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Case number 15-1489, Sierra Club Petitioner versus United States Department of Energy.

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Mr. Matthews for the petitioner, Mr. Smeltzer for the respondent, and Mr. Franklin for the interveners.

[00:00:58] Speaker 07:
Mr. Matthews, good morning.

[00:01:00] Speaker 01:
Good morning, Your Honor.

[00:01:01] Speaker 01:
Nathan Matthews on behalf of Sierra Club.

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I'd like to say five minutes for rebuttal.

[00:01:04] Speaker 07:
You're a long way from home.

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Yes.

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As explained in our briefs, DOE's action was unlawful in several regards.

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Today, I'd like to focus on two points related to DOE's NEPA obligation to examine gas production.

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DOE's orders are premised on the belief that the authorized liquefied natural gas exports will cause an increase in U.S.

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gas production.

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However, my first point is that DOE agrees that it did not identify or characterize the environmental impacts of that additional gas production.

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By failing to do so, DOE failed to take a hard look at those impacts.

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My second point is that the record demonstrates that DOE had the tools to foresee what those impacts would be.

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On that first point, although DOE admits that export-induced gas production may have significant impacts, for example, the Department states that increased gas production may cause increases in regional ozone pollution.

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But beyond that bare admission, DOE, in its own words, did not identify or characterize those impacts.

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So with regard to ozone, DOE provided no discussion of how many regions would suffer increased ozone, where those regions might be, how large the increases would be, or how often those increases would cause a violation of EPA's air quality standards.

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While DOE has discretion in choosing the method it uses for how to answer those questions, DOE can't decide simply not to answer those questions in the first place.

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NEPA's most basic command is that the agency shall sharply define the consequences of the authorized action to provide a clear basis for approving or rejecting a proposal.

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There is no case that has condoned an agency decision to simply acknowledge the possibility of a conceivably significant impact, but to then stop without providing any further evaluation of the scale or severity of that impact.

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Turning to my second point, the record demonstrates that DOE had the tools to provide that missing evaluation.

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The primary source of uncertainty that DOE identifies is uncertainty of the volume of future exports, but in its brief DOE admits that cumulative exports of 3.5 trillion cubic feet per year are foreseeable for purposes of NEPA.

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Available modeling tools can predict how that level of exports would increase gas production in individual gas plays.

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Nowhere in the record did DOE dispute that the Energy Information Administration's models could provide a play-level forecast of increased gas production.

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Nor can DOE argue that that EIA model is unreliable, because that's the same model DOE used to assess the economic impacts of exports.

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The only time DOE responded in the record to our suggestion to use that model to address play-level impacts was in the denial of our request for a hearing.

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And the argument DOE gave there was not that play-level predictions were unavailable, but that they would not be useful because they were, quote, insufficiently specific to support an analysis of environmental impacts.

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But then in discussing ozone, the department's sole argument for not modeling ozone impacts is to claim that DOE couldn't do so without having a play-level production estimate.

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So this is quintessential arbitrary reasoning.

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The department contends that the pieces it has won't fit together, but when we pressed for specifics, they identified a square peg and a square hole.

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To put this all in context, the gas play closest to the Freeport terminal is the Haynesville shale.

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The department explained that the Haynesville is one of the four largest shale gas plays.

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Freeport's application identifies the Haynesville shale as a likely source of gas to be exported, and the record demonstrates that both EIA and private modelers have the tools to predict how various levels of exports would increase gas production in the Haynesville shale specifically.

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The record also contains a peer-reviewed study, which DOE summarized without any criticism, which modeled how changing levels of gas production in the Haynesville Shale would affect ozone levels in Dallas, in Austin, in Baton Rouge, and other neighboring regions.

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Can I ask you about our decision in Sierra Club versus FERC, which came out I think after

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you all briefed this case, and how much of that, that deals with the approval by FERC of the terminal, how much of that decision ties our hands?

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Essentially none of it.

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A lot of it said that's being considered in this case.

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Yeah, I mean the panel in that decision explicitly stated that nothing in that opinion was any barrier to our ability to bring the same challenges against the Department of Energy.

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Instead, the panel recognized or concluded that the claims we had in that case would be better brought before the Department of Energy.

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But how about the discussion of the cumulative and indirect effects?

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The discussion of whether those indirect effects were foreseeable in that case all depended on the preliminary holding that authorization of exports was the Department of Energy's problem.

