[00:00:00] Speaker 01:
Case number 22-1101 et al.

[00:00:03] Speaker 01:
Alabama Municipal Distributors Group et al.

[00:00:06] Speaker 01:
Petitioners versus Federal Energy Regulatory Commission.

[00:00:11] Speaker 01:
Mr. Matthews for the petitioners Healthy Health and Sierra Club.

[00:00:14] Speaker 01:
Mr. Elliott for the petitioners Alabama Municipal Distributors Group et al.

[00:00:19] Speaker 01:
Ms.

[00:00:19] Speaker 01:
Benta for the respondents.

[00:00:21] Speaker 01:
Mr. O'Neill for the respondent interviewees.

[00:00:25] Speaker 05:
Morning, Council.

[00:00:26] Speaker 05:
Mr. Matthews, please proceed when you're ready.

[00:00:35] Speaker 08:
Thank you, Your Honor.

[00:00:36] Speaker 08:
Good morning.

[00:00:36] Speaker 08:
Nathan Matthews on behalf of Petitioners Healthy Gulf and Sierra Club.

[00:00:40] Speaker 08:
This case challenges the Evangeline Pass pipeline project, which would supply gas to the Blackman's Locified Natural Gas Export Terminal.

[00:00:49] Speaker 08:
Evangeline Pass is one of five different dockets FERC has prepared relating to this terminal, and Evangeline Pass would supply roughly a quarter of the terminal's gas supplies.

[00:00:58] Speaker 08:
I'd like to discuss three issues today relating to connected actions, indirect effects, and climate.

[00:01:04] Speaker 08:
And I'd also like to briefly address remedy.

[00:01:07] Speaker 05:
What was the last thing you said you'd like to briefly address?

[00:01:10] Speaker 05:
What was the last thing you said?

[00:01:13] Speaker 08:
Remedy.

[00:01:15] Speaker 08:
On connected actions, Burke argues that the terminal and the pipelines are not

[00:01:20] Speaker 08:
connected because they are not interdependent.

[00:01:23] Speaker 08:
This is factually incorrect.

[00:01:25] Speaker 08:
The terminal needs the gas that the pipeline would supply.

[00:01:27] Speaker 08:
EIS found that there was no existing or proposed pipeline to provide a substitute.

[00:01:32] Speaker 08:
PERC found that if they had to construct a new pipeline to replace Evangeline Pass, it would be 175 miles at an added cost of $1.4 billion.

[00:01:40] Speaker 04:
Can you clarify what you mean by needs?

[00:01:43] Speaker 04:
And I was confused about this in the brief, too.

[00:01:47] Speaker 04:
The terminal is getting gas from multiple pipelines.

[00:01:51] Speaker 04:
And if it doesn't get gas from this pipeline, are you saying the terminal doesn't work?

[00:01:56] Speaker 04:
Or it won't be at full capacity?

[00:01:59] Speaker 08:
It doesn't work at full capacity.

[00:02:00] Speaker 08:
I mean, the terminal works to export gas.

[00:02:03] Speaker 08:
And so it can't export gas without gas export.

[00:02:05] Speaker 04:
So that pipeline is really not required.

[00:02:08] Speaker 08:
Well, the terminal was proposed to FERC as a pipeline that would take 3.8 million decatherms per day of gas and then export it.

[00:02:15] Speaker 08:
So the project, as contemplated by FERC, can't go forward.

[00:02:19] Speaker 04:
If they were only going to build a pipe, the terminal will serve a purpose, even if this pipeline isn't one of the pipelines that feeds into it.

[00:02:34] Speaker 08:
portions of the terminal could run without this pipeline.

[00:02:36] Speaker 08:
You could build half of it and only use half the supply.

[00:02:39] Speaker 08:
But there is no way to do the full proposed and approved activity without the full volume of gas, if you can.

[00:02:47] Speaker 04:
And just on this topic, it's just a clarification question.

[00:02:51] Speaker 04:
I think it's page five of your reply.

[00:02:53] Speaker 04:
That could be misremembering.

[00:02:54] Speaker 04:
There's this really helpful, yeah, it is page five of your reply.

[00:03:01] Speaker 04:
The graphic?

[00:03:02] Speaker 04:
Yes.

[00:03:03] Speaker 04:
It was very... I have a reply.

[00:03:05] Speaker 04:
Thank you for it.

[00:03:07] Speaker 04:
But the numbers don't quite add up, and I wondered what's that all about.

[00:03:13] Speaker 08:
I don't know.

[00:03:14] Speaker 08:
It would have been very helpful if FERC had given us a graph like this, a map, a diagram, anything else in any of these five FERC dockets.

[00:03:24] Speaker 08:
My suspicion is that that balance of gas may be burned in the Gulf Express pipeline to power the compressor that then moves to get... But I don't know.

[00:03:32] Speaker ?:
Okay.

[00:03:33] Speaker 08:
So factually, the terminal cannot do everything it said it's going to do without this gas.

[00:03:41] Speaker 08:
And it's not spare change at the margin, more than a quarter of the gas that the terminal needs.

[00:03:47] Speaker 08:
But even if it was right that the terminal did not strictly depend upon the pipeline, interdependence is just one of the three regulatory definitions for connected actions.

[00:03:57] Speaker 08:
Clause 2 of the regulation says that actions are connected where one quote cannot or will not proceed unless other actions are taken previously or simultaneously.

[00:04:06] Speaker 08:
And FERC has explicitly adopted CEQ's regs on this.

[00:04:09] Speaker 08:
At 18 CFR section 380.1 FERC says we're going to follow all the CEQ regs.

[00:04:14] Speaker 08:
But FERC never addressed that regulatory text in its orders, didn't explain why it doesn't apply here during its brief, but it's clear that it does.

[00:04:23] Speaker 08:
Evangeline Pass would not go forward without the terminal.

[00:04:26] Speaker 08:
It serves no other purpose.

[00:04:28] Speaker 08:
And where this court has rejected segmentation arguments, the court has found that each segment had substantial independent utility.

[00:04:35] Speaker 08:
So if Evangeline Pass has no substantial independent utility, that itself clearly distinguishes this from all of our segmentation cases.

[00:04:43] Speaker 04:
Can I ask you a question about significance?

[00:04:46] Speaker 04:
Of greenhouse gases?

[00:04:47] Speaker 04:
Yes.

[00:04:47] Speaker 04:
Yes.

[00:04:50] Speaker 04:
Imagine I look at the significance discussion in this EIS, and I compare it to the significance discussion in Center for Biological Diversity, last term's case out of Alaska, and I think

[00:05:05] Speaker 04:
The discussion was more thorough in this case.

[00:05:10] Speaker 04:
Does that mean that you lose on significance?

[00:05:15] Speaker 08:
No, Your Honor.

[00:05:16] Speaker 08:
Tell me why.

[00:05:17] Speaker 08:
Because in this case, FERC provided a very different rationale for not discussing significance than in the Center for Biological Diversity.

[00:05:22] Speaker 08:
Say that again.

[00:05:23] Speaker 08:
FERC's rationale for not making a significance determination here is very different than what FERC articulated in Center for Biological Diversity.

[00:05:30] Speaker 08:
In particular, here FERC did not claim that it had no way to determine significance.

[00:05:36] Speaker 08:
FERC pointed to its pending policymaking to say that we are still figuring out the best way to do it, but FERC did not claim we can't or we just don't know how, that we haven't decided how yet.

[00:05:47] Speaker 08:
And FERC cites no authority, and I'm not aware of any that says the promise to do better in a future proceeding excuses you from making a required determination now, where the agency hasn't given an explanation as to why it can't make it now, just saying it would rather wade into it later.

[00:06:07] Speaker 08:
social cost of carbon, particularly the court.

[00:06:10] Speaker 08:
FERC here also didn't articulate two of the three arguments that were at issue in Center for Biological Diversity, as we explained in our briefs.

[00:06:17] Speaker 08:
But I don't think that the court needs to reach social cost of carbon arguments because of the importance of FERC's session up front that just had not decided how to make a significant determination.

[00:06:32] Speaker 05:
What if FERC had not gone down the road at all?

[00:06:36] Speaker 05:
Because is your argument predicated on the idea that there was the initial rule, and then it was converted basically to draft status?

[00:06:48] Speaker 08:
No.

[00:06:49] Speaker 08:
That would have, FERC presumably would have needed to offer a different rationale as to why it wasn't making a significant determination here.

[00:06:55] Speaker 08:
But we don't argue that the requirement to decide

[00:06:58] Speaker 08:
whether greenhouse gases are significant or how significant they are arises from FERC's rule.

[00:07:04] Speaker 08:
That comes from the NEPA REX that says agencies must evaluate the significance of effects.

[00:07:11] Speaker 08:
And it has consequences.

[00:07:13] Speaker 08:
I mean, it's not just we want to know.

[00:07:16] Speaker 08:
FERC typically requires mitigation for significant effects.

[00:07:20] Speaker 08:
Whereas FERC has said for greenhouse gases in the past, the reason they are not requiring mitigation is because they don't know whether the greenhouse gas emissions are significant.

[00:07:27] Speaker 08:
When it's reviewing alternatives, FERC typically will not require an applicant to adopt an alternative unless that alternative would offer a significant environmental advantage.

[00:07:36] Speaker 08:
So I do think that there's value in FERC just stating a position of did we think that these emissions were something to worry about or not.

[00:07:43] Speaker 08:
But it can also change the contours of the rest of FERC's analysis.

[00:07:47] Speaker 08:
And so that's why we think FERC had the obligation to say something about whether or not the greenhouse gas emissions, whether we're talking direct emissions or

[00:07:56] Speaker 08:
from the connected actions or indirect.

[00:07:58] Speaker 08:
Whatever scope we're using, FERC has to take the emissions in that scope and say if they're significant or not.

[00:08:04] Speaker 08:
And here FERC said, well, we plan to do that.

[00:08:09] Speaker 08:
We've talked about a couple of ways we could do it.

[00:08:12] Speaker 08:
And we'll get back to you.

[00:08:15] Speaker 08:
But then they went ahead and approved this project without actually meeting the obligation that they had already read.

[00:08:22] Speaker 08:
I'd like to circle back to Connected Actions for just a moment and address FERC's argument that the cumulative effect analysis somehow meant that there was no need to discuss Connected Actions.

[00:08:35] Speaker 06:
What's your FERC's experience with actually determining

[00:08:40] Speaker 06:
that something is or is not significant, that the emissions are?

[00:08:43] Speaker 08:
FERC has only actually made that determination in a couple of cases.

[00:08:47] Speaker 08:
One is the Northern Natural case that we described.

[00:08:50] Speaker 08:
Right.

[00:08:51] Speaker 08:
Where FERC said, in that case, we don't know where the line between significance and insignificance is, but we're confident that this project is on the insignificant side of it, where the emissions were so low that that solved the issue.

