Environmental Defense Fund v. FERC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 2021 Decided June 22, 2021

No. 20-1016

ENVIRONMENTAL DEFENSE FUND,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

SPIRE MISSOURI INC. AND SPIRE STL PIPELINE LLC,

INTERVENORS

Consolidated with 20-1017

On Petitions for Review of Orders

of the Federal Energy Regulatory Commission

Natalie M. Karas argued the cause for petitioner

Environmental Defense Fund. With her on the briefs were Erin

Murphy, Jason T. Gray, Kathleen L. Mazure, Matthew L. Bly,

and Sean H. Donahue.

Henry B. Robertson argued the cause and filed the briefs

for petitioner Juli Steck.

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Jennifer Danis and Edward Lloyd were on the brief for

amicus curiae Dr. Susan Tierney in support of petitioners.

Randy M. Stutz was on the brief for amicus curiae the

American Antitrust Institute in support of petitioners.

Anand R. Viswanathan, Attorney, Federal Energy

Regulatory Commission, argued the cause for respondent.

With him on the brief were David L. Morenoff, Acting General

Counsel, and Robert H. Solomon, Solicitor.

Jonathan S. Franklin argued the cause for intervenors

Spire STL Pipeline LLC and Spire Missouri Inc. in support of

respondent. With him on the brief were Christopher J. Barr,

Jessica R. Rogers, Matthew J. Aplington, Thomas E. Hirsch III,

David T. Kearns, Daniel Archuleta, and Sean P. Jamieson.

Paul Korman, Michael R. Pincus, and Michael Diamond

were on the brief for amicus curiae Interstate Natural Gas

Association of America in support of respondent.

Before: TATEL and MILLETT, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

EDWARDS.

EDWARDS, Senior Circuit Judge: In the action leading to

this petition for review, the Federal Energy Regulatory

Commission (the “Commission” or “FERC”) issued a

certificate of public convenience and necessity (“Certificate”)

under section 7(c) of the Natural Gas Act, 15 U.S.C.

§ 717f(c)(1)(A), to Intervenor-Respondent Spire STL Pipeline

LLC (“Spire STL”) to construct a new natural gas pipeline in

the St. Louis area. The Commission may issue such a

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Certificate only if it finds that construction of the new pipeline

“is or will be required by the present or future public

convenience and necessity.” Id. § 717f(e).

Pursuant to the Commission’s “Certificate Policy

Statement,” Certification of New Interstate Natural Gas

Pipeline Facilities, 88 FERC ¶ 61,227 (Sept. 15,

1999), clarified, 90 FERC ¶ 61,128 (Feb. 9, 2000), further

clarified, 92 FERC ¶ 61,094 (July 28, 2000), FERC first

considers whether there is a market need for the proposed

project. If there is a need for the pipeline, FERC then

determines whether there will be adverse impacts on “existing

customers of the pipeline proposing the project, existing

pipelines in the market and their captive customers, or

landowners and communities affected by the route of the new

pipeline.” Id. at 61,745. If adverse impacts on these

stakeholders will result, the Commission “balanc[es] the

evidence of public benefits to be achieved against the residual

adverse effects.” Id. In analyzing the need for a particular

project, the Certificate Policy Statement makes it clear that the

Commission will “consider all relevant factors.” See id. at

61,747 (emphasis added).

The issue in this case arose in 2016, when Spire STL

announced its intent to build a pipeline in the St. Louis

metropolitan area. In August of that year, Spire STL held an

“open season” during which it invited natural gas “shippers” to

enter into preconstruction contracts, also known as “precedent

agreements,” for the natural gas the pipeline would transport.

But no shippers committed to the project during the open

season. Instead, after the open season finished without any

takers, Spire STL privately entered into a precedent agreement

with one of its affiliates, Laclede Gas Company – now known

as Intervenor-Respondent Spire Missouri Inc. (“Spire

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Missouri”) – for just 87.5 percent of the pipeline’s projected

capacity.

In January 2017, Spire STL applied to the Commission for

a Certificate. It conceded that the proposed pipeline was not

being built to serve new load, as natural gas demand in the St.

Louis area is projected to stay relatively flat for the foreseeable

future. Rather, Spire STL claimed that the pipeline would result

in other benefits, such as enhancing reliability and supply

security, providing access to new sources of natural gas supply,

and eliminating reliance on propane “peak-shaving” during

periods of high demand. As evidence of need, Spire STL

principally relied on its precedent agreement with Spire

Missouri. In September 2017, the Commission – pursuant to its

obligations under the National Environmental Policy Act

(“NEPA”) – released an Environmental Assessment (“EA”) for

construction and operation of the proposed pipeline, finding

that they would have no significant environmental impact.

Petitioner Environmental Defense Fund (“EDF”), along

with several other parties, challenged Spire STL’s Certificate

application. EDF contended, inter alia, that the precedent

agreement between Spire STL and Spire Missouri should have

only limited probative value in FERC’s assessment of Spire

STL’s application because the two companies were corporate

affiliates. In addition, Petitioner Juli Steck, then known as Juli

Viel, contested the efficacy of the EA.

On August 3, 2018, in an Order Issuing Certificates

(“Certificate Order”), FERC granted the authorizations for the

new pipeline. See Joint Appendix (“J.A.”) 932. FERC’s

decision acknowledged that the pipeline was not meant to serve

new load demand. Nevertheless, FERC rejected arguments that

a market study should be undertaken to establish the need for

the project. Rather, the Commission’s decision principally

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focused on the precedent agreement between Spire STL and

Spire Missouri in finding that there was market need for the

project. And the Commission stated that it would not “second

guess” Spire Missouri’s purported “business decision” in

entering into the precedent agreement with Spire STL, even

though the shipper and the pipeline were affiliates. J.A. 968. In

November 2019, by a 2-1 vote, FERC denied requests for

rehearing filed by EDF and Steck. These two parties now seek

review in this court.

EDF asserts that the Commission’s decision to award a

Certificate to Spire STL was arbitrary and capricious because

the Commission uncritically and exclusively relied on the

affiliated precedent agreement to find need and because the

Commission failed to sufficiently justify its conclusion that the

new pipeline’s benefits would outweigh its adverse effects.

Steck, in turn, renews many of her challenges to the

Commission’s environmental analysis, including its EA.

For the reasons explained below, we find that Petitioner

Steck lacks standing to pursue her claims. However, we find no

jurisdictional infirmities in EDF’s petition for review. On the

merits, we agree with EDF that the Commission’s refusal to

seriously engage with nonfrivolous arguments challenging the

probative weight of the affiliated precedent agreement under

the circumstances of this case did not evince reasoned and

principled decisionmaking. In addition, we find that the

Commission ignored record evidence of self-dealing and failed

to seriously and thoroughly conduct the interest-balancing

required by its own Certificate Policy Statement. Therefore,

FERC’s Certificate Order and Order on Rehearing do not

survive scrutiny under the applicable arbitrary and capricious

standard of review. See Minisink Residents for Env’t Pres. &

Safety v. FERC (“Minisink”), 762 F.3d 97, 105-06 (D.C. Cir.

2014). Because “vacatur is the normal remedy” in

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circumstances such as we find in this case, we vacate FERC’s

Orders and remand the case to the Commission for appropriate

action. See Allina Health Servs. v. Sebelius, 746 F.3d 1102,

1110 (D.C. Cir. 2014).