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So that opinion regarding the FERC authorization didn't conclude, for example, that

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effects of exports on gas production were unforeseeable.

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It just held that every causal chain linking exports with gas production had, as an intermediate step, the Department of Energy's approval of exports.

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And so it said there was no foreseeable way in which FERC's authorization of infrastructure would have those indirect effects that wasn't interrupted by the Department of Energy approval, which the court instructed us to pursue in this present case.

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And those effects were limited to the region of the terminal, was that right?

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The effects it discussed?

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The effects that FERC discussed?

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Yeah.

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The FERC environmental impact statement, which was at issue in that case and which the Department of Energy adopted in these orders, provided no analysis of indirect effects related to gas production or anything other than effects at the terminal site itself.

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The environmental impact statement concluded that those are outside the scope of need for review.

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So, but the record demonstrates that the Department of Energy clearly had the ability to analyze the impact of export-induced gas production, certainly in the Haynesville shale, but there's also nothing in the record to suggest that DOE could not perform a similar analysis regarding additional gas production that may be induced in any other gas place as well.

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And the ability to foresee impacts in a quantitative way, or at least

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by some discussion of the scale of severity extends beyond ozone.

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The department also failed to identify the effect of natural gas exports on U.S.

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greenhouse gas emissions.

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The environmental addendum that the department prepared admitted that any uncertainties to where gas production would occur was no barrier for greenhouse gas emissions because the effects of those emissions are not local.

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Sierra Club repeatedly in the record

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commented that the Department of Energy needed to identify the net impact of exports for individual projects or cumulatively on United States greenhouse gas emissions.

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End of that.

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U.S.

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emission total is important because the U.S.

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has adopted both emission reduction targets and reporting obligations that specify the need to look at territorial emissions.

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So Sierra Club has never contended that potentially offsetting reductions in emissions that would occur overbroad as a result of LNG exports were irrelevant, but that's a reason to discuss both the domestic emissions increase and the potential offsets, not to just assume that it's a wash and fail to take a hard look at either.

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A central issue in this case is that the department, in the record and in its brief, argues that effects are uncertain.

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But uncertainty is not the same thing as unforeseeability.

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This court has recognized that NEPA requires reasonable forecasting and speculation.

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All forecasts will inherently have an element of uncertainty in them.

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and the department has demonstrated that it has the tools to deal with uncertainty and provide reasonable forecasts despite that.

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To take, again, one of the two central sources of uncertainty identified by the department, which is uncertainty over what level of natural gas exports will actually occur, the economic studies that inform the department's price impacts provide a clear example, is that

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The Department can assume different levels of exports, whether they think that they are likely or at least potential, and say, we don't know whether there's going to be three trillion or four trillion billion cubic feet of exports per year.

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But we can say, if it's three trillion, this is what the impacts are going to look like.

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And if it's four trillion, this is what the impacts are going to look like.

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And that that analysis of the spectrum of potential impacts provides the important analysis that NEPA requires.

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Another way of handling uncertainty is illustrated by the national energy technology laboratory report on global greenhouse gas emissions.

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We contend that that report is not a substitute for need for review, but one thing that that report gets right is it acknowledges that the amount of greenhouse gases emitted per unit of gas production is uncertain.

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So it provides estimates with error bars.

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It says, we don't know exactly what it's going to be, but it's somewhere in this range.

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And so there are a couple of different ways in which the Department of Energy could have predicted impacts despite or provided reasonable forecasts despite the sources of uncertainty that they identify.

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The department's willingness to use those scenario analyses and other tools for economic impacts but not use those same tools for assessing environmental impacts violated NEPA.

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I see that I'm into my time for rebuttal, so there are no questions.

[00:11:23] Speaker 07:
Mr. Smeltzer.

[00:11:32] Speaker 02:
Good morning, Your Honors.

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May it please the Court, John Smeltzer for the Department of Energy.

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Your Honors, DOE took a hard look at the environmental impacts of authorizing LNG exports from the Freeport terminal to the extent such impacts are reasonably foreseeable and can be meaningfully evaluated.

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NEPA and Section 3 of the National Gas Act require nothing more, so the petition for review should be denied.

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Let me start with the question of induced natural gas production.

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The impacts there, what we're talking about in terms of the environmental impacts are the impacts from drilling and producing from wells.

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And as the DOE explained in the environmental addendum, those are localized impacts that impact particular streams or particular air quality attainment areas in particular parts of the country.