[00:09:06] Speaker 08:
If FERC is required to consider either connected actions or indirect effects, then I think FERC could make the converse argument very plainly.

[00:09:13] Speaker 08:
FERC could propose a threshold of 100,000 tons per year.

[00:09:16] Speaker 08:
If we're looking at the connected actions, but still the direct effects of FERC infrastructure, we're already talking millions of tons per year.

[00:09:22] Speaker 08:
If we're looking at the whole life cycle effects, FERC had said that a pipeline that moves 1 to 100 of the gas of Evangeline Pass would have enough life cycle emissions to cross that 100,000 per year threshold.

[00:09:33] Speaker 08:
So maybe FERC doesn't know if it should be 100,000.

[00:09:35] Speaker 06:
Is that to say that the Northern case is as close as they've ever come to actually saying?

[00:09:40] Speaker 08:
FERC is extraordinarily reluctant to actually take a position on this.

[00:09:43] Speaker 08:
So I believe there's been one or two other subsequent cases like Northern that said, this is too small for us to worry about, but otherwise,

[00:09:51] Speaker 08:
FERC has not taken a position one way or the other.

[00:09:55] Speaker 06:
And has survived challenge in Northern any other case?

[00:09:57] Speaker 08:
I don't believe anyone has litigated the cases where they actually made a determination that admissions were insignificant.

[00:10:05] Speaker 06:
So they've been, it sounds like they've been hesitant or waiting or refusing whatever for a long time.

[00:10:12] Speaker 08:
This has been, yeah, this refusal has been a long standing position to FERC, but FERC's rationale has changed and it changed

[00:10:19] Speaker 08:
dramatically one for published draft greenhouse gas policy, but I will say that Evangeline Pass is not a one-off.

[00:10:26] Speaker 08:
You know, all of the other FERC decisions that were issued during that year I think also made the same argument about we are going to just figure out a way to do this sometime, but we haven't figured it out yet, so we're not, or haven't decided on which way to use yet, so we're not deciding significantly.

[00:10:42] Speaker 06:
But now they can say they're waiting on CEQ.

[00:10:46] Speaker 08:
I mean, CEQ has encouraged agencies to go ahead and make that decision already while waiting for final guidance.

[00:10:51] Speaker 08:
CEQ has said you could use the social cost of carbon as one way to do it.

[00:10:55] Speaker 08:
CEQ hasn't set a threshold for a certain dollar value of monetized greenhouse gas emissions constitute significance.

[00:11:01] Speaker 06:
This isn't the first case where someone has argued that the agency had to adopt the social cost of carbon metric.

[00:11:12] Speaker 06:
Has any

[00:11:13] Speaker 06:
agency done that?

[00:11:14] Speaker 06:
It's not just FERC.

[00:11:15] Speaker 08:
Oh, lots of other agencies use social cost of carbon in project-specific reviews.

[00:11:20] Speaker 08:
As FERC has recognized, we cite FERC orders in the briefs where FERC acknowledges that maybe the Bureau of Land Management, the Forest Service, other agencies use social cost of carbon in their review, need for review for individual projects, but FERC has refused to do so.

[00:11:35] Speaker 05:
Thank you.

[00:11:36] Speaker 05:
But you don't think they need to, you don't think we need to get to the social cost of carbon anyway?

[00:11:40] Speaker 08:
No, I mean, I think social cost of carbon is a great fallback option for FERC.

[00:11:44] Speaker 08:
But if FERC wanted to use its 100,000 ton per year significant threshold, if FERC wanted to adopt some other threshold, FERC just needs to make a decision so that we then can know, OK, well, when are projects going to require certain mitigation?

[00:11:58] Speaker 08:
When FERC approved this project, was its overall public interest balancing based on a conclusion that

[00:12:03] Speaker 08:
greenhouse gas emissions here were nothing to worry about, or instead did FERC have to decide.

[00:12:07] Speaker 08:
These were a big problem, but the project is so important that it's worth it anyway.

[00:12:11] Speaker 08:
Once FERC picks a way to do it, then maybe we won't like that.

[00:12:17] Speaker 08:
But if we challenge that, that'll be challenging the agency's application of its expertise and judgment.

[00:12:23] Speaker 08:
And it would be reviewed under a different standard or different case than FERC's complete refusal to make a decision now.

[00:12:30] Speaker 06:
So the agency could come back.

[00:12:32] Speaker 06:
as far as you're concerned now, and say, well, as we've said, we've looked at this in relation to larger emissions baselines, state, national, and so on.

[00:12:45] Speaker 06:
And taking that into account, this is insignificant.

[00:12:49] Speaker 06:
End of story.

[00:12:51] Speaker 08:
CEQ has encouraged agencies not to do that.

[00:12:53] Speaker 08:
So CEQ has said just saying that an individual project's emissions are a small percentage of the state or national totals is not a good way.

[00:13:00] Speaker 06:
But they're not bound by the CEQ.

[00:13:03] Speaker 08:
No, they're not.

[00:13:04] Speaker 06:
So we think that FERC should not do that.

[00:13:08] Speaker 08:
And depending upon what FERC did, perhaps we would challenge that.

[00:13:11] Speaker 08:
But then FERC would be in the position of having made a decision and defending it rather than having just refused to make a decision.

[00:13:17] Speaker 08:
And I do think that the fact that FERC is refusing to make a decision here is somewhat telling.

[00:13:24] Speaker 08:
If FERC really thinks that these are nothing to worry about, FERC should say it.

[00:13:28] Speaker 08:
For whatever reason, FERC is uncomfortable saying that, and I think the point of NEPA is to force agencies to ask these hard questions and divulge their thinking to the public.

[00:13:38] Speaker 08:
The public should know whether FERC thinks that individual projects just aren't a problem for the climate because they're a small part of the total, or the public should know if FERC thinks otherwise.

[00:13:46] Speaker 06:
Well, they haven't said irrelevant.

[00:13:48] Speaker 06:
They've simply said, I can't trace

[00:13:51] Speaker 06:
any consequence from a project level starting point?

[00:13:56] Speaker 08:
Perk hasn't said you can't trace any consequences.

[00:13:58] Speaker 08:
They said we can't trace it to direct physical effects.

[00:14:00] Speaker 08:
So they have said, we don't know how many millimeters of sea rise we're going to get from this.

[00:14:05] Speaker 08:
But FERC's current position is that the social cost of carbon is valid.

[00:14:09] Speaker 08:
FERC's only criticism of the social cost of carbon right now is to say there's not a threshold at which monetized impacts become significant.

[00:14:15] Speaker 08:
But FERC does not dispute that the social cost of carbon is an accurate reflection of how much harm is going to be caused by greenhouse gas emissions.

[00:14:24] Speaker 06:
And in this case, is that $137 million?

[00:14:27] Speaker 08:
A ballpark.

[00:14:29] Speaker 08:
Something like that.

[00:14:30] Speaker 08:
Yeah, OK.

[00:14:31] Speaker 08:
Looking just at the emissions from the direct infrastructure here.

[00:14:35] Speaker 08:
If you use a bigger scope, it's much bigger.

[00:14:37] Speaker 08:
If you look at indirect or connected actions, it's a much bigger number.

[00:14:40] Speaker 06:
But it's not just construction.

[00:14:43] Speaker 06:
It's not just construction.

[00:14:44] Speaker 08:
No, infrastructure.

[00:14:45] Speaker 08:
So the pipeline compressor stations during the whole life of the project operate.

[00:14:49] Speaker 08:
I see that I'm out of time, and I made it through the first of the three points.

[00:14:55] Speaker 08:
If there are other questions, I'm happy to answer them,

[00:14:59] Speaker 05:
We'll give you a little bit of time for rebuttal, Mr. Matthews.

[00:15:09] Speaker 05:
Australia.

[00:15:23] Speaker 03:
May it please the court, I'm Randolph Elliott on behalf of the Alabama Municipal Distributors Group and the other municipal commissioners.

[00:15:33] Speaker 03:
Sometime next year, Southern Natural Gas Company will file a new freight case.

[00:15:39] Speaker 03:
Under the orders on review here, Burke has ruled that Southern can design those rates to over-collect its total cost service.

[00:15:51] Speaker 03:
Southern, that's an uncontested fact.

[00:15:57] Speaker 03:
Perk approved, in this case, a lease of Southern's expansion of its pipeline capacity, a lease that expanded capacity to its affiliate, Tennessee Gas Pipeline.

[00:16:10] Speaker 03:
Now, this is what's called a cheap expansion, because the incremental costs expansion are much lower than the pipeline's existing average costs.

[00:16:22] Speaker 03:
lesson, according to the record here.

[00:16:26] Speaker 03:
Now, Southern leased the capacity to Tennessee in a negotiated lease rate that's about 25% higher than the incremental cost, lower than the average cost, but it's higher than the incremental cost.

[00:16:41] Speaker 03:
Perk ruled that the excess lease revenue above the incremental cost

[00:16:47] Speaker 03:
and be kept by Southern natural gas when it next determines its rates.

[00:16:51] Speaker 03:
It doesn't have to reconcile all of its costs and revenues, and the next rate creates two separate buckets.

[00:17:01] Speaker 03:
As a mathematical certainty, this allows Southern to over-recover its total costs of service.

[00:17:09] Speaker 05:
Now, we ask- But not at your expense, right?

[00:17:11] Speaker 05:
Pardon me?

[00:17:12] Speaker 05:
But not at your expense.

[00:17:14] Speaker 03:
Well, yes.

[00:17:17] Speaker 03:
We tend to say, and this customers don't object to the lease rate.

[00:17:24] Speaker 03:
Our contention is, and in the next rate case, you have to look at all the rate, all of the costs, and all of the revenues, and reconcile them.

[00:17:35] Speaker 03:
Because a fundamental tenet of rate making policy is that the pipeline is able to recover its total costs of service.

[00:17:44] Speaker 06:
and not anything more.

[00:17:45] Speaker 06:
That might make perfect sense going forward, I'm not sure, but I don't understand why it has anything to do with monies that have been captured during the current rate term.

[00:17:55] Speaker 06:
In other words, if the carrier got a windfall from an investment in some stock issuance, it wouldn't be down to your benefit, they would keep it.

[00:18:09] Speaker 06:
If they realized a higher rate of return on their equity then,

[00:18:14] Speaker 03:
was anticipated because of economies they could realize they get to keep it.

[00:18:31] Speaker 03:
you do take into account what's projected.

[00:18:33] Speaker 06:
Well, that's going forward again.

[00:18:35] Speaker 03:
That's going forward.

[00:18:35] Speaker 03:
That's our only contention.

[00:18:36] Speaker 06:
But your whole argument seems to be you want credit for the $21 million that's going to accrue before the next rate case.

