[00:00:01] Speaker 00: case number 23-1046, Citizens Action Coalition of Indiana Inc. [00:00:06] Speaker 00: Petitioner versus Federal Energy Regulatory Commission. [00:00:10] Speaker 00: Ms. [00:00:10] Speaker 00: Datla for the petitioner, Ms. [00:00:12] Speaker 00: Chu for the respondents, Mr. Morota for the intervener. [00:00:19] Speaker 06: Good morning, Council, whenever you're ready. [00:00:25] Speaker 01: Good morning, Your Honors, and may it please the Court. [00:00:27] Speaker 01: I'm Kirti Datla, representing Citizens Action Coalition of Indiana. [00:00:32] Speaker 01: Burke's certificate order authorizing the Henderson County expansion project rested on three errors. [00:00:38] Speaker 01: First, Burke stated that the project would cause the retirement of a coal plant and therefore reduce downstream greenhouse gas emissions without confronting the contrary conclusion in the very document that it relied on. [00:00:51] Speaker 01: The record evidence and CAC's arguments would show that no such causal connection exists. [00:00:56] Speaker 01: Second, Burke didn't assess the significance of those emissions as NEPA requires or respond to the argument that it needed to consider them as part of its Section 7 determination under the Natural Gas Act. [00:01:08] Speaker 01: And third, Burke defined the purpose and need of this project so narrowly as to preclude consideration of reasonable non-gas alternatives, which affected its analysis under NEPA and the Natural Gas Act. [00:01:20] Speaker 01: I'd like to start today with the retirement issue this morning, because I think this is a straightforward claim that might avoid the need to address other issues in the case. [00:01:28] Speaker 06: Straightforward factual claim, right? [00:01:31] Speaker 06: So you need to show no substantial evidence. [00:01:34] Speaker 01: I'm sorry, Aaron. [00:01:35] Speaker 01: I'm a little hard of hearing if you could. [00:01:36] Speaker 06: I'm sorry. [00:01:39] Speaker 06: Doesn't seem to be projecting too well. [00:01:41] Speaker 06: It's a factual claim, right? [00:01:44] Speaker 01: Our argument is that it's an arbitrary determination. [00:01:49] Speaker 01: And there's a component of that, that there is a failure to respond to contrary evidence in the record and contrary arguments in the record. [00:01:57] Speaker 01: But I think even if you accept Texas gases characterization as a substantial evidence challenge, there's just no evidence in the record supporting it. [00:02:05] Speaker 01: But we would frame it as a classic arbitrary and nutritious claim. [00:02:10] Speaker 01: I think the arbitrary nature of FERC's statement can be summed up in three sentences. [00:02:15] Speaker 01: At J266, FERC states that the final EIS explains that the project will result in a net reduction of downstream greenhouse gas emissions due to CenterPoint's retirement of coal fire generation at the AB power plant. [00:02:31] Speaker 01: Second, the very page on which the order cites for that proposition states that the table presenting those emission estimates is not used to determine project impacts [00:02:42] Speaker 01: or to establish a baseline for comparison with proposed project emissions. [00:02:47] Speaker 01: And third, FERC provides no explanation in the order for how it reached a conclusion that's contrary to the very document on which it relies and provides no response to CAC's arguments as to why that conclusion is untenable in light of the record. [00:03:01] Speaker 01: The court should send this issue back to FERC to either provide an explanation or to correct its statement about the causal connection and the nature of the downstream greenhouse gas emissions in this case. [00:03:13] Speaker 03: Estelle, if I can ask you about your argument about FERC's purpose here, which appellants say is overly narrow. [00:03:24] Speaker 03: But in your briefing, there is a concession that FERC can't order the Indiana State Utility to do to make a different choice, right? [00:03:32] Speaker 03: Indiana has chosen to build a gas-fired plant, and then will need a pipeline to bring natural gas to its plant. [00:03:42] Speaker 03: And your submission is not that for can make any different choice. [00:03:45] Speaker 03: So if that's the case, then how is the purpose defined too narrowly. [00:03:50] Speaker 01: So we think the purpose is defined so narrowly in this case for, you know, I think it can be seen a J 145, for example, where the purpose of need of the statement. [00:04:01] Speaker 01: is to provide up to 223 decaderms of natural gas to these specific power plants. [00:04:06] Speaker 01: So it's basically the project proposal. [00:04:09] Speaker 01: But I take your question to be asking, why did FERC need to consider other alternatives given that Indiana had decided that it has a preference for natural gas? [00:04:19] Speaker 01: And I think the response is that in any situation where a pipeline is connected to an end use, there are going to be two relevant actors in this situation. [00:04:28] Speaker 01: There's going to be the regulator of the pipeline, which is FERC. [00:04:31] Speaker 01: And there's going to be the regulator of the end use, which in this case was the Indiana Commission. [00:04:36] Speaker 01: But neither of those determinations on either side of that bind the other person. [00:04:41] Speaker 01: And I think one clear way to- Well, they're not binding. [00:04:43] Speaker 03: But FERC can't require Indiana to choose a different method of providing power to its citizens. [00:04:53] Speaker 01: Right. [00:04:54] Speaker 01: I think what FERC can do is say under its authority, under the Natural Gas Act, it has an obligation to consider [00:05:01] Speaker 01: and to determine that this pipeline is required in the interest of public convenience necessity. [00:05:06] Speaker 