Sierra Club v. DOE , 867 F.3d 189 ( 2017 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 2, 2017 Decided August 15, 2017
No. 15-1489
SIERRA CLUB,
PETITIONER
v.
UNITED STATES DEPARTMENT OF ENERGY,
RESPONDENT
FLNG LIQUEFACTION 2, LLC, ET AL.,
INTERVENORS
On Petition for Review of the Department of Energy Office of
Fossil Energy
Orders 3357-B (Nov. 14, 2014) and 3357-C (Dec. 4, 2015);
DOE/FE Docket No. 11-1161-LNG
Nathan Matthews argued the cause for petitioner. With
him on the briefs was Sanjay Narayan. Joanne M. Spalding
entered an appearance.
John L. Smeltzer, Attorney, U.S. Department of Justice,
argued the cause for respondent. With him on the brief were
John C. Cruden, Assistant Attorney General, and David
Gunter, Attorney.
2
Jonathan S. Franklin argued the cause for intervenors
Freeport LNG Expansion, L.P., et al. With him on the brief
was Lisa M. Tonery. Charles R. Scott entered an appearance.
Catherine E. Stetson, Stacy R. Linden, and Ben Norris
were on the brief for intervenor American Petroleum Institute.
Before: HENDERSON and WILKINS, Circuit Judges, and
SENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge WILKINS.
WILKINS, Circuit Judge: In this petition for review, Sierra
Club challenges the Department of Energy’s (the
“Department”) grant of an application to export liquefied
natural gas (“LNG”) using terminals and liquefaction facilities
(collectively, the “Freeport Terminal”) on Quintana Island in
Brazoria County, Texas. The Federal Energy Regulatory
Commission (“FERC”) is responsible for approving the siting
and construction of any such facilities. In Sierra Club v. FERC
(“Sierra Club (Freeport)”), 827 F.3d 36, 40 (D.C. Cir. 2016),
we upheld FERC’s decision to approve the construction of the
Freeport Terminal. However, the export of LNG out of that
terminal requires separate approval from the Department.
In 2011, the Intervenors, Freeport LNG Expansion, L.P.
and its related entities (collectively, “Freeport”), requested
permission to export an amount of LNG equivalent to 0.4
billion cubic feet per day (“Bcf/d”) of natural gas out of the
Freeport Terminal. The Department granted the application,
finding the proposed exports are in the “public interest” under
Section 3(a) of the Natural Gas Act. Under the National
Environmental Policy Act (“NEPA”), the Department also
considered and disclosed the potential environmental impacts
of its decision. Sierra Club argues that the Department fell
3
short of its obligations under both the Natural Gas Act and
NEPA. In particular, it asserts that the Department did not
sufficiently examine the indirect effects of LNG exports, such
as the effects related to the likely increase in natural gas
production and usage that will result from the export
authorization here, as well as the cumulative effects of other
anticipated, pending, or approved export proposals. For the
following reasons, Sierra Club’s petition is denied.
I.
Much of the pertinent background is explained in our
earlier decision in Sierra Club (Freeport). There, we
determined FERC complied with both the Natural Gas Act and
NEPA with respect to its decision to authorize the construction
of the Freeport Terminal. Yet the Department was
independently required to consider the environmental impacts
of its export authorization decision under NEPA and determine
whether it satisfied the Natural Gas Act’s “public interest” test.
A.
Section 3 of the Natural Gas Act authorizes the exportation
of natural gas from the United States unless the Department
determines that doing so “will not be consistent with the public
interest.” 15 U.S.C. § 717b(a). The Department’s discretion
in this regard depends on whether the country to which the gas
will be exported is one that has with the United States a “free
trade agreement requiring national treatment for trade in
natural gas” (a “Free Trade” country). Id. § 717b(c). If so, then
the Department must authorize the exportation to that country
“without modification or delay.” Id. § 717b(c). However, if
the country does not have such an agreement with the United
States (a “non-Free Trade” country), then the Department must
independently determine whether such exports would be
4
inconsistent with the public interest. Rather than assign LNG
export applications to particular end-user destinations, the
applications are designated for export to either Free Trade or
non-Free Trade countries, generally.
Freeport submitted four separate applications to the
Department seeking LNG export authorizations out of the
Freeport Terminal – two for Free Trade countries and two for
non-Free Trade countries, with each one seeking to export an
amount of LNG equivalent to 1.4 Bcf/d of natural gas. In
accordance with the Natural Gas Act, the Department promptly
granted Freeport’s Free Trade applications. For the non-Free
Trade applications, the Department published notices of intent
to initiate public-interest review proceedings. Sierra Club filed
a protest and moved to intervene in one of those proceedings
regarding Freeport’s 2011 application (the “FLEX
application”), which is the subject of the present petition. See
77 Fed. Reg. 7568 (Feb. 13, 2012) (“FLEX”). Although the
FLEX application originally sought authorization to export an
amount of LNG equivalent to 1.4 Bcf/d of natural gas, the
Department subsequently limited its authorization to 0.4 Bcf/d
after Freeport amended its application to construct a facility
with a smaller maximum capacity.
