The Federal Energy Regulatory Commission, or FERC, issued a certificate allowing Transcontinental Gas Pipe Line Company, known as Transco, to construct and operate a pipeline expansion project running through New Jersey, New York, Delaware, Maryland, and Pennsylvania. The project sought to add over 800,000 dekatherms of capacity, with the majority of the gas destined for New Jersey. Environmental groups and the New Jersey Division of Rate Counsel challenged the approval, arguing that FERC arbitrarily overlooked significant environmental consequences and failed to consider evidence that New Jersey already had sufficient gas capacity. State regulators had commissioned a study concluding that existing infrastructure could meet demand through 2030, and New Jersey law mandated annual reductions in natural gas usage. Despite this evidence, FERC approved the project in January 2023, relying on precedent agreements with local utilities and a final environmental impact statement that petitioners argued was deficient. The petitioners sought review in the D.C. Circuit, arguing that FERC's analysis was arbitrary and capricious under the Administrative Procedure Act.
The court analyzed the case under two primary legal frameworks: the National Environmental Policy Act and the Natural Gas Act. Under NEPA, the court held that FERC violated its procedural obligations by failing to make a case-specific significance determination regarding greenhouse gas emissions. Although FERC had previously acknowledged it could assess significance, it reverted to a stance of inaction without explanation, despite the project's emissions being well above the agency's own interim guidance threshold. The court also found FERC failed to discuss mitigation measures for these emissions, as required by NEPA regulations. While the court rejected challenges regarding upstream and downstream ozone emissions due to a lack of record evidence, it affirmed that the failure to label the project's greenhouse gas impacts as significant was arbitrary. Under the Natural Gas Act, the court found FERC acted arbitrarily in its market need determination. The agency failed to explain why it discredited the New Jersey Agencies Study, which concluded that current capacity was sufficient through 2030. Furthermore, FERC ignored the state's statutory mandates requiring annual reductions in natural gas usage, incorrectly characterizing these laws as unenforceable. The court also ruled that FERC's reliance on precedent agreements with local distribution companies was insufficient without addressing concerns that these companies could pass costs to captive ratepayers. Finally, the court found FERC's balancing of public benefits against adverse impacts was deficient because it merely disclosed emissions data without explaining how those emissions were weighed against the project's benefits.
The D.C. Circuit vacated FERC's certificate order, effectively halting the project's authorization until the agency conducts a proper review. FERC must now re-evaluate the project's market need, taking into account the New Jersey Agencies Study and state laws mandating gas reductions. The agency must also perform a rigorous environmental review that includes a specific significance determination for greenhouse gas emissions and a discussion of mitigation strategies. This decision signals that FERC cannot rely on generic proceedings to avoid case-specific environmental analysis and must meaningfully balance climate impacts against public benefits.
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