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Myersville Citizens For a Rural Community, Inc. v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

April 24, 2015

MYERSVILLE CITIZENS FOR A RURAL COMMUNITY, INC., ET AL., PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT DOMINION TRANSMISSION, INC., INTERVENOR

Argued: October 24, 2014.

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On Petition for Review of Orders of the Federal Energy Regulatory Commission.

Carolyn Elefant argued the cause and filed the briefs for petitioners.

Karin L. Larson, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were David L. Morenoff, Acting General Counsel, and Robert H. Solomon, Solicitor.

Catherine E. Stetson argued the cause for intervenor. On the brief were J. Patrick Nevins, Christopher T. Handman, and Sean Marotta.

Before: TATEL, MILLETT, and PILLARD, Circuit Judges.

OPINION

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Pillard, Circuit Judge:

Citizens of the small town of Myersville, in Frederick County, Maryland, oppose the construction of a natural gas facility called a compressor station in their town. The compressor station is a small part of a larger expansion of natural gas facilities in the northeastern United States proposed by Dominion Transmission, Inc., a regional natural gas company and Intervenor in this case. Dominion, which is in the business of storing and transporting natural gas, requested approval from the Federal Energy Regulatory Commission to move ahead with the project. The Commission, over the objections of the Myersville citizens, conditionally approved it in December 2012. Dominion then fulfilled the Commission's conditions, including obtaining a Clean Air Act permit from the Maryland Department of the Environment. Dominion built the station, and it has been operating for approximately six months.

The Myersville citizens petition this court to vacate the Commission's order approving the project. They attack the Commission's decision on a number of fronts. They argue that the Commission lacked substantial evidence to conclude that there was a public need for the project Dominion proposed. They assert that the Commission unlawfully interfered with Maryland's rights under the Clean Air Act.

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They challenge the Commission's environmental review of the project, including its consideration of potential alternatives. And they claim the Commission unlawfully withheld hydraulic flow diagrams from them in violation of their due process rights. Because we conclude that each of Petitioners' challenges lacks merit, we deny the petition for review.

I.

Dominion runs underground natural gas storage and transportation facilities in six northeastern and mid-Atlantic states. Dominion operates over 947 billion cubic feet of storage capacity and approximately 11,000 miles of natural gas pipeline. Before it sought the Commission's approval, Dominion conducted an " open season" in which it offered contracts for future supply of natural gas to potential customers. It entered contracts with two municipal utilities and a natural gas distribution company for firm transportation and storage services.[1] Dominion's proposed project, called the " Allegheny Storage Project," called for new or expanded natural gas facilities in Maryland, Ohio, West Virginia, and Pennsylvania, thereby providing to Dominion's customers an additional 115,000 dekatherms per day of firm transportation, 7.5 billion cubic feet of storage capacity, and 125,000 dekatherms per day of storage withdrawal at an estimated cost of over $112 million.[2]

The Project required the building of two compressor stations--facilities along a pipeline that compress gas to move it through the system at high speeds--and additional pipeline to serve the compressors. One of those compressor stations is located on a twenty-one-acre plot in the town of Myersville. That compressor station is the subject of this appeal.

Congress enacted the Natural Gas Act, ch. 556, 52 Stat. 821 (1938) (codified as amended at 15 U.S.C. § 717 et seq. ), 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, 96 S.Ct. 1806, 48 L.Ed.2d 284 (1976). " [S]ubsidiary" purposes include respecting " conservation, environmental, and antitrust" limitations. Id. at 670 & n.6. The Act vests the Commission with authority to regulate the transportation and sale of natural gas in interstate commerce, including authority to issue certificates permitting the construction or extension of natural gas transportation facilities, such as those Dominion operates. 15 U.S.C. § 717f(c).

Before any applicant may construct or extend natural gas transportation facilities, it must obtain a " certificate of public convenience and necessity" from the Commission pursuant to Section 7(c) of the Act. Id. § 717f(c)(1)(A). The Commission may issue a certificate to " any qualified applicant" if it finds that " the applicant is able and willing properly to do the acts and to perform the service proposed . . . and that the proposed service" and " construction . . . is or will be required by the present or future public convenience and necessity." Id. § 717f(e). As part of its certificate authority, the Commission has the " power to attach to the issuance of the certificate and to the exercise of the rights granted

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thereunder such reasonable terms and conditions as the public convenience and necessity may require." Id.

Petitioners in this case--Myersville Citizens for a Rural Community, Inc. and citizens of Myersville Franz Gerner, Ted Cady, and Tammy Mangan--protest the building of the Myersville compressor station. During the public comment process before the Commission, they raised objections, several of which form the basis of the current petition.

