Commissioner James Danly Statement
November 17, 2022
CP19-502-000
CP19-502-001
I concur in the decision to grant Commonwealth LNG, LLC’s (Commonwealth) Natural Gas Act (NGA)[1] authorization to site, construct, and operate a natural gas liquefaction and export facility, including an NGA section 3 natural gas pipeline, in Cameron Parish, Louisiana (Commonwealth LNG Project).
There are any number of problems with this order: we should not lose sight of the limits of our authority under the NGA,[2] we should have repudiated Northern,[3] and we should not have included Social Cost of Greenhouse Gases calculations in this proceeding’s environmental document.[4] All of these issues have been thoroughly canvassed in my concurrently-issued separate statement in Gulf South Pipeline Company, LLC[5] and in many earlier separate statements and need not here be repeated at length.
I will start by acknowledging that the Commission is acting on this authorization relatively quickly following the release of the Final EIS, which was issued on September 9, 2022. This order comes 69 days later. I note that the Commission’s action is approximately two months earlier than I recently predicted for the issuance of the order.[6]
I cannot overstate the importance of timely action on our pending NGA section 3 applications. Simply put, “LNG . . . is needed right now.”[7] FERC Staff’s 2022 Summer Assessment Report recognized as much.[8] Moreover, the Commission has come to understand that several project sponsors with pending applications expect their projects will supply Europe’s demand for LNG.[9] And unlike the application at issue in this proceeding, some of the applications for NGA section 3 authorizations continue to suffer unnecessary delay.
Two such projects are pending with the Commission on remand. On August 3, 2021, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) remanded, without vacatur, authorization orders for two such projects due to deficiencies under the Administrative Procedure Act (APA) in the Commission’s analysis of environmental justice issues and the Commission’s failure to respond to an argument regarding section 1502.21(c) of the Council on Environmental Quality’s National Environmental Policy Act regulations[10] when deciding whether it should use the Social Cost of Carbon.[11] It has been more than a year since the Commission reacquired jurisdiction over the orders on remand.[12] And on August 12, 2022, in one of the relevant dockets, i.e., Docket No. CP16-116-000, Texas LNG Brownsville, LLC (Texas LNG) indicated that it “is in active discussions with buyers of LNG, particularly in Europe, and is optimistic about the commercial environment and the opportunity to provide energy security to strategic allies of the United States.”[13] In that filing, Texas LNG requested prompt Commission action on remand and explained that “[t]he lack of Commission action on remand is having a material impact on Texas LNG” and that “Texas LNG has significant internal and external technical resources standing by to continue the development and eventual construction of the project, but without a final order on remand, Texas LNG lacks much-needed clarity on timing for project planning purposes.”[14] On November 4, 2022, Texas LNG again requested that the Commission promptly issue an order on remand.[15]
Rio Grande LNG, LLC has also recently requested prompt Commission action on remand.[16] And members of Congress have reached out to the Commission regarding the delay.[17] Even still, these efforts to underscore the importance of timely Commission action have all been unavailing. In the remand dockets, Commission staff took the unprecedented step of opening comment periods on the companies’ responses for Commission staff’s information request. Those comment periods closed on November 4, 2022, and action still has yet to be taken.[18]
It is beyond dispute that demand for American LNG has risen dramatically and that its importance as a geo-strategic commodity has become more critical than ever before. The costs caused by the Commission’s delays are profound.[19] Delay in processing applications results in greater project expenses and difficulty securing capital on commercially acceptable terms. The climate of uncertainty created by our delays threatens the entire LNG industry. When regulatory timelines are uncertain, risk premiums rise, and it becomes more difficult for investors to rationally allocate capital in this capital-intensive industry. Simply put, regulatory uncertainty chills investment and impairs an industry the Commission is charged with promoting.[20] Although I am not aware of it happening in a recent NGA section 3 application, we have already witnessed proposed NGA section 7 projects[21] withdrawn due to Commission inaction.[22] Had we acted quickly, and had those projects met with Commission approval, they could have delivered critical, desperately needed natural gas.