B.
In considering whether to grant the FLEX application, the
Department needed to determine whether and to what extent to
issue an environmental impact statement under NEPA. That
statute requires every agency proposing a “major Federal
action” to prepare a statement of its environmental impact if
the action will “significantly affect[] the quality of the human
environment.” 42 U.S.C. § 4332(C).
5
The agency must consider not just the “direct”
environmental effects that “are caused by the [agency’s] action
and occur at the same time and place,” but also the action’s
“indirect” environmental effects that “are caused by the action
and are later in time or farther removed in distance, but are still
reasonably foreseeable.” 40 C.F.R. § 1508.8; Sierra Club
(Freeport), 827 F.3d at 41. In addition, the agency must
consider the “cumulative impact[s]” on the environment,
meaning “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.” 40 C.F.R. § 1508.7.
Where multiple federal agencies have authority over
different aspects of the same project, agencies may coordinate
review, and may incorporate one another’s analysis. Here,
FERC was the “lead agency” for the purposes of complying
with NEPA, see 15 U.S.C. § 717n(b)(1), and the Department
acted as a “cooperating agency,” 40 C.F.R. § 1501.6(b). This
meant the Department could “adopt [FERC’s] environmental
analysis as its own for purposes of any additional NEPA review
triggered by an export-authorization request.” Sierra Club
(Freeport), 827 F.3d at 41. However, the Department must still
“independently review [FERC’s] work and conclude that [the
Department’s] own ‘comments and suggestions have been
satisfied.’” Id. at 41-42.
C.
The Department received applications similar to FLEX
from other companies seeking to export LNG around the same
time Freeport submitted its applications. In response to all
pending and anticipated applications, the Department
commissioned two studies – which we will refer to as the “EIA
Study” and the “NERA Study” – to evaluate the impact of LNG
6
exports on domestic energy markets and related
macroeconomic effects.
The first study was done by the Energy Information
Administration (“EIA”). By August 2011, the Department had
received applications for authority to export that totaled 5.6
Bcf/d of natural gas, J.A. 151, and requested that EIA conduct
a study on various scenarios assessing how “increased natural
gas exports could affect domestic energy markets, focusing on
consumption, production, and prices,” J.A. 132. In the EIA
Study, issued in January 2012, EIA examined how LNG
exports in amounts equivalent to 6 and 12 Bcf/d might impact
domestic energy markets over a 25-year period using the
National Energy Modeling System. See U.S. Energy
Information Administration, Effect of Increased Natural Gas
Exports on Domestic Energy Markets (January 2012), J.A.
318-26.
EIA observed that “projections of energy markets over a
25-year period are highly uncertain and subject to many events
that cannot be foreseen, such as supply disruptions, policy
changes, and technological breakthroughs.” EIA Study at 3,
J.A. 134. Its particular study contained several limitations that
made its projections even more uncertain, such as the fact that
it did not take account of the interaction of the U.S. market with
the global energy market. Id. With these caveats, EIA
projected that increased LNG exports would lead to increased
natural gas prices within the United States and that the U.S.
market would respond by increasing gas production.
Specifically, across all cases, it projected that increased
natural gas exports (of 6 to 12 Bcf/d, compared to a baseline of
no exports) would result in increased natural gas production
that would satisfy about 60 to 70 percent of the increase in
natural gas exports. Id. at 6, J.A. 137. Notably, across most
7
cases, about three-quarters of this increased production would
come from shale sources. Id. In response to higher gas prices,
EIA also projected a decrease in the amount of gas consumed
domestically, to be replaced primarily by switching to coal and
secondarily to renewable fuels. Id.1
The second study, the NERA Study, considered how these
domestic projections might fit into the global marketplace.
NERA Economic Consulting examined the same export
scenarios within the context of the global marketplace, as well
as additional scenarios involving different assumptions about
natural-gas development and international economic
conditions. See NERA Study at 3-5, J.A. 183-85. The results
revealed that “in many cases” – including the EIA Study’s
reference case – “the world natural gas market would not
accept the full amount of exports assumed in the EIA scenarios
at export prices high enough to cover the U.S. wellhead
domestic prices calculated by the EIA.” Id. at 3, J.A. 183.