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The causal connection between allowing exports and drilling in any particular area in relation to any particular air quality control district is highly attenuated.

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DOE is not leasing... Is there any modeling available that could at least lend further information on the...

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There are models that DOE has used to determine the levels of production that might occur as a result of certain export levels on a national level and on a play level.

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And plays are geographic formations that don't correspond specifically to air quality control regions.

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The Marcellus Shale, for example, one of the largest and most significant covers areas from Kentucky all along the Appalachian all the way up to New York.

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So if there was a model that told you there was going to be increased production, for example, out of the Marcellus Shale, it wouldn't tell you where that production occurs or would occur, you know, where the wells actually going to be drilled within that expansive geographic area.

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And that's generally true for all of natural gas producing areas.

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So what DOE explained is the model that's available that can help determine at a play level what

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production levels would be, still wouldn't tell you where the wells are and it wouldn't allow you to determine with respect to any particular air quality control region, for example, what the impacts would be on that air quality control region.

[00:14:01] Speaker 07:
Well, this is an application from the, whatever, Quintana Island, Texas terminal, right?

[00:14:07] Speaker 02:
Yes.

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So wouldn't the terminal know where the gas was coming from?

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I mean, where it was being drilled, or does it just open its doors?

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Right.

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Well, as DOE explained, there is the

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The natural gas system in the lower 48 states is highly integrated.

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There's an integrated pipeline system.

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And the shale plays and the tight gas plays and the other sources of natural gas are scattered all across the United States.

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And gas is fungible.

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And none of the contracts at issue with respect to the construction of the Freeport Terminal and the authorization require Freeport to source its gas from any particular place.

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And even if it were place-oriented,

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The causal connection here is a causal connection that's being postulated through market dynamics and the notion that there will be an increase in the demand for natural gas, which will then manifest itself throughout the country in some regions being produced that wouldn't otherwise have been produced without that increased demand.

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And so the causal connection that's at issue here is nobody's saying that

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the export from Freeport is going to cause natural gas to be produced any particular place.

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What DOE has said is that there's a possibility that it may accelerate domestic national gas production generally.

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And what DOE has further said is that

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just knowing that won't tell you where specifically that production is going to occur.

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And therefore, because of the attenuated nature, attenuated on two levels, first an inability to specifically determine what levels of demand there will be, what will be the aggregate export demand, very difficult to determine because it depends on

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all sorts of questions that can't be forecast, political conditions, technological conditions, regulatory changes, and these are conditions that when you're dealing with exports, you're talking about international, not only domestic conditions that may impact

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what the level of export demand will be.

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So you start with – and yes, DOE and its 2014 Annual Energy Outlook projected that there would be 3,500 billion cubic feet per year in the year 2029 through 2040 in exports.

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That's a projection that they made, you know, based on current conditions, but they also explained that, look, this is a highly uncertain projection.

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And then DOE further explained that, look, you start with this highly uncertain projection on demand, and then you try to determine, well, what does that tell you about where the gas is going to be produced in the United States?

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And as we just discussed, that demand impact isn't going to show you where those wells are going to be sunk.

[00:16:52] Speaker 07:
It can't be modeled.

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It just seems to me that NEPA, with respect to

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You need the analysis anyway with respect to the exportation of natural gas is almost a dead letter.

[00:17:08] Speaker 07:
I don't know.

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Can you give me an example of an application where you have been able to assess quantitatively?

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And that's another question I have, the difference between your emphasis on qualitative analysis and quantitative, where you've been able to

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make that analysis and say yes these will be the effects no these will not be the effects.

[00:17:33] Speaker 02:
Well, the certain site-specific effects, the effects on Quintana Island and the effects in surrounding Brazoria County from the construction of the export facilities and from the operation of the export facilities, are reasonably foreseeable and have been identified in the EIS that was prepared by FERC with DOE's cooperation.

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And same thing has happened in other cases.

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What we have said is beyond those localized effects that are reasonably foreseeable,

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You can foresee that there will be an impact on production

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And because of that, DOE went to great lengths and produced an environmental addendum that comprehensively set out what all those impacts might be with respect to air, water, seismicity, greenhouse gas emissions.

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There's not a single potential environmental issue that Sierra Club has identified that DOE did not consider in its environmental addendum.

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What DOE decided that it could not meaningfully do was determine what the specific impact would be on an air quality control region.

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Because DOE cannot meaningfully predict where those wells are going to be drilled and what natural gas fields are going to be developed.