Turning to the substance of today’s order, I disagree with the Commission’s attempt to sugarcoat its “analysis” just because we are unable to determine the significance of GHG emissions. Today’s order states that “[b]y adopting the climate impact analysis in the EIS, [the Commission] recognize[s] that the project may release GHG emissions that contribute incrementally to future global climate change impacts” and that the Commission has “identified climate change impacts in the region.”[23] Exactly what climate change impacts in the region did the Commission “identif[y]”?[24] There certainly appear to be no “identified climate change impacts” in the record. Could it be that the Commission is referring to no more than the disclosure of estimated emissions associated with the project’s construction and operation, or the comparison of the project’s GHG emissions to the total GHG emissions of the United States as a whole, or the comparison to state GHG inventories, or the comparison of a project’s GHG emissions to a state’s GHG emissions reduction goals?[25] Is the Commission merely referring to its discussion in the Final EIS of the U.S. Global Change Research Program’s Fourth Assessment Report, which was published in 2017 and 2018, and that report’s “observations” and “projections” of “climate change impacts” for the Southeast region of the United States?[26] Never mind the “climate change impacts,” where in the record can we find the “climate impact analysis” upon which that identification of impacts purports to rely? Can the Commission’s mere disclosure of direct emissions estimates and their bald comparison to state inventories truly be considered “analysis” when nothing can be gleaned from that information?[27] This is especially doubtful given that the Commission has no means by which to determine the significance of those estimated emissions.
Without a credible, reasoned method to determine significance, the Commission has a rocky road ahead should it continue in its pursuit of environmental policy goals. Aside from the legal risk under the APA that would attend the establishment of any unsupported, arbitrary threshold, a reading of the Supreme Court’s decision in West Virginia v. Environmental Protection Agency[28] should impress upon the Commission that caution is necessary when contemplating the regulation of subjects that have not been clearly placed within our jurisdiction by Congress. “Agencies have only those powers given to them by Congress, and ‘enabling legislation’ is generally not an ‘open book to which the agency [may] add pages and change the plot line.’”[29] Notably, the Commission received a much-needed reminder of this several months ago when the U.S. Court of Appeals for the Fifth Circuit vacated a portion of the Commission’s order that was ultra vires because the Commission’s acted outside its statutory authority.[30] Because the Commission does not have “a clear delegation from [Congress]”[31] to regulate GHG emissions, the Commission’s charge under the NGA remains “encourag[ing] the orderly development of plentiful supplies of . . . natural gas at reasonable prices.”[32] In other words, the NGA’s purpose, established by Congress and articulated by the Supreme Court, is for the Commission to promote the development of natural gas infrastructure.
What it comes down to is this—until a credible methodology, based on reasoned decision making, is established by a competent agency with the requisite statutory authority, the Commission cannot conclude whether the estimated GHG emissions from a proposed project are significant. The answer to the Commission’s problem is not to paper over the lack of analytical material in its orders by simply declaring that it has conducted “analysis” that has led to the identification of unspecified “impacts.” Ignore the Commission’s characterization of what it is doing; look instead to what it actually does. Equally important is what it fails to do. The Commission has never established a reasoned, credible basis upon which to ascribe significance under NEPA to a given quantity of project-level GHG emissions, using the Social Cost of Carbon or any other metric. Nor has the Commission been able to connect a particular project’s GHG emissions to discrete, physical effects on the environment. Why? Because there exist no means by which to arrive at such a determination such that it would satisfy our obligations under the APA to engage in reasoned decision making.
For these reasons, I respectfully concur in the judgment.
[1] 15 U.S.C. § 717b.
[2] See, e.g., Gulf S. Pipeline Co., LLC, 181 FERC ¶ 61,145 (2022) (Danly, Comm’r, concurring in part and dissenting in part at P 3).
[3] Id. (Danly, Comm’r, concurring in part and dissenting in part at P 4); see N. Nat. Gas Co., 174 FERC ¶ 61,189 (2021) (Northern). In Northern, a majority of my colleagues established what has been referred to (by some) as the “eyeball” test. See Catherine Morehouse, Glick, Danly spar over gas pipeline reviews as FERC considers project’s climate impacts for first time, Util. Dive, Mar. 19, 2021, https://www.utilitydive.com/news/glick-danly-spar-over-gas-pipeline-reviews-as-ferc-considers-projects-cli/597016/ (“‘We essentially used the eyeball test,’ [Chairman Glick] said, adding that based on that analysis, ‘it didn’t seem significant in terms of the impact of those emissions on climate change.’”).