Although “U.S. natural gas prices increase when the [United
States] exports LNG[,] . . . the global market limits how high
U.S. natural gas prices can rise under pressure of LNG exports
because importers will not purchase U.S. exports if U.S.
wellhead price rises above the cost of competing supplies.” Id.
at 2, J.A. 182. Thus, NERA “estimated lower export volumes”
than the EIA Study, indicating lesser impacts on U.S. markets
1
EIA later, in 2014, updated the EIA Study at the Department’s
request. See J.A. 900, 924. It updated its baseline level of exports to
reflect its latest projections (as explained in its 2014 Annual Outlook
report) for U.S. LNG exports in 2029: 3,500 Bcf/y (approximately
9.6 Bcf/d). See J.A. 908. It then modeled the incremental impact of
increasing exports from this baseline level (9.6 Bcf/d) to increased
levels of 12 Bcf/d and 20 Bcf/d (that is, 4,380 to 7,300 Bcf/y). J.A.
908. EIA’s updated study largely confirmed the basic conclusions
of the initial study regarding how the U.S. energy market might
respond to increased LNG exports. J.A. 907, 910-13.
8
than projected by EIA. Id. at 10, J.A. 190. But it acknowledged
“great uncertainties about how the U.S. natural gas market will
evolve.” Id. at 21, J.A. 201. Regardless, NERA concluded
that, in all the scenarios analyzed, “the U.S. would experience
net economic benefits from increased LNG exports.” Id. at 6,
J.A. 186.
Both studies were published in 2012. In 2013, the
Department issued orders with findings on all non-
environmental issues considered under Section 3(a), and
conditionally approved Freeport’s non-Free Trade export
applications, including FLEX. See Dep’t of Energy, Order No.
3357, Dkt. 11-161-LNG (Nov. 15, 2013). Approval was
contingent on Freeport’s satisfactory completion of the
ongoing FERC-led environmental review of the proposed
Freeport Liquefaction Project.
D.
In June 2014, FERC released its final environmental
impact statement for the Freeport Terminal construction
project (the “Impact Statement”) in accordance with NEPA.
The Impact Statement disclosed and analyzed direct, indirect,
and cumulative impacts from the construction and operation of
the proposed liquefaction and export facilities. However, it did
not evaluate the indirect effects pertaining to the authorization
of exports. The Department adopted the Impact Statement in
full and supplemented it with two reports relevant here: the
Addendum and the Life Cycle Report.
First, the Department issued an Addendum to the Impact
Statement to examine certain indirect effects of LNG exports,
focusing primarily on the impacts of export-induced natural gas
production in the United States. See Addendum to
Environmental Review Documents Concerning Exports of
9
Natural Gas from the United States (“Addendum” or “Add.”),
79 Fed. Reg. 48,132 (Aug. 15, 2014). The Department issued
this Addendum in response to concerns raised by many
commenters that the Department had not examined the
potential impacts of increased natural gas production and in
particular shale gas production – a trend its economic studies
suggested would occur under a variety of scenarios. See Add.
at 1, J.A. 815. The Addendum was intended to fill that void by
providing “additional information to the public regarding the
potential environmental impacts of unconventional natural gas
production activities,” based on a review of existing literature,
regulations, and best management practices. Id. at 2-3, J.A.
816-17. In particular, it disclosed the various ways shale gas
production might impact the water, air, and land resources
surrounding production activities; but it made no attempt to
specifically project where or to what extent the impacts of
increased production might occur in response to any particular
amount of exports.
Second, to address potential indirect effects of LNG
exports on global greenhouse-gas emissions (CO2 and
methane), the Department commissioned the National Energy
Technology Laboratory to prepare a report. See Life Cycle
Greenhouse Gas Perspective on Exporting Liquefied Natural
Gas from the United States (“Life Cycle Report”), 79 Fed. Reg.
32,260 (June 4, 2014). The report assesses the “life cycle” –
from the wellhead to power plant – of greenhouse-gas
emissions associated with electricity generated using U.S.
LNG in Europe or Asia, and compares these with emissions
from electricity generated from coal or other sources of gas.
See Life Cycle Report at 1-2, J.A. 586-87. The report
concluded that exporting U.S. LNG to produce power in
Europe and Asia would not increase greenhouse-gas emissions
compared to regional coal power, and that potential differences
in greenhouse-gas emissions relating to the use of U.S. LNG as
10
opposed to alternative sources of gas are largely dependent on
transport distance but are “indeterminate” due to “uncertainty
in the underlying modeled data.” Life Cycle Report at 9, 18,
J.A. 594, 603.
In November 2014, the Department issued its
Authorization Order authorizing exports in the FLEX
application. Dep’t of Energy, Order 3357-B, Dkt. 11-161-
LNG, Final Opinion and Order (“Authorization Order”) (Nov.
14, 2014). In that order, the Department explained its
reasoning for adopting FERC’s Impact Statement in full and
granting Freeport’s FLEX application under Section 3(a) of the
Natural Gas Act, finding the proposed exports are in the
“public interest.” Sierra Club petitioned for rehearing, which
the Department denied in December 2015. Dep’t of Energy,
Order 3357-C, Dkt. 11-161-LNG, Opinion and Order Denying
Request for Rehearing (“Rehearing Order”) (Dec. 4, 2015).
