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FERC Order Authorizing Commonwealth LNG Project Highlights Commission Divides

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On November 17, 2022, the Federal Energy Regulatory Commission authorized Commonwealth LNG LLC’s (Commonwealth) application under Section 3 of the Natural Gas Act (NGA) to site, construct, and develop a natural gas liquefaction and export facility in Cameron Parish, Louisiana (the Project).  The Commission’s November 17, 2022 order authorizing the Project (November 17 Order)1  reflects a Commission largely in agreement as to the scope – and limitations – of its authority under Section 3 of the NGA.  However, the multiple concurrences to the November 17 Order highlight divergent Commissioner views regarding the need for additional investment in LNG infrastructure in the United States and the impacts of that infrastructure on environmental justice communities and the environment. 

I. The November 17 Order

The Project will liquefy and export to foreign markets domestic natural gas sourced from existing natural gas pipeline systems in southwest Louisiana. Upon completion, the Project will consist of six liquefaction trains; six LNG storage tanks; one marine loading berth; a 3.04-mile-long, 42-inch diameter pipeline; and associated support facilities.  Under optimal operating conditions, the Project is expected to have a peak liquefaction capacity of up to 441.4 Bcf/year (approximately 9.5 MTPA).2

a. FERC Declines to Consider Economic Claims as Part of Section 3 Analysis

At the outset of the November 17 Order, the Commission defines the scope of its authority to review Commonwealth’s application, rejecting the notion that it has authority under Section 3 to consider market demand for additional LNG imports or exports.

Instead, Section 3 of the NGA requires the Commission to approve an application for the development of facilities used for the export of natural gas to foreign countries provided the Commission finds that the proposal “‘will not be [in]consistent with the public interest’ subject to ‘such terms and conditions as the Commission [may] find necessary or appropriate.’”3  The Commission addressed this standard in response to multiple comments and protests asserting that Commonwealth failed to provide evidence of market need for the Project.  The Commission ultimately declined to address these comments and protests, finding that the Secretary of Energy had not delegated authority to the Commission “to approve or disapprove the import or export of the commodity itself.”4  As a result, protests and comments relating to “economic claims (e.g., those regarding market demand for LNG) … are relevant only to the exportation of the commodity of natural gas, which is within [the Department of Energy’s] exclusive jurisdiction, and are not implicated by our limited action of reviewing proposed terminal sites.”5  Ultimately, this framework for Commission review “‘sets out a general presumption favoring such authorization[s].’  To overcome this favorable presumption and support denial of an NGA Section 3 application, there must be an “‘affirmative showing of inconsistency with the public interest.’”6  Having found no such inconsistency, the Commission authorized development of the Project.

b. FERC Recognizes Environmental Impacts … and its Limitations in Addressing Them

Having established the applicable standard of review, the Commission next considers FERC Staff’s evaluation of the potential impacts of the Project through the preparation of the Environmental Impact Statement (EIS).  The Commission notes that the EIS found that, while “some impacts [from the siting and operation of the Project] would be permanent and significant, such as impacts on visual resources, most impacts would not be significant or would be reduced to less-than significant levels” through mitigation and avoidance measures.7  

In addition to assessing the impacts typically addressed in the EIS,8 the EIS incorporated an environmental justice analysis, consistent with the requirements of Executive Order 12898, which directs federal agencies to identify and address “the disproportionately high and adverse human health or environmental effects of their actions on minority and low-income populations to the greatest extent practicable and permitted by law.”9  Within a 54-kilometer radius of the proposed Project site, Staff identified 91 out of 149 total block groups as environmental justice populations based on poverty and minority population levels.10  Importantly, while the Commission does not find that environmental justice considerations warrant a denial of authorization for the Project under NGA Section 3, it explicitly recognizes that the Environmental Protection Agency (EPA) and the Council on Environmental Quality (CEQ) are updating their environmental justice guidance and that the Commission intends to review and incorporate that guidance in the future. However, the Commission does not go so far as to identify which of the various approaches being considered by EPA and CEQ it intends to review and incorporate.11

The Commission also addresses the EIS’s analysis of greenhouse gas (GHG) impacts of the Project, which found that the Project will represent approximately 3.2% of Louisiana’s projected GHG emission levels by 2030.12  Despite comments urging the Commission to wait to conduct a National Environmental Policy Act (NEPA) analysis until it decides how it will determine the significance of GHG emissions, the Commission determines that it had “sufficient information to proceed” having “quantified and contextualized the project’s construction and operational GHG emissions, recognized that the project’s contributions to GHG emissions will incrementally contribute to future global climate change impacts, and described those potential impacts in the region.”13  While asserting that it possesses the necessary framework to quantify and contextualize the GHG impact of the Project, the Commission makes clear elsewhere in the November 17 Order that its analytical framework for GHG emissions is currently the subject of two draft policy statementsthe Updated Certificate Policy Statement and the Interim GHG Policy Statement.14  In relevant part, the draft Interim GHG Policy Statement proposes a NEPA significance threshold of 100,000 tons per year of carbon dioxide equivalent matter.15