[00:18:42] Speaker 06:
No, no.

[00:18:43] Speaker 03:
The pipeline interveners accuse us of asking for that.

[00:18:47] Speaker 03:
That's not what we asked for.

[00:18:48] Speaker 03:
Well, then clarify it.

[00:18:48] Speaker 03:
It works very clear in the rehearing order, paragraph 18, what we asked for, the credit of the excess police revenues in the next

[00:18:58] Speaker 03:
rakes are in future.

[00:19:00] Speaker 06:
You mean to say any revenues that will be captured after the next once the section four case begins from this or yes under lease right now we're not asking for an immediate you know capture of the windfall and why is that timely now why is that

[00:19:19] Speaker 06:
Why is that timely now?

[00:19:21] Speaker 03:
Why is that timely now?

[00:19:22] Speaker 06:
You raised that in section four.

[00:19:22] Speaker 03:
Right.

[00:19:22] Speaker 03:
You know, we address that, I think, in our discussion about standing, which nobody challenged.

[00:19:28] Speaker 03:
I understand you can address it.

[00:19:30] Speaker 03:
And FERC ruled with certainty that's how Southern is supposed to design its rates in its next rate case.

[00:19:36] Speaker 03:
It didn't leave that issue for determination in the next rate case.

[00:19:40] Speaker 03:
It's race jucade, if you will.

[00:19:45] Speaker 03:
Because that is an impending harm to us in the next rate case, it handcuffs us in the arguments we can make.

[00:19:51] Speaker 03:
With legal finality, we can challenge it now.

[00:19:55] Speaker 03:
In fact, we fear that if we waited and challenged it later.

[00:19:57] Speaker 06:
So you read FERCUS saying that in your later Section 4 case, they will not take into account the carrier's revenues from serving customers other than the munis.

[00:20:08] Speaker 03:
Exactly.

[00:20:09] Speaker 03:
That is amazing.

[00:20:10] Speaker 03:
And that is what they rule.

[00:20:11] Speaker 03:
You keep two separate buckets of costs and revenues.

[00:20:13] Speaker 03:
Can you point that out?

[00:20:15] Speaker 06:
I'm sorry, I didn't come across this.

[00:20:18] Speaker 06:
I'm sorry.

[00:20:18] Speaker 06:
Where do I find that in the FERC order?

[00:20:22] Speaker 03:
Well, it's Delphic, if you will.

[00:20:26] Speaker 03:
But the paragraph 63 of the certificate order says that in the next

[00:20:35] Speaker 03:
rate case, that's where they reject our request for the revenue credit.

[00:20:40] Speaker 03:
It says, Southern, we will require that during the term of the, this is the last sentence.

[00:20:49] Speaker 03:
What page are you on in the appendix?

[00:20:51] Speaker 03:
I'm on page 27 of the Joint Appendix.

[00:20:55] Speaker 06:
27 of the?

[00:20:56] Speaker 03:
Of the Joint Appendix, which is paragraph 63 of the order, page 27 of the order.

[00:21:07] Speaker 03:
The last Senate says we will require that during the term of the lease with Tennessee Gas, Southern will not be permitted to reflect in its system rates any of the costs associated with the lease capacity.

[00:21:28] Speaker 03:
Earlier in that paragraph you say, and no revenue credit.

[00:21:32] Speaker 06:
So you're saying that's for 20 years?

[00:21:35] Speaker 03:
That's for 20 years.

[00:21:38] Speaker 03:
And the rehearing order doubles down on that rationale.

[00:21:45] Speaker 06:
And I realize your request is for credits from the over the revenue in excess of costs on this new spur.

[00:22:00] Speaker 06:
But it follows as it not that any debits would follow would go to you as well right under your theory.

[00:22:09] Speaker 06:
Well, there's a catastrophe on the line.

[00:22:11] Speaker 06:
The contract is breached and they get out of it.

[00:22:15] Speaker 06:
The shipper gets out of it and the line or the LNG plant blows up and there are no revenues.

[00:22:23] Speaker 06:
Right.

[00:22:24] Speaker 06:
Just costs.

[00:22:26] Speaker 03:
Well, in the next rate case, they would have to adjust the rates.

[00:22:33] Speaker 03:
At your expense.

[00:22:34] Speaker 05:
On you.

[00:22:35] Speaker 05:
Your technology that that would be on you?

[00:22:38] Speaker 03:
What they have said is that all the costs and the risks of the expansion are on the pipeline.

[00:22:49] Speaker 03:
That's a key part of the rule.

[00:22:53] Speaker 06:
But you want the costs and the revenues both to be to your benefit or detriment.

[00:22:58] Speaker 03:
We're not trying to get a windfall here.

[00:23:00] Speaker 03:
What we're saying is that there can't be any over recovery of costs.

[00:23:05] Speaker 03:
You have to reconcile all the costs and revenues.

[00:23:07] Speaker 06:
Okay.

[00:23:08] Speaker 06:
What about an under recovery of costs under recovery of costs?

[00:23:14] Speaker 06:
Um, means your rates will go up, correct?

[00:23:21] Speaker 06:
The costs and revenues have always traveled together.

[00:23:24] Speaker 03:
Right.

[00:23:25] Speaker 06:
Right.

[00:23:25] Speaker 06:
I mean, we've looked back through all the changes that have occurred here and whether they were

[00:23:29] Speaker 06:
you know, specifically announced in Gulf South and all that.

[00:23:33] Speaker 06:
They've always been together.

[00:23:36] Speaker 03:
Well, this order says that that rule no longer obtains, at least with respect to the costs.

[00:23:44] Speaker 03:
And we said, but what about the revenues?

[00:23:49] Speaker 03:
The excess revenues?

[00:23:50] Speaker 03:
I mean, if the pipeline wanted to lease some incremental capacity at a low cost rate and eat the difference,

[00:23:59] Speaker 03:
It's free to do that, but that shouldn't come back to us.

[00:24:03] Speaker 03:
We can't be, we can't subsidize the, the, uh, expansion.

[00:24:08] Speaker 03:
That's clear order.

[00:24:09] Speaker 03:
And they claim we're not allowing that to happen.

[00:24:13] Speaker 03:
That's paragraph 25.

[00:24:14] Speaker 06:
It's like, you don't want to take the risk, but also paragraph 57.

[00:24:17] Speaker 03:
Okay.

[00:24:21] Speaker 03:
That's a fundamental tenant of, of policy.

[00:24:26] Speaker 03:
We,

[00:24:27] Speaker 03:
that right, we should not subsidize this capacity.

[00:24:31] Speaker 03:
Let me explain to you why we are subsidizing, just do a mathematical hypothetical here that I think, I mean suppose a pipeline has a rate, average cost of a dollar, it doubles its capacity and an incremental cost of just 50 cents per unit, so now its average cost is 75 cents.

[00:24:50] Speaker 03:
It leases that expanded capacity for 60 cents.

[00:24:55] Speaker 03:
So it's a dime more than the incremental cost.

[00:24:58] Speaker 03:
Under FERC's rule here, the customers, my clients, still pay a dollar.

[00:25:06] Speaker 03:
The lease capacity is sold at 60 cents.

[00:25:10] Speaker 03:
What does that do?

[00:25:11] Speaker 03:
I mean, the pipeline recovers 180, I mean, 80 cents average cost, more than its 75 cents actual average cost.

[00:25:22] Speaker 03:
So it's getting revenues,

[00:25:23] Speaker 03:
more than its cost by keeping the two buckets separate and allowing the pipeline to keep the excess lease revenue.

[00:25:31] Speaker 03:
We didn't say, go back, originally we said, your standard policy is to roll in a cheap expansion like that and charge everybody 75 cents.

[00:25:43] Speaker 03:
We wouldn't do that.

[00:25:46] Speaker 03:
They said, no.

[00:25:47] Speaker 03:
So we said, well, all right, fine.

[00:25:49] Speaker 03:
If you're gonna keep the lease rate at 60 cents, at least credit the excess revenue back to the total cost of service so that we don't subsidize the lease.

[00:26:00] Speaker 03:
In other words, in my hypothetical, the extra dime goes back to the original cost of service.

[00:26:07] Speaker 03:
The customers charge 90 cents, not a dollar.

[00:26:11] Speaker 03:
Lease is still 60 cents.

[00:26:13] Speaker 03:
No skin off their nose.

[00:26:16] Speaker 03:
90 cents and 60 cents, that produces the average 75 cents.

[00:26:21] Speaker 03:
Pipeline recovers its total regulated cost of service, which is sufficient.

[00:26:27] Speaker 03:
FERC has found that it would be sufficient to attract capital, provide an adequate, reasonable return.

[00:26:33] Speaker 03:
We're held harmless, though, because now we're not subsidizing the lease, and the pipeline's ratepayers are not collecting, in effect, through the back door, a higher rate of return than their allowed rate of return.

[00:26:47] Speaker 03:
That's our argument.

[00:26:49] Speaker 03:
We're not saying you gotta roll it in and give us a windfall.

[00:26:52] Speaker 03:
We're just saying, don't allow us to subsidize the pipeline's rate of return.

[00:27:00] Speaker 03:
Total up all of the pipeline's costs and revenues in the next rate case, as you always do.

[00:27:08] Speaker 06:
It subsidized in a quickie and sense, as Chief Judge was suggesting.

[00:27:14] Speaker 06:
It's not coming out of your pocket.

[00:27:15] Speaker 06:
You're claiming, I guess it's an opportunity

[00:27:18] Speaker 06:
cost to you.

[00:27:21] Speaker 03:
I think that's, that's, that's fair.

[00:27:24] Speaker 04:
If I understand your question, maybe this hypothetical can happen, but imagine that things go haywire as a result of this expansion and the average cost in your, in your hypothetical instead of going from a dollar to 75 cents goes from a dollar to a dollar and 25 cents.

[00:27:43] Speaker 03:
The pipeline per quarters hold the pipeline at risk.

[00:27:48] Speaker 03:
You wouldn't have.

[00:27:49] Speaker 03:
Cost overruns, they're explicit about that.

[00:27:54] Speaker 04:
So you are looking to have your cake and eat it too.

[00:27:59] Speaker 04:
You want to pay less if the average costs go down, but you don't want to pay more if the average costs go up.

[00:28:07] Speaker 03:
I don't feel like we're trying to have our cake and eat it too.

[00:28:10] Speaker 03:
What about the latter part?

[00:28:11] Speaker 04:
Is it true?

[00:28:12] Speaker 04:
Tell me if this is right or wrong.

[00:28:13] Speaker 04:
You want to pay less if the average costs go down.

[00:28:16] Speaker 04:
but you don't wanna pay more if the average costs go up.

[00:28:20] Speaker 03:
That's what FERC's policy holds.

[00:28:23] Speaker 05:
We're not supposed to.