This petition followed.
Sierra Club challenges the Department’s compliance with
the NEPA as well as the Natural Gas Act. We review both
challenges under the arbitrary and capricious review standard.
II.
We begin with the NEPA challenge. “NEPA is
‘essentially procedural,’ designed to ensure ‘fully informed
and well-considered decision[s]’ by federal agencies.” Del.
Riverkeeper Network v. FERC, 753 F.3d 1304, 1309-10 (D.C.
Cir. 2014) (quoting Vt. Yankee Nuclear Power Corp. v.
NRDC, 435 U.S. 519, 558 (1978)). The statute serves that
purpose by requiring federal agencies to take a “hard look” at
“their proposed actions’ environmental consequences in
advance of deciding whether and how to proceed.” Sierra Club
v. U.S. Army Corps of Eng’rs, 803 F.3d 31, 37 (D.C. Cir. 2015).
11
NEPA “does not dictate particular decisional outcomes, but
‘merely prohibits uninformed—rather than unwise—agency
action.’” Id. (quoting Robertson v. Methow Valley Citizens
Council, 490 U.S. 332, 351 (1989)).
In reviewing Sierra Club’s challenges, “our task is not to
‘flyspeck’ [the Department]’s environmental analysis for ‘any
deficiency no matter how minor.’” Sierra Club (Freeport), 827
F.3d at 46 (quoting Theodore Roosevelt Conservation P’ship v.
Salazar, 661 F.3d 66, 75 (D.C. Cir. 2011)). Our job is simply
“to ensure that the agency has adequately considered and
disclosed the environmental impact of its actions and that its
decision is not arbitrary or capricious.” Del. Riverkeeper, 753
F.3d at 1312-13 (quoting Balt. Gas & Elec. Co. v. NRDC, 462
U.S. 87, 97-98 (1983)). “Courts may not use their review of an
agency’s environmental analysis to second-guess substantive
decisions committed to the discretion of the agency.” Id. at
1313. “Where an issue ‘requires a high level of technical
expertise,’ we ‘defer to the informed discretion of the
[agency].’” Id. (quoting Marsh v. Or. Nat. Res. Council, 490
U.S. 360, 377 (1989)).
Sierra Club asserts the Department failed to comply with
NEPA because it did not tailor its review of indirect
environmental effects to any particular volume of exports. The
Department responds that the type of analysis Sierra Club urges
would be too speculative and, in any event, unhelpful to its
decisionmaking. For the following reasons, Sierra Club’s
petition for review of the Department’s decision with respect
to NEPA is denied.
A.
Before we consider the merits of Sierra Club’s challenge,
we address two preliminary matters.
12
First, the Department insists that it complied with NEPA
by adopting FERC’s Impact Statement, and that its
supplemental environmental reports (i.e., Addendum and Life
Cycle Report) were part of the Department’s effort to go above
and beyond what NEPA requires. Yet the Department plainly
relies on these supplemental records to justify its “hard look”
under NEPA. See, e.g., Respondent Br. 30 (“Together, the
[Impact Statement], Environmental Addendum, and Life Cycle
Report constitute a ‘hard look’ at relevant environmental
issues.”). Perhaps the Department framed its argument this
way to avoid accusations of defective notice; but Sierra Club
did not raise a notice challenge in its opening brief. Whatever
the intention, the result is that the Department’s arguments are
needlessly complicated. For our purposes, we will consider the
supplemental materials to be part of the agency’s
environmental review. The issue is whether, overall, the
Department conducted the requisite “hard look” “to ensure that
[it] has adequately considered and disclosed the environmental
impact of its actions . . . .” Minisink Residents for Env’tl Pres.
& Safety v. FERC, 762 F.3d 97, 111 (D.C. Cir. 2014).
Second, Sierra Club takes aim at the Department’s
decision with respect to both the “indirect effects” of its FLEX
authorization as well as the “cumulative” impact of its decision
“when added to other past, present, and reasonably foreseeable
future actions.” 40 C.F.R. § 1508.7. For each claim, Sierra
Club argues that the Department should have tailored its
environmental impacts analysis to a particular amount of
exports. For indirect effects, Sierra Club considers the amount
authorized in the FLEX proceeding; and for cumulative effects,
it considers the FLEX application as well as other pending and
anticipated LNG export approvals. The cumulative impact
requirement ensures that agencies consider effects that result
from “individually minor but collectively significant actions
13
taking place over a period of time.” Del. Riverkeeper, 753 F.3d
at 1319-20 (quoting 40 C.F.R. § 1508.7). Sierra Club does not
argue that the Department impermissibly “segmented” its
review of the Freeport Terminal exports from other export
authorizations, and “thereby fail[ed] to address the true scope
and impact of the activities that should be under consideration.”