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So is that something that is going to apply with every application?

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I would imagine yes, to the extent that these applications are the same in that way, that localized impacts can be focused on, and then otherwise the broader aggregate impacts on demand and on production will be – the specific impacts from that will not be reasonably foreseeable in most circumstances.

[00:19:11] Speaker 07:
Will there come a time where you've looked at so many terminals that you'll be able to say what the cumulative effect is?

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not just the regional or the localized, but the national or cumulative effect?

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Well, what DOE said in this case is the cumulative effect is foreseeable to the extent that they know the nature of the impacts.

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They can evaluate that.

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That's the qualitative.

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Is that right?

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Qualitative analysis, sure.

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What determines the actual production is going to be what the market demands and not the specific level that's authorized.

[00:19:49] Speaker 05:
You seem to be asserting, if I understand you correctly, that when you cannot determine a specific air quality control region, that's the end of the inquiry.

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We can't tell which air quality control region.

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Is it not possible to do some sort of air quality analysis in some other

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basis rather than following the defined rules.

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Well, what Sierra Club has asked for specifically in this case is by air quality control region.

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They say we can do that.

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And the study they point to with respect to the Haynesville shale was a study where the authors of that study just took for granted that there would be certain levels of production.

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And they modeled it out and then said, well, look,

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If that happens, this might happen in particular air quality control regions.

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And that's in the addendum, and that's described.

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And the question is, can anything more meaningful than that be provided at this stage of the inquiry?

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And what that study shows is that, yes, if lots of the shale plates are fully developed,

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there will be or potentially could be impacts on particular air quality control regions, and DOE says that would need to be monitored.

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But what DOE also says is, look, at this stage of the game, when we're just authorizing exports and we can't predict what the demand is going to be and where that gas is going to be produced, it's not meaningful for our decision-making right now

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decision, which is just an up or down decision on whether exports should be allowed to think that we are going to control.

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We are going to cause air quality problems in Pittsburgh or Houston, because that's just it's too attenuated to say that, you know, by approving an export application for 146 billion cubic feet per day of natural gas, which is a small fraction of overall production, whether there's exports or not, that you're going to have a particular quality control impact in some particular region in the

[00:21:51] Speaker 07:
Does that imply that there is a stage at which you will be able to assess those impacts?

[00:21:56] Speaker 02:
Well, there will be a stage when those impacts can be looked at, not necessarily by DOE in the export authorization process, but DOE is by no means the only actor.

[00:22:06] Speaker 02:
These things are regulated by state and the federal government in different ways.

[00:22:10] Speaker 03:
But isn't there, I guess,

[00:22:14] Speaker 03:
How are we as a court reviewing this supposed to know kind of like when we've crossed the line from not really knowing the extent of the impact versus not knowing, not being able to describe the nature of the impact?

[00:22:36] Speaker 03:
I mean, just to use, I guess, an absurd example.

[00:22:39] Speaker 03:
I mean, what if FERC had approved an LNG plant that would export a trillion cubic feet per year of liquefied natural gas?

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We just say that, you know,

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We can't you you your hands would be tied you couldn't you couldn't really assess what the impact would be if that went online.

[00:23:07] Speaker 02:
Either I think what what.

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The answer would be if it's not really what has been authorized.

[00:23:16] Speaker 02:
I mean, let me back up.

[00:23:17] Speaker 02:
What has been authorized in this case is at a level that presumably can be met, right?

[00:23:23] Speaker 02:
If FERC or DOE was to authorize at some level that is way beyond what any market projection has shown,

[00:23:31] Speaker 02:
Again, there would be no causal relationship between the authorization that provides something that is not foreseeable.

[00:23:40] Speaker 02:
It's a tough hypothetical because it wouldn't happen, but what matters in that context is what you can project as being potentially foreseeable from the particular authorization.

[00:23:58] Speaker 02:
What DOE has said is with respect to this particular application and others, that it can foresee that there will be production impacts, and it has provided to the best of its ability a comprehensive evaluation of what those impacts would be.

[00:24:18] Speaker 03:
it only stopped short in trying to put precise numbers on you know where the impact would be in particular uh... resources around the country because that's it's just to attend when this is a similar to judge henderson's question earlier which was it's kind of like death by a thousand cuts or something the sierra club is saying that you keep approving all of these uh... these facilities

[00:24:45] Speaker 03:
And so there's a lot of capacity there.

