City of Oberlin, Ohio v. FERC
937 F.3d 599
| D.C. Cir. | 2019Background
- Nexus sought a Section 7 certificate to build a 257-mile interstate natural gas pipeline (1.5 million dth/day) from Ohio to Michigan; precedent agreements covered 885,000 dth/day (59% of capacity), including 260,000 dth/day with Canadian shippers.
- FERC issued the Section 7 certificate (Aug. 25, 2017) and denied rehearing (July 25, 2018); Nexus later filed and pursued condemnation actions to obtain easements over petitioners’ land.
- Petitioners (City of Oberlin and a landowner coalition) challenge FERC’s certificate and rehearing denial, arguing among other things that FERC improperly relied on export contracts as evidence of project need, set an excessive initial rate design (14% ROE; conditioned on 50/50 equity-debt), and failed to satisfy NEPA/public-safety obligations.
- The D.C. Circuit found petitioners have Article III standing (landowners forced to sell or face condemnation have cognizable injury) and retained jurisdiction.
- The court rejected most challenges but held FERC failed to adequately explain why it may lawfully credit precedent agreements with foreign shippers serving foreign customers when finding public convenience and necessity under Section 7; remanded without vacatur for further explanation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether petitioners have Article III standing | Landowners lost property interests and face condemnations; thus have injury | FERC/Nexus argued settlements and dismissal of condemnation remove redressable injury | Court: Petitioners have standing; settlement on compensation does not erase injury of being subject to eminent domain |
| Whether FERC may credit precedent agreements for export toward Section 7 need finding | FERC cannot rely on export contracts because Section 7 governs interstate commerce, not foreign commerce; Takings/public-use concerns | FERC relied on record showing substantial domestic consumption, secondary U.S. delivery rights, and precedent; contended Section 3/DOE oversight addresses export public-interest review | Court: Remanded — FERC failed to adequately explain why crediting foreign-shipper contracts for Section 7 need is lawful under the Act and Takings Clause; further explanation required |
| Whether FERC’s approval of a 14% ROE with a 50/50 capital structure for initial rates was arbitrary | 14% ROE (even at 50/50) is excessive; FERC’s citation to precedent is insufficient without pipeline‑specific justification | FERC argued new (greenfield) pipelines justify higher ROE; it balanced consumer and investor interests and required future cost/revenue filings | Court: Held FERC’s explanation was adequate on this record; claim rejected |
| Whether FERC violated NEPA or improperly delegated safety review to DOT | FERC relied on Nexus’s compliance with DOT standards and did not independently analyze safety impacts or alternatives (e.g., rerouting away from residences) | FERC properly considered DOT standards as part of its independent EIS, addressed specific safety concerns, and accounted for population-based regulation and routing | Court: Rejected petitioners’ NEPA/safety claims; FERC conducted an adequate independent safety review |
Key Cases Cited
- Minisink Residents for Envtl. Pres. & Safety v. FERC, 762 F.3d 97 (D.C. Cir. 2014) (discussing NGA purposes)
- NAACP v. Fed. Power Comm’n, 425 U.S. 662 (U.S. 1976) (legislative aims of natural gas regulation)
- Hope Nat. Gas Co. v. FPC, 320 U.S. 591 (U.S. 1944) (consumer protection principle in utility regulation)
- Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017) (landowner standing; NGA rate and capital-structure discussion)
- Border Pipe Line Co. v. Fed. Power Comm’n, 171 F.2d 149 (D.C. Cir. 1948) (holding Section 7 does not include foreign commerce)
- Distrigas Corp. v. Fed. Power Comm’n, 495 F.2d 1057 (D.C. Cir. 1974) (Section 3/Section 7 substantive-equivalence discussion for imports/exports)
- BP Energy Co. v. FERC, 828 F.3d 959 (D.C. Cir. 2016) (remand for inadequate agency explanation)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (U.S. 1983) (arbitrary-and-capricious standard)
- Atlantic Ref. Co. v. Pub. Serv. Comm’n, 360 U.S. 378 (U.S. 1959) (Section 7 authority to approve initial rates)