Id. at 1313. The nature of the Department’s environmental
review does not lend itself to that argument because the
Department’s generalized impact assessment is not tailored to
any specific level of exports. Thus, we will consider whether
the Department adequately considered the indirect effects of
the FLEX authorization but our analysis applies equally to its
cumulative effects, given that the only distinction drawn by
Sierra Club between the two categories is the level of exports
involved in each one.
B.
The first set of “indirect effects” concerns the
environmental impacts of export-induced natural gas
production in the United States. Sierra Club is particularly
focused on how gas production might impact water resources
and ozone concentration wherever export-induced production
activities might occur.2 Although the Department examined
these impacts generally in the Addendum, Sierra Club’s chief
complaint is that the Department did not attempt to quantify the
impacts or tailor them to specific levels of exports or export-
induced gas production.
In its Authorization Order, the Department explained that
it deliberately did not perform such a quantitative impact
analysis – that is, tying an incremental increase in exports to an
2
In Part II.D, we separately consider greenhouse-gas emissions
resulting from export-induced gas production.
14
incremental increase in gas production, and in turn, to an
impact on specific environmental resources. It determined that
such indirect effects were not “reasonably foreseeable.”
1.
In determining what effects are “reasonably foreseeable,”
an agency must engage in “reasonable forecasting and
speculation,” Del. Riverkeeper, 753 F.3d at 1310 (quoting
Scientists’ Inst. for Pub. Info., Inc. v. Atomic Energy Comm’n,
481 F.2d 1079, 1092 (D.C. Cir. 1973)), with reasonable being
the operative word. The agency “need not foresee the
unforeseeable, but by the same token neither can it avoid
drafting an impact statement simply because describing the
environmental effects of and alternatives to particular agency
action involves some degree of forecasting.” Scientists’ Inst.
for Pub. Info., 481 F.2d at 1092. To navigate that dividing line,
we consider the “usefulness of any new potential information
to the decisionmaking process.” Dep’t of Transp. v. Pub.
Citizen, 541 U.S. 752, 767 (2004).
NEPA also “requires a reasonably close causal
relationship between the environmental effect and the alleged
cause,” analogous to proximate causation from tort law. Sierra
Club (Freeport), 827 F.3d at 47 (quoting Pub. Citizen, 541 U.S.
at 767). Just as baseless speculation is unhelpful, so, too, is
information that the agency “lacks [any] power to act on.” Pub.
Citizen, 541 U.S. at 768. Thus, the agency need not examine
everything for which the FLEX exports out of Freeport “could
conceivably be a but-for cause.” Sierra Club (Freeport), 827
F.3d at 46. “Instead, the effect must be sufficiently likely to
occur that a person of ordinary prudence would take it into
account in reaching a decision.” Id. at 47 (internal quotation
marks and citations omitted). We “look to the underlying
policies or legislative intent in order to draw a manageable line
15
between those causal changes that may make an actor
responsible for an effect and those that do not.” Pub. Citizen,
541 U.S. at 76 (quoting Metro. Edison Co. v. People Against
Nuclear Energy, 460 U.S. 766, 774 (1983)).
The Department offered a reasoned explanation as to why
it believed the indirect effects pertaining to increased gas
production were not reasonably foreseeable. At the outset, it
explained the difficulty with attempting to predict the
incremental quantity of natural gas that might be produced in
response to an incremental increase in LNG exports out of the
Freeport Terminal. The link between the two depends on the
price of gas, and the Department explained that the price
competitiveness of U.S. LNG in foreign energy markets
depends upon numerous factors that are inherently difficult to
predict, including the pace of technological change, U.S. and
international economic conditions, potential market
disruptions, and U.S. and foreign energy and environmental
regulations. Auth. Order at 84, J.A. 1024; Reh’g Order at 16-
17, J.A. 1115-16.
More importantly, even if the Department could make
reasonable projections about the quantity of export-induced gas
production, the Department was stumped by where, at the local
level, such production might occur. As the Department
explained, shale plays3 and other unconventional sources of
natural gas are spread throughout the lower 48 states, and there
is an interconnected pipeline system covering these states.
Reh’g Order at 19, J.A. 1118. This means every natural-gas-
producing region in the country is a potential source for new
gas wells in order to meet export-induced natural gas demand.
Forecasting the locale of export-induced production would
3
A “play” is a subsurface geological formation containing natural
gas.
