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Hydraulic Fracturing Cumulative Impacts Must Be Considered in NEPA Review of Gas Pipeline, Project Opponents Maintain

September 25, 2012

Novel arguments are being made in a closely followed NEPA case in the Northeast. Opponents of a natural gas pipeline proposal known as the “Northeast Upgrade Project” argue that FERC – the agency in charge of reviewing the project’s environmental effects – was required to prepare an Environmental Impact Statement to consider the environmental effects of increased natural gas development in the Marcellus shale, including the effects of hydraulic fracturing, as reasonably foreseeable cumulative impacts of constructing the pipeline.

The Northeast Upgrade Project

Natural gas has rarely been cheaper, and, as has become common knowledge over the last few years, the Marcellus shale, stretching from New York through Pennsylvania to Ohio and Virginia and recently opened to development due to improvements in hydraulic fracturing and directional drilling technologies, is one of the nation’s largest new sources of natural gas. See Fractured: The Road to the New EPA “Fracking” Study, Marten Law Environmental News (Sept. 17, 2010).

The gas has to be shipped from the largely rural areas where it is captured, to consumers in urban areas. Responding to increased production and resulting pipeline congestion, Tennessee Gas Pipeline, L.L.C. (Tennessee), a Kinder Morgan subsidiary, proposes to construct what is called the Northeast Upgrade Project, a five-part expansion of its “300 Line” natural gas pipeline between Pennsylvania and New Jersey. If completed on schedule in November 2013, the Northeast Upgrade will provide an additional 636,000 dekatherm[1] natural gas transmission capacity between the Marcellus shale region and the East Coast. That is enough gas to feed roughly 2,650 megawatts of continuous electrical generation to the electrical grid.[2]

A map of the proposed route, including five expansion segments beginning in Pennsylvania and terminating in northern New Jersey, is available at this link.[3]

Legal Background

The Northeast Upgrade Project is an interstate gas pipeline project meeting the jurisdictional criteria of the Natural Gas Act and subject to approval by the Federal Energy Regulatory Commission.[4] FERC must review the environmental impacts of the project under Section 102 of NEPA.

NEPA § 102 requires federal agencies to prepare a “detailed statement” of environmental impacts (an Environmental Impact Statement, or EIS) for all “major Federal actions significantly affecting the quality of the human environment.”[5] This, in turn, requires an agency to decide whether the impacts of the action under consideration will be “significant” enough to warrant a full environmental review. Under regulations developed by the Council on Environmental Quality (CEQ), the determination of significance is accomplished through an Environmental Assessment (an EA), and an EIS must be prepared only if significance criteria thresholds are exceeded.

The determination of significance requires an agency to consider both a project’s “context” and “intensity.”[6] The rules include ten “intensity factors,” including, as relevant here: “Whether the action is related to other actions with individually insignificant but cumulatively significant impacts.”[7] “Cumulative impact” means an impact that “results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions[, and] … can result from individually minor but collectively significant actions taking place over a period of time.”[8]

An agency’s Finding of No Significant Impact (a FONSI[9]), resulting in the decision to stop the environmental review after an EA and forgo a full EIS, while regularly upheld, is often controversial. Agency decisions regarding which impacts to include, and to exclude, from the cumulative impacts analysis in both EAs and EISs are often the subject of judicial review under challenges brought in federal courts, and numerous federal courts have ruled that an EIS must be prepared even if there is some possibility or reasonable likelihood that the project could entail significant impacts.[10]

