D.C. Circuit Court Strikes Down Unlawful FERC Approval of a Natural Gas Pipeline

Agency approved costly project without clear demonstration of need and despite legal concern; court says “affiliate” contract between two arms of same company is not enough to prove need

June 22, 2021
Sharyn Stein, (202) 905-5718, sstein@edf.org

(WASHINGTON) Ruling on a case brought by Environmental Defense Fund, the second highest court in the U.S. today struck down the Federal Energy Regulatory Commission’s (FERC) approval of a 66-mile natural gas pipeline in Illinois and Missouri. A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit today vacated FERC’s approval of the Spire STL Pipeline, finding that the agency did not sufficiently analyze whether the pipeline was in fact needed. 

“FERC’s role as the guardian of the public interest demands more than green-lighting a project based on the thin pretext of a single contract with the developer’s own affiliate,” said EDF Senior Director and Lead Counsel Natalie Karas.

In carrying out its statutory duty under the Natural Gas Act, the court held that FERC must determine whether a pipeline is in the public interest before approving the project. In the case of Spire STL, the agency failed to engage in a rigorous determination of need, basing its approval solely on a contract between Spire STL and its affiliated company, gas utility Spire Missouri.

The court held that FERC’s decision was arbitrary and capricious, stating in its decision that:

Under the circumstances presented in this case – with flat demand as conceded by all parties, no Commission finding that a new pipeline would reduce costs, and a single precedent agreement between affiliates – we agree with EDF that the Commission’s approach did not reflect reasoned and principled decisionmaking.

The decision sends the case back to FERC in order to address the deficiencies in its orders.  

“FERC’s failure to perform its statutory duties leads to a host of negative consequences for local communities, ratepayers, and the environment,” Karas said. “People in the region, including EDF members, continue to experience direct harm to their land that is in the pathway of the pipeline. Meanwhile, ratepayers are being asked to pay for the new infrastructure for decades to come.”

More rigorous oversight by FERC of affiliate contracts, in which one arm of a company signs a contract with another, could prevent the imposition of unnecessary costs on utility customers and lock-in of greenhouse gas pollution over the 50-year life of new pipelines. EDF has asked FERC to apply more stringent review of all new infrastructure in its pending proceeding to address the way it approves new pipelines.

FERC issued its initial approval for the Spire STL project in August 2018. EDF sought rehearing of that decision, which FERC denied. FERC allowed Spire STL to complete construction and begin operating the pipeline despite serious legal concerns. EDF filed a legal challenge to FERC’s approval of the Spire STL project in January 2020.

EDF filed its initial brief last June, with support from amici American Antitrust Institute and Former Assistant Secretary of Energy Sue Tierney, arguing that FERC needs to do more to assess need under the Natural Gas Act. In October, EDF filed a reply brief, rebutting FERC’s attempt to defend its approval. The Court held oral argument on March 8, 2020.

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