Sabal Trail: court requires FERC to account for GHG impact from pipeline’s downstream gas users

On August 22, 2017, the United States Court of Appeals serving the District of Columbia circuit granted the petition for review in the case of Sierra Club v. the Federal Energy Regulatory Commission (FERC) and Duke Energy.

“The petition for review in No. 16-1329 is granted,” the court’s decision reads. “The orders under review are vacated and remanded to FERC for the preparation of an environmental impact statement that is consistent with this opinion.”

Sabal Trail is up and running

Federal Appeals Court Sides with Sierra Club in Florida Pipeline Case

Sabal Trail pipeline – Map: EIA

The timeline to build the project is as follows:

  • 2015: FERC issued a final environmental impact statement (EIS)
  • 2016: FERC approved construction of all three project segments
  • 2016: Construction on the $3.2 billion Sabal Trail pipeline began after developers received finalized permits from FERC and the U.S. Army Corps of Engineers
  • 2016: FERC issued a rehearing order, denying rehearing and at the same time declining to rescind the pipelines’ certificates
  • JULY 2017: Sabal Trail developers completed construction of the Phase I scope of the Sabal Trail project, consisting of the following:
  • 5 miles of 36-inch diameter pipeline
  • 5 miles of 24-inch diameter pipeline
  • Three compressor stations in Alexander City, Alabama; Hildreth, Florida; and Reunion, Florida
  • Six meter stations in Tallapoosa County, Alabama; Suwannee County, Florida; Citrus County, Florida; Osceola County, Florida (2 meter stations); and Orange County, Florida
  • JULY 2017: Sabal Trail pipeline begins operations

In a report dated July 10, 2017, the EIA announced that FERC had authorized Phase I of the Sabal Trail pipeline to begin full operation.

The EIA pointed out that the 515-mile interstate natural gas pipeline transporting natural gas from an interconnection with the Transco pipeline in Tallapoosa County, Alabama, to the Central Florida Hub in Osceola County, Florida, is one part of the Southeast Market Pipelines, three pipeline projects designed to increase natural gas transport capacity to Florida.

Florida’s need for electricity

“Much of the additional natural gas expected to flow into Florida will be transported to its power plants,” the EIA said in its report.

“Since the beginning of 2016, Florida has added 3.4 gigawatts (GW) of natural gas-fired electricity generating capacity, which is more than any other state. Another 3.9 GW of natural gas-fired capacity is planned to come online in Florida over the next six years, based on data reported to EIA by project developers.

Federal Appeals Court Sides with Sierra Club in Florida Pipeline Case

Source: EIA

“Increases in Florida’s natural gas capacity have come as older coal- and oil-fired capacity has been retired. Unlike many states that have been building new natural gas generators, Florida is not located near a major source of natural gas production, and Florida’s geology is not conducive to underground natural gas storage. As a result, the natural gas needed to meet increasing demand is transported by pipeline.

“Sabal Trail Phase I is designed to have a total capacity of 810 million cubic feet per day (MMcf/d) and began partial service on June 14, with only two of three Phase I compressor stations operating. The next two phases will increase Sabal Trail’s total capacity to 1,050 MMcf/d. Phase II, when completed in 2020, will add 170 MMcf/d of capacity with the addition of two new compressor stations, and Phase III, scheduled for 2021, will add 70 MMcf/d of capacity through expansions to existing compressor stations.

“Two other projects associated with the Southeast Market Pipelines are Transco’s Hillabee Expansion Project and NextEra’s Florida Southeast Connection. Phase I of the Hillabee Expansion added 800 MMcf/d of capacity to the Transco line in Alabama to provide natural gas to Sabal Trail. Phases II and III of the Hillabee Expansion Project will add 200 MMcf/d and 100 MMcf/d of capacity, respectively, in 2020 and 2021.

The Florida Southeast Connection receives natural gas from Sabal Trail at the new Central Florida Hub, where Sabal Trail also connects with the other major pipelines in central Florida in order to increase regional natural gas deliverability. Florida Southeast Connection has the capacity to transport 640 MMcf/d of natural gas to Indiantown in southern Florida. (Source: U.S. Energy Information Administration, Electric Power Monthly)

The EIA said that the Southeast Market Pipelines represent the third major pipeline network delivering natural gas to central Florida. The first network, Florida Gas Transmission, having been put in service in 1959 “and has been expanded many times since then. The Gulfstream Natural Gas System came into service in 2002. Sabal Trail connects with both of these pipeline systems at or near the Central Florida Hub.”

Phases 2 and 3 of the Sabal Trail project are slated for 2020-2021

The developers said that the scope of phase II of the Sabal Trail project consists of two additional greenfield compressor stations to be constructed in 2020 in Albany, Georgia, and Dunnellon, Georgia, and Phase III scope of the Sabal Trail project consists of adding additional horsepower in 2021 at existing compressor stations.