[4] Gulf S. Pipeline Co., LLC, 181 FERC ¶ 61,145 (Danly, Comm’r, concurring in the judgment at P 7); see also Final Environmental Impact Statement at 4-397 & 4-398 (Final EIS).
[5] Gulf S. Pipeline Co., LLC, 181 FERC ¶ 61,145.
[6] See Commission Danly November 4, 2022 Letter to Senator Barrasso at App. D, page 75 (predicting a January 9, 2023 order issuance date by estimating 4 months as the time between the final NEPA document and order issuance because that was the average processing time from January 1, 2019, to May 24, 2021).
[7] See Senate Energy & Nat. Res. Committee, Full Committee Hearing To Review FERC’s Recent Guidance On Natural Gas Pipelines, https://www.energy.senate.gov/hearings/2022/3/full-committee-hearing-to-review-ferc-s-recent-guidance-on-natural-gas-pipelines, at 01:02:24 (Mar. 3, 2022) (recording Chairman Manchin).
[8] See FERC Staff Report to the Commission, Summer Energy Market and Reliability Assessment, at 6 (May 19, 2022), https://www.ferc.gov/media/report-summer-assessment-2022 (“Higher natural gas prices for summer 2022 are expected at major trading hubs across the U.S. as demand growth is forecasted to exceed supply growth amid increases in LNG liquefaction capacity, increase exports due to global demand for LNG, and limited growth in natural gas production.”) (FERC Staff’s Summer 2022 Assessment Report); id. at 7 (“The surrounding Gulf Coast region should see a combination of strong industrial sector and electric power sector demand this summer in addition to record LNG export demand.”); id. at 8 (“Natural gas production from the nearby Appalachia region is typically more than able to meet summer demand in the Northeast and New England, resulting in slightly reduced natural gas prices as compared to the Texas and Louisiana Gulf Coasts (South Texas to Henry Hub), which have significant year-round demand for electric power generation, industrial processes, and LNG exports.”); id. at 9-10 (“International LNG prices continue to remain relatively high in 2022 amid supply uncertainties and the need to replenish Europe’s natural gas inventories, which combined with increased liquefaction capacity in the U.S. is expected to drive higher LNG exports from the U.S.”) (citing EIA, Short-Term Energy Outlook Market Review - Natural Gas (April 7, 2022), https://www.eia.gov/outlooks/steo/marketreview/natgas.php); id. at 11 (“[H]igh European natural gas prices have recently incentivized more LNG exports to the continent, with shipments to Europe outpacing exports to Asia beginning in December 2021. Continued increased international demand should incentivize high utilization rates of and exports from U.S. LNG export terminals throughout summer 2022.”) (citation omitted); id. at 41 (“Natural gas exports are forecast to contribute to natural gas demand growth, as LNG exports continue to increase.”); id. (“U.S. energy sector participants may continue to expand production and export supplies needed globally, such as LNG.”).
[9] See Rio Grande LNG, LLC, 181 FERC ¶ 61,032, at P 5 (2022) (“expects to play a role in supplying Europe’s demand for LNG as the European Union attempts to reduce reliance on Russian energy supplies.”); Port Arthur LNG, LLC, 181 FERC ¶ 61,024, at P 3 n.7 (2022) (“Sempra Infrastructure Partners, LP has entered into negotiations with multiple European companies that contemplate negotiation of long-term sale and purchase agreements for LNG from the Liquefaction Project.”); see also Texas LNG Brownsville LLC, Request for Commission Action on Remand for Texas LNG Project, Docket No. CP16-116-000, at 2 (Aug. 12, 2022) (explaining that the applicant “is in active discussions with buyers of LNG, particularly in Europe, and is optimistic about the commercial environment and the opportunity to provide energy security to strategic allies of the United States”).
[10] 40 C.F.R. § 1502.21(c).
[11] Vecinos para el Bienestar de la Comunidad Costera v. FERC, 6 F.4th 1321 (D.C. Cir. 2021) (Vecinos).
