City of Port Isabel v. Fed. Energy Regulatory Comm'n

111 F.4th 1198

CITY OF PORT ISABEL, et al., Petitioners v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent

Rio Bravo Pipeline Company, LLC and Rio Grande LNG, LLC, Intervenors.

City of Port Isabel and Sierra Club, Petitioners v. Federal Energy Regulatory Commission, Respondent

Texas LNG Brownsville, LLC, Intervenor.

No. 23-1174

Consolidated with 23-1221

No. 23-1175

Consolidated with 23-1222

United States Court of Appeals, District of Columbia Circuit

Argued May 17, 2024

Decided August 6, 2024

On Petitions for Review of Orders of the Federal Energy Regulatory Commission Nathan Matthews argued the cause for petitioners. With him on the joint briefs were Lisa M. Diaz, Tom Gosselin, and Gilberto Hinojosa. Eric E. Huber entered an appearance in No. 23-1174.

Robert M. Kennedy, Senior Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Matthew R. Christiansen, General Counsel, Robert H. Solomon, Solicitor. Jason Perkins, Attorney, entered an appearance in No. 23-1174.

Varu Chilakamarri argued the cause for intervenors Rio Bravo Pipeline Company, LLC and Rio Grande LNG, LLC in support of respondent. With her on the joint briefs were Jeremy C. Marwell, Matthew X. Etchemendy, David L. Wochner, and John Longstreth. James Dawson, Timothy J. Furdyna, James D. Seegers, and Paul M. Teague entered appearances in No. 23-1174.

Nathan Matthews argued the cause for petitioners. With him on the joint briefs were Lisa M. Diaz, Tom Gosselin, and Gilberto Hinojosa in No. 23-1175.

Robert M. Kennedy, Senior Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Matthew R. Christiansen, General Counsel, Robert H. Solomon, Solicitor, and Jason Perkins, Attorney in No. 23-1175.

Michael R. Pincus argued the cause for intervenor Texas LNG Brownsville, LLC in support of respondent. With him on the brief were Paul Korman and Mosby Perrow in No. 23-1176.

Before: Srinivasan, Chief Judge, Childs and Garcia, Circuit Judges.

Garcia, Circuit Judge.

In 2021, petitioners challenged the Federal Energy Regulatory Commission's authorization of two liquefied natural gas export terminals in Cameron County, Texas, and a pipeline that would carry natural gas to one of those terminals. In related decisions, we granted the petitions for review in part and remanded without vacatur. Vecinos para el Bienestar de la Comunidad Costera v. FERC ("Vecinos I"), 6 F.4th 1321, 1325 (D.C. Cir. 2021); Vecinos para el Bienestar de la Comunidad Costera v. FERC ("Vecinos II"), No. 20-1045, 2021 WL 3716769 (D.C. Cir. Aug. 3, 2021) (unpublished opinion). On remand, the Commission issued orders reauthorizing the projects.

Petitioners now challenge the reauthorization orders. They argue that the Commission failed to comply with certain National Environmental Policy Act and Natural Gas Act requirements. Once again, we agree in part. The Commission erroneously declined to issue supplemental environmental impact statements addressing its updated environmental justice analysis for each project and its consideration of a carbon capture and sequestration system for one of the terminals. It also failed to explain why it declined to consider air quality data from a nearby air monitor. We deny the petitions in all other respects. Given the nature and severity of the flaws in the Commission's second effort to properly assess the projects, we vacate the reauthorization orders and remand to the Commission for further consideration.

I

A

Under Section 3 of the Natural Gas Act ("NGA"), the Commission exercises authority delegated from the Department of Energy "to approve or deny an application for the siting, construction, expansion, or operation of" facilities used to export liquefied natural gas ("LNG"). 15 U.S.C. § 717b(e)(1); see EarthReports, Inc. v. FERC, 828 F.3d 949, 952-53 (D.C. Cir. 2016). The Commission "shall" approve such an application unless it finds that the project "will not be consistent with the public interest." 15 U.S.C. § 717b(a); see EarthReports, 828 F.3d at 953.

Under Section 7 of the NGA, the Commission reviews applications for the construction and operation of pipelines that transport natural gas in interstate commerce. 15 U.S.C. § 717f(c); Allegheny Def. Project v. FERC, 964 F.3d 1, 4 (D.C. Cir. 2020). The Commission "shall" authorize such a pipeline if it "is or will be required by the present or future public convenience and necessity." 15 U.S.C. § 717f(e); see Allegheny Def. Project, 964 F.3d at 4.