01: And if there is a reasonable alternative on the table, then it has to weigh that alternative as against the pipeline proposal. [00:05:15] Speaker 01: And I don't take FERC to have said in light of Indiana's decision that the status quo has changed so much that it's impossible for any other alternative to come about if we deny this pipeline. [00:05:26] Speaker 01: What it said is that we're blinding ourselves. [00:05:30] Speaker 01: We're walling off any consideration of whether there is a non-natural gas alternative on the table because of Indiana's decision. [00:05:37] Speaker 06: What's the alternative? [00:05:39] Speaker 06: What's the reasonable alternative they've excluded? [00:05:43] Speaker 01: Yes. [00:05:43] Speaker 06: Something other than natural gas. [00:05:46] Speaker 01: So I think we think the set of reasonable alternatives comes from one of the [00:05:51] Speaker 01: you know, proper purpose and needs that Burke could have relied on, which is actually. [00:05:55] Speaker 06: I mean, do nothing? [00:05:57] Speaker 01: No, not at all. [00:05:57] Speaker 01: So we take the purpose, the sort of legal, like legally sufficient purpose and need of this project to be to provide reliability when intermittent resources are down. [00:06:07] Speaker 01: And as we explained in the rehearing petition and put evidence into the record, that sort of backup reliability power can be provided through many mechanisms, such as battery storage, demand response reduction, [00:06:21] Speaker 01: buying electricity off the grid, which is exactly what is happening right now, now that there is no natural gas plant online, and the coal plant has been shut down, and that mix of electricity generation has changed. [00:06:33] Speaker 06: But then you're using FERC's authority over transportation to second guess Indiana's judgment with respect to generation. [00:06:44] Speaker 01: Yeah, so I would say two things. [00:06:45] Speaker 06: Which I would think you would embrace. [00:06:47] Speaker 06: They're shutting down coal plants, [00:06:50] Speaker 06: They're replacing them with renewables, and they want a natural gas backup so people can turn the lights on on cloudy days. [00:06:59] Speaker 01: Yeah, so I think I would say maybe three things in response. [00:07:02] Speaker 01: So first, I don't think we would consider this to be second guessing. [00:07:05] Speaker 01: I think this would be FERC making an independent judgment that the requirements of the Natural Gas Act have been met. [00:07:12] Speaker 01: And second, I would say, I don't think this is a controversial proposition. [00:07:17] Speaker 01: The transatlantic, sorry, transcontinental pipeline case that's cited in the briefing from 1961, Springport case, said that FERC's predecessor agency, the Federal Power Commission, could consider end uses when making its determination under the same statutory language here. [00:07:34] Speaker 01: There, FERC denied a pipeline because it said the natural gas is going to industrial boilers, and in that case, [00:07:41] Speaker 01: FERC, the Federal Power Commission, said that coal would be a better use. [00:07:45] Speaker 01: And that was its reason for denying the pipeline. [00:07:48] Speaker 01: And so obviously, we recognize that there is two different actors here, and everyone should be respectful of everyone else. [00:07:55] Speaker 01: But I don't think this is controversial. [00:07:57] Speaker 01: And the third thing I'll say is that I think there are really important reasons why FERC has to make that independent determination of whether the pipeline is required. [00:08:07] Speaker 01: Part of that is because FERC is also protecting other states' interests. [00:08:10] Speaker 01: So the pipeline here crosses through Kentucky and has effects on that state that aren't accounted for in Indiana's process. [00:08:17] Speaker 01: You can imagine much bigger, much more impactful pipelines that cross many, many states. [00:08:23] Speaker 01: And FERC's obligation is to take those interests into account. [00:08:26] Speaker 01: And of course, FERC is also protecting important federal interests in this case, the interests that the public convenience and necessity standard protects, like those of [00:08:34] Speaker 01: Landowners whose property might be taken because of eminent domain those of consumers who might face higher rate pairs and of course the environmental impacts Ask you about the social cost of carbon argument Imagine I've never heard that phrase imagine. [00:08:54] Speaker 04: I don't know how it works. [00:08:56] Speaker 04: What what is it? [00:08:59] Speaker 04: Social cost of carbon tool social cost of greenhouse gases tool [00:09:02] Speaker 01: Yeah, it's an attempt to monetize the impacts of greenhouse gas emissions. [00:09:06] Speaker 01: But if I could, I just want to make clear that our argument here isn't akin to the ones that this court has seen in prior cases, which is that we're not arguing that FERC was required to use the social cost of carbon to make a significance determination in this case. [00:09:22] Speaker 01: Our argument is that this court has said in Sable Trail that FERC has to make a significance determination. [00:09:29] Speaker 01: That's what the NEPA regulations say. [00:09:31] Speaker 01: That's what FERC's own regulations say. [00:09:33] Speaker 01: And the order here says we're declining to make a significance determination. [00:09:38] Speaker 01: And that's what we're challenging here. [00:09:39] Speaker 04: I could be misremembering. [00:09:42] Speaker 04: But I think that the rehearing petition specifically mentions social cost of carbon tools. [00:09:48] Speaker 01: Yeah. [00:09:48] Speaker 01: So the argument in the rehearing petition is that FERC has to make a significant determination. [00:09:54] Speaker 