I. BACKGROUND

A. Statutory and Regulatory Background

The Natural Gas Act provides the Commission with

authority “to regulate the transportation and sale of natural gas

in interstate commerce.” City of Oberlin v. FERC, 937 F.3d

599, 602 (D.C. Cir. 2019). To safeguard the public, “Section 7

of the Act requires an entity seeking to construct or extend an

interstate pipeline for the transportation of natural gas to obtain

[a Certificate] from the Commission.” Id. (citing 15 U.S.C.

§ 717f(c)(1)(A)). The Commission may issue Certificates only

if, among other things, it finds that the proposed construction

or extension “is or will be required by the present or future

public convenience and necessity; otherwise such application

shall be denied.” 15 U.S.C. § 717f(e). In deciding whether to

issue Certificates under this standard, the Commission must

“evaluate all factors bearing on the public interest.” Atl. Refin.

Co. v. Pub. Serv. Comm’n of N.Y., 360 U.S. 378, 391 (1959)

(emphasis added). And there is good reason for the

thoroughness and caution mandated by this approach: A

Certificate-holder may exercise eminent domain against any

holdouts in acquiring property rights necessary to complete the

pipeline. 15 U.S.C. § 717f(h).

In its Certificate Policy Statement, the Commission has set

forth the “analytical steps” that guide its dispositions of

Certificate applications. See 88 FERC at 61,745. The first

question the Commission considers is “whether the project can

proceed without subsidies from [the applicant’s] existing

customers.” Id. “To ensure that a project will not be subsidized

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by existing customers, the applicant must show that there is

market need for the project.” Myersville Citizens for a Rural

Cmty., Inc. v. FERC (“Myersville”), 783 F.3d 1301, 1309 (D.C.

Cir. 2015).

If there is market need, the Commission then determines

whether there are likely to be adverse impacts on “existing

customers of the pipeline proposing the project, existing

pipelines in the market and their captive customers, or

landowners and communities affected by the route of the new

pipeline.” 88 FERC at 61,745. If adverse impacts on these

stakeholders will result, “the Commission balances the adverse

effects with the public benefits of the project, as measured by

an ‘economic test.’” Myersville, 783 F.3d at 1309 (quoting 88

FERC at 61,745). “Adverse effects may include increased rates

for preexisting customers, degradation in service, unfair

competition, or negative impact on the environment or

landowners’ property.” Id. (citing 88 FERC at 61,747-48).

Public benefits generally include “meeting unserved demand,

eliminating bottlenecks, access to new supplies, lower costs to

consumers, providing new interconnects that improve the

interstate grid, providing competitive alternatives, increasing

electric reliability, or advancing clean air objectives.” Id.

(quoting 88 FERC at 61,748).

As to market need and interest-balancing, the Certificate

Policy Statement further provides:

Rather than relying only on one test for need, the

Commission will consider all relevant factors

reflecting on the need for the project. These might

include, but would not be limited to, precedent

agreements, demand projections, potential cost

savings to consumers, or a comparison of projected

demand with the amount of capacity currently serving

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the market. The objective would be for the applicant

to make a sufficient showing of the public benefits of

its proposed project to outweigh any residual adverse

effects . . . .

The amount of evidence necessary to establish

the need for a proposed project will depend on the

potential adverse effects of the proposed project on

the relevant interests. Thus, projects to serve new

demand might be approved on a lesser showing of

need and public benefits than those to serve markets

already served by another pipeline. However, the

evidence necessary to establish the need for the

project will usually include a market study. . . . Vague

assertions of public benefits will not be sufficient.

88 FERC at 61,747-48 (emphases added).

The Certificate Policy Statement also specifically

addresses the significance of precedent agreements in

demonstrating need:

Although the Commission traditionally has

required an applicant to present [preconstruction]

contracts to demonstrate need, that policy . . . no

longer reflects the reality of the natural gas industry’s

structure, nor does it appear to minimize the adverse

impacts on any of the relevant interests. Therefore,

although contracts or precedent agreements always

will be important evidence of demand for a project,

the Commission will no longer require an applicant

to present contracts for any specific percentage of the

new capacity. Of course, if an applicant has entered

into contracts or precedent agreements for the

capacity, . . . they would constitute significant

evidence of demand for the project.

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Eliminating a specific contract requirement

reduces the significance of whether the contracts are

with affiliated or unaffiliated shippers, which was the

subject of a number of comments. A project that has

precedent agreements with multiple new customers

may present a greater indication of need than a

project with only a precedent agreement with an

affiliate. The new focus, however, will be on the

impact of the project on the relevant interests balanced

against the benefits to be gained from the project. As

long as the project is built without subsidies from the

existing ratepayers, the fact that it would be used by

affiliated shippers is unlikely to create a rate impact

on existing ratepayers.

Id. at 61,748-49 (emphases added).

B. The Instant Case

For the last two decades, natural gas consumption in the

St. Louis area has been roughly flat. And when the Commission

issued the Certificate Order in this case, all parties agreed that

future demand projections were not expected to increase. See

Certificate Order, J.A. 979 (noting that “[a]ll parties” agreed

that natural gas demand forecasts “for the region are flat for the

foreseeable future”); see also, e.g., J.A. 583 (July 2017 report

prepared by Concentric Energy Advisors on behalf of Spire

Missouri and submitted to the Commission stating that Spire

Missouri “does not expect any significant growth or decline

in . . . forecasted demand over time”); Spire STL Pipeline LLC

Docket Nos. CP17-40-000 and 001 Response to Data Request

at 9, Accession No. 20180313-5193 (Mar. 13, 2018) (Spire

STL submission to the Commission stating that its “gas supply

annual demand requirement” was projected to “remain

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relatively constant” at “average historical usage” levels for the

next 20 years).

As of 2016, five natural gas pipelines served the St. Louis

region. At that time, a majority of Spire Missouri’s natural gas

supply was provided via pipelines owned and operated by

Enable Mississippi River Transmission, LLC (“Enable MRT”).

It is undisputed that, prior to Spire STL’s application in this

case, Spire Missouri had declined to subscribe to proposals for

new natural gas pipelines in the region, stating that the

proposed new pipelines did not make operational and economic

sense for its customers.

In 2016, Spire STL announced its intent to construct a new

natural gas pipeline to serve homes and businesses in the St.

Louis area. Following an amendment to its Certificate

application, the final length of the proposed pipeline was

approximately 65 miles. The initial estimated cost of the

project was approximately $220 million, with a proposed

overall rate of return of 10.5 percent – a return on equity of 14

percent and a cost of debt of seven percent.

Between August 1, 2016 and August 19, 2016, Spire STL

held an “open season,” during which it sought to enter into

precedent agreements with natural gas shippers. After an

unsuccessful open season, Spire STL then entered into a single

precedent agreement with its affiliate, Spire Missouri, for 87.5

percent of the pipeline’s 400,000 dekatherm-per-day transport

capacity. Spire STL indicated that other shippers expressed

interest, but it did not enter precedent agreements with any of

them.

On January 26, 2017, Spire STL applied to the

Commission for a Certificate to begin construction of the

proposed pipeline. The stated purpose of the pipeline was to

“enhance reliability and supply security; reduce reliance upon

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older natural gas pipelines; reduce reliance upon mature natural

gas basins . . . ; and eliminate reliance on propane peak-

shaving infrastructure.” J.A. 89. In particular, the new pipeline

would provide gas from newly accessed sources in the Rocky

Mountains and Appalachian Basin; avoid transecting the New

Madrid Seismic Zone, unlike other pipelines in the area; and

reduce use of propane for “peaking” during periods of high

demand, which purportedly has negative environmental,

operational, and cost-related impacts.

