39 F.4th 719
D.C. Cir.2022Background
- Nexus sought a Section 7 certificate from FERC to build a natural-gas pipeline from Ohio to Michigan; the project had eight precedent agreements covering 59% of capacity, including two Canadian shippers accounting for 17%.
- FERC granted the certificate, crediting all precedent agreements (including export agreements) as evidence of market demand and weighing benefits against environmental and landowner impacts.
- The City of Oberlin challenged FERC’s reliance on export-bound precedent agreements; this Court in Oberlin I remanded for FERC to explain why crediting export agreements in a Section 7 analysis was lawful, but did not vacate the certificate.
- On remand FERC explained three reasons to credit export agreements (Section 3(c) free-trade presumption, domestic benefits from added capacity, and the Dawn Hub connection) and stated it would have approved the certificate even without the export agreements.
- The City renewed statutory and Takings Clause challenges; the D.C. Circuit denied the petition, finding FERC’s explanation rational and its alternative justification adequate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC may credit precedent agreements to export-bound shippers in a Section 7 certificate analysis | Export-bound gas is not "interstate commerce" and therefore only Section 3 (exports) governs; export contracts cannot justify a Section 7 certificate | Nexus transports gas in interstate commerce; Section 7 requires weighing all public-interest factors, so export agreements are probative | FERC lawfully considered export precedent agreements in its Section 7 analysis because the pipeline transports interstate gas and Section 7's public-interest inquiry is broad |
| Whether FERC’s reasons for crediting export agreements were arbitrary and capricious | FERC failed to adequately justify crediting export agreements; reliance effectively substitutes Section 3 public-interest findings for Section 7 | FERC gave three coherent bases: (1) Section 3(c) deems exports to free-trade nations consistent with public interest; (2) domestic benefits flow from added capacity; (3) the Dawn Hub links exports to domestic markets | FERC’s three rationales were adequate and supported a rational connection between facts and decision |
| Whether crediting export agreements violates the Takings Clause (eminent domain/public-use) | Granting eminent domain for export-serving capacity is not a public use | Congress authorized eminent domain for pipelines meeting public convenience and necessity; courts defer to legislative judgment if rationally related to public purpose | No Takings violation: a valid Section 7 public-convenience finding satisfies public-use review and FERC did not conflate Sections 3 and 7 |
| Whether the certificate would have been valid without the export precedent agreements | FERC could not demonstrate the certificate would stand absent export agreements | On remand FERC showed domestic precedent agreements accounted for 42% of capacity and existing pipelines lacked that capacity; other benefits supported approval | Court accepts FERC’s alternative explanation: certificate valid even excluding export agreements |
Key Cases Cited
- City of Oberlin v. FERC, 937 F.3d 599 (D.C. Cir. 2019) (prior remand requiring FERC to justify crediting export precedent agreements)
- Atlantic Refining Co. v. Pub. Serv. Comm’n of N.Y., 360 U.S. 378 (1959) (Section 7 requires evaluation of all factors bearing on the public interest)
- Border Pipe Line Co. v. Fed. Power Comm’n, 171 F.2d 149 (D.C. Cir. 1948) (distinguishing pipelines engaged exclusively in foreign commerce)
- Okla. Nat. Gas Co. v. FERC, 28 F.3d 1281 (D.C. Cir. 1994) (gas commingled with interstate gas becomes interstate)
- United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir. 2016) (arbitrary-and-capricious review requires a rational connection between facts and choice)
- Kelo v. City of New London, 545 U.S. 469 (2005) (legislative judgment on public purpose is entitled to deference)
- Nat’l R.R. Passenger Corp. v. Bos. & Me. Corp., 503 U.S. 407 (1992) (so long as taking is rationally related to a conceivable public purpose it is constitutional)
- Midcoast Interstate Transmission, Inc. v. FERC, 198 F.3d 960 (D.C. Cir. 2000) (FERC’s public-convenience determination supports use of eminent domain)