[00:28:23] Speaker 05:
No, but what do you want?

[00:28:25] Speaker 03:
Yes.

[00:28:27] Speaker 05:
Right, that just seems like the debt is a windfall.

[00:28:32] Speaker 05:
Because you're not willing to take the risk of the increased costs.

[00:28:35] Speaker 03:
No, I mean.

[00:28:35] Speaker 05:
You just wanna bank the increased revenues.

[00:28:37] Speaker 03:
Yeah, in my hypothetical, we would be taking that risk if we said everybody should pay 75 cents.

[00:28:45] Speaker 03:
Let everybody's price or float as the costs come.

[00:28:50] Speaker 03:
That's not what we're arguing.

[00:28:51] Speaker 03:
We're just arguing.

[00:28:52] Speaker 03:
If there is an excess lease revenue, that's uncontested.

[00:28:57] Speaker 03:
There will be.

[00:28:58] Speaker 04:
If heads, you win.

[00:29:01] Speaker 04:
If tails, they lose.

[00:29:04] Speaker 03:
No.

[00:29:05] Speaker 03:
Well, I would argue that the present FERC order is just the other way.

[00:29:09] Speaker 03:
The pipeline is to pocket the excess lease revenue at the customer's expense.

[00:29:14] Speaker 05:
But the thing is you're not the relevant customer in that situation because the costs aren't coming from you either.

[00:29:22] Speaker 03:
Well, if you'll allow me, I mean, that's a fallacy because the expansion here is a compressor station and three metering stations.

[00:29:33] Speaker 03:
Zero miles of pipeline.

[00:29:34] Speaker 03:
They're not constructing a new pipeline.

[00:29:36] Speaker 03:
It's not even a lease of facilities.

[00:29:38] Speaker 03:
It's a lease of the capacity on the existing pipeline system.

[00:29:44] Speaker 03:
The expanded capacity is made possible by the equipment, the compressor, if you will, that enables a reverse flow on the pipe.

[00:29:53] Speaker 03:
But it's the existing pipeline infrastructure that's being used.

[00:29:58] Speaker 03:
And they're not that incremental rate that 70 cents, 7 cents that they talk about compared to the lease rate.

[00:30:09] Speaker 03:
That is based only on the cost of the compressor and the metering station.

[00:30:12] Speaker 03:
It doesn't include any of the pipeline.

[00:30:14] Speaker 03:
So they're building this expansion capacity, if you will, on our backs.

[00:30:19] Speaker 03:
Okay.

[00:30:19] Speaker 03:
The pipeline capacity that we've already paid for or are paying for in our turn of rates.

[00:30:24] Speaker 05:
Let me make sure my colleagues don't have additional questions for you now.

[00:30:26] Speaker 03:
Practical terms, the nature of the subsidy.

[00:30:29] Speaker 05:
Okay, thank you.

[00:30:29] Speaker 05:
We'll give you a little time for rebuttal.

[00:30:31] Speaker 05:
We'll hear from the commission now.

[00:30:35] Speaker 05:
This is Spanta.

[00:30:48] Speaker 02:
Good morning.

[00:30:48] Speaker 02:
I'm Carol Banta for the commission.

[00:30:51] Speaker 02:
I'll begin with the lease issue.

[00:30:54] Speaker 02:
I think the court understands it pretty well.

[00:30:56] Speaker 02:
There is no subsidy here.

[00:30:57] Speaker 02:
And I don't think that we had had an argument raised that these customers were subsidizing this.

[00:31:07] Speaker 02:
They do want the revenues.

[00:31:09] Speaker 02:
But I don't think this argument that we just heard, I don't recall seeing that made.

[00:31:16] Speaker 06:
You don't what?

[00:31:17] Speaker 06:
You don't what?

[00:31:19] Speaker 02:
I don't recall seeing the argument made that they are actually subsidizing this service.

[00:31:25] Speaker 02:
The orders and the briefs talk about the new lease capacity that's being created by the new facilities, the compression and the metering stations and so on.

[00:31:34] Speaker 02:
And in this case, as the court understands, Tennessee as the lease, the lessee is

[00:31:46] Speaker 02:
or I should say Southern as the lessor is bearing all the risk.

[00:31:49] Speaker 02:
If anything goes wrong with this, if the contract falls through, something happens.

[00:31:53] Speaker 02:
The general system rate payers, I should say the petitioners here are transportation service rate payers.

[00:32:03] Speaker 02:
We're paying the system rates that are designed and have been designed in the past to pay for the service that they receive.

[00:32:10] Speaker 02:
The lease capacity is a property interest that will be

[00:32:14] Speaker 02:
held by Tennessee, it is not transportation service.

[00:32:18] Speaker 02:
It's very clear lease capacity is a property interest.

[00:32:22] Speaker 02:
It has different rights than transportation service.

[00:32:24] Speaker 02:
It has different billing than transportation service.

[00:32:27] Speaker 02:
So what the commission did in this case was approve the lease and the rates for the lease capacity.

[00:32:33] Speaker 02:
That has no effect on

[00:32:36] Speaker 02:
the transportation rates that system service customers such as the petitioners are paying.

[00:32:42] Speaker 02:
Say they're fully insulated from any risk if something goes wrong with this lease transaction, that is on Southern.

[00:32:49] Speaker 02:
It's between Southern and Tennessee and the municipals and the other system transportation service rate payers are not paying for that.

[00:32:57] Speaker 02:
And so the commission said, as your honor said, that the costs and the revenues go together.

[00:33:03] Speaker 02:
These general transportation service customers paying system rates are not entitled to the revenues from the lease capacity because they aren't paying the costs for the lease capacity or bearing the risk.

[00:33:19] Speaker 02:
So that's the commission's position on this issue.

[00:33:22] Speaker 06:
Has this been this distinction between property rights and services?

[00:33:30] Speaker 06:
in the commission's position in past proceedings?

[00:33:34] Speaker 02:
Yes.

[00:33:35] Speaker 02:
Yes.

[00:33:36] Speaker 02:
I think it goes all the way back to the certificate policy statement.

[00:33:41] Speaker 02:
To which?

[00:33:42] Speaker 02:
I think it's in the certificate policy or the lease policy that we discussed in our brief, which both go back some decades.

[00:33:48] Speaker 02:
Yes.

[00:33:49] Speaker 02:
And certainly... 2007?

[00:33:53] Speaker 02:
Well, yeah, possibly even before that, but the commission clarified in Gulf South and in subsequent cases.

[00:33:58] Speaker 02:
And I don't think anyone can point to a case after

[00:34:00] Speaker 02:
that gulf south in 2007 where the commission hasn't segregated the costs and revenues from the lease separate.

[00:34:08] Speaker 06:
Well, but on the theory that this is a property sale of property rights, at least that the lease is a is a is a transfer of property rights.

[00:34:17] Speaker 02:
It's a property interest.

[00:34:18] Speaker 02:
Yes.

[00:34:18] Speaker 06:
That is the theory underlying everything from gulf south south forward.

[00:34:23] Speaker 02:
Yes.

[00:34:25] Speaker 02:
And the commission, I think, explains that, among other places, in the certificate order, JA 21, 22, 23 talks about what a lease is, how it differs from transportation service.

[00:34:41] Speaker 02:
It is a property interest that the lessee holds, but it also comes with fewer rights in some respects than from transportation service.

[00:34:49] Speaker 02:
with regard to secondary points, capacity release, things like that.

[00:34:53] Speaker 02:
It is a different animal, and it is treated as a different animal.

[00:35:01] Speaker 02:
No more questions on the lease?

[00:35:03] Speaker 05:
Is it possible to lower the podium just a little more?

[00:35:06] Speaker 05:
Because I think if the microphone's below you, the voice carries comes through a little more.

[00:35:10] Speaker 02:
Is that better?

[00:35:11] Speaker 05:
I think so, as long as you speak into it.

[00:35:13] Speaker 05:
Yeah, thanks.

[00:35:13] Speaker 02:
I can also speak louder.

[00:35:15] Speaker 02:
I often do.

[00:35:19] Speaker 02:
So with respect to the connected actions, this court has- Let me just stay with this for a second.

[00:35:25] Speaker 06:
Sure.

[00:35:26] Speaker 06:
So if there is a catastrophe such that the property that's been leased is unusable, that loss falls entirely on the lessee?

[00:35:43] Speaker 02:
I think it falls on the lessor, on Southern.

[00:35:47] Speaker 02:
and whatever agreement they have with the lessee to cover that.

[00:35:51] Speaker 02:
Yeah, I don't know the exact terms.

[00:35:53] Speaker 02:
The point being that that is, the risk is entirely on the lease side between Southern and Tennessee and not on the system rate payers, exactly.

[00:36:02] Speaker 02:
The transportation service rates.

[00:36:07] Speaker 02:
The ins and outs of who exactly would bear that catastrophe as between Southern and Tennessee, I'm not sure, but I can tell you that it would not be the system rate.

[00:36:16] Speaker 02:
So with regard to connected actions, I think looking at the body of cases, Delaware Riverkeeper 2014, City of Boston, and other cases from this court, the Evangeline pipeline is functionally

[00:36:45] Speaker 02:
and temporarily separate from any of the other projects.

[00:36:49] Speaker 02:
They aren't all tied together.

[00:36:51] Speaker 02:
It serves the terminal as a customer, but the terminal was already approved before this project was even proposed.

[00:36:58] Speaker 02:
Or I think it was approved before it even held an OECD to determine what pipelines might serve it in the future.

[00:37:05] Speaker 02:
Now, interestingly, I don't think there was even a re-hearing order challenge in the terminal approval proceeding, and there was no appeal from that.

[00:37:13] Speaker 02:
So the terminal was approved, had an environmental impact statement, and was approved before it found the pipelines to serve it, and then they separately proposed their projects to serve it using different transportation networks, different sources, different paths,

[00:37:31] Speaker 02:
And they're different companies.

[00:37:33] Speaker 02:
They just all contracted with the same customer.

[00:37:36] Speaker 02:
But they are not linked to that in the sense that you would do an environmental impact statement.

[00:37:41] Speaker 02:
Now that said, in this environmental impact statement for the Evangeline project, it did include the information about the terminal from its environmental impact statement in the discussion of cumulative impacts.

[00:37:53] Speaker 06:
Who did that?

[00:37:54] Speaker 06:
Was that the DOEs?

[00:37:56] Speaker 02:
No, no.

[00:37:58] Speaker 06:
You should have included the environmental analysis of the terminal, right?

[00:38:02] Speaker 06:
Right, so didn't DOE do that?

[00:38:04] Speaker 02:
Well, the Commission had to approve the construction of the terminal under its authority under Section 3.

[00:38:11] Speaker 02:
It prepared the environmental impact statement.

[00:38:15] Speaker 02:
DOE was a cooperating agency.