Spire STL made it clear that its new pipeline “was not

[being] developed to serve new demand.” J.A. 265. It further

stated that “conjecture” as to whether Spire Missouri might

“reduce its contract entitlements on other pipelines” as a result

of contracting for capacity on the proposed pipeline “would be

inappropriate.” J.A. 104. The application also asserted that the

proposed project was “the result of a fair process undertaken

by [Spire Missouri] to examine competitive alternatives and

select the one that would best meet its needs.” J.A. 105. In

materials it later submitted to the Commission, Spire Missouri

acknowledged that it used propane peaking on only three days

between 2013 and 2018 – a consecutive three-day period in

January 2014.

Several parties either protested or conditionally protested

Spire STL’s application, including the Missouri Public Service

Commission (the “Missouri Commission”) – a state body that

regulates natural gas shippers – and Enable MRT. In its

conditional protest, the Missouri Commission expressed

skepticism as to the “need for the project,” J.A. 143, while also

urging FERC to undertake a particularly thorough review of the

impact the project might have on customers of existing

pipelines given that “the St. Louis market is static and there is

no demonstrated need . . . for . . . new capacity,” see J.A. 152.

In its protest, Enable MRT claimed that the project “ha[d] been

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shielded from a truly competitive market,” J.A. 155, and that

“where a proposed project does not have precedent agreements

for all of the capacity of the project and the project’s only

precedent agreement is with a single affiliated shipper with

predominantly captive retail customers, the mere existence of

such a precedent agreement is insufficient to show adequate

market demand,” J.A. 161. See also J.A. 181 (“As a[] [shipper]

with captive retail customers, [Spire Missouri] can pass

through to those customers the costs associated with its

contract with Spire [STL]. Rather than pay lower rates to

receive gas from an unaffiliated pipeline, Spire [STL] and

[Spire Missouri] can maximize the revenue and return earned

by their corporate parent by having [Spire Missouri] pay to

receive service from Spire’s Project.”). Enable MRT also

highlighted certain public-facing comments by Spire Missouri

and Spire STL’s corporate parent indicating that construction

of the pipeline would increase shareholder earnings. And in

later submissions to the Commission, Enable MRT asserted

“that the affiliate relationship between [Spire Missouri] and

Spire STL [had] thwarted fair competition,” J.A. 812, and that

economic risks of the pipeline would be shifted onto Spire

Missouri’s “captive ratepayers [for natural gas] and the

ratepayers of pipelines that would experience decontracting

due to” the new pipeline, J.A. 813.

In May 2017, EDF sought to intervene and filed a protest.

It raised several arguments regarding the probative weight of

the precedent agreement between Spire STL and Spire

Missouri in demonstrating market need for the proposed

pipeline, given their affiliated relationship. In particular, EDF

expressed concerns regarding the growing trend for

utility holding companies [to] enter[] into affiliate

transactions whereby the retail utility affiliate

commits to new long term capacity with its pipeline

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developer affiliate. The essence of this financing

structure is to take a cost pass-through for a retail gas

or electric distribution utility – a contract for natural

gas transportation services – and pay those

transportation fees to an affiliated pipeline developer

entitled to accrue return on its investment from that

same revenue. Thus ratepayer costs which may not be

justified by ratepayer demand are being converted

into shareholder return.

J.A. 550 (footnote omitted). EDF also requested that the

Commission “apply heightened scrutiny” to the Certificate

application given the affiliated relationship between Spire STL

and Spire Missouri. See J.A. 556-58; see also J.A. 856

(asserting that “there is a gap . . . between state and federal

regulatory oversight of affiliate precedent agreements, such as

the one Spire STL has submitted in this proceeding to

demonstrate market need”). And it asserted that “[w]here, as

here, there is evidence of self-dealing calling into question the

need for a project, th[e] Commission should take steps to

ensure that customers are protected.” J.A. 558; see also J.A.

559 (explaining why “record evidence” should have resulted in

“enhanced regulatory scrutiny” in this case); J.A. 855

(reiterating “that the pursuit of earnings growth must be

balanced against the inherent risk to customers embedded in

[this] affiliate transaction”).

In September 2017, Commission staff published an

Environmental Assessment for the proposed pipeline,

including their finding of no significant impact from

constructing and operating the pipeline. In reaching that

conclusion, the EA noted that the pipeline “was not developed

to serve new demand.” J.A. 765, 768.

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On October 30, 2017, Petitioner Steck moved to intervene.

In comments to the Commission, she alleged that there were

several deficiencies in the EA, “particularly in its treatment of

the purpose and need for the project and of climate change.”

J.A. 791. She therefore requested preparation of either a full

Environmental Impact Statement or a revised EA.

On August 3, 2018, by a 3-2 vote, the Commission issued

the Certificate Order, granting a Certificate to Spire STL.

Therein, the Commission referenced the concerns of the

protestors and intervenors regarding the affiliated precedent

agreement, see, e.g., J.A. 938-40, 944-47, 950-51, and noted

that “[a]ll parties, including Spire, agree that the new capacity

is not meant to serve new demand, as load forecasts for the

region are flat for the foreseeable future,” J.A. 979. The

Commission also found that data provided by Spire STL and

Enable MRT “show[ed] that the difference in the cost of gas

delivered to Spire Missouri via the proposed [pipeline] as

compared with gas accessed via” current pipelines “was not

materially significant.” J.A. 980.

The Commission purported to apply the Certificate Policy

Statement in reaching its decision. See J.A. 940-41; see also

J.A. 941 n.31 (“[T]he current Certificate Policy Statement

remains in effect and will be applied to natural gas certificate

proceedings pending before the Commission as appropriate.”

(citation omitted)). However, the Commission’s decision

appeared to rely entirely on the precedent agreement between

Spire STL and Spire Missouri in finding that there was market

need for the project. See J.A. 963 (“The fact that Spire Missouri

is affiliated with the project’s sponsor does not require the

Commission to look behind the precedent agreements to

evaluate project need. . . . [T]he Commission may reasonably

accept the market need reflected by the applicant’s existing

contracts with shippers and not look behind those contracts to

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establish need.” (footnotes omitted)); J.A. 967 (“We disagree

with [Enable] MRT’s stance that the mere existence of a

precedent agreement is insufficient to show adequate market

demand when a project is subscribed by affiliates for less than

the full project capacity.” (footnote and internal quotation

marks omitted)). FERC also explicitly rejected calls for a

market study to assess the need for a new pipeline. See J.A.

966-67. And it dismissed arguments that Spire STL had

engaged in anticompetitive behavior, while finding that

whether Spire Missouri or its corporate parent had engaged in

anticompetitive behavior was irrelevant to its determination.

Rather, according to the Commission, any concerns regarding

anticompetitive behavior could only be addressed by the

Missouri Commission, as “Spire Missouri is not regulated by

this Commission and thus we have no authority to dictate its

practices for procuring services.” J.A. 964.

