9th Circuit Finds That FERC Acted Arbitrarily and Capriciously by Awarding Incentive Adders to PG&E for Membership in CAISO

On November 27, 2024, the Federal Energy Regulatory Commission (FERC or Commission) issued Venture Global CP2 LNG, LLC,¹ an order that sets aside, in part, the Commission’s prior authorization of the CP2 LNG Terminal and CP Express Pipeline Project (collectively, the CP2 Project) under sections 3 and 7 of the Natural Gas Act (NGA). In anticipation of future appellate challenges to its authorization of the CP2 Project, FERC ordered the initiation of a supplemental environmental impact statement (SEIS) process under the National Environmental Policy Act (NEPA) to assess the CP2 Project’s contribution to cumulative air impacts for nitrogen dioxide (NO₂) and particulate matter less than 2.5 micrometers (PM_2.5). Accordingly, FERC stated that it would not allow construction to commence on the CP2 Project’s proposed liquefied natural gas (LNG) export terminal and related feed gas pipeline until the SEIS process concluded and a subsequent order was issued. Concurrent with its Venture Global order, FERC issued a projected schedule for the NEPA process that does not conclude until July 24, 2025. Construction on the CP2 Project had been expected to be imminent, with the project sponsor seeking a partial authorization to proceed with construction only hours prior to Venture Global’s issuance.

On November 27, 2024, in Venture Global, CP2 LNG, LLC,¹ the Federal Energy Regulatory Commission’s (FERC or Commission) explicitly overruled precedent set in Northern Natural Gas Co.,² a 2021 decision in which FERC made an affirmative finding that an interstate natural gas pipeline project it was certificating under section 7 of the Natural Gas Act (NGA) would not make a “significant” contribution to global climate change. Northern Natural is the only FERC decision in which a so-called significance determination was made with respect to greenhouse gas emissions (GHG) arising from a FERC-regulated natural gas infrastructure project. In Venture Global, FERC rejected arguments that it needed to follow Northern Natural and assess the significance of GHG emissions in all NGA certificate proceedings to comply with the National Environmental Policy Act (NEPA). NEPA requires federal agencies, including FERC, that perform “major federal actions,” which include issuing NGA section 7 certificates, to prepare an environmental impact statement (EIS) if the action will “significantly affect[] the quality of the human environment.”³ FERC has been under pressure to fully explain why it has chosen not to apply Northern Natural’s significance analysis in subsequent cases, and that issue is currently before FERC on remand from the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) in Healthy Gulf et al. v. FERC, which reviewed FERC’s approval of a liquefied natural gas (LNG) terminal under NGA section 3.

On November 21, 2024, the Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 1920-A¹ addressing requests for rehearing and clarification of FERC’s landmark final rule on transmission planning and cost allocation issued in May 2024. While the Commission largely affirmed the final rule, the order grants rehearing of some of the more controversial aspects of Order No. 1920.

*Thank you to JaKell Larson, 2024 Akin Summer Associate, for her valuable collaboration on this article.

Interstate oil, liquid and refined products pipelines regulated by the Federal Energy Regulatory Commission (FERC) will soon be able to raise their transportation rates (provided they were set using FERC’s popular Index rate methodology) in the wake of a significant new decision by the District of Columbia Circuit (the D.C. Circuit) in Liquid Energy Pipeline Association v. FERC (LEPA).

On Wednesday, July 24, 2024, the U.S. House of Representative Committee on Energy and Commerce held a Subcommittee on Energy, Climate, and Grid Security hearing to review the Federal Energy Regulatory Commission (FERC or Commission) Fiscal Year 2025 Budget Request. Members of the Subcommittee had the opportunity to hear testimony from all five Commissioners, including FERC Chairman Willie Phillips and Commissioner Mark Christie, as well as the three recently confirmed commissioners, David Rosner, Lindsay See and Judy Chang. In addition to their prepared remarks, the five commissioners answered questions on FERC’s mandate to provide affordable and reliable electricity and natural gas services nationwide, while also ensuring it fulfills its primary mission of maintaining just and reasonable rates.

On July 9, 2024, the U.S. Court of the Appeals for the D.C. Circuit held that the Federal Energy Regulatory Commission (FERC or the Commission) erred in ordering refunds for certain bilateral spot market transactions in the Western Energy Coordinating Council (WECC) region that exceeded the $1,000/megawatt-hour (MWh) “soft” price cap for such sales.¹ Finding FERC failed to conduct a “Mobile-Sierra public-interest analysis” before “altering” those contracts by ordering refunds, the court vacated FERC’s orders and remanded the case to FERC for further proceedings.²

On June 28, 2024, in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., which for 40 years required court deference to reasonable agency interpretations of federal statutes in certain circumstances, even when the reviewing court would read the statute differently. The Court ended “Chevron deference” and held that courts “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” In doing so, the Court upended a longstanding principle of administrative law that is likely to make agency decisions more susceptible to challenge in the courts.