Environmental Defense Fund v. Federal Energy Regulatory Commission

Under the Natural Gas Act, an entity seeking to construct an interstate natural-gas-transport pipeline had to obtain a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC) (defendant). A 1999 FERC certificate policy statement indicated that in determining whether to issue a certificate, FERC would first assess whether there was market need for the project. If there was, FERC would then balance the project’s potential adverse impacts and public benefits. FERC had traditionally required the project proposer to demonstrate market need by presenting preconstruction contracts, known as precedent agreements, representing commitments by natural-gas suppliers to supply gas for the proposed pipeline. However, the certificate policy statement eliminated the precedent-agreement requirement and stated instead that precedent agreements would be considered only as evidence of the need for the project, along with other evidence including a market study. In 2016, Spire STL Pipeline LLC (Spire STL) announced plans to build a natural-gas pipeline in St. Louis, Missouri and invited natural-gas shippers to enter into precedent agreements. No shippers agreed, and Spire STL ultimately entered a precedent agreement with its own affiliate, Spire Missouri, for 87.5 percent of the pipeline’s estimated capacity. Spire STL applied for a certificate for the pipeline project, asserting benefits including enhanced reliability of the natural-gas supply and reduced reliance on older pipelines. Spire STL stated explicitly that the project would not serve new demand for natural gas. Entities including the Environmental Defense Fund (EDF) (plaintiffs) challenged Spire STL’s certificate application, presenting plausible evidence of self-dealing by Spire STL and claiming that the corporate affiliation between Spire STL and Spire Missouri limited the precedent agreement’s probative value as evidence of market need for the project. However, FERC treated the precedent agreement as conclusive proof of market need. FERC also found that the proposed pipeline’s benefits outweighed its potential adverse effects but provided no evidence supporting this cost-benefit analysis. FERC issued a certificate, and EDF petitioned for review.