United States Court of Appeals, District of Columbia Circuit
February 2, 2017
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
Matthews argued the cause for petitioner. With him on the
briefs was Sanjay Narayan. Joanne M. Spalding entered an
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,
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.
Wilkins, Circuit Judge
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.
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 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.
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
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
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.
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.
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. §
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.
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
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 exports on domestic energy markets
and related macroeconomic effects.
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.
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.
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 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