[12] The remaining authorizations at issue on remand are for Texas LNG Brownsville LLC’s Texas LNG Project in Docket No. CP16-116 (Brownsville Project) and Rio Grande LNG, LLC’s Rio Grande LNG Terminal in Docket No. CP16-454 and Rio Bravo Pipeline Company, LLC’s Rio Bravo Pipeline Project in Docket No. CP16-455 (collectively, Rio Projects). For the authorizations relevant to Rio Projects, the D.C. Circuit’s mandate issued on October 25, 2021. For the authorizations relevant to the Brownsville Project, the D.C. Circuit’s mandate issued on September 27, 2021. In regard to the authorizations for Annova LNG Common Infrastructure, LLC’s Annova LNG Brownsville Project in Docket No. CP16-480, the court in Vecinos “dismiss[ed] the petition . . . as moot.” Vecinos, 6 F.4th at 1327. The Commission granted a request to vacate the Annova LNG Brownsville Project authorization on April 15, 2021. Annova LNG Common Infrastructure, LLC, 175 FERC ¶ 61,030 (2021).
[13] Texas LNG Brownsville LLC, Request for Commission Action on Remand for Texas LNG Project, Docket No. CP16-116-000, at 2 (Aug. 12, 2022).
[14] Id. at 2-3.
[15] See Texas LNG Brownsville LLC, Reply Comments, Docket No CP16-116-000, at 18 (Nov. 4, 2022).
[16] Rio Grande LNG, LLC, Reply Comments, Docket Nos. CP16-454-000, et al. (Nov. 4, 2022) (stating “that the Commission has all information required in order to issue an order properly responding to the D.C. Circuit’s Remand Order as well as the long-pending Rio Bravo Amendment Application in Docket No. CP20-481, and respectfully requests that the Commission promptly and as expeditiously as possible issue an order on remand”).
[17] See U.S. Senator John Cornyn, November 4, 2022 Letter, Docket No. CP16-454-000, at 1 (observing that the project sponsor is “is well-positioned to provide LNG supply to our allies in Europe” and urging the Commission to resolve the pending proceedings in a timely manner); U.S. Representative Dan Crenshaw, August 22, 2022 Letter, Docket Nos. CP16-116, et al., at 1-2 (explaining the importance of LNG exports and requesting an explanation for the delay in acting on remand).
[18] See Commission Staff, Notice Seeking Public Comment on Responses to Information Requests re Texas LNG Brownsville LLC, Docket No. CP16-116-000 (Sept. 30, 2022) (establishing an October 21, 2022 deadline for initial comments and a November 4, 2022 deadline for reply comments); Commission Staff, Notice Seeking Public Comment on Responses to Information Requests re Rio Grande LNG, LLC and Rio Bravo Pipeline Co., LLC, Docket Nos. CP16-454-000, et al. (Sept. 30, 2022) (same). But see Chairman Glick Response to U.S. Representative Dan Crenshaw’s August 22, 2022 Letter, Docket No. CP16-116-000, et al., at 1 (Oct. 31, 2022) (“Once the comment period closes, the Commission will move forward with action addressing the Court’s remand.”).
[19] See, e.g., Nat’l Grid LNG, LLC, 179 FERC ¶ 61,205, at PP 5-7 (2022) (explaining that although National Grid LNG, LLC “planned to begin construction of the project at the end of 2016[,] . . . it did not receive certificate authorization until October 2018,” and therefore it requested an increase in its initial recourse rates since the estimated cost of the facilities increased from $180,256,679 to $390,829,000—a difference of $210,572,321—as a result of increased construction costs due to the timing change and construction work plan changes). Cf. Duke Energy, Dominion Energy and Duke Energy cancel the Atlantic Coast Pipeline (July 5, 2020), https://news.duke-energy.com/releases/dominion-energy-and-duke-energy-cancel-the-atlantic-coast-pipeline (announcing Dominion Energy’s and Duke Energy’s cancellation of the Atlantic Coast Pipeline Project—a project with a Commission-issued certificate of public convenience and necessity—due to “ongoing delays and increasing cost uncertainty which threaten[ed] the economic viability of the project” and explaining that the project faced many challenges, including: (1) adverse court decisions regarding their federal permit for waterbody and wetland crossings (Nationwide Permit 12), which led to uncertainty in the companies’ investment; and (2) “legal challenges to the project’s federal and state permits[,] [which] caused significant project cost increases and timing delays” and resulted in an estimated “project cost . . . increase[] to $8 billion from the original estimate of $4.5 to $5.0 billion” as well as an estimated delay of “three-and- a-half-year[s]” for the project’s in-service date).