[00:24:47] Speaker 03:
And if all of that capacity is used, or even if some significant amount of it is used, there's going to be some impact.

[00:24:54] Speaker 03:
But because we say, well, we don't know how much of those facilities are actually really, how many are going to come online.

[00:25:01] Speaker 03:
You know, there's lots of applications and licenses that are granted.

[00:25:05] Speaker 03:
The facilities don't get built.

[00:25:08] Speaker 03:
And we don't know, you know, there's so many things that we don't know that we just, even though we're approving all of this, we're just going to say, you know, we can't really tell what the impact is.

[00:25:20] Speaker 03:
And there's something that seems wrong with that.

[00:25:24] Speaker 02:
I understand their argument.

[00:25:25] Speaker 02:
And what they focused on in this case is the projection in the 2014

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annual energy outlook, which says 3,500 billion cubic feet per year.

[00:25:34] Speaker 02:
And that is a projection that doesn't tie to this particular authorization.

[00:25:41] Speaker 02:
The authorization here was for 146 billion cubic feet per year, not 3,500.

[00:25:47] Speaker 02:
But what we've explained is that the 3,500, even if you accept that number, is still a small percentage of overall production.

[00:25:55] Speaker 02:
And the overall production figures are also presented in the addendum.

[00:26:01] Speaker 02:
And I think the projected 2,040 overall domestic production was around 37,000 billion cubic feet.

[00:26:11] Speaker 02:
And so the numbers are there in terms of the generics of the potential cumulative impacts.

[00:26:21] Speaker 02:
DOE has only stopped short in trying to predict at this stage, given that we're talking about long-term projections that are just very hard to predict.

[00:26:30] Speaker 02:
provides really reliable information and the play-level modeling that can tell you maybe where some production will occur by play still won't get you that fine enough look to be able to say is this going to be a problem in a particular area.

[00:26:47] Speaker 02:
What DOE explained is the export control decision is a blunt instrument with respect to trying to control

[00:26:55] Speaker 02:
You know, emissions that will occur down the line through the very attenuated chain of causation with lots of other actors involved.

[00:27:05] Speaker 02:
And we submit given the basis of their decision and the inability to reasonably foresee specific impacts, it was perfectly reasonable to stop with the analysis where they did.

[00:27:18] Speaker 07:
Can I ask you before you sit down about Sierra Club versus Burke?

[00:27:22] Speaker 07:
Yes.

[00:27:22] Speaker 07:
Does it tie, do you think it ties our hands?

[00:27:26] Speaker 02:
It does with respect, if there were any challenge to the FEIS as being, but Sierra Club's not, in this case, not really bringing those challenges, so no you're not.

[00:27:36] Speaker 07:
Okay.

[00:27:36] Speaker 07:
All right.

[00:27:37] Speaker 07:
Thank you.

[00:27:38] Speaker 07:
Mr. Franklin.

[00:27:46] Speaker 06:
Thank you, Your Honor.

[00:27:47] Speaker 06:
May it please the Court, Jonathan Franklin, for the Freeport interveners.

[00:27:50] Speaker 06:
I'd like to start, Joe Tederson, with addressing a few of your questions.

[00:27:56] Speaker 06:
First of all, Freeport does not know where the gas is coming from.

[00:28:00] Speaker 06:
We get it from shippers.

[00:28:01] Speaker 06:
It's tied into the interstate natural gas pipeline system.

[00:28:04] Speaker 06:
It can literally come from anywhere, and that is what, in fact, DOE found.

[00:28:09] Speaker 06:
was contributing in large measure to their inability to find reasonable foreseeability in this case.

[00:28:17] Speaker 06:
I would also say that, just to follow up on the last question, while maybe this defer case does not tie the court's hands, we do think that it is very relevant, at least on the cumulative impacts part of the decision.

[00:28:29] Speaker 06:
In that case, the court relied on

[00:28:31] Speaker 06:
among other things, the language in Kleppe and other precedents that talked about the cumulative impacts being in the same geographic region.

[00:28:40] Speaker 06:
And while the Court did say we're not tying your hands in this case, I think that same analysis would apply to this case as well.

[00:28:48] Speaker 06:
And that, in fact, goes to another point that Your Honor made, and that is whether NEPA would be a dead letter.

[00:28:53] Speaker 06:
No, it would not be.

[00:28:55] Speaker 06:
There was a more than 300 page environmental impact statement prepared here at great cost, at great length, with a lot of analysis that went into it.