FERC’s Review

In November 2011, FERC published a 272 page long EA for the Northeast Upgrade Project, concluding that the proposal, as mitigated, would not entail significant environmental effects.[11] As relevant here, the EA did not discuss increased natural gas development as a direct or indirect impact of the proposed project. Rather, it included a discussion of recent and forecast natural gas development in the Marcellus shale as part of its cumulative impacts analysis.[12] The review was described in the EA itself as “limited,” covering only generally the expected future increase in natural gas development in the Marcellus region, and the types of impacts potentially related to that development, making no attempt to determine whether and to what extent the Northeast Upgrade Project would induce, increase, or enable such development, or potentially result in specific adverse impacts. Ultimately, FERC concluded that “[a] more specific analysis of Marcellus Shale upstream facilities is outside the scope of this analysis because the exact location, scale, and timing of future facilities are unknown. In addition, the potential cumulative impacts of Marcellus Shale drilling activities are not sufficiently causally related to the Project to warrant the comprehensive consideration of those impacts in this EA.”[13]

On May 29, 2012, relying on its EA, FERC issued a certificate for public convenience and necessity (CPCN) for the Northeast Upgrade Project.[14] The CPCN Order included a lengthy response to demands from project opponents that FERC should have conducted an EIS on broader Marcellus shale impacts.[15] On June 28, 2012, project opponents Delaware Riverkeeper, New Jersey Highlands Coalition, and the Sierra Club filed a request for rehearing outlining the contours of their disagreement with FERC.[16] In sum, the fight is over whether the EA should have dug deeper into the impacts of increased natural gas development, and, having done so, concluded that those impacts were significant, warranting an EIS.

The Cumulative Impacts Arguments

The project’s opponents raise numerous NEPA issues, including arguments over segmentation and the enforceability of mitigation measures that merit their own discussion. However, those interested in hydraulic fracturing will be most interested in the opponents’ cumulative impacts arguments, where the challengers attempt to force FERC to expand the scope of its review to include increased drilling all over the Marcellus shale – and FERC has refused.

Reasonable Foreseeability and Marcellus Shale Development

As explained above, CEQ regulations require consideration of reasonably foreseeable cumulative impacts. The project opponents argue that information is available to allow FERC to engage in “reasonable forecasting”[17] of impacts, including those related to “gas exploration and production and the construction and operation of well pads, access roads, gathering lines, compressor stations, and other infrastructure,” including (although largely left unsaid), impacts associated with the increased use of hydraulic fracturing.[18] They point to the wealth of information available online regarding the past and forecasted development of natural gas in Pennsylvania and elsewhere.[19]

FERC disagrees, arguing that the data lacks specificity and certainty for purposes of cumulative impact review. For example, FERC states, it cannot determine which wells will actually be developed, and the location of associated infrastructure such as roads. Thus, “the factors necessary for meaningful analysis of when, where, and how Marcellus Shale development will occur are ultimately unknowable and not reasonably foreseeable at this time.”[20]

To further support its position, FERC distinguishes cases raised by the opponents in which courts have rejected an EA for insufficient analysis of induced impacts. For example, in Thomas v. Peterson,[21] involving an EA prepared by the U.S. Forest Service that considered the impacts of a timber road, but not future timber sales, the Ninth Circuit rejected the argument that future sales were too uncertain and removed from the action to be analyzed. FERC notes, for example, that in Thomas the Forest Service was required to approve both the road and the timber sales, such that its decision to conduct separate environmental reviews was impermissible segmentation of a larger action (a common issue under NEPA). Since FERC has no control over future well permitting, siting, and drilling, it argues, Thomas is not analogous. Rather, FERC points to cases such as Sylvester v. U.S. Army Corps of Engineers,[22] where review of a golf course did not require review of the associated resort. Project opponents, for their part, point to still other cases where related or induced development was required to be reviewed.[23]

The Causal Relationship and FERC as Gatekeeper

FERC also declined to review the impacts of further exploration, development, and production because, it argues, such activities are not sufficiently causally related to the Northeast Upgrade Project to merit inclusion. Project opponents argue that “there can be no doubt whatsoever that the construction of an interstate natural gas transmission line in order to enable natural gas drillers to get their product to market is causally related to the development of shale gas resources in the Project area. …”[24]

