 47 (quoting Pub. Citizen, 541

U.S. at 770) (alteration omitted); see also EarthReports, 828

F.3d at 955.

This case presents virtually identical circumstances.

Under the Florida Electrical Power Plant Siting Act, “a power

plant cannot be built unless a site certification is obtained” from

the Florida Power Plant Siting Board (“the Board”). Ecodyne

Cooling Div. of Ecodyne Corp. v. City of Lakeland, 893 F.2d

297, 299 (11th Cir. 1990) (citing Fla. Stat. §§ 403.506,

403.511). “Such certification constitutes the sole license for a

power plant’s construction and operation.” Id. (citing Fla. Stat.

§ 403.511); see also Seminole Tribe of Fla. v. Hendry Cty., 114

So. 3d 1073, 1075 (Fla. Dist. Ct. App. 2013) (“It is clear from

this statutory language that the [Florida Electrical Power Plant

Siting Act] is a centrally coordinated, one-stop licensing

process.”). Accordingly, no power plant is built or expanded

in the state of Florida—and consequently no greenhouse gases

are emitted from Florida power plants—without the Board’s

approval. See Fla. Stat. § 403.506(1) (stating no power plant

may be constructed or expanded “without first obtaining

certification” from the Board). This breaks the chain of

causation. See Pub. Citizen, 541 U.S. at 754 (analogizing the

NEPA causal relationship to “proximate cause in tort law”).

NEPA does not require FERC to address indirect

environmental effects resulting from the Board’s licensing

decision. See Freeport, 827 F.3d at 47–48 (holding the

Commission need not address downstream environmental

effects if “triggering [the] chain of events” leading to those

5

effects requires the “critical . . . intervening action” of another

agency).

Despite this clearly-controlling case law and the exclusive

authority of the state Board to license the construction and

expansion of power plants in Florida, the Court concludes

FERC’s approval of the pipeline is a “legally relevant cause”

of the greenhouse gas emissions from the Florida power plants.

See Maj. Op. at 23. But its attempt to explain why NEPA

operates more expansively when applied to pipelines compared

to export terminals, as well as its arguments as to why the

Florida Board should be treated differently than DOE under

NEPA, are both ultimately unpersuasive. Both projects qualify

as “major [f]ederal actions significantly affecting the quality of

the human environment,” 42 U.S.C. § 4332(C), so there is no

reason why NEPA’s requirement to consider indirect

environmental effects would not apply equally to both.

Moreover, nothing in the statutory language empowering the

Commission to regulate export terminals and pipelines

suggests the Commission’s authority is more limited in one

circumstance than another. Congress has granted the

Commission “the exclusive authority to approve or deny an

application for the siting, construction, expansion, or operation

of an [export] terminal,” 15 U.S.C. § 717b(e)(1), and to impose

any conditions on those terminals the Commission finds to be

“necessary or appropriate,” id. § 717b(e)(3)(A). Thus, the

Commission has the power to approve or deny the construction

and operation of export terminals subject to any conditions it

wishes to impose. Likewise, Congress requires any applicant

seeking to construct or extend natural gas transportation

facilities to obtain a “certificate of public convenience and

necessity” from the Commission. Id. § 717f(c)(1)(A). The

Commission “shall” issue a certificate if “the applicant is able

and willing properly to do the acts and to perform the service

proposed” and if the proposed service or construction “is or

6

will be required by the present or future public convenience and

necessity.” Id. § 717f(e). FERC also has the “power to attach

to the issuance of the certificate . . . such reasonable terms and

conditions as the public convenience and necessity may

require.” Id. Accordingly, nothing in the text of either statute

empowers the Commission to entirely deny the construction of

an export terminal or the issuance of a certificate based solely

on an adverse indirect environmental effect regulated by

another agency. See id. §§ 717b(e), 717f(e).

The actual distinction between this case and the DOE cases

discussed above is doctrinally invisible. We stated in Freeport

that “[i]n the specific circumstances where . . . an agency has

no ability to prevent a certain effect due to that agency’s limited

statutory authority over the relevant action, then that action

cannot be considered a legally relevant ‘cause’ of the effect for

NEPA purposes.” 827 F.3d at 47. Those “specific

circumstances” exist here. FERC’s statutory authority is

limited by the fact that the Board, not FERC, has the “sole

authority” to authorize or prohibit the construction or

expansion of power plants in Florida. See id. at 48. If this

Court wishes to apply the “touchstone of Public Citizen” that

“[a]n agency has no obligation to gather or consider

environmental information if it has no statutory authority to act

on that information,” Maj. Op. at 21, it must consider not only

whether an agency can act, but whether the results of such

action would have an effect on the indirect environmental

impact.

Even if the Court is correct that the Commission has the

power to deny pipeline certificates based on indirect

environmental concerns, such a denial represents the limit of

the Commission’s statutory power. Nothing would prevent the

Florida Board from independently approving the construction

or expansion of the power plants at issue. In fact, the record

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shows the Board has already approved some of these projects

prior to the Commission reaching a decision on the proposed

pipelines. JA 910–11. Moreover, there is also nothing

preventing the Intervenors from pursuing an alternative method

of delivery to account for the same amount of natural gas.

Practical considerations point in the opposite direction. Both

the Board and the Commission have concluded Florida has a

need for additional natural gas, and nothing in today’s opinion

takes issue with those holdings. Additionally, the Commission

has concluded that the failure to take action to address this

natural-gas shortage “could result in . . . fuel shortages” and

“could lead to insufficient energy production to meet expected

demands.” JA 920. Given the dire consequences of failing to

act, it is inconceivable that the Intervenor utility companies

would stand idly by and allow a power crisis to develop. The

much more likely result is that they would simply choose

another alternative—albeit a much more inconvenient,

expensive, and possibly environmentally-harmful

alternative—in response to a denial of a certificate by FERC.

See Oral Arg. Rec. at 59:45–59:50 (stating the Intervenors are

“going to keep the lights on” regardless of whether FERC

approves the pipelines).

Thus, just as FERC in the DOE cases and the Federal

Motor Carrier Safety Administration in Public Citizen did not

have the legal power to prevent certain environmental effects,

the Commission here has no authority to prevent the emission

of greenhouse gases through newly-constructed or expanded

power plants approved by the Board. To be sure, the

Commission could make it extremely inconvenient to deliver

the same amount of natural gas to the plants, but this is an issue

of practicality, which, as conceded by the majority, is irrelevant

under NEPA. See Maj. Op. at 23. Accordingly, the

Commission was not obligated under NEPA to discuss

8

downstream greenhouse gas emissions, and I would deny the

entire petition for review.