16
require an economic model that used as an input the price
elasticity of each potentially productive area at the local level
throughout the country. Yet the Department explained it was
“fundamentally uncertain how natural gas production at the
local level will respond to price changes at the national level,”
Reh’g Order at 17, J.A. 1116, and “it would be impossible to
identify with any confidence the marginal production at the
wellhead or local level that would be induced by FLEX’s
exports over the [20-year4] period of its non-[Free Trade
country] authorization,” Reh’g Order at 16, J.A. 1115. This is
in large part due to the “local idiosyncrasies” involved, such as
“the limitations of estimating geology at the local level, and the
uncertainty of predicting local regulation, land use patterns,
and the development of supporting infrastructure.” Reh’g
Order at 18, J.A. 1117. Given that “nearly all of the
environmental issues presented by unconventional gas
production are local in nature,” the Department concluded that
without knowing where the production would occur, the
corresponding environmental impacts are “not ‘reasonably
foreseeable’” under NEPA. Auth. Order at 85, J.A. 1025.
The Department was not required to “foresee the
unforeseeable.” Scientists’ Inst. for Pub. Info., 481 F.2d at
1092. Its determination that an economic model estimating
localized impacts would be far too speculative to be useful is a
product of its expertise in energy markets and is entitled to
deference. See Del. Riverkeeper, 753 F.3d at 1312. Sierra Club
does not seriously dispute that the agency could not predict
where export-induced production would occur on a local level.
Because the Department could not estimate the locale of
production, it was in no position to conduct an environmental
analysis of corresponding local-level impacts, which inevitably
4
The FLEX application originally sought approval for exports over
a 25-year period but the Department reduced the term to 20 years.
17
would be “more misleading than informative.” Reh’g Order at
17, J.A. 1116; cf. Theodore Roosevelt Conservation P’ship,
616 F.3d at 513 (agency did not violate NEPA where it omitted
from its cumulative impact analysis other projects which were
“too preliminary to meaningfully estimate their cumulative
impacts” in an environmental impact statement).
2.
Sierra Club contends that even if identifying impacts
specific to local-level resources is a challenge, the agency
could have engaged in a regional impacts analysis. Although
acknowledging that the Department provided “some regional
analysis of how gas production in general affects water
resources . . . [and] regional ozone levels[,]” Sierra Club
suggests it should have done more. Pet’r Br. 60. In particular,
Sierra Club points out that the Department demonstrated an
ability to conduct an economic analysis projecting where
increased production might occur at the shale-play level, yet
the Department failed to explain why it could not use those
tools to project shale-play level environmental impacts specific
to the amount of exports authorized.
In its Rehearing Order, the Department explained why its
economic projections do not translate over well in the
environmental-impact context. Identifying which shale plays
are likely to contribute to export-induced production would not
“provide [any] information about where any incremental
production would arise within those shale plays,” which
themselves “overlap and stretch for thousands of square miles
below diverse surface environments.” Reh’g Order at 18-19,
J.A. 1117-18 (emphasis added). It would not add any
confidence to projections about impacts on particular water
resources, for example, which are “unique for each location
and may vary widely from well to well.” Add. at 10, J.A. 824.
18
Nor could the agency predict “where in relation to existing
ozone concentrations the incremental production would
occur,” thus making futile any effort to determine which
attainment areas might be at risk. Reh’g Order at 18, J.A. 1117;
see also Add. at 29, J.A. 843 (map showing overlay of ozone
non-attainment zones and shale basins, with no correlation
between the two). Under these circumstances, the Department
determined that it would not “facilitate meaningful analysis” to
make projections about play-level environmental impacts.
Reh’g Order at 18-19, J.A. 1117-18; see also Auth. Order at
85, J.A. 1025 (“[N]early all of the environmental issues
presented by unconventional gas production are local in nature,
affecting local water resources, local air quality, and local land
use patterns, all under the auspices of state and local regulatory
authority.”). It thus declined to engage in the shale-play level
analysis urged by Sierra Club.
The Department’s determination in that regard is
consistent with the “rule of reason.” The purpose of NEPA is
not to “generate . . . excellent paperwork,” but rather to “foster
excellent action” through informed decisionmaking. 40 C.F.R.
§ 1500.1(c). The Department drew the line when it declined to
attempt to quantify impacts on a regional level that would not
provide meaningful information about what water resources or
attainment areas might be impacted. Sierra Club suggests
certain estimates that the Department could have provided,
such as regional totals of estimated water usage; but its
suggestions do not reveal any flaw in the Department’s
reasoning, which recognized that shale plays do not correspond
to the water resources that might be impacted. At a certain
point, the Department’s obligation to drill down into
increasingly speculative projections about regional
environmental impacts is also limited by the fact that it lacks
any authority to control the locale or amount of export-induced
gas production, much less any of its harmful effects. Cf. Pub.
19
Citizen, 541 U.S. at 768 (“Since [the agency] has no ability
categorically to prevent the cross-border operations of Mexican
motor carriers, the environmental impact of the cross-border
operations would have no effect on [its] decisionmaking—[the
agency] simply lacks the power to act on whatever information
might be contained in the EIS.”).