After preparing an Environmental Assessment of the Allegheny Storage Project, the Commission rejected the objections made by Petitioners and others and granted Dominion a conditional Section 7 certificate. Dominion Transmission, Inc., 141 FERC ¶ 61,240 (Dec. 20, 2012) (" Certificate Order " ). The Commission conditioned the certificate, in part, on Dominion's ability to secure all necessary federal authorizations, including Clean Air Act permits. Certificate Order, App. B, Envtl. Condition 8. After considering renewed objections, the Commission denied rehearing. Dominion Transmission, Inc., 143 FERC ¶ 61,148 (May 16, 2013) (" Rehearing Order" ). The Myersville compressor station was placed into service on November 1, 2014. FERC, Docket No. CP12-72, Supplemental Information Filing Replacing Previous filed In Service Notification Request of Dominion Transmission, Inc. under CP12-72 (filed Nov. 10, 2014). Petitioners timely petitioned for review of the Commission's orders.

***

We have jurisdiction pursuant to 15 U.S.C. § 717r(b). Our review of the Commission's decision is limited to determining whether the order was " arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); see Minisink Residents for Envtl. Pres. & Safety v. FERC, 762 F.3d 97, 105-06, 412 U.S.App.D.C. 97 (D.C. Cir. 2014). " If supported by substantial evidence, the Commission's findings of fact are conclusive." B& J Oil & Gas v. FERC, 353 F.3d 71, 76, 359 U.S.App.D.C. 214 (D.C. Cir. 2004) (citing 15 U.S.C. § 717r(b)). We must assure ourselves that the Commission's " decisionmaking is reasoned, principled, and based upon the record." Am. Gas Ass'n v. FERC, 593 F.3d 14, 19, 389 U.S.App.D.C. 162 (D.C. Cir. 2010) (internal quotation marks omitted). In so doing, we consider " whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d 1071, 1083, 353 U.S.App.D.C. 170 (D.C. Cir. 2002). Because the grant or denial of a Section 7 certificate of public convenience and necessity is a matter " peculiarly within the discretion of the Commission," Okla. Natural Gas Co. v. Fed. Power Comm'n, 257 F.2d 634, 639, 103 U.S.App.D.C. 256 (D.C. Cir. 1958), this court does not " substitute its judgment for that of the Commission," Nat'l Comm. for the New River v. FERC, 373 F.3d 1323, 1327, 362 U.S.App.D.C. 276 (D.C. Cir. 2004). Moreover, " [w]hen considering FERC's evaluation of 'scientific data within its technical expertise,' we afford FERC 'an extreme degree of deference.'" Washington Gas Light Co. v. FERC, 532 F.3d 928, 930, 382 U.S.App.D.C. 327 (D.C. Cir. 2008) (quoting Nat'l Comm. for the New River, Inc., 373 F.3d at 1327).

II.

Petitioners challenge the Commission's finding of public need for the Project as unsupported by substantial evidence. They fault the Commission for approving the Project without requiring Dominion to submit its revised agreements with the new natural gas customers that subscribed to the added capacity. They contend that the absence of current gas contracts in the record undermines the Commission's finding that there is a public need for the

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Project adequate to ensure that pre-existing customers will not subsidize it. They also claim that the Project will result in an expansion of natural gas storage and transportation capacity beyond what Dominion disclosed to the Commission.

The Commission has outlined in a policy statement the criteria it considers in determining whether a proposed facility will receive a certificate of public convenience and necessity. Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC ¶ 61,227 (Sept. 15, 1999), clarified, 90 FERC ¶ 61,128 (Feb. 9, 2000), further clarified, 92 FERC ¶ 61,094 (July 28, 2000). The " threshold" question the Commission considers is " whether the project can proceed without subsidies from [the applicant's] existing customers." 88 FERC at 61,745. To ensure that a project will not be subsidized by existing customers, the applicant must show that there is market need for the project. The project must " stand on its own financially" through investment by the applicant and support from new customers subscribed to the expanded capacity through " preconstruction contracts." Id. at 61,746; see also 90 FERC at 61,392.

Provided a project will not be subsidized by existing customers, the Commission then balances the " public benefits against the potential adverse consequences" of the proposal. 88 FERC at 61,745. If no adverse effects would stem from the project, no balancing is required, and the Commission proceeds to environmental review. Otherwise, the Commission balances the adverse effects with the public benefits of the project, as measured by an " economic test." Id. Adverse effects may include increased rates for preexisting customers, degradation in service, unfair competition, or negative impact on the environment or landowners' property. Id. at 61,747-48. Public benefits may include " meeting unserved demand, eliminating bottlenecks, access to new supplies, lower costs to consumers, providing new interconnects that improve the interstate grid, providing competitive alternatives, increasing electric reliability, or advancing clean air objectives." Id. at 61,748.

