Late last month, the U.S. Court of Appeals for the District of Columbia Circuit, in New Jersey Conversation Foundation, et al. v. FERC, unanimously vacated the Federal Energy Regulatory Commission’s (FERC) approval of the Transcontinental (Transco) Gas Pipe Line Company Regional Energy Access Expansion Project.

The roughly $950 million gas pipeline project involves the construction and operation of over 36 miles of new natural gas pipeline facilities built by a Williams Co. subsidiary. In addition to the pipeline, the project called for the construction of a new compressor station and modification to the existing stations that currently run through several Northeastern states including Maryland, Delaware, New York, Pennsylvania, and New Jersey. According to the project specifications, the project is intended to expand natural gas delivery capacity by close to 830,000 dekatherms per day.

FERC approved the Regional Energy Access Expansion Project back in January 2023, while a sizeable portion of the project’s capacity didn’t come into service until later that same year. Almost immediately, however, a number of environmental groups, including the Sierra Club and the Delaware River Network along with the New Jersey Division of Rate Counsel and several state attorneys challenged FERC’s approval of the project. Many opponents questioned whether the pipeline project was even needed under the Natural Gas Act.

In its ruling, the three-judge panel on the D.C. Circuit Court of Appeals first criticized the FERC’s “arbitrary and capricious” decision to not determine the significance of the environmental impact of the project’s greenhouse gas emissions. As part of its assessment of the project’s greenhouse emissions, FERC found that they would impose social costs of $46 billion while the project’s downstream emissions could potentially equal 39 percent of the total annual emissions budget of New Jersey and Maryland, according to the appellate court.

The court cited to its recent ruling in Healthy Gulf v. FERC, in which it similarly criticized the FERC’s failure to thoroughly consider the environmental significance of greenhouse gas emissions. The court emphasized that “even if FERC is not required to make a significance determination, choosing not to do so on the basis of an arbitrary and capricious explanation is nevertheless a violation of the [Administrative Procedure Act].” The court also relied upon the prior case of Northern Natural Gas Co., 2021FERC 61, 189 P 29, that dealt with the Northern Natural Gas pipeline in which FERC was able to make a case-specific significance determination and FERC providing “no justification for why it cannot determine significance here.”

“FERC asserts that it adequately weighed the potential environmental harms of the project just by disclosing the project’s reasonably foreseeable GHG emissions,” the court said. “It calculated anticipated GHG emissions, listed harms expected due to climate change generally, and identified climate policy goals at international, national, and state levels — then seemingly swept the issue under the rug in its balancing, stopping short of explaining how anticipated GHG emissions factored in weighing the potential adverse impact against the potential benefit of the project.”

Also in its decision, the appellate court determined that FERC failed to address why it discredited the findings of two market studies showing that current pipeline capacity would be able to meet New Jersey’s natural gas demands well beyond 2030. In the past, FERC has relied on pipeline capacity contracts as an indicator when a project is needed. However, for the Regional Energy Access expansion project, the court held that these agreements were insufficient to establish market need for it if the local gas utilities can sell unneeded pipeline capacity to others and pass on their pipeline costs to captive ratepayers.

“FERC also arbitrarily misconstrued New Jersey’s energy efficiency laws — which mandate sizable and continuous reductions to natural gas usage by public utilities — as unenforceable,” the court said. “To the contrary, New Jersey law is mandatory and includes mechanisms for its enforcement.”

In the end, the appellate court vacated FERC’s order approving the Transco project rather than just remanding the case back to FERC. It did this because the court decided it was unclear whether FERC would be able to fix the flaws in its approval order. Any disruption to the pipeline’s operations caused by the vacating of the approval order is, in the court’s mind, “significantly outweighed by the core deficiencies” in FERC’s decision and rehearing orders.

While FERC is likely to issue an emergency certificate to Transco, which would allow the project to keep on operating, what is certain to spring from this order is more uncertainty as to whether FERC is properly considering the significance of greenhouse gas emissions when compared to market need. All of this may make future project developers with FERC approval wary that their projects may also see their project approvals vacated.