FERC, for its part, does admit that “there is a relationship between the project and Marcellus Shale development (Tennessee states in its application that the project will provide shippers access to natural gas supplies being produced in the Marcellus Shale supply area).” Citing the U.S. Supreme Court’s decision in U.S. Dep’t of Transp. v. Public Citizen,[25] ruling that NEPA requires a “reasonably close causal relationship” between environmental effects and the alleged cause and that the Federal Motor Carrier Safety Administration did not have to consider the potential environmental impacts of increased number of Mexican trucks on U.S. roads in an EA, FERC simply takes the position that increased gas drilling is not sufficiently related to the construction of the Northeast Upgrade Project to merit consideration.[26] FERC argues, for example, that the Northeast Upgrade Project could only possibly account for “a very small percentage of the projected growth,” and that natural gas development “will continue with or without the project and will find other avenues to market.”[27] Ultimately, FERC appears to see the Northeast Upgrade Project as only a small part of a much larger transportation system designed to alleviate system-wide congestion, sufficiently removed from production and other activities to support forgoing further consideration.

Project opponents, on the other hand, see FERC as the gatekeeper of natural gas development. They argue that “development of upstream activities in the Marcellus region may only proceed if the Commission continues to expand access to markets through the interstate pipeline system,” and that FERC’s role in promoting, preventing, and effectively controlling natural gas transportation requires it to evaluate all of the impacts of those decisions.[28]

Other Agencies and the Independent Review Responsibility

Finally, the project challengers reach back to the seminal case of Calvert Cliffs’ Coordinating Comm. v. U.S. Atomic Energy Comm’n,[29] in which Judge Skelly Wright and the D.C. Circuit struck down the AEC’s attempts to farm out to other agencies its responsibilities under the then-newly enacted NEPA. Throughout its EA and CPCN Order, FERC refers to state-level regulatory regimes which will address the potential impacts of increased gas drilling, apparently in justification of its own decision not to address those potential impacts in further detail. According to the project’s opponents, by this decision FERC “abdicates its NEPA responsibilities by categorically deferring to standards administered by other agencies, without independently addressing anticipated impacts.”[30]

Conclusion

As is often the case with NEPA, the details of the argument tend to obscure the underlying fight. While the parties will wrangle mightily over abstract issues such as foreseeability and causality, what is really at stake is whether FERC’s environmental review process must be opened up completely to the ongoing controversy over natural gas drilling and hydraulic fracturing, likely adding significant cost and delay to an already lengthy and expensive process, and numerous further avenues of attack to FERC’s permitting decisions. FERC, of course, would prefer to keep its review more focused and see pipelines get built. Those interested in bringing to light the potential impacts of increased gas drilling feel differently.

On July 9, 2012, FERC took the unusual step of “granting” the Request for Rehearing, but only to afford additional time for consideration of the request. Project opponents have moved for expedited consideration because, they argue, FERC’s failure to actually act on their request leaves them unable to proceed at FERC with their challenge, and unable to proceed in court lacking a final decision, and, lacking a court challenge, the project will move forward as planned without an EIS.

A successful challenge could have a significant impact on the scope and depth of environmental review of natural gas infrastructure, particularly where hydraulic fracturing is involved. If no challenge is brought or the challengers are not successful, more such projects are likely to follow: Tennessee has already sold out the capacity created by the Northeast Upgrade.

For more information, please contact any member of Marten Law’s Permitting and Environmental Review or Energy groups.

[1] A dekatherm is one million Britsh thermal units (Btu), equivalent to roughly 1,000 cubic feet natural gas in the U.S.

[2] Under the assumptions provided by the U.S. Energy Information Administration at this link, 1,000 cubic feet natural gas produces approximately 100 kilowatt hours. 636,000 dekatherm (i.e., 1,000 cubic feet) * 0.1 MWh / 24 hours = 2,650 MW daily generation.