"Before authorizing the construction and operation of a proposed LNG facility or pipeline, the Commission must conduct an environmental review under" the National Environmental Policy Act ("NEPA"). Vecinos I, 6 F.4th at 1325. If, as here, the Commission determines that approval of the facility constitutes a "major Federal action[] significantly affecting the quality of the human environment," the Commission must prepare an Environmental Impact Statement ("EIS"). 42 U.S.C. § 4332(2)(C); see id. § 4336(b)(1). Among other things, the EIS must address the "reasonably foreseeable environmental effects" of the proposed action as well as "a reasonable range of alternatives ... that are technically and economically feasible, and meet the purpose and need of the proposal." Id. § 4332(2)(C)(i), (iii). The EIS "forces the [Commission] to take a 'hard look' at the environmental consequences of its actions" and "ensures that [those] consequences, and the [Commission's] consideration of them, are disclosed to the public." Sierra Club v. FERC ("Sabal Trail"), 867 F.3d 1357, 1367 (D.C. Cir. 2017).

B

This case concerns two proposed natural gas projects. On March 30, 2016, Texas LNG Brownsville LLC ("Texas LNG") filed a Section 3 application for authorization to construct and operate an LNG export terminal on the northern shore of the Brownsville Shipping Channel in Cameron County, Texas. On May 5, 2016, Rio Grande LNG, LLC ("Rio Grande") filed a Section 3 application for authorization to construct and operate its own LNG export terminal at a different site on the same shore. Rio Bravo Pipeline Company, LLC ("Rio Bravo") simultaneously filed a related Section 7 application for authorization to construct and operate a new interstate pipeline system to deliver natural gas from existing grid interconnects in Nueces County, Texas, to the Rio Grande terminal. The Rio Grande terminal and Rio Bravo pipeline together form the Rio Grande project.¹

After publishing a final EIS for each project, on November 22, 2019, the Commission issued orders authorizing the projects. See Order Granting Authorizations Under Sections 3 and 7 of the Natural Gas Act, Rio Grande LNG, LLC & Rio Bravo Pipeline Co., 169 FERC ¶ 61,131 (Nov. 22, 2019); Order Granting Authorization Under Section 3 of the Natural Gas Act, Texas LNG Brownsville LLC, 169 FERC ¶ 61,130 (Nov. 22, 2019) (collectively, the "2019 Approval Orders" or "authorization orders").

Petitioners—environmental groups, residents, and the nearby city of Port Isabel—intervened in the Commission's proceedings and sought rehearing of the authorization orders. They argued that the Commission's analyses of the projects' ozone emissions and impacts on climate change and environmental justice communities were deficient under NEPA and the Administrative Procedure Act ("APA"). They also claimed that the Commission failed to justify its determinations of public interest and convenience under the NGA. Regarding the Rio Grande project, petitioners further argued that the Commission violated NEPA by failing to adequately analyze alternative project designs.

After the Commission denied their rehearing requests, petitioners sought review in our court. On August 3, 2021, we addressed petitioners' challenges to the authorization orders in two companion decisions. Vecinos I, 6 F.4th 1321; Vecinos II, 2021 WL 3716769.

In Vecinos I, we held that the Commission failed to adequately justify its decision to examine environmental justice impacts within only a two-mile radius of the projects, when some environmental impacts of the projects would extend beyond that area. See 6 F.4th at 1330-31. Thus, we instructed the Commission to either better explain its reasoning or analyze the projects' impacts within a different radius. Id. at 1331. We also directed the Commission to respond to petitioners' argument that 40 C.F.R. § 1502.21(c) (2020)² required it to use the social cost of carbon protocol or some other generally accepted methodology to assess whether the climate impact of the projects' greenhouse gas ("GHG") emissions would be significant or not. See id. at 1328-30. Given the deficiencies in the Commission's environmental analyses, we further directed the Commission to reconsider its NGA public interest determinations for the projects. Id. at 1331 (citing 15 U.S.C. §§ 717b(a), 717f(e)). Ultimately, we remanded without vacatur because we found it likely that the Commission could remedy the deficiencies while reaching the same result. Id. at 1332.

In Vecinos II, we "denied in all respects" the other challenges petitioners raised to the authorization orders. 2021 WL 3716769, at *1.

In November 2021, in response to our remand, Rio Grande filed on a separate docket a proposal to add a carbon capture and sequestration ("CCS") system to its terminal design. The system would employ processes to remove carbon dioxide emissions during natural gas liquefaction and then transport those emissions by pipeline to an EPA- and state-authorized underground injection well for sequestration. Rio Grande projected that the system would capture at least 90% of the carbon dioxide produced at the terminal. The company asked the Commission to consider the CCS proposal at the same time it considered reauthorization of the existing project. Commission staff initially anticipated issuing an environmental assessment of the CCS system in May 2023 but suspended those plans after Rio Grande failed to...