The Commission explained that it was generally unwilling

to consider arguments raising “issues fall[ing] within the scope

of the business decision of a shipper,” even if the shipper and

the pipeline were affiliates. J.A. 968; see also J.A. 943 (“The

Commission is not in the position to evaluate Spire Missouri’s

business decision to enter a contract with Spire [STL] for

natural gas transportation, which . . . will be evaluated by the

[Missouri Commission].”). In particular, FERC was unwilling

to assess the challenges that protestors had raised questioning

the purported justifications that Spire STL had offered in

support of the proposed new pipeline. As the Commission

phrased it:

The lengthy arguments the protestors make regarding

whether Spire Missouri should have chosen to utilize

existing infrastructure to meet the project purposes or

committed to capacity on previously proposed

projects, whether retiring Spire Missouri’s propane

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peaking facilities and replacing them with capacity

from the [proposed pipeline] is a cost effective

approach, whether choosing a transportation path that

avoids the New Madrid fault is unnecessarily

cautious, and even, in the first instance, the extent to

which the [proposed pipeline] will provide economic

and rate benefits to Spire Missouri’s customers, all go

to the reasonableness and prudence of Spire

Missouri’s decision to switch transportation

providers.

J.A. 968. As to why Spire Missouri had declined to subscribe

to, or otherwise endorse, “prior failed [pipeline] projects” in the

area, the Commission found that such questions were “not

necessarily relevant to [its] decision” and explicitly declined to

resolve any related factual questions. See J.A. 968-69.

Regarding its balancing of the benefits and adverse

impacts of the project, the Commission, without deeper

analysis, simply concluded

that the benefits that the [proposed pipeline] will

provide to the market, including enhanced access to

diverse supply sources and the fostering of

competitive alternatives, outweigh the potential

adverse effects on existing shippers, other pipelines

and their captive customers, and landowners or

surrounding communities. Consistent with the criteria

discussed in the Certificate Policy Statement and

[Natural Gas Act] section 7(e), . . . we find that the

public convenience and necessity requires approval of

Spire [STL]’s proposal.

J.A. 986.

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Finally, the Commission rejected the vast majority of

challenges to its Environmental Assessment, including those of

Petitioner Steck.

Commissioners LaFleur and Glick dissented. Both

believed that the Commission should have looked behind and

beyond the precedent agreement in evaluating market need,

given the facts of the case and the affiliated nature of the two

Spire entities. Commissioner Glick noted that “[t]here are

several potential business reasons why [Spire STL]’s corporate

parent might prefer to own a pipeline rather than simply take

service on it, such as the prospect of earning a 14 percent return

on equity rather than paying rates to [Enable] MRT or another

pipeline company.” J.A. 1058. In addition, both dissenting

Commissioners would have found that adverse impacts of the

proposed pipeline outweighed benefits.

Several parties filed rehearing requests, including Steck on

August 31, 2018 and EDF on September 4, 2018. In her

request, Steck renewed several of her challenges to the EA and

also objected to the Commission’s environmental analysis in

the Certificate Order. EDF argued that the precedent agreement

was not dispositive evidence of market need. It also challenged

Spire STL’s contentions as to the benefits of the new pipeline,

including possible cost savings to Spire Missouri and whether

the new pipeline was needed to allow Spire Missouri to cease

using propane peaking facilities. And more generally, EDF

argued that the Commission had failed to adequately balance

costs and benefits in the Certificate Order.

On October 1, 2018, the Secretary of the Commission

issued a tolling order solely “to afford additional time for

consideration of the matters raised.” J.A. 1107. It appears that

during the period between the issuance of the Certificate Order

and September 2019, Spire STL completed virtually all

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construction of the pipeline. See J.A. 1135 (notice of Enable

MRT withdrawing its petition for rehearing and asserting that

“[i]n the year in which the [rehearing requests] ha[d] been

pending, Spire STL . . . ha[d] nearly completed construction of

the proposed pipeline”). During that period, Spire STL also

submitted a revised cost estimate to the Commission of almost

$287 million, or approximately $67 million more than it had

originally estimated.

On November 21, 2019, the Commission issued an Order

on Rehearing (the “Rehearing Order”), denying the requests for

rehearing on the merits. The Commission reaffirmed its belief

that it “is not required to look behind precedent agreements to

evaluate project need, regardless of the affiliate status of the . . .

shipper.” J.A. 1149 (footnote omitted). It also asserted that it

had “evaluated the record and did not find evidence of

impropriety or self-dealing to indicate anti-competitive

behavior or affiliate abuse.” J.A. 1152 (footnote omitted). And

it reiterated that, in its view, it was “not in the position to

evaluate Spire Missouri’s business decision to enter a contract

with Spire STL for natural gas transportation.” J.A. 1152

(footnote omitted).

The Commission also stated that several of the benefits

Spire STL touted in its application and subsequent submissions

to the Commission were “sufficient to overcome any concerns

of overbuilding.” J.A. 1155. As to cost, the Commission

clarified that the Certificate Order had “evaluated cost

differences of gas delivered to Spire Missouri from both the”

proposed new pipeline and Enable MRT’s existing system and

found that they “were not materially significant.” J.A. 1159

(citing J.A. 980). Finally, the Rehearing Order found that the

EA, and the Commission’s resulting environmental analysis,

were sound.

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Commissioner Glick again dissented. He argued that the

Commission had acted arbitrarily and capriciously by refusing

to engage with counterevidence or seriously consider

countervailing arguments as to market need and benefits of the

pipeline. See, e.g., J.A. 1183 (“Whatever probative weight that

[precedent] agreement has, the Commission cannot simply

point to the agreement’s existence and then ignore the evidence

that undermines the agreement’s probative value.”); J.A. 1185

(“The Spire companies’ obvious financial motive coupled with

the abundant record evidence casting doubt on the need for the

project ought to have caused the Commission to carefully

scrutinize the record to determine whether the [proposed

pipeline] is actually needed or just financially advantageous to

the Spire companies.”). In his view, the issuing of the

Certificate to Spire STL had also represented “an unreasonable

application of the . . . Certificate Policy Statement.” J.A. 1188.

Steck and EDF filed their petitions for review in this court

on January 21, 2020.

II. ANALYSIS

A. Standard of Review

The Commission’s award of a Certificate is reviewed

under the Administrative Procedure Act’s arbitrary and

capricious standard. See Minisink, 762 F.3d at 105-06 (citations

omitted); 5 U.S.C. § 706(2)(A). Under this standard, an action

by the Commission may be set aside “if the agency has relied

on factors which Congress has not intended it to consider,

entirely failed to consider an important aspect of the problem,

offered an explanation for its decision that runs counter to the

evidence before the agency, or is so implausible that it could

not be ascribed to a difference in view or the product of agency

expertise.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State

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

20

overarching question in this case is whether “the Commission’s

‘decisionmaking [wa]s reasoned, principled, and based upon

the record.’” Myersville, 783 F.3d at 1308 (quoting Am. Gas

Ass’n v. FERC, 593 F.3d 14, 19 (D.C. Cir. 2010)). “A passing

reference to relevant factors . . . is not sufficient to satisfy the

Commission’s obligation to carry out ‘reasoned’ and

‘principled’ decisionmaking”; this means that “[t]he

Commission must ‘fully articulate the basis for its decision.’”

Am. Gas Ass’n, 593 F.3d at 19 (quoting Mo. Pub. Serv.

Comm’n v. FERC, 234 F.3d 36, 41 (D.C. Cir. 2000)). When the

Commission’s explanation for a contested action is lacking or

inadequate, it will not survive judicial review and the matter

will be returned to FERC for appropriate action. See, e.g., Mo.