What does the court’s decision mean for development and permitting of future pipelines?

Federal Appeals Court Sides with Sierra Club in Florida Pipeline Case

The Sierra Club and other petitioners opposed construction of the Southeast Market Pipelines Project (which includes the Sabal Trail pipeline) in Alabama, Georgia and Florida that would bring natural gas to power generation plants in Florida. The project will carry natural gas 55 miles through Alabama, 196 miles through Georgia, and 214 miles into Florida so that gas-fired power plants have access to the fuel to make electricity for Florida customers.

Petitioners had claimed that FERC issued an environmental impact statement without adequately taking into account the effects of the greenhouse gas emissions that would eventually impact climate change when the pipeline’s largest customers—two electric utilities, Florida Power & Light and Duke Energy Florida—burned the natural gas delivered by the pipeline project to make electricity for millions of customers in Florida.

“By its scheduled completion in 2021, the project will be able to carry over one billion cubic feet of natural gas per day,” the decision explains.

The project developers are three separate companies building three separate pieces of the project. As detailed in the appeal court’s decision, Sabal Trail is owned by Spectra Energy Partners, NextEra Energy and Duke Energy. The Hillabee Expansion is owned by the Williams Companies. Florida Southeast Connection is owned by NextEra, Duke Energy and NextEra subsidiary Florida Power & Light.

The developers said that increased transport of natural gas will make it possible for utilities to retire older, dirtier coal-fired power plants, which is considered a net positive for GHG emissions, as burning natural gas emits about half the carbon dioxide that is emitted by burning coal.

But in its background for its decision the court said that “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.”

The court said that FERC dutifully obeyed its mandate to conduct an environmental review of the proposed project, including soliciting public comment and holding 13 public meetings on the environmental effects of the proposed pipeline project.

Following the denial by FERC, the D.C. federal appeals court said that the environmental groups, which it refers to collectively as “Sierra Club,” along with a group of landowners that was included in the same petition, “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. … 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.”

The court determined that it has jurisdiction and that the petitioners had standing and it proceeded to consider the merits of the petitioners’ claims, eventually leading to its Aug. 22 decision.

In its opinion the court discussed some of the specific concerns brought up by the petitioners.

“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 court went on to say that FERC had 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. … FERC did recognize the existence and demographics of the neighborhood in question, and discussed the neighborhood extensively.”

The court said that 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.

“To sum up,” the court said in its opinion, “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 [the National Environmental Policy Act of 1969] requires nothing more.”

But then, the court made a hard turn the other way.

The destination of the gas being transported must be considered

“It’s not just the journey, though,” the court said, “it’s also the destination.”

At this point in its opinion, the court referenced the destination for the natural gas that will travel through the pipelines: “…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 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. … 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,” the court said, “must consider not only the direct effects, but also the indirect environmental effects, of the project under consideration.”

At that point in delivering its opinion, the court went into a discussion of indirect effects that are “reasonably foreseeable.” The court concluded that it is reasonably foreseeable that the gas transported in the pipeline will be burned by the power plants to create electricity. “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.”

“We conclude,” the court said, “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.”

Later in the opinion, the court said, “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.”

The court went on to discuss other requests by the Sierra Club, one of which asked FERC to convert emissions estimates to concrete harms by way of the Social Cost of Carbon, a tool from an interagency working group that attempts to value in dollars the long-term harm done by each ton of carbon emitted.

In their argument to the court, the electric utilities that are the buyers of the gas that will be transported to them by the pipelines, said that without more pipelines to supply gas to Florida power generators, there will be a shortage of gas in the face of increasing demand for electricity. Circuit Judge Brown wrote a concurring and dissenting opinion following the court’s opinion. In it Judge Brown referenced the utilities’ argument for a gas shortage without the pipelines.

Brown said in the opinion that both the Florida Power Plant Siting Board and FERC have concluded that Florida has a need for additional natural gas, “and nothing in today’s opinion takes issue with those holdings. Additionally, the Commission [FERC] 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.’ … 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.”

Brown concluded his dissent saying that FERC was not obligated under NEPA to discuss downstream greenhouse gas emissions, “and I would deny the entire petition for review.”

Haynes and Boone environmental, energy attorneys weigh in on court’s decision

Oil & Gas 360® spoke with energy and environmental attorneys at Haynes and Boone to get some further insight into the outcome of the D.C. appeals court decision.

Federal Appeals Court Sides with Sierra Club in Florida Pipeline Case

Haynes and Boone Partner Phil Lookadoo, Washington, D.C.