01: It has a whole range of options on the table to do so. [00:09:58] Speaker 01: One of those we mentioned is the social cost of carbon. [00:10:00] Speaker 01: Others include comparing the emissions from this project to the emissions reduction goals of the nation or the states. [00:10:08] Speaker 01: Of course, here there aren't those emission goals. [00:10:10] Speaker 01: They also include just making a, I'm sorry. [00:10:13] Speaker 04: You can finish sentence. [00:10:15] Speaker 01: Yeah, they also include just making the same kind of qualitative judgment that makes for other environmental impacts that don't have clear bright line rules. [00:10:23] Speaker 01: In this very order, FERC discusses, for example, the impact on wetlands and orested lands. [00:10:28] Speaker 01: There's no bright line rule for significance. [00:10:30] Speaker 01: It just requires the agency to make a judgment. [00:10:32] Speaker 01: And it'll get some deference on the back end of making that judgment. [00:10:37] Speaker 04: I think, if I also remember correctly, at least one of the orders or statements in the case, a commissioner said, [00:10:50] Speaker 04: You know, we should we even if we did social cost of carbon here. [00:10:56] Speaker 04: It would be and we would we would reach an insignificance find. [00:11:03] Speaker 04: Remembering that. [00:11:03] Speaker 01: So I think this is any Texas gases. [00:11:06] Speaker 01: I'm sorry. [00:11:07] Speaker 04: I am remembering that right. [00:11:09] Speaker 04: I know you may disagree that I'm just asking as a factual matter. [00:11:11] Speaker 01: Yeah, I think Texas gas makes the argument that the two to the commissioners wrote statements on the denial of rehearing that said [00:11:19] Speaker 01: You know, we disagree. [00:11:21] Speaker 04: They're the ones who don't want to ever do social. [00:11:23] Speaker 04: They're the ones who don't want to ever do social cost of carbon, I think. [00:11:26] Speaker 04: But I think that's right. [00:11:27] Speaker 01: One of them is one of them is no longer a commissioner. [00:11:30] Speaker 01: But yes, those two are. [00:11:31] Speaker 01: Yes. [00:11:31] Speaker 04: But I think one of the commissioners who does want to do social cost of carbon said in this case, [00:11:39] Speaker 04: We should just do it, because it's going to lead to an insignificance finding here. [00:11:43] Speaker 04: So why not just say it's insignificant? [00:11:48] Speaker 04: But again, I might be misremembered. [00:11:49] Speaker 01: Yeah, so I'll say two things on this. [00:11:51] Speaker 04: One is that I think- Before you say whether you agree with it, am I remembering correctly? [00:11:54] Speaker 01: Yes, yes, yes. [00:11:55] Speaker 01: Sorry, I should have said that. [00:11:57] Speaker 01: So I agree that the concurrence to Burke's order by two commissioners states, this project will reduce emissions. [00:12:05] Speaker 01: And so we should have said it's not significant. [00:12:07] Speaker 01: is dependent on the argument that I started with, which is that the project absolutely does not reduce emissions. [00:12:12] Speaker 01: But the second thing I'll say, which is maybe a broader point, is that I think the standard order of operations, when we think the agency hasn't explained itself, and that's obviously in a concurrence and not Burke's order, is to send it back to the agency to allow it to do so. [00:12:27] Speaker 04: I got that. [00:12:33] Speaker 04: If, I guess I'm wondering, I think I made maybe some common ground here between me and you. [00:12:38] Speaker 04: I think if you did social cost of carbon and you did it and you excluded the closing of the coal plants, I think then you may well be looking, maybe you'd be looking at a significance finding, a finding of significance. [00:12:57] Speaker 01: I guess what I would say and I, [00:13:00] Speaker 01: You know, I really want to find common ground here, so I hate to not do that. [00:13:03] Speaker 01: But I think it's hard to find a finding of significance when the order disclaims that that's what it's doing. [00:13:10] Speaker 01: And I suspect that the reason the order. [00:13:11] Speaker 04: I guess I'm talking about a different order. [00:13:13] Speaker 04: No, the order as you would have them do it. [00:13:15] Speaker 04: Sure. [00:13:16] Speaker 04: And because if the social cost of carbon of this project is, as the order I think says, between a billion and 12 billion, then [00:13:30] Speaker 04: It seems like that's significant, which I think maybe you would embrace. [00:13:40] Speaker 04: But then it's leading to where I'm going with this, which is this is a relatively small project compared to some FERC certificates. [00:13:52] Speaker 04: And if the cost of this is as much as $12 billion, then [00:13:59] Speaker 04: When is the benefit of a project ever going to outweigh the carbon costs? [00:14:12] Speaker 01: So I think I'll say two things. [00:14:14] Speaker 01: So first, I think you seem to, the question seems to represent the issue is a straight up cost benefit analysis. [00:14:25] Speaker 01: I just am not here to take a position on whether that's accurate or not, because it's not an argument we raised in our brief. [00:14:32] Speaker 01: But I think what I'll say is, at least on the NEPA side of things, it's a procedural statute, and it requires you to say why you think that the ultimate benefits of the action are worth the environmental costs. [00:14:44] Speaker 01: You know, maybe there's no reason, there's no way to, you know, stop them. [00:14:48] Speaker 01: You know, the project is so important. [00:14:50] Speaker 01: Whatever the answer is, it's a procedural statute that doesn't impose substantive requirements. [00:14:54] Speaker 01: And I think on the natural gas side of things, it would be like