Pub. Serv. Comm’n, 234 F.3d at 42.

B. Standing

The “irreducible constitutional minimum” of standing

requires three elements. Spokeo, Inc. v. Robins, 136 S. Ct.

1540, 1547 (2016) (citation omitted). “The plaintiff must have

(1) suffered an injury in fact, (2) that is fairly traceable to the

challenged conduct of the defendant, and (3) that is likely to be

redressed by a favorable judicial decision.” Id. (citation

omitted). The party invoking federal jurisdiction bears the

burden of demonstrating standing. Id. (citation omitted).

Generally, “[t]o establish injury in fact, a plaintiff must show

that he or she suffered an invasion of a legally protected interest

that is concrete and particularized and actual or imminent.” Id.

at 1548 (citation and internal quotation marks omitted).

However, where a party alleges procedural injury, “courts relax

the normal standards of redressability and imminence.” Sierra

Club v. FERC, 827 F.3d 59, 65 (D.C. Cir. 2016) (citing

Summers v. Earth Island Inst., 555 U.S. 488, 496-97 (2009)).

21

In a NEPA procedural injury case, the causation

requirement is met when a “causal chain” contains “at least two

links: one connecting the omitted [NEPA analysis] to some

substantive government decision that may have been wrongly

decided because of the lack of [proper NEPA analysis] and one

connecting that substantive decision to the plaintiff’s

particularized injury.” Id. (alterations in original) (citation

omitted). In other words, “[i]t must be substantially probable

that the substantive agency action that disregarded a procedural

requirement created a demonstrable risk, or caused a

demonstrable increase in an existing risk, of injury to the

particularized interests of the plaintiff.” Id. (citation and

internal quotation marks omitted).

1. Steck’s Standing

Steck does not have standing to pursue her claims against

FERC in this court. She does not own land transected by Spire

STL’s pipeline and has not had property rights taken via

eminent domain. Instead, Steck asserts in a declaration that she

lives “half a mile from” the new Chain of Rocks meter and

regulation station (the “Chain of Rocks Station”) at “the

southern end of the pipeline,” Final Br. of Pet’r Juli Steck

Addendum 1 (hereinafter “Steck Decl.”) ¶ 4; that the metering

station “sits between . . . blind curves,” id. ¶ 5; that the station

“is a looming eyesore and a traffic hazard” which “is not in

keeping with the character of [her] neighborhood,” and which

she passes approximately three times per week, id. ¶ 7; and that

the now-completed construction of the pipeline “interfered

with [her] use and enjoyment of” a local park through which

part of the pipeline was built, id. ¶¶ 9-10, and that she

“experienced the noise, dust, diesel fumes, and traffic stops

from construction both at home and in” the park, id. ¶ 8.

22

Steck claims that the “blind curves” near the metering

station are a “traffic hazard” to which she objects. Even if this

is sufficient to show a cognizable injury-in-fact, Steck has not

met her burden on causation as to this alleged injury. This is so

because she does not claim that the blind curves resulted from

the construction of the Chain of Rocks Station. Therefore, she

has not shown that issuance of a Certificate to Spire STL

caused any “traffic hazard” that now exists.

In addition, any alleged injuries that Steck suffered during

the now-completed construction of the pipeline and metering

station cannot support standing for want of redressability.

Those alleged injuries, including that Spire’s “drill[ing] under

[a] lake” to construct the pipeline interfered with her “use and

enjoyment of the [nearby] park,” id. ¶ 9, ended when the

construction was completed. Nor does Steck assert that there is

any lasting impact from these prior injuries. Therefore, a

favorable judicial decision will not redress her alleged injuries.

Steck also alleges that the metering station “is a looming

eyesore,” id. ¶ 7, as if to suggest that this constitutes a

cognizable injury-in-fact. It is true that some intangible injuries

may be concrete enough to support standing. See Spokeo, 136

S.Ct. at 1549. And “[t]he Supreme Court has recognized that

harm to ‘the mere esthetic interests of [a] plaintiff . . . will

suffice’ to establish a concrete and particularized injury”

sufficient to support standing. Sierra Club v. Jewell, 764 F.3d

1, 5 (D.C. Cir. 2014) (third alteration in original) (quoting

Summers, 555 U.S. at 494). However, Steck’s claims that

allude to aesthetic injuries do not correspond with the types of

aesthetic interests that the Supreme Court has said will suffice

to establish concrete and particularized injuries.

At no point in her declaration does Steck indicate any ways

in which the new metering station injures her specific aesthetic

23

interests, beyond labeling it a “looming eyesore” that “is not in

keeping with the character of [her] neighborhood.” See Steck

Decl. ¶ 7. She never alleges that she used and enjoyed the land

on which the station now exists; that she intended to use the

land in the future; or that her planned future uses of the land

have been foreclosed by the construction. In other words, she

never indicates how she derived aesthetic value from the land

as it had existed before the construction. See, e.g., Sierra Club

v. Morton, 405 U.S. 727, 735 (1972) (holding that

environmental group lacked standing because “[n]owhere in

the pleadings or affidavits did the [group] state that its members

use [the affected area] for any purpose, much less that they use

it in any way that would be significantly affected by the

proposed actions of the respondents” (emphases added)); Lujan

v. Defs. of Wildlife, 504 U.S. 555, 565-66 (1992) (explaining

that “a plaintiff claiming injury from environmental

damage must use the area affected by the challenged activity”

(emphasis added)); Friends of the Earth, Inc. v. Laidlaw Env’t

Servs. (TOC), Inc., 528 U.S. 167, 181-83 (2000) (explaining

that organizations’ members would have had standing as a

result of the detailed ways in which the challenged actions had

led them to modify their prospective behavior, reduced their

property values, or otherwise diminished their enjoyment of the

affected areas); Jewell, 764 F.3d at 5-6 (recounting detailed

declarations explaining the ways in which the challenged

action would diminish declarants’ ability to “use, enjoy, and

appreciate,” or “ability to visit and enjoy,” affected areas

(citations omitted)).

Steck does not even allege that she can see the new station

from her property. Rather, the only aesthetic injury that might

be implied from her declaration is that she must look at an

“eyesore” several times per week while driving past. Viewed

in full frame, Steck’s alleged aesthetic injuries reflect nothing

more than generalized grievances, which cannot support

24

standing. See Lujan, 504 U.S. at 573-74 (explaining that

generalized grievances do not raise Article III cases or

controversies for standing purposes).

At oral argument, Steck’s counsel was unable to identify

any authority that would allow mere incidental viewership of

something unappealing to qualify as an injury-in-fact for

standing purposes. See Oral Arg. Tr. at 27:21-28:23. This is not

surprising, for we can find nothing in the existing case law to

suggest that a person who incidentally views something

unpleasant has suffered an injury-in-fact for purposes of

standing. In her brief, Steck cites Sierra Club v. FERC for the

proposition that “[a]esthetic and recreational harm [may]

bestow[] standing.” Final Br. of Pet’r Juli Steck 10 (citing 827

F.3d 59, 66 (D.C. Cir. 2016)). However, the declaration in

support of standing in Sierra Club is strikingly different from

Steck’s declaration in this case. The declarant in Sierra Club

“fishe[d], boat[ed], and seasonal duck hunt[ed] frequently

around” the affected areas. 827 F.3d at 66 (citation and

alterations omitted). The declarant further averred that the

resulting “‘increase in liquefied natural gas vessel

traffic’ . . . w[ould]: (1) harm his aesthetic interests in the

[nearby] waterways . . . ; (2) inconvenience him, given the

‘large exclusion zone the Coast Guard maintains around

tankers’; and (3) ‘diminish his use and enjoyment of the

waterways.’” Id. (citation and alterations omitted). He also

noted that, because of the “existing levels of operation” in the

affected areas, he had “moved his ‘primary boat’” away from

them. Id. (citation omitted). These concrete injuries, including

those to his aesthetic interests, are a far cry from those asserted

by Steck, who has neither altered her behavior nor explained

why she has any particularized connection to the land on which

the metering station now sits.

