The D.C. Circuit Court of Appeals on July 30 vacated and remanded an order by FERC approving a natural gas pipeline in New Jersey that state regulators said was unneeded (23-1064).
FERC last year approved Transcontinental Gas Pipe Line Co.’s Regional Energy Access Expansion Project to boost gas delivery by 829,400 dekatherms/day to bring gas from Pennsylvania into New Jersey over the objections of New Jersey regulators and others (CP21-94). (See FERC Approves Pipeline Expansion Despite New Jersey’s Worries.)
Before the gas project came to FERC for approval, the New Jersey Board of Public Utilities opened a proceeding on the future of natural gas in the state, which determined it did not need more pipeline capacity through at least 2030. That proceeding was opened in February 2019; Transco applied to FERC in March 2021; the BPU issued a final order in the proceeding in June 2022; and FERC approved the pipeline expansion in January 2023.
About 73.5% of the project’s gas was destined for customers who signed contracts in New Jersey, but the rest was for Delaware, Maryland and Pennsylvania.
The New Jersey Conservation Foundation, New Jersey Division of Rate Counsel, New Jersey Attorney General’s Office and others challenged FERC’s approval after the commission upheld it on rehearing.
The court found that FERC failed to make a significance determination when it came to the project’s greenhouse gas emissions and failed to discuss mitigation measures.
FERC quantified the emissions associated with the project, finding construction could add 43,548 metric tons of CO2 equivalent, while operation would add 562,044 metric tons per year. Using the fuel downstream from the pipeline would add just over 16 million metric tons. The higher estimates are the project would use 39% of the total annual emissions budgets of New Jersey and Maryland.
The commission said counting the emissions was enough and it did not have to weigh their significance for the project as it had an open proceeding looking into such issues generically.
FERC “did not explain, however, how the pendency of that generic proceeding affects its ability in the meantime to make a case-specific determination here, when it was able to do so in Northern Natural,” the court said, referencing the first time the commission assessed the greenhouse gas emissions of a proposed natural gas infrastructure project and its impact on global climate change. (See FERC Assesses Climate Impact of Gas Project for 1st Time.)
“The anticipated emissions from this project are more than a hundredfold higher than the 100,000 metric tons per year of CO2e that the commission’s interim guidance suggests as a significance threshold,” the court said. Even if FERC was not obliged to make a determination, choosing not to do so on the basis of an arbitrary explanation is a violation of the Administrative Procedure Act, it said.
The court also found FERC acted arbitrarily in granting the certificate under the Natural Gas Act because it failed to explain why it discredited New Jersey’s study finding no need of new pipelines for the rest of the decade. It also failed to give weight to the state’s climate law that requires sizeable and continuous cuts in natural gas use by utilities.
FERC criticized the New Jersey study for relying on the continued availability of 619 million dekatherms/day of off-system peaking resources that are not under long-term, firm contracts.
“The commission did not, however, identify any past event in which such resources — despite being subject to short-term contracts — were unavailable when needed,” the court said. “In fact, the commission recognized that ‘downstream capacity has been available to New Jersey shippers in the past through short-term peaking contracts and may be available in the future on the same short-term basis.’”
The project had contracts for the new capacity. Normally such precedent agreements are used to show a market need, but the court faulted FERC for failing to respond to challenges to its reliance on those. While New Jersey local distribution companies signed up for capacity, it is not guaranteed they will use it to serve their customers.
“If ratepayers assume the cost even when they do not need the capacity, LDCs can afford to contract for additional unneeded capacity, which they can then resell at a profit, even in a soft capacity market,” the court said. “Because the commission failed to respond to that challenge to its reliance on precedent agreements with LDCs who subscribed to a majority of the pipeline’s capacity, the commission acted arbitrarily.”