any other agency determination, where as long as it provides good reasons that are, you know, not arbitrary, then it's going to get deference on the back end of that determination. [00:15:06] Speaker 04: But can you imagine a natural gas project with benefits [00:15:12] Speaker 04: that will outweigh the social costs of carbon? [00:15:18] Speaker 01: I'm sure I could imagine one, because I don't know. [00:15:22] Speaker 01: I think this goes back to my first point, which is that I don't know that the way to think about this in the end is a straight-up monetization of all costs on one side and all benefits on the other. [00:15:33] Speaker 06: A pretty good candidate for one would be a 25-mile pipeline [00:15:40] Speaker 06: designed to facilitate conversion to non-renewable, to renewable fuel generation? [00:15:48] Speaker 01: I think if the question is posing if we sent this back to FERC and asked them to make a determination and they decided this is both valid underneath and under the Natural Gas Act, I think, as I said before, we think they would get some deference for that under standard administrative law procedures. [00:16:07] Speaker 01: The problem here is that FERC [00:16:09] Speaker 01: declined to make a significant determination despite the clear regulations in this court's precedent saying that they have to do so. [00:16:16] Speaker 04: I think you did oppose the certificate, right? [00:16:19] Speaker 04: I mean, even before FERC had. [00:16:22] Speaker 01: I'm sorry, did we oppose? [00:16:24] Speaker 04: You opposed the issuance of a certificate here, right? [00:16:28] Speaker 01: Yeah, we did oppose the issuance of, yeah, yes. [00:16:32] Speaker 04: And maybe I'm, I think I'm hearing you correctly. [00:16:37] Speaker 04: I think what maybe what you're saying is that the argument about social cost of carbon is linked to a significant determination, not to any other requirement. [00:16:50] Speaker 01: Yeah, for NEPA purposes. [00:16:51] Speaker 04: Is that correct? [00:16:53] Speaker 01: Well, I would just put it slightly more broadly, which is that for NEPA purposes, our position is [00:16:58] Speaker 01: whatever method is chosen to use to assess significance, social cost of carbon is one on the table. [00:17:03] Speaker 01: As I mentioned, we made arguments as to why there are other alternatives on the table. [00:17:09] Speaker 01: That has to lead to a significance determination at the end of the road. [00:17:12] Speaker 01: And part of that is not just because this current has said so, but because it triggers obligations to consider things like whether those significant impacts could be mitigated. [00:17:20] Speaker 04: But let's say in a perfect world for good [00:17:25] Speaker 04: social cost of carbon said we're not only going to put it in the order but we're going to actually consider it as part of our decision making and we have considered it and we consider this to be an environmentally significant action. [00:17:39] Speaker 04: Is your point that going forward after that the rest of FERC's analysis can ignore the social cost of carbon? [00:17:49] Speaker 01: No, that's the first argument in our opening brief, which is that we argued that Burke has to explain whether and how it is weighing any greenhouse gas emissions in its Section 7 determination. [00:17:59] Speaker 01: And I also think that's the premise of Stable Trail, which is that the reason it matters for NEPA purposes is because it matters for natural gas act purposes. [00:18:07] Speaker 03: If you could say a little bit more about the relationship between what has to happen under NEPA and what is required for Section 7 analysis, because you've acknowledged, as our cases do, that NEPA is a purely procedural statute. [00:18:23] Speaker 03: But it does seem that much of your briefing and your argument here suggests that what happens in the NEPA analysis is essentially connected to how FERC makes its public convenience and necessity argument. [00:18:37] Speaker 03: Right. [00:18:37] Speaker 01: So I'm just wondering how you see that in a relationship. [00:18:41] Speaker 01: Sure. [00:18:41] Speaker 01: So the entire purpose of NEPA is to inform the agency's ultimate decision. [00:18:47] Speaker 01: And here, the ultimate decision is under Section 7 to make the determination that the pipeline is required in the public convenience and necessity. [00:18:55] Speaker 01: So there are kind of two basic NEPA issues here. [00:18:57] Speaker 01: So one is the consideration of alternatives. [00:18:59] Speaker 01: And as we've been discussing, the failure to consider a reasonable alternative means that, [00:19:05] Speaker 01: the Natural Gas Act determination about whether something is required is sort of necessarily also questionable because it's hard to say that something is required if you don't know what the alternatives to that action might be. [00:19:16] Speaker 01: And then on the greenhouse gas emissions, both of the greenhouse gas emissions issues, I think, affect the natural gas analysis because we think FERC got the number wrong. [00:19:28] Speaker 01: And so any assessment that happened under Section 7, which it isn't clear from the order that any happened at all, [00:19:34] Speaker 01: but any assessment would have been based on an incorrect figure. [00:19:37] Speaker 01: And then again, the assessment of significance is relevant because it reflects a judgment from the agency about whether there really are adverse impacts that anyone should care about. [00:19:47] Speaker 01: And without that, it's hard to see how it weighed into the natural gas analysis. [00:19:54] Speaker 04: This is very similar to a question I already asked. [00:19:56] Speaker 04: And so you may think, well, I've already answered it, but I'm not sure I totally understand the answer. [00:20:02] Speaker 