[3] Interestingly, the project was originally planned to run through the Delaware Water Gap National Recreation Area (“DEWA”), part of the National Park System. This, however, proved infeasible, and the final approved project now jogs several additional miles to avoid the area entirely. Under the National Park Service organic statutes, NPS is authorized to grant all manner of rights-of-way through its jurisdiction, including for linear infrastructure such as transmission lines and roads, but no general authorization exists for natural gas pipelines. The only way to do it is to lobby Congress for an amendment to the statute creating the parklands at issue, generally found in Title 16, Chapter 1 of the United States Code. Many such authorizations can be found in the park laws, either as originally enacted or as later amended, but Congressional action is, obviously, not guaranteed. Without support and cooperation from NPS, the political outlook is often not good. Tennessee’s system currently includes a DEWA crossing, but that line was built in the 1950s prior to DEWA’s creation, and while many of Tennessee’s right-of-way agreements with landowners permitted multiple pipelines, authorizations acquired through condemnation did not. Lands pass to NPS subject to existing rights-of-way, and therefore while NPS cannot order the existing pipeline to be removed, it does not have to cooperate in any proposed expansion. The NPS did not support the Northeast Upgrade Project, resulting in the revised route.

[4] 15 U.S.C. §§ 717f(c) (requiring a certificate of public convenience and necessity for such lines).

[5] NEPA § 102(2)(C), 42 U.S.C. § 4332(2)(C).

[6] 40 C.F.R. § 1508.27.

[7] Id. (intensity factor 7).

[8] 40 C.F.R. § 1508.7

[9] Not to be confused with Arthur Herbert Fonzarelli (also known as the Fonz, or Fonzie), a raffish but ultimately loveable character on the popular sitcom Happy Days.

[10] E.g., City of Waltham v. U.S. Postal Serv., 11 F.3d 235 (1st Cir. 1993) (substantial possibility that a significant impact could occur); Ocean Advocates v. Army Corps of Eng’rs, 402 F.3d 846 (9th Cir. 2004) (requiring consideration of “potential” effects).

[11] Northeast Upgrade Project, Environmental Assessment, Docket No. CP11-161-000 (November 2011).

[12] Id. pp. 2-121 to 2-126.

[13] Id. p. 2-125.

[14] Order Issuing Certificate and Approving Abandonment (“CPCN Order”), Docket No. CP11-161-000, 139 FERC ¶ 61,161 (May 29, 2012).

[15] CPCN Order, ¶¶ 178-200.

[16] Request for Rehearing, Docket No. CP-11-161-000 (June 28, 2012). Full disclosure: the project opponents are represented, in part, by the Columbia Environmental Law Clinic, for which the author previously worked, though not in any way related to this matter.

[17] Request for Rehearing, 40-41 (quoting Selkirk Conservation Alliance v. Forsgren, 336 F.3d 944, 962 (9th Cir. 2003).

[18] Id. at 45-46.

[19] Id. at 47-48.

[20] CPCN Order, ¶¶ 190-91.

[21] 753 F.2d 754 (1985).

[22] 884 F.2d 394 (9th Cir. 1989).

[23] E.g., Request for Rehearing, 41 (citing Friends of the Earth v. U.S. Army Corps of Eng’rs, 109 F. Supp. 2d 30 (D.D.C. 2000); City of Davis v. Coleman, 521 F.2d 661 (9th Cir. 1975); Mullin v. Skinner, 756 F. Supp. 904 (E.D.N.C. 1990); Grand Canyon Trust v. Fed. Aviation Admin, 290 F.3d 339 (D.C. Cir. 2002).

[24] Request for Rehearing, 46-47.

[25] 541 U.S. 752 (2004).

[26] CPCN Order ¶ 185.

[27] Id.

[28] Request for Rehearing, 45-46 (citing Human Soc. of U.S. v. Johanns, 520 F. Supp. 2d 8 (D.D.C. 2007).

[29] 449 F.2d 1109 (D.C. Cir. 1971)

[30] Request for Rehearing, 43.

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