[00:29:04] Speaker 06:
There were more than 70 environmental conditions that my clients have to abide by in connection with this authorization.

[00:29:12] Speaker 06:
The DOE looked at reasonably foreseeable environmental impacts in that more than 300 page EIS, which was done by FERC, but with DOE as a cooperating agency.

[00:29:24] Speaker 06:
But they properly and reasonably declined to engage in speculation that really would not meaningfully affect their analysis.

[00:29:32] Speaker 06:
And that's important here.

[00:29:33] Speaker 06:
The question is not, can we put together a bunch of models and, as my friend here was saying, just try this scenario, try this one, try this one, try this one.

[00:29:43] Speaker 06:
Ultimately, even if you ran all that through your models, you're not going to come up with meaningful information.

[00:29:48] Speaker 06:
And just to take the localized impacts here, we're talking about, in this case, not any direct impact, not even really first level indirect impact.

[00:29:58] Speaker 06:
We're talking about price impact.

[00:30:00] Speaker 06:
So they're saying because we're going to be exporting a volume of gas, that is going to increase demand, that that will have some effect on prices over the next 20 years.

[00:30:09] Speaker 06:
And that effect on prices will in turn have an effect on production.

[00:30:13] Speaker 06:
That effect on production will then, in turn, have a substitution effect on other users.

[00:30:18] Speaker 06:
And what DOE said is, look, because of this lengthy and theoretical chain of causation, that's zero composites, we have concluded that we really wouldn't derive any meaningful information out of that analysis.

[00:30:30] Speaker 06:
We did a very, very thorough analysis on everything that we could, in fact, reasonably predict, but have reasonable

[00:30:39] Speaker 06:
uh, foreseeability on, but we are not going to go that next step and try to quantify things that are inherently unquantified.

[00:30:47] Speaker 06:
In addition to not knowing when the gas is going to be produced, where it's going to be produced, and how many quantities is going to be produced, there are numerous other drivers of gas prices and gas production, including the overall economy,

[00:31:00] Speaker 06:
future regulatory changes, future technological changes, and we're talking about projections or predictions over a 25-year period.

[00:31:09] Speaker 06:
And I'm just going to give you an example here, and this is just an example, it's not from the record this case, but DOE, and this is at, you can see the site at footnote five of the DOE's brief, every year they come up with a projection that goes out 25 years.

[00:31:24] Speaker 06:
What's the

[00:31:24] Speaker 06:
the energy market going to look like.

[00:31:28] Speaker 06:
And they use the same modeling system that Sierra Club is asking.

[00:31:31] Speaker 06:
And I just out of curiosity, I went back and I looked at the 2005 projection, and they were projecting in 2005, 10 years later, in 2015, there would be seven trillion cubic feet of net imports of natural gas, including 4.33 trillion imports of natural gas.

[00:31:49] Speaker 06:
If you look at the 2016 projection, the actual imports of natural gas, zero, or close to zero.

[00:31:55] Speaker 06:
And that goes to this whole why we're here, and that is my clients built this terminal.

[00:32:00] Speaker 06:
thinking that it was going to be an import terminal, back when everybody was saying imports were going to be the thing.

[00:32:05] Speaker 06:
And it's not that we weren't doing our best.

[00:32:07] Speaker 06:
It's not that DOE isn't doing its best.

[00:32:10] Speaker 06:
It's just these things are inherently impossible to project.

[00:32:13] Speaker 06:
You can't know.

[00:32:14] Speaker 06:
If somebody tells you, I know what natural gas prices are going to be 15 years from now, and by the way, that's the linchpin of this entire analysis is natural gas prices.

[00:32:25] Speaker 06:
Because all of the effects that Sierra Club is positing here come from the price impacts of this demand.

[00:32:31] Speaker 06:
And if somebody says, I can tell you what that's going to be, they're lying to you.

[00:32:36] Speaker 06:
They can't.

[00:32:37] Speaker 06:
And they can put a model together, and they can do a projection.

[00:32:40] Speaker 06:
But I think DOE was very careful to say,

[00:32:42] Speaker 06:
that its modeling does not establish reasonable foreseeability.

[00:32:47] Speaker 06:
They use that modeling in a different capacity.

[00:32:49] Speaker 06:
They used it primarily for their public interest determination.