04: What natural gas project would you not oppose? [00:20:09] Speaker 01: Well, in this case, we're representing clients who live near this natural gas plant. [00:20:15] Speaker 01: And so probably the only natural gas projects that they would oppose are the ones that directly affect their daily lives. [00:20:21] Speaker 04: Applying the legal arguments that you make in this case, what natural gas projects are legal? [00:20:30] Speaker 01: Yeah, I think what I'll say is the only thing we could do in any we in the abstract sense of not my clients, but some other we could do is to say that there are these legal obligations that Congress has said the agency has to meet. [00:20:43] Speaker 01: And if they don't meet them, then that's subject to challenge. [00:20:45] Speaker 01: If they do meet them, that argument becomes much harder. [00:20:49] Speaker 04: But applying the argument you made in this case, when would FERC ever be able to meet [00:20:54] Speaker 01: Yeah, I think what I've said is that I think there are projects that FERC could decide are meaningful. [00:20:59] Speaker 01: I have not thought through all of them. [00:21:01] Speaker 01: Yeah, I haven't thought through all of the potential pipeline projects in this country. [00:21:05] Speaker 01: I just don't have an answer for you on that one. [00:21:07] Speaker 06: OK. [00:21:08] Speaker 06: I appreciate that. [00:21:10] Speaker 06: Thank you. [00:21:10] Speaker 06: We'll give you some rebuttal. [00:21:26] Speaker 06: Ms. [00:21:27] Speaker 06: Chu, good morning. [00:21:28] Speaker 02: Good morning. [00:21:28] Speaker 02: May it please the court, Susanna Chu representing the Federal Energy Regulatory Commission. [00:21:36] Speaker 02: Let me start with the first issue that was raised, the retirement of the coal plant and the causation issue. [00:21:43] Speaker 02: Whether that is framed as a substantial evidence factual issue or an arbitrary and capricious argument, the agency was not unreasonable in taking into account that the fact [00:21:56] Speaker 02: The purpose for this pipeline is to supply natural gas to a power plant in Indiana that is going to supply backup generation for a new portfolio of renewable power sources. [00:22:11] Speaker 02: So the commission did take that into account because that's the whole purpose of this pipeline. [00:22:17] Speaker 02: And it calculated net emissions resulting downstream from the conversion of this plant from coal to natural gas. [00:22:25] Speaker 02: And also the fact that this plant is not running, it's running like two to 7% of the time. [00:22:31] Speaker 02: But the commission also did the full analysis. [00:22:35] Speaker 02: It did the analysis of the emissions from the pipeline itself. [00:22:40] Speaker 02: And that analysis is exactly the same analysis that the commission did in the Alabama municipal case, which came out last week, and the Center for Biological Diversity case. [00:22:53] Speaker 02: from last year. [00:22:54] Speaker 04: Sable Trail says you have to consider the downstream indirect effects. [00:23:02] Speaker 04: And one way to read the order is you did two potential analyses. [00:23:12] Speaker 04: You did one analysis where you just consider the pipeline. [00:23:16] Speaker 04: You don't consider any downstream effects. [00:23:20] Speaker 04: You did another analysis where you consider the pipeline and you consider the downstream indirect effects from the gas plant. [00:23:30] Speaker 04: But you also consider the closing of the coal plant. [00:23:35] Speaker 04: And why doesn't Sable Trail require you to do a third analysis, which is the pipeline and [00:23:48] Speaker 04: downstream indirect effects of the gas plant without considering the benefits of closing the cold. [00:23:57] Speaker 02: I think your honor, I think that that is an analysis that is in the environmental impact statement. [00:24:05] Speaker 02: I believe that the commission did a full analysis of all of the emissions relating to this project and the power plant downstream of the project. [00:24:17] Speaker 02: So I think this, the reasoning. [00:24:20] Speaker 04: I believe you, but it will help me when I go back and the panel is working on an opinion, whichever way it goes, to be able to know that the JA page that you're referring to there. [00:24:41] Speaker 02: I would have to take a look at their multiple tables in the environmental impact statement. [00:24:46] Speaker 06: My understanding is that... You calculated the social cost of carbon for the downstream emissions from burning the gas, correct? [00:24:58] Speaker 02: I think so, yes. [00:24:59] Speaker 02: That's right. [00:24:59] Speaker 02: The social cost of carbon. [00:25:01] Speaker 06: In order to monetize to get the social cost of carbon, you need to know [00:25:06] Speaker 06: the volume of emissions from burning the gas, right? [00:25:11] Speaker 02: That's right, Your Honor. [00:25:12] Speaker 06: I didn't write down the page where you did the intermediate step, but I thought you actually went farther by monetizing. [00:25:22] Speaker 02: Right, Your Honor. [00:25:23] Speaker 06: Which disabled trail does not require. [00:25:26] Speaker 02: That's right, Your Honor. [00:25:27] Speaker 02: The commission here actually went farther [00:25:31] Speaker 02: than it did in prior cases. [00:25:34] Speaker 02: Although it did this analysis in both Alabama municipal and incentive for biological diversity where it calculated the actual emissions and then it applied the social cost of carbon. [00:25:45] Speaker 02: It applied all the different discount rates and came up with a range of values. [00:25:50] Speaker 04: Could it base its decision in part on the social cost of carbon? [00:25:57] Speaker 02: I know, your honor. [00:25:58] Speaker 02: I think it the commission did not