Washington D.C.-based Haynes and Boone Partner Phil Lookadoo and Austin, Texas-based Senior Counsel Jeff Civins said that, although the court’s decision did not order the pipeline to cease operating, the decision could have the effect of delaying use of the pipeline during the court-ordered further environmental review by FERC.  While the court’s decision would not be likely to stop further construction or put an end to the project, it would likely influence future pipeline construction applications and decisions.

NEPA, or the National Environmental Policy Act, is the basis for its decision, the attorneys told Oil & Gas 360®. “It doesn’t compel a particular outcome, it requires agencies to look at a range of alternatives and their environmental impacts,” Civins said.

The attorneys said that one of the questions FERC has to now answer is, “Is there an increase in greenhouse gas emissions that is attributable to the pipeline?” In other words, in compiling environmental impact statements for proposed pipeline projects, FERC must now look at greenhouse gas emissions associated with downstream power plants, according to the court’s decision.

“FERC is being told by the court to find a way to quantify the emissions,” Lookadoo said. “The court is saying FERC needs to determine if there is any reasonable way to reduce GHGs, but how can a pipeline do that? The GHG emissions would be controlled by the power plants and the decisions of the government authorities that regulate those power plants.”

“Probably it will come down to FERC attempting to quantify emissions by highlighting any GHG reductions that natural gas will make by replacing coal to make electricity, and they will go on conducting business as usual,” Lookadoo said.

“The public needs a diverse portfolio of energy sources,” Civins said. “The remand from the court requires FERC re-do the EIS to incorporate an accounting for greenhouse gas emissions downstream.  As a result of this, FERC will likely come out in the same place. The court did not order the pipeline to cease operations while FERC looks at this.”

Federal Appeals Court Sides with Sierra Club in Florida Pipeline Case

Haynes and Boone Senior Counsel Jeff Civins, Austin, Texas

The key aspect, Lookadoo and Civins said, is that GHG emissions are different than other emissions and pollutants whose impacts are local. The impacts of GHGs are global. They are not direct and immediate like other pollutants. For greenhouse gases that are emitted downstream it’s a question of what effect will that have on the planet? This issue is something new for FERC to consider. “You could say the camel has his nose under the tent, but pretty soon he’ll be in the tent with you,” Lookadoo said.

“The uncertainties of trying to predict where things are going to go make it very difficult on industry to make and execute plans,” Civins said. Lookadoo noted the strong dissent by Judge Brown and said, “The outcome could also change if a review of the court’s 2-1 split decision is sought.”

FERC’s commissioner departures have left the agency with no quorum for months, but the U.S. Senate on Aug. 3, 2017 confirmed Neil Chatterjee and Robert Powelson as commissioners of FERC, restoring a quorum to an agency which has a significant backlog of projects to review.

Civins pointed out that FERC’s responsibility is to ensure the reliability of the system. The individual states determine which power plants get built and which do not.

As to FERC coming up with the ability to quantify the effects of greenhouse gas emissions associated with the projects in front of it, “I doubt we will ever have a direct equation that says ‘X greenhouse gas emissions equals X impact’,” the Haynes and Boone attorneys said.

Analyst opinion from Baird Equity Research

When the appeals court ruling came down this week, Baird Equity Research sent a note to clients that discusses its view as to the effect on pipeline companies.

Litigation Alert: Sierra Club Beats FERC, Duke in GHG Ruling

We await further legal insights from energy legal experts, but our first take is negative for gas MLPs. The DC Circuit Court of Appeals surprised us and legal experts when the judges ruled that FERC must consider power plant greenhouse gas emissions in construction of the Sabal Trail pipeline, a clear negative for newbuild infrastructure if such a ruling becomes precedent at FERC under environmental reviews.

  • In Sierra Club vs. FERC, Duke Energy (link) from the DC Circuit Court of Appeals for the District of Columbia, Circuit Judge Thomas Griffith wrote, “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 pipelines will carry…We thus grant Sierra Club’s petition for review and remand for preparation of a conforming environmental impact statement.”


  • New hurdle at FERC possible. If this decision stands as precedent, FERC will need to add another layer to its environmental impact statements (EIS) under the National Environmental Policy Act (NEPA), which probably would decrease the probability of FERC certification of new projects, all else equal. Congressional legislation could likely redefine this ruling at some point, but in the absence of new law, court precedent likely would guide FERC’s hand.


  • Growth impaired. For incumbent pipeline operators, the ruling is a mixed bag: it likely ossifies the current network of pipelines (a boost to margins and oligopoly-like market characteristics), but will prevent shale development. Coming on the heels of the recent judicial ruling supporting New York’s denial of Constitution Pipeline water permits, the regulatory landscape for greenfield natural gas pipelines in the US materially worsened this week, in our view.

The court’s decision may be read here in full.

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