[00:32:52] Speaker 06:
And what they found, and this also goes to what Sierra Club's arguing here, Sierra Club's essential argument has been in this case and all of the other cases, that in their view, DOE should not allow any exports of natural gas anywhere at any time.

[00:33:07] Speaker 06:
Now, what DOE determined, looking at all of this qualitatively,

[00:33:12] Speaker 06:
and looking at all of the other environmental impacts is that we think, yeah, there might be some effects somewhere.

[00:33:18] Speaker 06:
We can't tell you what they're going to be because those are not reasonably foreseeable.

[00:33:21] Speaker 06:
But what we have determined is that the public interest will be better served by allowing the state and federal and, in some cases, international agencies that regulate those effects directly

[00:33:33] Speaker 06:
to do their job, rather than by using the blunt instrument of an export ban.

[00:33:39] Speaker 06:
Now, that's their public interest determination that was made according to the powers delegated to them in the Natural Gas Act, and I think that that is a reasonable determination.

[00:33:48] Speaker 06:
And if Sierra Club still believes that exports should not be allowed, notwithstanding the presumption that Congress has established in the statute that they are in the public interest,

[00:33:59] Speaker 06:
then they need to take that case to Congress.

[00:34:01] Speaker 06:
NEPA required DOE to evaluate reasonably foreseeable environmental impacts and to take a hard look at that.

[00:34:10] Speaker 06:
And DOE did that in a more than 300 page EIS that they worked on with FERC.

[00:34:16] Speaker 06:
But what they declined to do is to go further and speculate on things that would not meaningfully affect their decision.

[00:34:22] Speaker 06:
Now that determination is entitled to deference under both NEPA and the NGA, and we think that according to the deference that it's due, the decisions should be upheld.

[00:34:35] Speaker 07:
All right, I may have mischaracterized it as a dead letter.

[00:34:39] Speaker 07:
I think I would characterize it as an exercise in futility almost, a 300-page report taking many, many years.

[00:34:46] Speaker 07:
And the end result is we can't give you an answer.

[00:34:51] Speaker 07:
I understand.

[00:34:52] Speaker 07:
I mean, I understand all the reasons that's so.

[00:34:56] Speaker 07:
But I'm just making that comment.

[00:34:59] Speaker 06:
And it's a fair point, Your Honor.

[00:35:00] Speaker 06:
And I don't want to make light of it.

[00:35:02] Speaker 06:
I think what I was saying, though, is that it's

[00:35:05] Speaker 06:
We can't tell you this because this is just beyond what we can do.

[00:35:09] Speaker 06:
But the people around this facility are indeed protected by the fact that an environmental statement was done.

[00:35:17] Speaker 06:
And it was done in a way that all of the other environmental impact statements, or most of the ones that this court sees, are done.

[00:35:23] Speaker 06:
We're talking about going further and saying, we're not talking about the effect in this region or even nearby.

[00:35:28] Speaker 06:
We're talking about, say, an effect in North Dakota.

[00:35:32] Speaker 06:
based on an authorization in taxes.

[00:35:36] Speaker 06:
And that is a price impact.

[00:35:38] Speaker 06:
And I don't think there's any case anywhere that has ever gone that far in saying that kind of thing is reasonably foreseeable, particularly when an agency has said, we just can't do it.

[00:35:49] Speaker 07:
I do have one question, and that is, is liquefaction done for any reason other than transport?

[00:35:57] Speaker 06:
I don't believe it is, Your Honor.

[00:35:59] Speaker 07:
I mean, that's a big enough reason.

[00:36:02] Speaker 07:
You don't use liquefied natural gas.

[00:36:04] Speaker 06:
No, it has to be liquefied and then turned back into a gas.

[00:36:09] Speaker 06:
And it's done that way for exports so that it can actually, the volume, I don't know, people know that the numbers of volume shrinks dramatically when you liquefy it.

[00:36:17] Speaker 06:
And that's what, if you've ever seen the ships, they have these big balls that they carry them in.

[00:36:22] Speaker 06:
And that's how you get them on ships.

[00:36:26] Speaker 06:
OK.

[00:36:26] Speaker 06:
Thank you.

[00:36:26] Speaker 06:
Thank you.

[00:36:28] Speaker 07:
Does Mr. Matthews have any time left?

[00:36:35] Speaker 07:
You don't have to use them all.

[00:36:38] Speaker 01:
So I'd just like to make a couple points, and in particular, clarify the record.