rely on the social cost of carbon. [00:26:02] Speaker 02: It did provide the numbers for informational purposes that the commission can has continued to find that the social cost of carbon is not It's an imperfect methodology for determining [00:26:17] Speaker 02: the impacts in project specific cases like this one. [00:26:22] Speaker 04: Is Sable Trail best read to say FERC has to not only note the downstream effects, but also base its decision in part on the downstream effects? [00:26:39] Speaker 02: I think that's right. [00:26:40] Speaker 02: Sable Trail does say that the commission has to do the downstream analysis, which it did not do in that case. [00:26:46] Speaker 02: And it has done in every case since then. [00:26:48] Speaker 04: Doing the analysis is a little bit different than basing your decision, at least in part, on the analysis. [00:26:56] Speaker 02: Well, that's right. [00:26:57] Speaker 02: Did you do both here? [00:27:00] Speaker 02: Well, the commission did a full analysis that is consistent with Alabama municipal and with Center for Biological Diversity. [00:27:09] Speaker 02: has found that it is not able to make an up or down call on significance for climate change purposes. [00:27:16] Speaker 02: And the commission has explained it addresses the significance broadly of greenhouse gas emissions. [00:27:26] Speaker 02: The climate change section in the environmental impact statement discusses climate change impacts. [00:27:31] Speaker 02: The commission does the full analysis of all of the emissions relating to the pipeline and to the power plant. [00:27:39] Speaker 02: It even went to the stage of calculating potential social cost of carbon numbers. [00:27:45] Speaker 02: But the commission has said there isn't a threshold. [00:27:48] Speaker 02: I'm sorry. [00:27:48] Speaker 03: How does all of that analysis affect whether something is in the public convenience and necessity in FERC's reasoning? [00:27:57] Speaker 02: So FERC relies on the 1999 certificate policy statement to determine whether a project is in the public convenience and necessity. [00:28:06] Speaker 02: This is explained in the certificate order around paragraph 19. [00:28:12] Speaker 02: But basically, it does an economic analysis first, and then it proceeds to do an environmental analysis. [00:28:19] Speaker 02: And that environmental analysis is the NEPA analysis. [00:28:23] Speaker 02: It is what we've been talking about. [00:28:25] Speaker 02: So the whole NEPA analysis is necessarily part and parcel of the Natural Gas Act Public Convenience Necessity Determination. [00:28:32] Speaker 02: That's why in our brief, we cite to [00:28:35] Speaker 02: Center for Biological Diversity and the Delaware Riverkeeper case, where the court has found that if the challenges under NEPA fail, then they necessarily fail under the Natural Gas Act as well, because that environmental analysis is necessarily part and parcel of the Natural Gas Act analysis. [00:29:06] Speaker 02: I just like to add that the commission here is a collegial body. [00:29:10] Speaker 02: It acts by majority vote. [00:29:14] Speaker 02: And to the extent that any of the commissioners would have said something else in addition to what was said in the majority order, that is a different issue. [00:29:23] Speaker 02: In terms of the majority order, all of the commissioners here agreed that this project was in the public convenience of necessity. [00:29:31] Speaker 03: And the reasoning is a bit of a fudge. [00:29:34] Speaker 02: I don't think it's a bit of a fudge, Your Honor. [00:29:36] Speaker 06: I think that... A bit of a fudge because people with very different perspectives all think this is an easy case. [00:29:46] Speaker 06: I mean, some commissioners want to throw out this whole social cost of carbon analysis to begin with, and others want to embrace it but think this is the easiest case in the world because you're supporting a renewable generation facility. [00:30:05] Speaker 02: I hear you, your honor. [00:30:06] Speaker 02: Actually, this is an easy case. [00:30:07] Speaker 02: And I think actually all the commissioners agreed it's an easy case. [00:30:11] Speaker 02: It just happens that perhaps some commissioners would have said something else. [00:30:15] Speaker 02: But it's an easy case. [00:30:16] Speaker 02: This pipeline is in the public convenience of necessity. [00:30:20] Speaker 04: If it's an easy case, why wouldn't you have just responded to what the petitioners argued in their rehearing petition? [00:30:29] Speaker 02: Well, they [00:30:34] Speaker 02: The lack of a rehearing order, Your Honor, I think does not undermine any of the reasoning in the certificate order itself. [00:30:40] Speaker 02: There are times when the commission determines not to issue a rehearing order. [00:30:46] Speaker 02: And our position is that the certificate order stands sufficient in addition to the environmental statement. [00:30:53] Speaker 02: Those two support the commission's action here. [00:30:56] Speaker 04: What if the petition rehearing had made an outcome-determinative argument [00:31:02] Speaker 04: that was undeniably persuasive. [00:31:08] Speaker 04: Would you have had to respond to it? [00:31:11] Speaker 02: I think that if it were outcome determinative and it had not been raised previously, then yes, the commission would have had to respond, of course. [00:31:20] Speaker 02: But in this situation, there was no outcome determinative argument that was made. [00:31:28] Speaker 02: So I think the commission acted reasonably in deciding to rely on a certificate order. [00:31:32] Speaker 02: They think it's potentially outcome determined. [00:31:36] Speaker 02: That's right, Your Honor. [00:31:36] Speaker 02: Petitioners do think so. [00:31:38] Speaker 02: But again, I would say Center