[00:38:17] Speaker 02:
in the terminal impact statement and in fact adopted that as its own in its order 4446 and and did its own analysis but it cooperated in the preparation and adopted and then expanded upon the environmental impact statement for the terminal.

[00:38:33] Speaker 06:
Now here's the construction of the terminal not the continued operation.

[00:38:39] Speaker 02:
Right that's it but it is actually that is a separate proceeding DOE is also a cooperating agency in that one.

[00:38:46] Speaker 02:
So DOE was a cooperating agency in the terminal impact statement.

[00:38:52] Speaker 02:
And in the, I don't remember if it's an impact statement or an environmental assessment, whatever is being done for the terminal amendment, DOE is a cooperating agency in that.

[00:39:01] Speaker 02:
And we'll use that in its opinion regarding increased exports.

[00:39:08] Speaker 02:
As to Evangeline PASS, DOE is not a cooperating agency because

[00:39:12] Speaker 02:
It already approved the exports, so it's not involved in this.

[00:39:17] Speaker 02:
But the commission, as part of preparing a full hard look at this project,

[00:39:24] Speaker 02:
in the Evangeline Pass analysis included anything that came before and even other projects that were ongoing.

[00:39:30] Speaker 02:
So in the environmental impact statement, it included information about the terminal from that prior impact statement.

[00:39:37] Speaker 02:
It included information about the Columbia Gulf East Lateral Express pipeline that had been proposed.

[00:39:44] Speaker 02:
It included that, I think, both in the environmental impact statement and in the order.

[00:39:48] Speaker 02:
And then later,

[00:39:50] Speaker 02:
when Texas Eastern proposed its Venice extension project, which is still under consideration.

[00:39:56] Speaker 02:
The commission looked at the draft environmental impact statement from that so that it could address fully any potential cumulative impacts in the rehearing order.

[00:40:05] Speaker 02:
So the information it discusses in the cumulative impact section of the rehearing order

[00:40:09] Speaker 02:
It draws upon the draft environmental impact statement for that other pipeline.

[00:40:14] Speaker 02:
So the commission did take a full hard look at any potential cumulative impacts, but that is not the same as saying that these are connected actions that must be treated all in a single proceeding.

[00:40:23] Speaker 02:
What is the practical difference between those two?

[00:40:27] Speaker 02:
I'm not sure, honestly.

[00:40:29] Speaker 02:
I mean, the commission is just trying to take a hard look overall, so I don't know exactly what the

[00:40:35] Speaker 02:
it would be expected to do differently were it to treat any or all of these actions as connected.

[00:40:41] Speaker 02:
But it has, if we look at the environmental impact statement discussion of the East Lateral Express project, and if you look at the hearing order talking about the draft impact statement in the Venice extension order, the commission takes quite a hard look at it, points out actually some of these facilities aren't even physically near each other for a lot of the geographically confined considerations.

[00:41:05] Speaker 02:
None of these connect to the terminal, to clarify.

[00:41:08] Speaker 02:
The terminal has its own pipeline that was approved in its proceeding, the Gator Express.

[00:41:14] Speaker 02:
It has two legs.

[00:41:15] Speaker 02:
So those are the feeders to the terminal.

[00:41:17] Speaker 02:
None of these projects connect to the terminal.

[00:41:18] Speaker 02:
They all connect.

[00:41:19] Speaker 05:
They all feed into that.

[00:41:20] Speaker 02:
Into the Gator Express.

[00:41:22] Speaker 02:
And not even in the same places.

[00:41:23] Speaker 02:
So one of the legs of Gator Express was to connect with the Tennessee system, including some capacity that was already there.

[00:41:32] Speaker 02:
And then now this capacity eventually passed

[00:41:35] Speaker 02:
The other leg was to connect with Texas Eastern, and that's where Venice Extension will connect.

[00:41:43] Speaker 02:
Neither leg connected to Columbia Gulf, so Columbia Gulf on the East Lateral Express is building to it and will join on the same platform where it's connecting with Texas Eastern.

[00:41:54] Speaker 02:
So you have Texas Eastern and Columbia Gulf at one platform.

[00:41:59] Speaker 02:
You have Tennessee connecting at the end of the other leg of the Gator Express.

[00:42:04] Speaker 02:
So they're all building to the project, but they're all separate companies with separate contracts and separate agreements with the terminal for what to provide and being built on different timelines and in different physical areas.

[00:42:20] Speaker 02:
And they don't link up as in like the Delaware Riverkeeper segmented linear.

[00:42:25] Speaker 06:
In the City of Boston case, which is quoted in the rehearing order here, it says the test asks

[00:42:35] Speaker 06:
This is a test of substantial independent utility.

[00:42:39] Speaker 06:
The test asks whether, quote, whether one project will serve a significant purpose even if a second related project is not built.

[00:42:47] Speaker 06:
What purpose would the pipelines here serve, Evangeline and so on, if the terminal had not been built?

[00:42:56] Speaker 02:
Well, we do concede that while the terminal is independent from what

[00:43:01] Speaker 02:
whatever pipelines it might have chosen to serve it.

[00:43:05] Speaker 02:
We don't contend that Evangeline Pass doesn't depend on the terminal existing.

[00:43:09] Speaker 02:
The terminal, of course, was already approved before this proceeding even began.

[00:43:13] Speaker 06:
Right, right, but the Evangeline depends upon there being a terminal there to serve.

[00:43:17] Speaker 06:
It does, but we don't have... So how does it meet the test of something that would have been built even if the other portion here, the terminal, had not been built?

[00:43:27] Speaker 02:
But we don't have a case that addresses this.

[00:43:31] Speaker 02:
So we don't know whether that independence has to be both ways.

[00:43:36] Speaker 02:
We don't have a case that says that if it's just one way that that can't count.

[00:43:40] Speaker 02:
If we look at all the factors, like the timing, the function, the commercial and financial independence, and all the other factors, it's not simply does it depend on that, but what does it have in common with it?

[00:43:53] Speaker 06:
Here's what the commission said in Food and Water Watch.

[00:43:58] Speaker 06:
Actually, it's the court speaking about the commission.

[00:44:01] Speaker 06:
The commission reasonably determined that the projects have independent utility, i.e.

[00:44:06] Speaker 06:
that quote, quoting the commission, one project will serve a significant purpose even if a second related project is not built.

[00:44:13] Speaker 06:
Close quote.

[00:44:15] Speaker 06:
Commission found that each project would have gone forward absent the other.

[00:44:19] Speaker 06:
I can't say that here.

[00:44:20] Speaker 02:
No, but here we have the second project.

[00:44:21] Speaker 02:
We're not talking about the first project and something that needs to be built later.

[00:44:24] Speaker 02:
We are talking about the second project.

[00:44:26] Speaker 02:
So we can see that we don't have a case.

[00:44:28] Speaker 06:
What do you mean that one's later than the other?

[00:44:30] Speaker 06:
Is that it?

[00:44:31] Speaker 02:
What's that?

[00:44:32] Speaker 06:
I'm not sure of your point that one here comes later than the other.

[00:44:35] Speaker 02:
Well, it's just not that we have a project in front of us that depends on something else to be done in the future.

[00:44:40] Speaker 06:
This is right.

[00:44:41] Speaker 06:
It's been done.

[00:44:42] Speaker 02:
It's been done.

[00:44:43] Speaker 06:
But the question is, I thought the question

[00:44:46] Speaker 06:
Would these pipelines have been built had there been no terminal to which the answer would be no?

[00:44:51] Speaker 02:
I think we have to say the answer there is no.

[00:44:52] Speaker 02:
But I don't think that's the end of the inquiry.

[00:44:54] Speaker 02:
We don't have case law on point for that.

[00:44:57] Speaker 02:
But we do have all the factors that the court considers.

[00:45:00] Speaker 02:
And it is a balancing test, because in Food and Water Watch, the temporal issue there was equivocal in the court's words.

[00:45:09] Speaker 02:
But the other factors that you look at

[00:45:11] Speaker 02:
on balance made it appear to be not connected.

[00:45:15] Speaker 02:
And so we do look at things like the function, the commercial and financial.

[00:45:19] Speaker 02:
Again, these pipeline projects are separate from each other, separate companies, separate paths and everything.

[00:45:26] Speaker 02:
They did all contract with the same end customer.

[00:45:28] Speaker 02:
They're not being built by Venture Global.

[00:45:29] Speaker 02:
They're not owned by Venture Global.

[00:45:31] Speaker 02:
They're just someone who contracted with the terminal to deliver to it.

[00:45:36] Speaker 02:
And again, the court did note in City of Boston, among other cases, that if we don't know, for instance, when we're looking at the terminal, if we don't know what pipelines are going to be involved, the court's language was later projects can fully account for the cumulative impacts when those effects become better known.

[00:45:55] Speaker 02:
And that's where the commission demonstrates the rigor of its analysis here, in that it made sure on the cumulative impacts to consider every

[00:46:05] Speaker 02:
possible one of these projects as information about them became known.

[00:46:09] Speaker 02:
To the extent that in the rehearing order, all we had was a draft environmental impact statement for Venice extension, and the court still, or the commission still devoted something like seven paragraphs to discussing it.

[00:46:19] Speaker 05:
So you're not aware that that analysis would have differed in any way if the various projects were treated as connected?

[00:46:27] Speaker 02:
I think that's right.

[00:46:29] Speaker 02:
I don't think it would have been different.

[00:46:32] Speaker 05:
So from the commission's perspective, nothing's at stake, actually, in the connectedness inquiry.

[00:46:36] Speaker 05:
I mean, whether you have to do it over would be, but.

[00:46:38] Speaker 02:
Well, I wouldn't say.

[00:46:39] Speaker 02:
I wouldn't want to.

[00:46:40] Speaker 02:
I'd have to think through what impact it might have for other cases.

[00:46:43] Speaker 02:
But I think as far as considering whether the commission met its obligation to take a hard look, it did, whether we want to call it connected or call it what it looked at and how it analyzed under the cumulative impacts.

[00:46:55] Speaker 02:
I think the point is that the commission fulfilled its NEPA responsibilities in the case.

[00:47:01] Speaker 05:
And then you mentioned a couple times that part of what feeds into the commission's perspective that there's non-connectedness here is that there's separate companies.

[00:47:12] Speaker 05:
And are there other cases in which, even though they're separate companies, the projects are still treated as connected?

[00:47:20] Speaker 02:
Not in the key precedents that I am aware of, the ones that we looked at.

[00:47:25] Speaker 02:
Boston, Food and Water Watch, I'm not aware of one.

[00:47:30] Speaker 02:
where it's been different.

[00:47:33] Speaker 02:
It tends to come up when it's the same company and they've got several projects and maybe they're near each other even if they're not lined up and that's where it comes up.