Finally, we pause to consider whether the Department
should have taken a different approach for its cumulative
impacts analysis. The Supreme Court has instructed that
“when several proposals for . . . actions that will have
cumulative or synergistic environmental impact upon a region
are pending concurrently before an agency, their environmental
consequences must be considered together.” Kleppe v. Sierra
Club, 427 U.S. 390, 410 (1976). “[T]he key language there is
‘upon a region.’” Sierra Club (Freeport), 827 F.3d at 50
(quoting Kleppe, 427 U.S. at 410). Here, the crucial stumbling
block in the Department’s indirect-effects analysis was
identifying where the export-induced natural gas production
might occur or, if a regional analysis was possible, how its
impacts might play out. Our conclusion is thus no different in
the context of cumulative exports as it is for the indirect effects
of the FLEX application itself.
Rather than ignore the potential impacts of increased gas
production altogether, the Department assumed that production
could occur anywhere across the country and examined the
effects with that in mind. Thus, the Addendum considered
impacts that may be felt regardless of where they occur, see,
e.g., Add. at 13-14, J.A. 827-28 (identifying water-
contamination risks associated with any drilling operation), as
well as those that are more specific to particular environments,
see, e.g., id. at 13, J.A. 827 (explaining water impacts are “most
likely to be more prevalent in the arid western regions of the
United States”). It also identified the relevant policymakers,
20
and existing state and federal laws that govern, and might
curtail, the environmental impacts. See, e.g., id. (explaining
the Clean Water Act regulates surface discharge and the Safe
Drinking Water Act regulates underground injection of
wastewaters); id. at 16-17, J.A. 830-31 (chart providing state-
by-state comparison of hydraulic fracturing chemical
disclosure regulations). Generalizing the impacts does not
necessarily mean minimizing them; and here, the Addendum
candidly discussed significant risks associated with increased
gas production. See, e.g., id. at 27, J.A. 841 (explaining that
increased production causes pollution and might “create new
or expanded ozone non-attainment areas” and could frustrate
state implementation plans for bringing current non-attainment
areas into compliance with national standards).
Under our limited and deferential review, we cannot say
that the Department failed to fulfill its obligations under NEPA
by declining to make specific projections about environmental
impacts stemming from specific levels of export-induced gas
production.
C.
Sierra Club similarly contends that the Department failed
to fulfill its obligations with respect to the potential for the U.S.
electric power sector to switch from gas to coal in response to
higher gas prices, which in turn would be a response to
increased exports. See EIA Study at 6, J.A. 137. As the
Department noted, the economic causal chain between its
export authorization and the potential use of coal as a substitute
fuel for gas “is even more attenuated” than its relationship to
export-induced gas production. Reh’g Order at 23, J.A. 1122.
Sierra Club has the same complaint about the Department’s
failure to make specific projections about the indirect effects of
coal, but offers no reason to believe the impacts are any more
21
foreseeable or more prone to usefulness than those associated
with increased gas production. Thus, Sierra Club’s petition
with respect to coal usage is denied.
D.
Sierra Club challenges the Department’s examination of
the potential greenhouse-gas emissions resulting from the
indirect effects of exports. To address these issues, the
Department evaluated the upstream and downstream
greenhouse-gas emissions (CO2 and methane) from producing,
transporting, and exporting LNG in its Life Cycle Report. See
J.A. 578. Sierra Club challenges the adequacy of the
Department’s review.
As for the “upstream” – i.e., domestic – emissions, Sierra
Club asserts that the Department failed to disclose the “amount
of greenhouse gases that would be emitted by export-induced
gas production” in the Impact Statement. Pet’r Br. 63.
Although the Impact Statement itself did not contain that
information, Sierra Club acknowledges that the information it
seeks is provided in the Life Cycle Report. Indeed, Sierra Club
explains that studies published by the Department collectively
“provide detailed estimates of the amount of emissions from
each stage of the well-to-terminal life cycle” – which it
describes as providing a “thorough analysis” and which it
suggests the Department should have used as a reference for
analyzing the effects of export-induced gas production in
individual shale plays. Pet’r Reply Br. 21.
As for “downstream” emissions – i.e., those resulting from
transport and usage abroad – Sierra Club does not challenge the
method employed by the Department to address them, but
instead believes it should have evaluated additional variables.
The Department compared emissions from exported U.S. LNG
22
to emissions of coal or other sources of natural gas. Sierra Club
asserts that the Department should have also considered the
potential for LNG to compete with renewables, which it says
are “prevalent” in certain import markets.5 Sierra Club’s
complaint “falls under the category of ‘flyspecking.’”
Myersville Citizens for a Rural Cmty., Inc. v. FERC, 783 F.3d
1301, 1324 (D.C. Cir. 2015).