for Biological Diversity and the Delaware Riverkeeper case and the commission's reasoning here all support the reasoning that the environmental analysis is part and parcel of the Natural Gas Act public convenience and necessity argument. [00:31:57] Speaker 02: you know, there's not a separate standard. [00:32:00] Speaker 02: And you know, this argument falls on the same grounds as it falls on the NEPA statute. [00:32:08] Speaker 02: Thanks for your patience. [00:32:09] Speaker 06: Thank you, Ms. [00:32:10] Speaker 06: Chu. [00:32:11] Speaker 02: Thank you. [00:32:19] Speaker 06: Mr. Morata, good morning. [00:32:21] Speaker 05: Good morning, your honor, and may it please the court. [00:32:23] Speaker 05: Sean Murata on behalf of the intervener, Texas Gas. [00:32:25] Speaker 05: Let me just get you those JA numbers where the commission did exactly what Sable Trail requires, which is JA 206 and 207, where there's a table where the commission lays out the exact thing that Sable Trails requires. [00:32:38] Speaker 05: What are the emissions that are going to be created by this downstream power plant? [00:32:42] Speaker 05: They then also take into account the offsets that are created by the fact there is the retirement of coal plants. [00:32:47] Speaker 05: And then they go on further at J 218 and monetize that through the social cost of carbon. [00:32:53] Speaker 05: Now, admittedly, the commission in this case, like an Alabama municipal and all of the other cases says, we're not really sure what to do with that because it's not clear that social cost of carbon is appropriate at the project level. [00:33:04] Speaker 05: It's not clear how we take the number that this generates and factor it into section seven. [00:33:10] Speaker 05: But it is information that the public and decision makers can rely upon as they think about this issue. [00:33:16] Speaker 05: And so [00:33:16] Speaker 05: the commission did exactly everything that Sable Trail requires, because Sable Trail does not require the next step that Ms. [00:33:22] Speaker 05: Datla is arguing for, which is to say, and then you have to quantify it, and then that quantification has to in some way, though they're not really sure how able to say, which I think is the same problem that the commission has, how do you take that number and then stick it on the scales and start doing a Section 7 way? [00:33:37] Speaker 05: So I think the commission's action here is perfectly consistent with everything that this court has required. [00:33:43] Speaker 05: It's particularly consistent with everything this court has required because of the net negative finding that the commission made. [00:33:49] Speaker 05: The commission found, again, consistent with Sable Trail. [00:33:53] Speaker 05: And Judge Walker, your question suggested that Sable Trail said you have to consider full burn without offsets. [00:33:58] Speaker 05: Actually, Sable Trail acknowledges that one of the things that gas does is it allows coal to be retired. [00:34:04] Speaker 05: What Sable Trail went on to say is that doesn't mean you can't quantify emissions at all just because hypothetically it might allow you to retire coal. [00:34:12] Speaker 05: Rather, you have to quantify on both sides. [00:34:15] Speaker 05: You have to look at the foreseeable emissions and the foreseeable reductions and consider both of them together. [00:34:21] Speaker 05: I guess I took [00:34:23] Speaker 04: work here to be kind of washing its hands of the reduction, saying, yes, we noted the emission reductions from closing the coal plant, but we didn't actually make that part of our basis for our decision. [00:34:44] Speaker 05: So the FEIS does say we're not treating it as a baseline, but at J 266 to 268, with paragraphs 47, 48 of the certificate order, FERC makes a clear net negative finding. [00:34:56] Speaker 05: It says that it will reduce by upwards of 2 million tons per year emissions because of the retirement of coal. [00:35:03] Speaker 05: And the fact that the coal unit will retire because of these gas turbines coming online, [00:35:08] Speaker 05: finds ample support and substantial evidence in the record. [00:35:11] Speaker 04: The petitioners say, no, the coal plant had to be retired and had long planned to be retired. [00:35:18] Speaker 04: The coal plant just wasn't making money anymore. [00:35:22] Speaker 05: So it's true the coal plant long had to be retired, but the gas generators replacing it have also been long part of the plan. [00:35:28] Speaker 05: All the way back to the 2016 plan at page 46 says, [00:35:31] Speaker 05: Our 2016 plan calls for construction of a new combined cycle gas turbine in lieu of further investments. [00:35:38] Speaker 05: The retirement of this coal unit and the replacement of it with these gas turbines have always been gone hand in hand. [00:35:45] Speaker 05: The reason the gas turbines coming online is why they can cease making investments. [00:35:50] Speaker 04: I hear the phrase, the line, social cost of carbon, arguably not appropriate at the project level. [00:36:00] Speaker 04: And maybe this would have been a better question for FERC. [00:36:03] Speaker 04: But it seems like most of the cases we get are project cases. [00:36:07] Speaker 04: So what is the non-project level scenario where [00:36:13] Speaker 04: social cost of carbon would be a better tool, according to its proponents. [00:36:21] Speaker 05: I think what we'd say is perhaps used in legislative rules. [00:36:25] Speaker 05: So maybe that's not FERC. [00:36:26] Speaker 05: Maybe it's EPA. [00:36:27] Speaker 05: Maybe it's some other agency. [00:36:28] Speaker 05: Because of course, FERC decides on the projects that are placed in front of it. [00:36:31] Speaker 05: But the problem at the project level is, as I think everybody acknowledges, every