25

Finally, Steck claims that she has suffered a procedural

injury as a result of the Commission’s alleged failure to comply

with its NEPA obligations. See Final Br. of Pet’r Juli Steck 10;

Steck Decl. ¶ 10; see also Oral Arg. Tr. at 27:18-20, 33:19-25.

Steck argues that this procedural injury is “an independent

source of standing.” Oral Arg. Tr. at 33:24-25. “But

deprivation of a procedural right without some concrete interest

that is affected by the deprivation—a procedural right in

vacuo—is insufficient to create Article III standing.” Summers,

555 U.S. at 496; see also Spokeo, 136 S. Ct. at 1550 (explaining

that a plaintiff “cannot satisfy the demands of Article III by

alleging a bare procedural violation”). Because Steck has failed

to allege a concrete injury that is “tethered to” the

Commission’s issuance of the Certificate, she has not shown a

viable Article III injury. Sierra Club v. FERC, 827 F.3d 36, 43

(D.C. Cir. 2016) (quoting WildEarth Guardians v. Jewell, 738

F.3d 298, 305 (D.C. Cir. 2013)).

In sum, on the record before us, we hold that Steck has

failed to satisfy her burden of demonstrating standing. We

therefore dismiss her petition for review.

2. EDF’s Standing

EDF clearly has standing to pursue its claims.

“An association has standing to bring suit on behalf of its

members when: (1) its members would otherwise have

standing to sue in their own right; (2) the interests it seeks to

protect are germane to the organization’s purpose; and (3)

neither the claim asserted nor the relief requested requires the

participation of individual members in the lawsuit.” Nat’l

Lifeline Ass’n v. FCC, 983 F.3d 498, 507-08 (D.C. Cir. 2020)

(citation and internal quotation marks omitted). EDF’s

members include at least four individuals who own land

transected by Spire STL’s pipeline, each of whom have had

26

property rights taken via eminent domain. These EDF members

also allege various ways in which the presence of the pipeline

has harmed, and continues to harm, their property, economic,

aesthetic, and emotional interests.

“[A] landowner made subject to eminent domain by a

decision of the Commission has been injured in fact because

the landowner will be forced either to sell its property to the

pipeline company or to suffer the property to be taken through

eminent domain. . . . [I]t is enough that [eminent domain

proceedings] have been deemed authorized and will proceed

absent a sale by the owner.” Gunpowder Riverkeeper v. FERC,

807 F.3d 267, 271-72 (D.C. Cir. 2015) (citing B&J Oil & Gas

v. FERC, 353 F.3d 71, 74-75 (D.C. Cir. 2004)). Moreover,

“credible claims of exposure to increased noise and . . .

disruption of daily activities . . . are sufficient to satisfy Article

III’s injury-in-fact requirement.” Sierra Club v. FERC, 867

F.3d 1357, 1366 (D.C. Cir. 2017) (quoting Sierra Club, 827

F.3d at 44). Those injuries were caused by the Commission’s

orders, which allowed for the exercise of eminent domain

against the EDF members’ land, and vacatur of those orders

likely will allow those injuries to be redressed. See City of

Oberlin, 937 F.3d at 604-05. “And nobody disputes that the

prevention of this sort of injury is germane to [EDF]’s

conservation-oriented purposes, or cites any reason why these

individual members would need to join the petition in their own

names.” Sierra Club, 867 F.3d at 1366. Thus, EDF has

associational standing.

C. EDF’s Petition Was Timely

The Natural Gas Act requires that, prior to obtaining

judicial review, an aggrieved party must have sought rehearing

before the Commission “unless there [wa]s reasonable ground

for failure so to do.” 15 U.S.C. § 717r(b). The Act also states

27

that “[u]nless the Commission acts upon the application for

rehearing within thirty days after it is filed, such application

may be deemed to have been denied.” Id. § 717r(a) (emphasis

added). As to the timing of judicial review, the act provides that

an aggrieved party “may obtain a review” of a Commission

order “by filing” a petition for review “within sixty days after

the order of the Commission upon the application for

rehearing.” Id. § 717r(b).

In Allegheny Defense Project v. FERC, 964 F.3d 1 (D.C.

Cir. 2020) (en banc), we confronted the Commission’s then-

consistent practice of issuing “tolling orders” following

rehearing requests. See id. at 9-11. The tolling orders were

fashioned so that they “d[id] nothing more than prevent

[rehearing requests] from being deemed denied by agency

inaction and preclude . . . applicant[s] from seeking judicial

review until the Commission act[ed]” on the merits. Id. at 9.

This court found that such tolling orders were insufficient for

FERC to avoid a “deemed denial” per 15 U.S.C. § 717r(a). Id.

at 18-19.

In this case, EDF filed a request for rehearing with the

Commission on September 4, 2018. On October 1, 2018, the

Secretary issued a tolling order that did nothing more than

“afford additional time for consideration of the matters raised”

in rehearing requests. J.A. 1107; see Allegheny Def. Project,

964 F.3d at 6-7 (same language in tolling order at issue). The

Commission did not dispose of the merits of the rehearing

requests in this case until November 21, 2019, when it issued

the Rehearing Order. See J.A. 1144. EDF then filed its petition

for review in this court on January 21, 2020. According to the

Spire Intervenor-Respondents (but not the Commission),

EDF’s petition for review was untimely because, under

Allegheny Defense Project, the requests for rehearing were

“deemed denied” as of October 4, 2018. And, since the petition

28

for review was submitted more than 60 days thereafter, the

court lacks jurisdiction. See Br. for Intervenors-Resp’ts Spire

STL Pipeline LLC and Spire Missouri Inc. 1-2. We reject this

argument.

In Texas-Ohio Gas Co. v. Federal Power Commission, 207

F.2d 615 (D.C. Cir. 1953), we held that the 60-day requirement

of Section 717r(b) did not preclude our consideration of a

petition for review from a final denial of relief, even if there

had been a deemed denial in the interim and the petition for

review was filed more than 60 days following that deemed

denial. See id. at 616-17. Allegheny Defense Project did not

disturb this binding precedent, which is squarely controlling in

this case.

Moreover, in Allegheny Defense Project, the petitioners

filed two sets of petitions for review. See 964 F.3d at 6-9. The

first set was filed in March and May 2017, within 60 days of

the March 2017 tolling order, see id. at 6-7, while the second

was filed in December 2017 and January 2018, after the

Commission rejected the merits of the rehearing requests, see

id. at 8-9. Though this court found that the tolling order failed

to prevent a deemed denial as of March 2017, the court

proceeded to evaluate the merits of both sets of petitions for

review, including the later set of petitions filed more than 60

days following the date of “deemed denial.” See id. at 19.

EDF filed its petition for review on January 21, 2020,

within the period allowed by statute “after the order of the

Commission upon the application for rehearing.” 15 U.S.C.