[00:47:41] Speaker 02:
So it is one of the facts and it goes to the functional prong, functional discussion.

[00:47:47] Speaker 02:
And the commission alluded to, I mean it did say something about not being the same company in I believe paragraph 40 of the hearing order.

[00:47:55] Speaker 02:
I know I looked at paragraphs 40 and 42 where the commission is

[00:48:00] Speaker 02:
suggesting that that is one of the indicators that it was looking for.

[00:48:04] Speaker 02:
I mean, and it just makes sense when you're comparing it to something like Delaware Riverkeeper where it was one company that was marketing it as a single pipeline.

[00:48:14] Speaker 05:
And you don't take issue with the proposition that in order to operate it to achieve its full potential, that all of these various projects, even if they're coming from different companies, that the inputs feed into the full potential.

[00:48:30] Speaker 02:
I know that's certainly why the terminal contracted with them.

[00:48:34] Speaker 02:
I can't categorically say that it couldn't get.

[00:48:38] Speaker 02:
released capacity or some kind of secondary, occasionally from someone else if it was cheaper, because it does have interconnects with different systems.

[00:48:46] Speaker 02:
But certainly, it did enter into these contracts with the intention of being able to maximize and maximize its options, because they are different systems.

[00:48:53] Speaker 02:
They're bringing gas from different places.

[00:48:55] Speaker 02:
There may be times that they're getting more from Tennessee, which draws not only from the Appalachian region, but it can connect with the mid-continent system in Oklahoma.

[00:49:04] Speaker 02:
Maybe it has access to something that Texas Eastern doesn't

[00:49:07] Speaker 02:
for wherever Texas Eastern is bringing its gas from.

[00:49:09] Speaker 02:
So I think any business is gonna wanna have options, but we don't have a finding here about what percentage of the terminal capacity, does it have to be running 100% 24-7 to mathematically make sense, or is there some amount lower than that?

[00:49:25] Speaker 02:
We don't have that data.

[00:49:27] Speaker 02:
I don't think there's any basis to assume that it would be running flat out 100% all the time, but we just don't know that.

[00:49:38] Speaker 05:
Can we just talk a second about effects, unless there's further questions about this?

[00:49:42] Speaker 05:
So can you just tell us what's the current status, or do you have a sense of what the current status is on the review of the 100,000?

[00:49:51] Speaker 02:
It's ongoing.

[00:49:52] Speaker 02:
I don't know that there's been any updates since what we have where it was reverted to draft status.

[00:50:06] Speaker 02:
The fact that it's still ongoing.

[00:50:09] Speaker 02:
We think it further supports what the commission has been saying about the difficulty of this.

[00:50:13] Speaker 02:
The fact that the commission is continuing to grapple with these issues and consider ways to add even more to its environmental analysis.

[00:50:22] Speaker 02:
It just shows that the commission is trying to be rigorous about this and responsive to what the court has required.

[00:50:29] Speaker 02:
We believe that the analysis in this case does everything that this court has required in past cases.

[00:50:35] Speaker 02:
cases or found the commission deficient for not doing.

[00:50:40] Speaker 02:
The commission quantified the emissions with aggressive maximum assumptions and compared it to national and state and regional emissions and goals.

[00:51:00] Speaker 02:
And it did discuss the social cost of carbon, and it still continues to find that

[00:51:06] Speaker 02:
not appropriate for the commission to make project level analysis.

[00:51:10] Speaker 02:
But it is still considering ways to do that.

[00:51:13] Speaker 05:
And I mean, it did it did do all the things that you said it did.

[00:51:16] Speaker 05:
But then at the end of the day, it didn't tell us how much that matters.

[00:51:21] Speaker 05:
And that seems like it's a pretty significant.

[00:51:23] Speaker 05:
I'm not I'm not saying that whether I'm not concluding whether that's necessary or not.

[00:51:29] Speaker 05:
But that seems

[00:51:31] Speaker 05:
It's hard to say that that's immaterial, because the whole point of it is for an agency to lend its expertise to the matter.

[00:51:37] Speaker 02:
I mean, what I can point out is that in both paragraph 98 of the certificate order and I forget exactly where in the rehearing order, the commission did say that overall, considering everything looking at this project, this is an environmentally acceptable action.

[00:51:53] Speaker 02:
And another thing I would note is that all five commissioners at the time agreed, even if they didn't necessarily agree

[00:52:00] Speaker 02:
on every aspect of Power Y, there were no dissents on this project.

[00:52:05] Speaker 06:
Isn't the determination of significance a statutory obligation?

[00:52:11] Speaker 02:
Well, it is with respect to performing, whether you do an environmental impact statement, which of course we did.

[00:52:18] Speaker 02:
I think that the commission has to include this discussion, but I don't believe the court.

[00:52:26] Speaker 05:
I thought the regulation uses the word significant too.

[00:52:28] Speaker 02:
You have to discuss, I think it says you have to discuss the significance.

[00:52:32] Speaker 02:
And the commission discusses as much as it can here, but the court is not.

[00:52:38] Speaker 05:
It's hard to say it discusses a lot of things that would inform significance.

[00:52:44] Speaker 02:
Yes, but it has not determined whether or how to make that ultimate determination if it needs to, and this

[00:52:57] Speaker 02:
I don't think there's a case where this court has said that it has to, and that this analysis doesn't represent a hard look.

[00:53:05] Speaker 04:
What's your response to Tishner's argument that you do need to?

[00:53:12] Speaker 04:
He says you just need to make a decision.

[00:53:15] Speaker 02:
Well, that's all well and good to say, but we don't have a court case that says we have to take that step.

[00:53:22] Speaker 04:
And the commission, what is your argument for why this court should not say that in this case?

[00:53:30] Speaker 02:
Um, because the commission still doesn't believe, doesn't believe it has a tool that is appropriate for that.

[00:53:39] Speaker 02:
And it is trying to determine whether, whether it can be appropriate, whether that or some other tool could be appropriate for that, but it isn't there yet.

[00:53:48] Speaker 02:
And, um,

[00:53:53] Speaker 02:
You know, the commission is a bipartisan body that has to come to some kind of, if not consensus, at least a majority.

[00:54:00] Speaker 04:
I mean, maybe, maybe petitioner would say, until you figure it out, you just can't, you just can't certify things.

[00:54:07] Speaker 02:
I don't know what the support for that is.

[00:54:09] Speaker 04:
So I, why is that wrong?

[00:54:15] Speaker 04:
Pretty like these are not hostile questions.

[00:54:18] Speaker 04:
I'm giving you the opportunity to make your case.

[00:54:22] Speaker 02:
And I think the commission, the commission's answer has just been, we just don't have the tool to do that, but we take a hard look at this project and we still think it's an environment.

[00:54:36] Speaker 04:
And he might say, the petitioner might say, just don't certify anything until you figure it out.

[00:54:45] Speaker 02:
I don't know what the basis for

[00:54:49] Speaker 02:
I mean, if the commission takes a hard look under NEPA, then it's fulfilled its NEPA review.

[00:54:57] Speaker 04:
That's question begging there.

[00:54:59] Speaker 04:
His point is you can't take a hard look until you have figured it out.

[00:55:04] Speaker 02:
Well, I disagree with that.

[00:55:07] Speaker 04:
Why do you disagree?

[00:55:09] Speaker 02:
Whether or not a particular project, whether it's emissions levels are

[00:55:18] Speaker 02:
significant whatever that might mean I think the Commission doesn't think that's but that ultimate finding is necessary to be able to make a finding that something is in but why I'll stop I'll stop beyond what the Commission has said I can't I can't supply something beyond what the Commission itself you must think that it doesn't matter as long as there's the conclusion in paragraph 98 I mean that has to that has to be the Commission's

[00:55:49] Speaker 02:
Well, what Paragraph 98 tells us is that all five commissioners found this environmentally acceptable.

[00:55:55] Speaker 05:
Right.

[00:55:55] Speaker 05:
And so it has to be that you think that as long as there's a bottom line conclusion that it's environmentally acceptable, then it doesn't matter if there's a sub-conclusion as to the significance of some aspect of that.

[00:56:08] Speaker 02:
I think that's right.

[00:56:10] Speaker 05:
How could it not be?

[00:56:10] Speaker 05:
I mean, it has to be.

[00:56:12] Speaker 05:
Otherwise, you would lose, right?

[00:56:15] Speaker 06:
Yes.

[00:56:19] Speaker 06:
Isn't significance also the criterion for moving past the environmental assessment to go on to an EIS?

[00:56:29] Speaker 02:
Well, of course, and here we did that.

[00:56:30] Speaker 06:
I understand that, but there must be some criterion by what we decide whether to do that.

[00:56:38] Speaker 02:
I don't know what the commission, when the commission took the policy statement back to draft, it said it wouldn't apply it in currently pending cases, but it still did the environmental impact statement here anyway.

[00:56:50] Speaker 02:
And I believe it did with other similar projects.

[00:56:53] Speaker 02:
I know it did with East Lateral Express.

[00:56:55] Speaker 06:
Okay, and sometimes it doesn't do an EIS.

[00:56:58] Speaker 06:
Some things that it determines don't have a significant impact, right?

[00:57:02] Speaker 06:
So it must be some criterion that's using to say some EAs present a significant and some an insignificant.

[00:57:10] Speaker 02:
It does and I don't know what those are because it didn't bother with that here because it just went to the environmental impact statement and the language that the commission used at the time

[00:57:21] Speaker 02:
I'm not sure whether I have it flagged, but the commission said that because initially it did do an environmental assessment for this project and then it issued a notice which is in the record.

[00:57:29] Speaker 02:
I just don't remember.

[00:57:31] Speaker 02:
Here it is.

[00:57:34] Speaker 02:
where the Commission said staff will prepare an environmental impact statement.

[00:57:40] Speaker 02:
It will assist the Commission in its consideration of the project's contribution to climate change and its decision-making process to determine whether the project is in the public needs and necessity.

[00:57:50] Speaker 02:
And that just reflects the Commission striving to comply with

[00:57:55] Speaker 02:
a number of this court's cases and giving the robust discussion of all the different facets that it had not done in the environmental assessment.

[00:58:05] Speaker 02:
So it made that determination in this case even though it explicitly was not applying the policy of being the 100,000 or more.

[00:58:15] Speaker 02:
It went ahead and did it in this case regardless.

[00:58:19] Speaker 05:
So it sounds like what the commission is doing is

[00:58:22] Speaker 05:
there's some situations in which the commission thinks it's just insignificant.

[00:58:27] Speaker 05:
And then there's other situations in which the commission thinks we can't just say at the threshold that it's insignificant, but we're also not going to say whether it's significant.

[00:58:35] Speaker 05:
And for those cases, it's just going to do an environmental impact statement to cover itself.

[00:58:44] Speaker 05:
Is that essentially what's going on?