ton of CO2 that goes into the atmosphere [00:36:38] Speaker 05: affects global warming in a non-differentiated way. [00:36:41] Speaker 05: So how, you know, there is a point when you, you know, many small impacts add up to one big impact, but it's, you know, FERC has not determined, and I'm not sure anybody's really determined, except perhaps for the petitioners, how do you determine when this one small project, which again has been noted, is actually facilitating the transition to renewables is significantly contributing to global warming? [00:37:04] Speaker 05: So I think that tends to be the problem. [00:37:05] Speaker 05: And the problem also is you generate these gigantic numbers, even from the most minuscule projects. [00:37:10] Speaker 05: I think, and although I understand Ms. [00:37:14] Speaker 05: Datla is representing clients, so they have their own sort of unique and parochial interests. [00:37:18] Speaker 05: But I think the overall argument from environmental groups is essentially don't approve any gas project. [00:37:23] Speaker 05: But that's certainly not what the Natural Gas Act requires. [00:37:26] Speaker 05: And certainly the commission on this record where they [00:37:30] Speaker 05: have a gas turbine, which is only going to run 2% to 7% of the time to reinforce reliability when the sun doesn't shine or the wind doesn't blow, is certainly in the public convenience and necessity. [00:37:43] Speaker 05: Unless the court has further questions. [00:37:45] Speaker 05: Thank you. [00:37:50] Speaker 06: Ms. [00:37:50] Speaker 06: Doudla, we'll give you two minutes. [00:37:55] Speaker 01: Thank you, Your Honor. [00:37:55] Speaker 01: Just a couple of quick points. [00:37:58] Speaker 01: On the retirement issue, I was struck by the decision of both of my friends on the other side not to confront the lack of support for what FERC actually said, which is that there will be a reduction of downstream greenhouse gas emissions because this project will lead to the retirement of these plants. [00:38:16] Speaker 01: And just to kind of [00:38:18] Speaker 01: emphasize how contradictory that is with the document on which it relied. [00:38:21] Speaker 01: At J175, the final EIS says there's no such causal connection between the retirement of the coal plants and these turbines. [00:38:29] Speaker 01: At J224, it says there's no such causal connection with the broader plan, to which my friend from Texas Gas referred to. [00:38:36] Speaker 01: And I think if you look at J48, which has a table produced by Centerpoint Energy, [00:38:42] Speaker 01: laying out different options for different plans. [00:38:44] Speaker 01: You'll see the intuitive reason why just saying something is part of a plan does not create a causal connection. [00:38:50] Speaker 01: There are four plans laid out in that table. [00:38:53] Speaker 01: Every single one has the coal plants retiring, but not every single one has natural gas turbines providing backup power for intermittent renewable energy. [00:39:03] Speaker 01: And so I just don't think it's responsive at all to say that there's a plan here. [00:39:07] Speaker 01: And I want to respond, I think, Judge Katzis, to your question about, isn't this an easy case? [00:39:13] Speaker 01: And I think even if you set aside the problem. [00:39:17] Speaker 01: Assuming the causal connection. [00:39:18] Speaker 06: I understand you're challenging that. [00:39:21] Speaker 01: Exactly. [00:39:21] Speaker 06: I mean, if I accept the causal connection, it feels easy to me. [00:39:25] Speaker 01: Yeah. [00:39:26] Speaker 01: So I think we would say two things. [00:39:28] Speaker 01: So obviously, we're strongly disagreeing with the idea that there is a net reduction for either of our natural gas purposes, but also [00:39:36] Speaker 06: The explanation that you- I'm sorry, why would that be? [00:39:41] Speaker 06: Oh, why would there not be a- Yeah, coal is very dirty relative to renewables and natural gas. [00:39:50] Speaker 06: So the coal-fired- And again, assuming the connection, right, you're replacing a coal-burning plant with mostly renewables, [00:40:03] Speaker 06: And then natural gas is the backup when you need it. [00:40:07] Speaker 01: Yeah. [00:40:07] Speaker 01: So I'll say two things. [00:40:09] Speaker 01: I think maybe there is some confusion in this case because the coal-fired power plants that have been retired. [00:40:15] Speaker 01: are on the same physical site as the new natural gas turbines. [00:40:19] Speaker 01: But the coal-fired power plants are being retired, and they're being replaced with renewable energy. [00:40:23] Speaker 01: The purpose of the natural gas plant is to say, given that we've made that shift, what needs to come in to provide backup renewable power? [00:40:31] Speaker 01: And that was the discussion about battery power and demand response and all that. [00:40:34] Speaker 01: But the second thing I'd like to close with is, even if it's a reasonable thing for FERC to have said to say, look, this is an easy case, even if there's no direct causal connection, [00:40:45] Speaker 01: This is part of a bigger plan, and we think it's important to facilitate that plan. [00:40:49] Speaker 01: And so that's why we're concluding on net these climate effects aren't significant. [00:40:54] Speaker 01: And this is how it weighs in the Natural Gas Act analysis. [00:40:57] Speaker 01: That's nowhere in this order at all. [00:40:59] Speaker 01: And the thing to do, if you think that's a reasonable explanation on the table, is to send it back to FERC and tell them that they're required to give that explanation rather than just not make a response. [00:41:10] Speaker 01: Thank you, Your Honors. [00:41:12] Speaker 06: Sorry. [00:41:13] Speaker 06: Thank you. [00:41:13] Speaker 06: The case is submitted.