§ 717r(b). The petition for review was therefore timely and we

may consider the merits of EDF’s contentions.

29

D. FERC’s Grant of a Certificate of Public

Convenience and Necessity Was Arbitrary and

Capricious

Under established law, precedent agreements are

“always . . . important evidence of demand for a project.”

Minisink, 762 F.3d at 111 n.10 (quoting 88 FERC at 61,748).

And, in some cases, such agreements may demonstrate both

market need and benefits that outweigh adverse effects of a

new pipeline. See City of Oberlin, 937 F.3d at 605-06;

Myersville, 783 F.3d at 1311. But there is a difference between

saying that precedent agreements are always important versus

saying that they are always sufficient to show that construction

of a proposed new pipeline “is or will be required by the present

or future public convenience and necessity.” 15 U.S.C.

§ 717f(e).

According to the Commission’s Certificate Policy

Statement, “the evidence necessary to establish the need for [a]

project will usually include a market study. . . . Vague

assertions of public benefits will not be sufficient.” 88 FERC

at 61,748. In addition, the Certificate Policy Statement

indicates that pipelines built for reasons other than demand

growth might require greater showings of need and public

benefits. See id. (“[P]rojects to serve new demand might be

approved on a lesser showing of need and public benefits than

those to serve markets already served by another pipeline.”).

The Policy Statement also explicitly states that “[a] project that

has precedent agreements with multiple new customers may

present a greater indication of need than a project with only a

precedent agreement with an affiliate.” Id. In addressing why

it is unnecessary for the Commission to categorically discount

the value of affiliated precedent agreements when assessing

applications to construct new pipelines, the Policy Statement

explains that, in all cases, the Commission invariably focuses

30

on “the impact of the project on the relevant interests balanced

against the benefits to be gained from the project.” Id. Finally,

it is noteworthy that nothing in the Certificate Policy Statement

suggests that a precedent agreement is conclusive proof of need

in a situation in which there is no new load demand, no

Commission finding that a new pipeline would reduce costs,

only a single precedent agreement in which the pipeline and

shipper are corporate affiliates, the affiliate precedent

agreement was entered into privately after no shipper

subscribed during an open season, and the agreement is not for

the full capacity of the pipeline.

In this case, the Commission was presented with strong

arguments as to why the precedent agreement between Spire

STL and Spire Missouri was insufficiently probative of market

need and benefits of the proposed pipeline. Indeed, those

arguments drew on the Commission’s own Certificate Policy

Statement for support. But rather than engaging with these

arguments, the Commission seemed to count the single

precedent agreement between corporate affiliates as conclusive

proof of need. Nothing in the Certificate Policy Statement

endorses this approach.

Furthermore, we can find no judicial authority endorsing a

Commission Certificate in a situation in which the proposed

pipeline was not meant to serve any new load demand, there

was no Commission finding that a new pipeline would reduce

costs, the application was supported by only a single precedent

agreement, and the one shipper who was party to the precedent

agreement was a corporate affiliate of the applicant who was

proposing to build the new pipeline. This is hardly surprising

because evidence of “market need” is too easy to manipulate

when there is a corporate affiliation between the proponent of

a new pipeline and a single shipper who have entered into a

precedent agreement. See Chinook Power Transmission, LLC,

31

126 FERC ¶ 61,134, 61,767 (2009) (explaining that, in a

different context, the Commission “will apply a higher level of

scrutiny” to certain affiliate transactions “due to the absence of

arms’ length negotiations as a basis for the commitment,

concerns that the affiliate would receive unduly preferential

treatment, further concerns that a utility affiliate contract could

shift costs to captive ratepayers of the affiliate and subsidize

the . . . project inappropriately, and the lack of transparency

that would surround the arrangement”).

Moreover, in this case the Commission failed to

adequately balance public benefits and adverse impacts. This

is a serious problem in a case in which there is no new load

demand and only one affiliated shipper. In the Certificate

Order, the Commission’s balancing of costs and benefits

consisted largely of its ipse dixit “that the benefits that the

[proposed pipeline] will provide to the market, including

enhanced access to diverse supply sources and the fostering of

competitive alternatives, outweigh the potential adverse effects

on existing shippers, other pipelines and their captive

customers, and landowners or surrounding communities.” J.A.

986. The Commission pointed to no concrete evidence to

support these assertions.

In the Rehearing Order, the Commission made a

superficial effort to remedy the obvious deficits of the

Certificate Order by noting that Spire Missouri had articulated

several public benefits for the proposed pipeline. See J.A.

1155-56. However, the Commission never addressed the

claims raised by EDF and others challenging whether these

purported benefits were likely to occur. Instead of evaluating

the legitimate claims that had been raised, the Commission

simply stated that it had “no reason to second guess the

business decision of” Spire Missouri as reflected in the

precedent agreement. Rehearing Order, J.A. 1155; see also

32

Rehearing Order, J.A. 1159 (declining to evaluate extent to

which Spire Missouri’s customers would experience economic

benefit from pipeline construction because doing so would

“second guess the business decisions of an end user”). Before

this court, EDF has continued to challenge the Commission’s

failure to appropriately scrutinize the costs and alleged benefits

of the project. See Final Opening Br. of Pet’r EDF 39-40; see

also Final Reply Br. of Pet’r EDF 15-18 (asserting that

purported benefits of proposed pipeline were invoked post hoc

by the Commission, unlikely to be realized, or pretextual).

Under the circumstances presented in this case – with flat

demand as conceded by all parties, no Commission finding that

a new pipeline would reduce costs, and a single precedent

agreement between affiliates – we agree with EDF that the

Commission’s approach did not reflect reasoned and principled

decisionmaking.

The Commission and the Spire Intervenor-Respondents

advance several arguments in response, but none carry the day.

First, they rely on isolated statements this court has made while

reviewing previous Commission grants of Certificates. In

Minisink, we echoed the Certificate Policy Statement in

explaining that precedent “agreements ‘always will be

important evidence of demand for a project.’” 762 F.3d at 111

n.10 (quoting 88 FERC at 61,748). Similarly, in Myersville, we

noted that the petitioners had “‘identif[ied] nothing in the

policy statement or in any precedent construing it to suggest

that it requires, rather than permits, the Commission to assess

a project’s benefits by looking beyond the market need

reflected by the applicant’s existing contracts with shippers.’”

783 F.3d at 1311 (quoting Minisink, 762 F.3d at 111 n.10). In

City of Oberlin, we upheld the Commission’s decision to treat

both affiliated and unaffiliated precedent agreements as

evidence of market need, as “it is Commission policy to not

look behind precedent or service agreements to make

33

judgments about the needs of individual shippers.” 937 F.3d at

606 (quoting Myersville, 783 F.3d at 1311). And in

Appalachian Voices v. FERC, No. 17-1271, 2019 WL 847199,

(D.C. Cir. Feb. 19, 2019) (per curiam) (unpublished), the court

upheld the Commission’s decision not to distinguish between

affiliated and unaffiliated precedent agreements under the facts

of that case. See id. at *1. According to the Commission and

the Spire Intervenor-Respondents, these cases stand for two

broad propositions: (1) that the Commission generally need not

look behind precedent agreements in determining whether

there is market demand; and (2) that affiliated precedent

agreements should almost always be treated the same as

unaffiliated precedent agreements. We disagree, because it is

quite clear that our case law does not go so far as Respondents

claim.

