38 F.4th 220
D.C. Cir.2022Background
- Petitioners (environmental organizations) sought review of FERC’s certificate allowing Mountain Valley, LLC to build the 75.1‑mile Southgate Project connecting the (not‑yet‑operational) Mainline System terminus in Virginia to North Carolina facilities.
- Mountain Valley had significant Mainline construction delays; Mainline was largely built but not operational and lacked an established revenue stream.
- FERC approved Mountain Valley’s Section 7 certificate and authorized an initial return on equity (ROE) of 14% (higher than the typical ~10.55%), treating Southgate as a new market entrant/greenfield risk profile.
- FERC prepared an EIS addressing erosion/sedimentation mitigation (silt fences, trench breakers, monitoring, third‑party inspectors, weekly reports) and performed a cumulative‑impacts analysis using HUC‑10 watersheds, concluding limited combined turbidity impacts and negligible effects on Kerr Reservoir.
- Petitioners challenged the ROE as unsupported/market‑skewing and argued NEPA violations for inadequate mitigation analysis and an insufficient cumulative impacts assessment. The D.C. Circuit denied the petition, finding FERC’s ROE and EIS analyses reasonable and supported by substantial evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Return on equity (14%) | 14% is unsupported, ignores current market data, and improperly treats Southgate as a new entrant despite Mountain Valley’s Mainline experience | FERC reasonably treated Southgate functionally as a new entrant because Mainline lacked operations/revenue and FERC cited precedent approving higher ROE for greenfield risk; FERC addressed objections and explained project risks | Court upheld FERC: functional approach reasonable; ROE supported by substantial evidence and consistent with precedent |
| NEPA — mitigation measures (erosion/sediment control) | EIS relied on measures that failed on Mainline and did not evaluate effectiveness adequately; thus FERC failed to take a hard look | EIS detailed mitigation, explained differences in terrain and precipitation from Mainline, required monitoring, weekly reports, inspectors with stop‑work authority, and concluded measures would avoid/minimize impacts | Court held EIS mitigation discussion adequate under NEPA’s “hard look” requirement |
| NEPA — cumulative impacts (turbidity/sedimentation) | FERC artificially narrowed temporal/geographic scope, failed to account for additive turbidity plumes and downstream effects (e.g., Kerr Reservoir) | FERC used HUC‑10 watershed scope, identified overlapping crossings, found spatial/temporal separation and short‑lived plumes, and concluded limited cumulative effects (Kerr Reservoir >30 miles away) | Court deferred to FERC’s technical judgment and found the cumulative impacts analysis reasonable and adequately supported |
Key Cases Cited
- Missouri Pub. Serv. Comm’n v. FERC, 337 F.3d 1066 (D.C. Cir. 2003) (Section 7 rate standard for newly certificated service)
- Gulf South Pipeline Co. v. FERC, 955 F.3d 1001 (D.C. Cir. 2020) (background on initial rates and review)
- Atl. Ref. Co. v. Pub. Serv. Comm’n of State of NY, 360 U.S. 378 (1959) (hold‑the‑line concept for initial rates)
- Marsh v. Oregon Nat. Res. Council, 490 U.S. 360 (1989) (arbitrary and capricious standard for NEPA review)
- Baltimore Gas & Elec. Co. v. NRDC, 462 U.S. 87 (1983) (NEPA requires a hard look at environmental consequences)
- Bluefield Waterworks & Imp. Co. v. Pub. Serv. Comm’n of W. Va., 262 U.S. 679 (1923) (rate reasonableness over time and market conditions)
- City of Oberlin v. FERC, 937 F.3d 599 (D.C. Cir. 2019) (factors for evaluating ROE decisions)
- Sierra Club v. FERC, 867 F.3d 1357 (D.C. Cir. 2017) (ROE and rate‑setting principles)
- American Rivers v. FERC, 895 F.3d 32 (D.C. Cir. 2018) (cumulative impacts and piecemeal segmentation under NEPA)