Applying those criteria, the Commission found that the Project would not be subsidized by existing customers and that the " minimal" adverse effects were outweighed by the public benefits. Certificate Order ¶ 21. In finding a public need for the project, the Commission found that " [a]ll of the proposed capacity has been subscribed under long-term contracts, demonstrating the existence of a market for the project." Id. The Commission concluded that the Project would ensure " the ability of two local distribution companies [Washington Gas Light Co. and Baltimore Gas & Electric] to meet the needs of their overall 1.5 million customers during periods of peak demand (i.e., the winter heating season)," providing " sufficient justification to authorize the construction and operation" of the Project. Id. ¶ 66.

We review the Commission's factual findings to ensure they are supported by " substantial evidence," or " such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Colo. Interstate Gas Co. v. FERC, 599 F.3d 698, 704, 389 U.S.App.D.C. 436 (D.C. Cir. 2010) (internal quotation marks omitted); see also 15 U.S.C. § 717r(b). The standard " 'requires more than a scintilla, but can be satisfied by something less than a preponderance of the evidence.'" Minisink, 762 F.3d at 108 (quoting FPL Energy Me. Hydro LLC v. FERC, 287 F.3d 1151, 1160, 351 U.S.App.D.C. 148 (D.C. Cir. 2002)).

A.

We first address the Commission's finding that the Project was supported by market need.

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Dominion secured precedent agreements with three natural gas customers through the " open season" it conducted in the summer of 2007 for what was then called the " Storage Factory Project." Certificate Order ¶ 10. A precedent agreement is a long-term contract subscribing to expanded natural gas capacity. See, e.g., Process Gas Consumers Grp. v. FERC, 177 F.3d 995, 1000, 336 U.S.App.D.C. 162 (D.C. Cir. 1999). Technical issues led Dominion to abandon the Storage Factory Project in November 2008. Certificate Order ¶ 10 n.8. It revised and renamed the project the Allegheny Storage Project. Id. Dominion stated in its application that its precedent agreements were revised to reflect the changes, and that the Allegheny Storage Project was designed " to meet the needs of the prospective Storage Factory Project customers." Id. Dominion did not submit those revised precedent agreements to the Commission. Instead, it provided a summary of relevant terms of the original agreements and the affidavit of Dominion's Director of Gas Business Development stating that the Allegheny Storage Project customers had executed " binding precedent agreements representing 100% market commitment" for fifteen years for the expanded capacity. J.A. 96-98.

Petitioners argue that the Commission's finding of market need was unsupported by substantial evidence because Dominion did not submit the revised precedent agreements themselves for the record. To the extent that Petitioners argue the Commission is legally required to include in the record the most current version of precedent agreements in order to find that a project is supported by market need, that argument was not preserved for appeal. See 15 U.S.C. § 717r(b) (" No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do." ). Petitioners did not argue before the Commission that it lacks the authority to find public need unless the most current precedent agreements, as distinct from other evidence of demand, are in the administrative record. The closest they came was in a request for rehearing, where, in a footnote, they stated: " It should be noted that there do[ ] not appear to be even sample or generic precedent agreements available in the public record." J.A. 467 n.20. That did not adequately raise the issue, and, in any case, we need not consider arguments " tucked away in a footnote" in a request for rehearing. North Carolina v. FERC, 112 F.3d 1175, 1192, 324 U.S.App.D.C. 209 (D.C. Cir. 1997); see also Washington Legal Clinic for the Homeless v. Barry, 107 F.3d 32, 39, 323 U.S.App.D.C. 219 (D.C. Cir. 1997).

Petitioners nonetheless preserved the more case-specific version of the argument: that the absence of the updated precedent agreements from this particular administrative record rendered the Commission's factual finding that the Project was fully subscribed unsupported by substantial evidence. Petitioners argued on rehearing that the agreements were " out of date" and that they " relate to a completely different project so at best, they demonstrate only a need for the Storage Factory Project, not for the [Allegheny Storage Project]." J.A. 467. In denying rehearing, the Commission addressed and rejected that argument. See Rehearing Order ¶ 30 n.29. It was therefore preserved for review.

Petitioners' challenge to the Commission's finding of market need fails on the record even in the absence of the updated precedent agreements. In addition to the sworn affidavit stating that ...


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