In both Minisink and Myersville, the precedent agreements

at issue were not alleged to be between affiliated entities. See

Minisink, 762 F.3d at 111 n.10; Myersville, 783 F.3d at 1307,

1309-10. Thus, those cases presented significantly different

facts than the instant Certificate application. Appalachian

Voices was an unpublished opinion, meaning that the panel

found its opinion to be of “no precedential value” when

disposing of the case. See D.C. CIR. R. 36(e)(2). Moreover,

unlike in this case, the Certificate applicant in that case had

submitted a market study to the Commission to show the need

for, and benefits of, the proposed project. See Mountain Valley

Pipeline, LLC, 161 FERC ¶ 61,043, 61,297 (2017).

In City of Oberlin, the pipeline applicant had entered into

four precedent agreements with affiliate shippers but had

entered eight precedent agreements in total. See 937 F.3d at

603. The facts of that case are therefore easily distinguishable,

and the evidence of market demand was much stronger than in

the instant case, where there is but a single precedent

34

agreement and it is with an affiliated shipper. It is true that City

of Oberlin says that FERC can put precedent agreements with

affiliates on the same footing as non-affiliate precedent

agreements (i.e., it may “fully credit[]” them), but only so long

as FERC finds “no evidence of self-dealing” or affiliate abuse

and the pipeline operator “bears the risk for any unsubscribed

capacity.” Id. at 605. And tellingly, the Commission made an

uncontested finding that there was “no evidence of self-

dealing” or affiliate abuse in City of Oberlin. See id.

Here, by contrast, EDF and others have identified

plausible evidence of self-dealing. This evidence includes that

the proposed pipeline is not being built to serve increasing load

demand and that there is no indication the new pipeline will

lead to cost savings. FERC’s failure to engage with this

evidence did not satisfy the requirements of reasoned

decisionmaking. Indeed, as noted above, FERC’s ostrich-like

approach flies in the face of the guidelines set forth in the

Certificate Policy Statement. The challenges raised by EDF

and others were more than enough to require the Commission

to “look behind” the precedent agreement in determining

whether there was market need. If it was not necessary for the

Commission to do so under these circumstances, it is hard to

imagine a set of facts for which it would ever be required.

Because the Commission declined to engage with EDF’s

arguments and the underlying evidence regarding self-dealing,

its decisionmaking was arbitrary and capricious.

Next, the Commission contends that its balancing of

benefits and adverse impacts was sufficient because the Natural

Gas Act “vests the Commission with ‘broad discretion to

invoke its expertise in balancing competing interests and

drawing administrative lines.’” Br. for Resp’t FERC 42

(quoting Minisink, 762 F.3d at 111). The Commission’s

discretion in this sphere is, indeed, broad, but it may not go

35

entirely unchecked. The Commission must provide a cogent

explanation for how it reached its conclusions. As discussed,

FERC failed to balance the benefits and costs in both the

Certificate Order and Rehearing Order.

Finally, Respondents claim that there is evidence in the

record supporting their assertions as to the benefits of the

pipeline, even in the absence of increasing demand or potential

cost savings. However, it is not enough that such evidence may

exist within the record; the question is whether the

Commission’s decisionmaking, as reflected in its orders, will

allow us to conclude that the Commission has sufficiently

evaluated that evidence in reaching a reasoned and principled

decision. See SEC v. Chenery Corp., 318 U.S. 80, 87-88, 93-95

(1943); SEC v. Chenery Corp, 332 U.S. 194, 196 (1947). Based

on the Certificate Order and Rehearing Order, we cannot say

that the Commission has done so. It is not surprising that the

Commission failed to seriously engage with the question of

whether these benefits were real or illusory given that it took

the position that it would “not second guess the business

decisions” of the pipeline shipper in this case. Certificate

Order, J.A. 968.

In sum, it was arbitrary and capricious for the Commission

to rely solely on a precedent agreement to establish market

need for a proposed pipeline when (1) there was a single

precedent agreement for the pipeline; (2) that precedent

agreement was with an affiliated shipper; (3) all parties agreed

that projected demand for natural gas in the area to be served

by the new pipeline was flat for the foreseeable future; and (4)

the Commission neglected to make a finding as to whether the

construction of the proposed pipeline would result in cost

savings or otherwise represented a more economical alternative

to existing pipelines. In addition, the Commission’s cursory

36

balancing of public benefits and adverse impacts was arbitrary

and capricious.

III. REMEDY

The final question that we must address concerns remedy.

The Spire Intervenor-Respondents urge that, if we set aside

FERC’s certification, we should remand without vacatur. EDF,

in turn, contends that vacatur is appropriate. “The decision

whether to vacate depends on the seriousness of the order’s

deficiencies (and thus the extent of doubt whether the agency

chose correctly) and the disruptive consequences of an

interim change that may itself be changed.” Allied-Signal, Inc.

v. Nuclear Regul. Comm’n, 988 F.2d 146, 150-51 (D.C. Cir.

1993) (citation and internal quotation marks omitted).

However, “[v]acatur ‘is the normal remedy’ when we are faced

with unsustainable agency action.” Brotherhood of Locomotive

Eng’rs & Trainmen v. Fed. R.R. Admin., 972 F.3d 83, 117

(D.C. Cir. 2020) (quoting Allina Health Servs. v. Sebelius, 746

F.3d 1102, 1110 (D.C. Cir. 2014)).

Based on these considerations, we believe that vacatur is

appropriate. Given the identified deficiencies in the

Commission’s orders, it is far from certain that FERC “chose

correctly,” see Allied-Signal, 988 F.2d at 150 (citation

omitted), in issuing a Certificate to Spire STL. We understand

that the pipeline is operational, and thus there may be some

disruption as a result of the “interim change,” see id. at 150-51

(citation omitted), i.e., de-issuance of the Certificate, caused by

vacatur. However, we have identified serious deficiencies in

the Certificate Order and Rehearing Order. And “the

second Allied–Signal factor is weighty only insofar as the

agency may be able to rehabilitate its rationale.” Comcast

Corp. v. FCC, 579 F.3d 1, 9 (D.C. Cir. 2009) (citation omitted).

37

The Commission’s ability to do so is not at all clear to us at this

juncture.

Furthermore, remanding without vacatur under these

circumstances would give the Commission incentive to allow

“build[ing] first and conduct[ing] comprehensive reviews

later.” Standing Rock Sioux Tribe v. Army Corps of Eng’rs, 985

F.3d 1032, 1052 (D.C. Cir. 2021). We certainly do not wish to

encourage such an approach given the significant powers that

accompany a certificate of public convenience and necessity.

See 15 U.S.C. § 717f(h) (allowing holder of Certificate to

exercise eminent domain); see also Rehearing Order, J.A.

1195-96 (Glick, Comm’r, dissenting) (noting that “Spire STL

prosecuted eminent domain actions against over 100 distinct

entities . . . involving well over 200 acres of privately owned

land”). See generally Rehearing Order, J.A. 1202 (Glick,

Comm’r, dissenting) (“A regulatory construct that allows a

pipeline developer to build its entire project while

simultaneously preventing opponents of that pipeline from

having their day in court ensures that irreparable harm will

occur before any party has access to judicial relief.”).

IV. CONCLUSION

For the foregoing reasons, we dismiss Juli Steck’s petition

for review and grant EDF’s petition for review. We vacate the

Certificate Order and Rehearing Order and remand to the

Commission for further proceedings.