[20] See NAACP v. FPC, 425 U.S. 662, 669-70 (1976) (recognizing that the purpose of the NGA is to “encourage the orderly development of plentiful supplies of . . . natural gas at reasonable prices”) (citations omitted).
[21] 15 U.S.C. § 717f.
[22] See, e.g., Adelphia Gateway, LLC, Withdrawal of Prior Notice, Docket No. CP21-14-000, at 2 (Oct. 12, 2021) (withdrawing a request to install and operate an additional electric-motor driven compressor unit at its already authorized Marcus Hook Compressor Unit because “as a result of the extension of the environmental review through the supplemental EIS process and a prolonged Commission review process, the Project has been delayed well beyond Adelphia’s expectations and, more specifically, there is significant uncertainty regarding when an order will issue in this docket” and “[i]n light of this, Adelphia has decided not to continue the development of the Project”); Eastern Gas Transmission & Storage, Letter Withdrawing its Applications for the Mid-Atlantic Cooler Project, Docket No. CP21-97-000, at 1 (Sept. 20, 2021) (withdrawing an application for an NGA section 7 certificate—which had been filed nearly six months prior and had requested permission to build minor upgrades to three compressor stations in Pennsylvania and Virginia—because, “[d]espite [the project’s] limited scope, the Commission has not taken action to prepare an Environmental Assessment”); Dominion Energy Transmission Inc., Withdrawal of Certificate Application for Sweden Valley Project, Docket No. CP18-45-000 (June 28, 2019) (withdrawing an application for a project that “involved limited facilities, including modification of an existing compressor station and the construction of two measuring stations, approximately five miles of pipeline and related ancillary facilities” because “the Project has been adversely impacted” and “[t]he Project customer has opted to terminate the requested transportation service” as a result of the Commission’s inaction on the application nearly ten months after the issuance of an environmental assessment).
[23] Commonwealth LNG, LLC, 181 FERC ¶ 61,143, at P 75 (2022) (citations omitted) (Commonwealth).
[24] Id.
[25] See Final EIS at 4-396 to 4-397.
[26] See id. at 4-394 & 4-395 (citing U.S. Global Change Research Program, Climate Science Special Report, Fourth National Climate Assessment, VOLUME I (Donald J. Wuebbles et al. eds) (2017), https://science2017.globalchange.gov/downloads/CSSR2017_FullReport.pdf (USGCRP Report Volume I); U.S. Global Change Research Program, Fourth National Climate Assessment, Volume II Impacts, Risks, And Adaptation In The United States (David Reidmiller et al. eds.) (2018), https://nca2018.globalchange.gov/downloads/NCA4_2018_FullReport.pdf (USGCRP Report Volume II)).
[27] See Merriam-Webster, https://www.merriam-webster.com/dictionary/analysis (defining “analysis” as “a detailed examination of anything complex in order to understand its nature or to determine its essential features : a thorough study”); Cambridge Dictionary, https://dictionary.cambridge.org/dictionary/english/analysis (defining “analysis” as “the act of studying or examining something in detail, in order to discover or understand more about it, or your opinion and judgment after doing this”); Oxford Learner’s Dictionaries, https://www.oxfordlearnersdictionaries.com/definition/english/analysis (defining “analysis” as “the detailed study or examination of something in order to understand more about it; the result of the study”).
[28] West Virginia v. EPA, 142 S. Ct. 2587 (2022).
[29] Id. at 2609 (citation omitted).
[30] See Midship Pipeline Co., L.L.C. v. FERC, 45 F.4th 867, 877 (5th Cir. 2022) (vacating part of the Commission’s order and remanding the remainder because “[t]he FERC’s interpretation of the NGA to give the agency power to determine ‘the reasonable cost’ of remediation efforts ‘change[d] the plot line’ of its enabling legislation, and was therefore erroneous” and “[t]he FERC lacks such authority under the NGA, and it likewise lacked authority to order an ALJ to make such a determination indirectly”) (quoting West Virginia v. EPA, 142 S. Ct. at 2609).
[31] West Virginia v. EPA, 142 S. Ct. at 2616.
[32] NAACP, 425 U.S. at 669-70 (citations omitted); accord Myersville Citizens for Rural Cmty., 783 F.3d 1301, 1307 (quoting NAACP, 425 U.S. at 669-70).