[00:58:46] Speaker 02:
I do know that in the only case I'm aware of, and council suggested there might be a couple others, maybe there are, I do know in the Northern Natural case, the commission went ahead and did it in that case, and it was- Went ahead and did, and- A significant, an insignificance finding.

[00:59:00] Speaker 02:
Yeah.

[00:59:01] Speaker 02:
Because the numbers were minuscule.

[00:59:03] Speaker 02:
I think if you add the construction and operation of that pipeline, it's about a 10th of the construction and operation of Evangeline Pass.

[00:59:11] Speaker 02:
So there is some amount like that

[00:59:15] Speaker 02:
where the commission, at least the commission at the time, said this isn't even worth arguing about.

[00:59:21] Speaker 05:
Right, I'm just saying, in answer to Judge Gisborne's question, the commission's making a determination of significance in some cases, because it's saying in some cases that it's just too insignificant.

[00:59:30] Speaker 02:
If it's patently so tiny that it's insignificant, maybe that's an easy question.

[00:59:34] Speaker 05:
Right, but it's not, the converse of that is not.

[00:59:37] Speaker 02:
It's not something that the commission has been prepared to do, and it's not something that the court can hold in.

[00:59:43] Speaker 02:
Even Northern Natural, that was the commission choosing to do it there.

[00:59:46] Speaker 02:
It wasn't because it was compelled to.

[00:59:52] Speaker 02:
But again, I would point out, unlike many of the projects that this court sees, all five commissioners at the time agreed in both orders, even as they differed as to how they would end.

[01:00:07] Speaker 05:
Make sure my colleagues don't have additional questions.

[01:00:09] Speaker 05:
We'll hear from Intervener.

[01:00:11] Speaker 05:
We're exhausted.

[01:00:16] Speaker 05:
Mr. O'Neill.

[01:00:33] Speaker 07:
Oh, may it please the court.

[01:00:34] Speaker 07:
My name is Brian O'Neill and I represent the respondent and intervener.

[01:00:40] Speaker 07:
By way of status, as I mentioned before, the Plaquemines LNG project is under construction.

[01:00:47] Speaker 07:
It's been fully approved.

[01:00:49] Speaker 07:
It's been fully funded between $21 billion and expected in service dates in the fourth quarter of next year.

[01:00:57] Speaker 05:
Could you speak up a little, or could we turn the volume up a little bit?

[01:01:00] Speaker 05:
Something is not coming through.

[01:01:01] Speaker 05:
I'll try to speak louder.

[01:01:02] Speaker 07:
Thank you.

[01:01:05] Speaker 07:
In any event, the – and in addition, the pipeline construction, at least with respect to the Tennessee and Southern – they expect that the construction will be in tune with and aligned with the in-service data next year with respect to the Blackwood's LNG facility.

[01:01:26] Speaker 07:
I'd like to touch upon a couple of issues with respect to each of the positions.

[01:01:30] Speaker 07:
review here, following up on the connected actions discussion.

[01:01:36] Speaker 07:
I think it's important for the court to understand the reasoning behind the need for connected actions in some cases, and that's to avoid the segmentation by an agency in order to avoid environmental review.

[01:01:49] Speaker 07:
a segment project to discrete sections and therefore avoid the overall environmental impact statement requirements.

[01:02:01] Speaker 07:
Here, we have environmental impact statements.

[01:02:05] Speaker 07:
If you take into account all of the projects that the commissioners have raised here in legend connection, all of those projects have been the subject of a final environmental impact statements.

[01:02:15] Speaker 07:
And indeed, with respect to the Evangeline Pass project,

[01:02:20] Speaker 07:
And in that case, with respect to the other cases, the cumulative analysis took into account

[01:02:35] Speaker 07:
data express pipeline facilities, the instant facilities for the court, as well as the other considered actions in connection with Texas Eastern proposal, Columbia proposal.

[01:02:50] Speaker 07:
One has to wonder, therefore, if connected, if there was a requirement that this be deemed to be a connected actions, what more would have to be done?

[01:02:59] Speaker 07:
And I don't know what it is.

[01:03:01] Speaker 07:
All I can tell you is that the commission here

[01:03:03] Speaker 07:
has fulfilled its NEPA obligations with respect to each of the projects that has been for it.

[01:03:09] Speaker 07:
And I point out also that the two of the projects, the Blackman's LNG facilities that were approved along with the Gator Express pipeline, those are final actions that are not appealed.

[01:03:20] Speaker 07:
Similarly, the Columbia project is one of the other links, one of the other supply links to do.

[01:03:30] Speaker 07:
Gator Express pipeline also has been approved by the commission, and that is a final action.

[01:03:35] Speaker 07:
It has not, it's no longer subject to appeal.

[01:03:38] Speaker 07:
Once again, one wonders therefore, what is it that would need to be done?

[01:03:43] Speaker 07:
The only, with respect to the connected actions argument, and the only case that petitioners have been able to get to is the Delaware River case, and the facts there are significantly different than what's before this court in this case.

[01:04:00] Speaker 06:
the regs make, or maybe it's a statute, differentiate between connected and cumulative effects.

[01:04:08] Speaker 06:
And in discussing this, you actually slid from talking about connectedness to talk about the cumulative effect.

[01:04:15] Speaker 06:
What is the difference?

[01:04:17] Speaker 07:
Well, as I pointed out, that's what I think is important for the court to recognize.

[01:04:23] Speaker 07:
The need for a consideration under the connected actions requirement is to consider all of the facilities in one environmental impact statement, rather than dividing the projects up into discrete.

[01:04:35] Speaker 07:
That's not the case here.

[01:04:36] Speaker 07:
That was the case, however, in the Delaware River.

[01:04:39] Speaker 06:
Well, if here the commission were remanded to take a connected view of everything,

[01:04:50] Speaker 06:
At the very least, I suppose it would mean that whatever the emissions for each of these properties is would be added together, correct?

[01:05:03] Speaker 07:
I'd have to say perhaps.

[01:05:05] Speaker 06:
And so it might cause a very different view of whether something is significant if the something is this whole package rather than some piece of it.

[01:05:15] Speaker 07:
Well, the commission, as I pointed out, did do an environmental impact statement with respect to all of these projects, each of them.

[01:05:22] Speaker 07:
And in addition, with respect to significance, it's somewhat of a straw man here.

[01:05:28] Speaker 07:
If the commission makes a determination that there is significance, if you will, what that means under NEPA is that they have to do an environmental impact statement.

[01:05:37] Speaker 07:
That's precisely what the commission did here with respect not only to the Imagine the Past project, but to each of the other.

[01:05:43] Speaker 06:
So the significance determination

[01:05:46] Speaker 06:
in the sequence of events that runs from doing an assessment and then deciding whether it's significant enough to do an EIS.

[01:05:53] Speaker 06:
That's the only time where significance comes into play.

[01:05:57] Speaker 07:
Well, under NEPA, it's what the extent of the environmental review has to be if there is a significance determination.

[01:06:06] Speaker 07:
And that's moving, as Your Honor pointed out earlier, from environmental analysis to a full environmental impact review, which is, as I said, which has been done here.

[01:06:17] Speaker 06:
Let me see.

[01:06:20] Speaker 06:
I guess this was a misimpression.

[01:06:21] Speaker 06:
I thought that they made that determination as significant enough to do an EIS, and then

[01:06:27] Speaker 06:
have to determine at the end of the EIS, is this a significant effect on the environment?

[01:06:32] Speaker 06:
But you're saying, no, that was already determined in the decision to make an EIS.

[01:06:38] Speaker 07:
I believe that's right, Your Honor.

[01:06:39] Speaker 06:
All right, well, we'll get Mr. Matthews in on that, too.

[01:06:42] Speaker 07:
Well, may I have a moment to address the other petition?

[01:06:46] Speaker 07:
If you don't, in just a minute, please.

[01:06:48] Speaker 07:
I'll be very, very brief.

[01:06:49] Speaker 07:
I think it's important, on the capacity at least, the commission's policy, which has been followed consistently

[01:06:57] Speaker 07:
Here we have a brand new capacity that's been created, capacity that none of the shippers on the Southern System want or need, including the petitioners here.

[01:07:15] Speaker 07:
fact is that they have been treated consistent.

[01:07:18] Speaker 07:
The Commission treated this consistently with its policy.

[01:07:21] Speaker 07:
It has put the risk on Southern Natural with respect to this risk of all the costs.

[01:07:28] Speaker 07:
has segregated the cost and the revenue from the cost of service associated with the development of rates for the existing customer.

[01:07:37] Speaker 07:
There's just no implication here with respect to capacity lease on any of the rates, including the rates paid by the commissioners here.

[01:07:46] Speaker 07:
And that's just an important distinction that I think seems to have been missed here.

[01:07:51] Speaker 07:
Also, I'd point out, in our brief, we cited the

[01:07:57] Speaker 07:
case, a national fuel case, which is on all fours with our situation here for the commission.

[01:08:03] Speaker 07:
We treated it precisely the same way.

[01:08:06] Speaker 07:
We were criticized by petitioners for alleging this is a post hoc rationalization.

[01:08:14] Speaker 07:
In fact, the commission considered that both their order and the order.

[01:08:20] Speaker 04:
I know we're running long on time, but can I ask you the question that I asked with regard to the climate

[01:08:25] Speaker 04:
impact the climate significance.

[01:08:27] Speaker 04:
It seems to me the petitioners are saying FERC has just got to make a decision, some decision, and that can then be critiqued or assessed.

[01:08:37] Speaker 04:
And until they do it, I guess FERC should just not approve any projects.

[01:08:42] Speaker 04:
They have to figure this out first.

[01:08:45] Speaker 04:
There cannot be a hard look until they make a decision about what is significant.

[01:08:52] Speaker 04:
What is your response to that?

[01:08:54] Speaker 07:
I'll answer it this way.

[01:08:56] Speaker 07:
I think here the fact is that the Commission did decide to do an environmental impact statement.

[01:09:04] Speaker 07:
That's what's required if there's a significant determination.

[01:09:09] Speaker 07:
In essence, therefore, in these cases, the Commission has, without announcing it, actually reached a conclusion that there is a significant

[01:09:18] Speaker 07:
factor here and it needs to be addressed by virtue of that's right okay okay thank you mr. O'Neill mr. Matthews will start with three minutes for rebuttal

[01:09:47] Speaker 08:
Thank you, Your Honor.

[01:09:48] Speaker 08:
I'd like to first address what would have been required in the connected action analysis that's missing from cumulatives.

[01:09:56] Speaker 08:
Burke interprets cumulative actions to only include effects that overlap in time and space.

[01:10:01] Speaker 08:
Burke explains that in the EIS at JA 440 here.