[00:36:42] Speaker 01:
First is that looked like natural gas exports and foreseeable levels of exports will fundamentally change the US energy market.

[00:36:50] Speaker 01:
The 3 and 1 half trillion cubic feet per year of exports that DOE concedes is foreseeable is at least 10% of US gas production.

[00:36:57] Speaker 01:
And you can't take that gas out of the US market without that gas coming from somewhere.

[00:37:03] Speaker 01:
The effect of exports on increasing gas production is not just incidental to the exports authorized here or to cumulatively proposed exports.

[00:37:13] Speaker 01:
Freeport's application states that the major source of reported economic benefit from the proposed exports is going to be the economic activity created with the extra gas production that would result from the proposed exports here.

[00:37:26] Speaker 01:
So there is nothing in the record to suggest that there is any doubt that exports will increase gas production, and that is central to both free ports application.

[00:37:39] Speaker 01:
It's also central to the Department of Energy's conclusion that exports will not adversely affect U.S.

[00:37:44] Speaker 01:
gas supply or gas prices.

[00:37:46] Speaker 01:
DOE has a Natural Gas Act obligation to consider the effect on gas prices and supply before authorizing exports.

[00:37:52] Speaker 01:
DOE concluded that there would not be an adverse effect here because gas markets would respond by increasing production in response to exports.

[00:38:01] Speaker 01:
This court's holding under Scientists Institute's public information states that if that forecast of increased gas production is good enough for DOE's economic analysis, DOE can't turn around and then say, yeah, but it's too uncertain to use for the environmental analysis.

[00:38:13] Speaker 01:
What's good for the goose is good for the gander there.

[00:38:16] Speaker 01:
I'd also like to point out that the record contradicts the Department of Energy's statement that they cannot predict where, at least at the gas play level, the exports will occur.

[00:38:27] Speaker 01:
I don't know if you honestly have the records of record in front of you, but if you look at Joint Appendix, page 476, that is a

[00:38:36] Speaker 01:
report by a private consultant, Deloitte Market Point, considering the impact of an individual liquefied natural gas export proposal that provides quantitative estimates of how gas production would increase in a number of gas plays, including the Haynesville Shale, which is

[00:38:52] Speaker 01:
play closest to the terminal.

[00:38:54] Speaker 01:
There's no suggestion in the record that either that particular forecast is unreliable, or that the EIA's modeling tools can't prepare a similar forecast.

[00:39:03] Speaker 01:
EIA described its model as a play-level model, and again, in the record, DOE never claimed that the EIA tools can't provide play-level estimates of increased production.

[00:39:15] Speaker 01:
DOE instead claimed, without support, that those play-level estimates would not be useful.

[00:39:21] Speaker 01:
Another circumstance in which the department has mischaracterized the record or where the record does not support the department's position is the claim that they can't go from a play-level production forecast to an analysis of environmental impacts because either they don't know where within a play gas production will occur or the play is not contiguous with air quality regions.

[00:39:43] Speaker 01:
But the Kimball-Cook study, which the department summarized, again, without criticism in the addendum, said all we need to know is how much production will increase in the Haynesville shale, say 5% or 10%, and we can predict how that will impact air quality in Dallas, Austin, Baton Rouge, et cetera.

[00:40:01] Speaker 01:
So the only time that the department actually discussed what an available model could do, it endorsed the model's prediction of providing the kind of analysis we think the department was required to do here.

[00:40:12] Speaker 01:
And then finally, on the FERC case and its discussion of cumulative impacts, I think there's a confusion of the cart and the horse there.

[00:40:20] Speaker 01:
In the FERC case, the court concluded that because FERC was not required to consider indirect effects of gas production, then the FERC did not need to consider the cumulative impact of other export facilities.

[00:40:33] Speaker 01:
I see that my time is up.

[00:40:37] Speaker 01:
So the court said that because there were no foreseeable indirect effects within FERC's purview of that particular facility that spans, say, the Hainesville Shale Play, then FERC would need to consider the cumulative effect of other export terminals that would also affect production in the Hainesville Shale Play.

[00:40:59] Speaker 01:
But if this – for the Department of Energy, where the indirect effects of an individual project do reach out that far, then that broader geographic unit also determines the scope of the cumulative effects analysis.

[00:41:11] Speaker 01:
Okay.

[00:41:11] Speaker 01:
There are no further questions?

[00:41:13] Speaker 01:
No.

[00:41:13] Speaker 01:
Thank you, Your Honor.