II. Commissioner Concurrences Highlight Different Perspectives

While unanimous in their authorization of the Project, separate concurrences by each of Chairman Glick and Commissioners Danly, Clements, and Phillips highlight widely divergent perspectives both with respect to the role of the Commission in reviewing LNG export projects and, more generally, the role of the United States as an LNG exporter.Chairman Glick recognizes in his concurrence that the Commission is currently limited to considering whether construction and operation of facilities (but not the underlying import/export activity) is consistent with the public interest—with the presumption that such facilities are in the public interest.16  Unsatisfied with the results of this “bifurcated” process, Commissioner Glick asserts that the Commission is legally and morally obligated to consider the impacts of these types of facilities “including both the impacts directly attributable to the facility itself and cumulatively along with other facilities in the area.”17  Such a holistic process, Chairman Glick suggests, would allow FERC to consider the “readily apparent” impact of the operation of each project on GHG levels.18

Similarly, Commissioner Clements contends that the Commission must reconsider its approach to reviewing projects under NGA Section 3 to more fully account for and protect environmental justice communities.19  Commissioner Phillips likewise supported efforts to “improve community outcomes at large” in his concurrence.20

Commissioner Danly, by contrast, recognizes FERC’s limitations with respect to reviews under NGA Section 3, and asserts that it is not the Commission’s place to determine GHG impacts of LNG export projects unless and until Congress explicitly vests FERC with that authority.  Commissioner Danly notes that Congress has provided no such charge to FERC or any other competent agency with requisite statutory authority to do so.21  In the absence of such explicit authority, Danly warns, the Commission must demonstrate caution not to exercise authority it does not possess.22

III. Key Takeaways

  • Absent a directive from Congress to do so, the current Commissioners are unlikely to consider LNG market issues in the context of NGA Section 3 applications, even if those issues are raised by opponents of the Project.
  • The current Commissioners will likely continue to authorize NGA Section 3 applications provided there is no affirmative showing that the project at issue is inconsistent with the public interest as that concept is currently and narrowly defined in NGA Section 3.
  • The four concurrences to the November 17 Order highlight stark divisions among the Commissioners concerning the need for additional LNG infrastructure in the United States, the impact of such infrastructure on the environment (including environmental justice communities), and the role the Commission should have in adjudicating these issues. While Chairman Glick and Clements support requiring the Commission to account for the ongoing impacts of GHG emissions from LNG export/import activities, Commissioner Danly admonishes against such an approach without a clear, new directive from Congress. Project developers should factor these divergent Commissioner views into risk assessments for their projects.
  • The Updated Certificate Policy Statement and Interim GHG Policy Statement may result in changed NEPA thresholds for LNG development. Developers should continue to closely monitor these proceedings in FERC Docket Nos. PL18-1 and PL21-3, respectively.
  • Although the concurrences reflect disparate positions on the role of the Commission in reviewing the impact of proposed LNG projects under NGA Section 3, the concurrences uniformly state that the current framework for review is inadequate and could be improved or, at a minimum clarified, through Congressional intervention.

1 Commonwealth LNG, LLC, 181 FERC 61,143 (2022).

2 Id. at PP 4-6.

3 Id. at P 10.

4 Id. at P 13.

5 Id.

6 Id. at P 14.

7 Id. at P 15.

8 See id. at PP 32, 36.

9 Id. at P 45. See  Exec. Order No. 12898, 59 Fed. Reg. 7629 (Feb. 16, 1994).

10 Id. at P 50.

11 Id. at fn. 90.

12 Id. at P 75, fn. 192.

13 Id. at P 76.

14 Certification of New Interstate Nat. Gas Facilities, Consideration of Greenhouse Gas Emissions in Nat. Gas Infrastructure Project Revs., 178 FERC ¶ 61,197 (2022).

15 Commonwealth LNG, LLC, 181 FERC at fn. 196.

16 Id., Glick Concurrence at P 6.

17 Id., Glick Concurrence at PP 2, 5.

18 Id., Glick Concurrence at P 4.

19 Id., Clements Concurrence at PP 4-5.

20 Id., Phillips Concurrence at P 3.

21 Id., Danly Concurrence at PP 9-10.

22 Id. (citing West Virginia v. EPA, 142 S. Ct. 2587 (2022))

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