[01:10:04] Speaker 08:
So for wetlands, for example, Perk looked at the analysis of the Evangeline Pass pipeline and said, this is in a different watershed than the other projects that are at issue here.

[01:10:13] Speaker 08:
And Perk concluded that the wetlands impacts will not overlap.

[01:10:17] Speaker 08:
So it didn't discuss the wetlands impacts of the other projects, because it said they're happening someplace else.

[01:10:20] Speaker 08:
No one is simultaneously exposed to the same effects, the JA443 to 444.

[01:10:27] Speaker 08:
We're not challenging that as adequacy of that as applied to cumulative impacts.

[01:10:31] Speaker 08:
But connected action says, fine, maybe they're in a different watershed.

[01:10:35] Speaker 08:
But if you approve one project, that still makes the other one more likely to happen.

[01:10:38] Speaker 08:
And you need to be aware of that before you start going down that road, before you open the barn door.

[01:10:43] Speaker 08:
And that big picture approach is especially important because on the benefit side, FERC is looking at the big picture.

[01:10:51] Speaker 08:
It's not drawing a line between the benefits provided by the pipeline and the benefits provided by the terminal.

[01:10:56] Speaker 08:
In explaining why the pipeline was in the public interest, the terminal said that it will enable exports to stimulate jobs in gas production, that it will help U.S.

[01:11:04] Speaker 08:
balance of trade, all these other effects that the pipeline only provides if it is going to a terminal that then exports the gas.

[01:11:11] Speaker 08:
Those statements are JA 12 and 86 to 87.

[01:11:15] Speaker 08:
So FERC is going to say, when it looks at any piece of this project, here are the benefits that a big enterprise provides, and those outweigh the harms of this individual segment.

[01:11:24] Speaker 08:
Then it moves to the next segment, it says the big picture benefits still outweigh the individual harms.

[01:11:28] Speaker 08:
The next segment is the big picture benefits that way the individual arms.

[01:11:31] Speaker 08:
It's not making an apples to apples comparison.

[01:11:33] Speaker 08:
And so that's why even if they don't overlap in the same watershed or if the air pollution doesn't hit the same communities, FERC needs to look at the total amount of the impacts of the connected actions before it approves the individual projects.

[01:11:50] Speaker 08:
I'd also like to just address indirect effects.

[01:11:52] Speaker 08:
I know we didn't discuss that briefly, but we're happy to rest on the briefs for explaining why this case is more like Sable Trail in the city of Oberlin.

[01:11:59] Speaker 08:
But there's an easier way to address indirect effects and the obligation to go upstream, which is that, as I said, FERC is arguing that this pipeline is in the public interest because it will support jobs in gas production.

[01:12:11] Speaker 08:
So if FERC is going to say that we can look at the benefits of gas production, FERC can't make a public citizen argument saying that it lacks the authority to consider the environmental effects of that additional gas production as well.

[01:12:21] Speaker 04:
On climate significance, are you going to?

[01:12:23] Speaker 04:
I'm happy to go there.

[01:12:24] Speaker 04:
So I've been kind of describing your argument and describing it inaccurately.

[01:12:29] Speaker 08:
I'd like to put a little nuance on the argument, is that we don't think that FERC requires, or that NEPA requires FERC to do the impossible.

[01:12:35] Speaker 08:
So if FERC has to either make a decision one way or the other, or say that it can't,

[01:12:41] Speaker 04:
If FERC said there really is no way for us to- Why is it not good enough for FERC to say we can't yet?

[01:12:46] Speaker 08:
Because FERC hasn't even said we can't yet.

[01:12:48] Speaker 08:
FERC hasn't said when FERC has said we've got a menu of options and we haven't chosen which one to pick yet.

[01:12:53] Speaker 08:
And the orders here are explicit about that.

[01:12:56] Speaker 08:
And then Commissioner Glick's concurrence says the only reason I'm joining this order is because we are not saying we don't know how to assess significance.

[01:13:03] Speaker 08:
So I'm joining it because we're saying we're not gonna do it, you know, we're still picking the best way.

[01:13:09] Speaker 05:
So that is- So you think we can't yet would be okay.

[01:13:13] Speaker 08:
I think that if they said, we really can't, that like, you know.

[01:13:17] Speaker 05:
I don't know what's the difference between really can't and can't.

[01:13:21] Speaker 05:
I'm just trying to get to.

[01:13:22] Speaker 08:
So if you could explain why, like what's coming.

[01:13:24] Speaker 08:
So like if this case was in 2010, and there hadn't been the interagency working group on social cost of carbon, they said, we don't know how to do this, but like once we get some numbers from TEQ, then in future cases, maybe that would be a method, but it's not available now.

[01:13:37] Speaker 08:
But like it wouldn't necessarily require FERC to come up with numbers for what the social cost of carbon could be.

[01:13:43] Speaker 08:
in isolation.

[01:13:44] Speaker 08:
And even that's a bit of an overstatement because part of the reason social cost of carbon was developed was in response to this Center for Biological Diversity versus National Highway Safety Transportation Administration case where they said, actually, you do need to come up with a way to figure this out.

[01:13:58] Speaker 06:
Mr. Matthews, if, as I was just given to understand or misunderstand, the significance question arises in determining whether to go beyond an environmental assessment to an EIS.

[01:14:09] Speaker 06:
They've done that here.

[01:14:11] Speaker 06:
Why do they need to say anything?

[01:14:12] Speaker 08:
So a separate NEPA regulation.

[01:14:15] Speaker 08:
So the threshold question of whether to prepare an environmental impact statement is, are there going to be any significant impacts?

[01:14:21] Speaker 08:
They could have said, well, this is going to have significant wetlands impacts.

[01:14:25] Speaker 08:
Therefore, we're doing an EIS.

[01:14:27] Speaker 08:
That doesn't entail any conclusion about whether the greenhouse gas impacts are significant.

[01:14:30] Speaker 06:
What compels that determination?

[01:14:33] Speaker 08:
There's a separate regulation.

[01:14:35] Speaker 08:
I want to say it's 1502.16.

[01:14:37] Speaker 08:
It's in our briefs.

[01:14:39] Speaker 08:
And we cite it when we're responding to the intervener's argument that says, once you're in the EIS for every individual effect, you need to discuss the significance of that individual effect.

[01:14:49] Speaker 08:
And FERC's practice is that significance determination, the significance of individual effects matters because it shapes the contours of how FERC addresses mitigation, alternatives, et cetera.

[01:15:01] Speaker 08:
Um, I see that maybe I can clarify that you were asking why did FERC do the EIS here and reluctantly give FERC some credit.

[01:15:09] Speaker 08:
The regulations at the time said that an EIS was required unless FERC could affirmatively conclude that all impacts were insignificant.

[01:15:17] Speaker 08:
In this case, and possibly a little bit before in 2021, FERC

[01:15:24] Speaker 08:
after much urging from our part, although I can't say we necessarily get the credit, recognize that if it was not going to take a position as to whether greenhouse gas emissions were significant or not, I believe FERC explained that that was the reason why it was then switching to doing environmental impact statements, because it couldn't make the affirmative finding of insignificance for all impacts.

[01:15:43] Speaker 05:
Thank you.

[01:15:44] Speaker 05:
Do the colleagues have additional questions?

[01:15:46] Speaker 05:
I guess not.

[01:15:47] Speaker 05:
Thank you, Mr. Matthews.

[01:15:51] Speaker 05:
Mr. Elliott, we'll give you two minutes for your rebuttal.

[01:16:12] Speaker 03:
Thank you.

[01:16:13] Speaker 03:
I wanted to touch on the question of property and came up in Council's argument.

[01:16:22] Speaker 03:
Property interest here is a right to inject gas at certain points, remove gas at certain other points on the southern natural gas existing pipe system.

[01:16:33] Speaker 03:
The capacity lease here, section 2.2, page 213 of the Joint Appendix,

[01:16:41] Speaker 03:
is quite explicit on this.

[01:16:43] Speaker 03:
It's not a lease of facilities, it's a lease of capacity rights.

[01:16:47] Speaker 03:
So the property interest is this inchoate interest, inchoate right to inject and remove gas from the existing pipeline system.

[01:16:56] Speaker 03:
There's no lease of facilities in the accounting treatment, which is an exhibit Y to the application, and it's addressed in paragraph 68 of the certificate order.

[01:17:10] Speaker 03:
And that's exhibit wise, page 243.

[01:17:13] Speaker 03:
There's no transfer of property.

[01:17:16] Speaker 03:
So there's no property that's being transferred to southern Tennessee.

[01:17:22] Speaker 03:
The rate base of southern natural gas is going to still contain 100% of its power.

[01:17:28] Speaker 03:
Nothing's being transferred to Tennessee.

[01:17:31] Speaker 03:
That's part of the subsidy that we're existing customers are essentially doing.

[01:17:36] Speaker 03:
The rate base for the other bucket of costs is just the compressor and the metering stations, the $171 million.

[01:17:44] Speaker 03:
So there are two buckets of costs, but there are two rate bases.

[01:17:48] Speaker 03:
But the interest really in the pipe, the bulk of the costs of southern natural gas are staying with existing customers.

[01:17:59] Speaker 03:
Talking about proper transfer of property to Tennessee is not really true.

[01:18:04] Speaker 06:
Well, if I lease three floors of a 10 story building, I'm sorry.

[01:18:10] Speaker 06:
If I lease three stories of a 10 story building, right?

[01:18:14] Speaker 06:
Don't I have a property, right?

[01:18:16] Speaker 03:
They have the property right to transfer.

[01:18:19] Speaker 06:
I can use it, I can fill it, I can not fill it.

[01:18:22] Speaker 03:
Yes, but it's a right to use the existing pipeline facility that's still in the existing customer rate.

[01:18:31] Speaker 03:
And that's the nature of the incremental service.

[01:18:37] Speaker 03:
Perk's argument basically is that these prices are not cost-based and therefore our rate-making policies don't apply.

[01:18:47] Speaker 03:
They really never draw the line.

[01:18:49] Speaker 03:
We're not challenging the lease price.

[01:18:50] Speaker 03:
They can lease it at whatever price they want to agree with the lessor, the lessee.

[01:18:59] Speaker 03:
The second issue is, what do you do with the lease revenue when setting cost-based rates?

[01:19:04] Speaker 03:
And that's where FERC never addresses this issue.

[01:19:07] Speaker 03:
The precedent, Rockies Express and Natural says, credit the revenues to avoid double recovery or over recovery.

[01:19:18] Speaker 03:
Those have never been over.

[01:19:20] Speaker 05:
Make sure my colleagues don't have additional questions at the time.

[01:19:22] Speaker 05:
OK.

[01:19:23] Speaker 05:
Thank you, counsel.

[01:19:24] Speaker 05:
Thank you to all counsel.

[01:19:25] Speaker 05:
We'll take this case under submission.