As the Department explained, there are a number of other
fuel sources that U.S. LNG might compete with, and “[t]o
model the effect that U.S. LNG exports would have on net
global [greenhouse-gas] emissions would require projections
of how each” fuel source (nuclear, renewable, etc.) would be
affected in each potential LNG-importing nation. Auth. Order
at 93, J.A. 1033. Such an analysis, the Department noted,
would require consideration of the dynamics of all energy
markets in LNG-importing nations, and given the many
uncertainties in modeling such market dynamics, the analysis
would be “too speculative to inform the public interest
determination.” Auth. Order at 93, J.A. 1033. In addition to
foreseeability limitations, “‘practical considerations of
feasibility might well necessitate restricting the scope’ of an
agency’s analysis.” Sierra Club (Freeport), 827 F.3d at 50
(quoting Kleppe, 427 U.S. at 414). We see nothing arbitrary
about the Department’s decision.
III.
Finally, we consider whether the Department
appropriately authorized the FLEX exports destined for non-
5
Freeport argues we lack jurisdiction of this claim because Sierra
Club did not raise its objection before the Department. See 15 U.S.C.
§ 717r(b). We disagree. Sierra Club’s rehearing request challenged
the Department’s analysis of the extent to which U.S. LNG exports
would displace other fuel sources.
23
FTA countries under the Natural Gas Act’s “public interest”
test. See 15 U.S.C. § 717b(a). We review the Department’s
decision here, too, under the arbitrary and capricious standard.
Wash. Gas Light Co. v. FERC, 532 F.3d 928, 930 (D.C. Cir.
2008).
Congress enacted the Natural Gas Act with the “principal
purpose” of “encourag[ing] the orderly development of
plentiful supplies of . . . natural gas at reasonable prices.”
NAACP v. Fed. Power Comm’n, 425 U.S. 662, 669-70 (1976).
Other “subsidiary” purposes include respecting “conservation,
environmental, and antitrust” limitations. Id. at 670 & n.6;
accord Myersville Citizens for a Rural Cmty., 783 F.3d at 1307.
The Natural Gas Act provides that the Department “shall”
authorize exports to non-FTA nations “unless . . . it finds that
the proposed exportation . . . will not be consistent with the
public interest.” 15 U.S.C. § 717b(a) (emphasis added). We
have construed this as containing a “general presumption
favoring [export] authorization.” W. Va. Pub. Servs. Comm’n
v. U.S. Dep’t of Energy, 681 F.2d 847, 856 (D.C. Cir. 1982).
Thus, there must be “an affirmative showing of inconsistency
with the public interest” to deny the application. Panhandle
Producers & Royalty Owners Ass’n v. Econ. Regulatory
Admin., 822 F.2d 1105, 1111 (D.C. Cir. 1987).
For its “public interest” review, the Department
considered various factors such as domestic economic effects
(e.g., job creation and tax revenue, J.A. 313-14) and foreign
policy goals (e.g., global fuel diversification and energy
security for our foreign trading partners, J.A. 1036), in addition
to the environmental impacts it examined through the NEPA
process. It ultimately decided to grant the FLEX application,
explaining that Section 3 of the Natural Gas Act “is too blunt
24
an instrument to address [Sierra Club’s] environmental
concerns efficiently.” Auth. Order at 87, J.A. 1027.
In the two-and-a-half pages Sierra Club dedicates to this
claim, the only factor it suggests is inconsistent with the public
interest is environmental. Sierra Club argues that the
Department failed to conduct a thorough enough examination
of the environmental impacts and thus arbitrarily granted the
application. In doing so, it repeats the same argument it made
to support its NEPA claim – namely, that the Department
arbitrarily failed to evaluate foreseeable indirect effects of
exports. We have already rejected this argument and explained
why the Department adequately considered the environmental
impacts of its decision. Sierra Club offers no basis for
reevaluating the scope of the Department’s evaluation for
purposes of the Natural Gas Act.
To the extent Sierra Club suggests the Department should
have weighed environmental concerns more heavily before
granting the FLEX application, it fails to overcome the
presumption in favor of exports. Notably, even if the
Department determined the impacts were significant, it could
still find that the public interest weighs in favor of allowing the
exports. “[I]t is . . . well settled that NEPA itself does not
mandate particular results, but simply prescribes the necessary
process.” Robertson, 490 U.S. at 350. Thus, “[i]f the adverse
environmental effects of the proposed action are adequately
identified and evaluated, the agency is not constrained by
NEPA from deciding that other values outweigh the
environmental costs.” Id.; see, e.g., id. (“[I]t would not have
violated NEPA if the Forest Service, . . . had decided that the
benefits to be derived from downhill skiing at Sandy Butte
justified the issuance of a special use permit, notwithstanding
the loss of 15 percent, 50 percent, or even 100 percent of the
mule deer herd.”). Sierra Club has given us no reason to
25
question the Department’s judgment that the FLEX application
is not inconsistent with the public interest. Sierra Club’s
petition for review on this claim is denied.
IV.
For the foregoing reasons, Sierra Club’s petition for
review of the Department’s orders is denied.
So ordered.