[00:00:00] Speaker 01:
Case number 20-1503, Edda.

[00:00:03] Speaker 01:
Sierra Club Petitioner for the United States Department of Energy.

[00:00:07] Speaker 01:
Ms.

[00:00:07] Speaker 01:
Naismith for the petitioner.

[00:00:09] Speaker 01:
Mr. Smeltzer for the respondents.

[00:00:11] Speaker 01:
Mr. Nelson for the interviewers.

[00:00:17] Speaker 02:
Good morning.

[00:00:18] Speaker 02:
Good morning, Your Honors.

[00:00:19] Speaker 02:
May it please the Court, Maneen Naismith, for petitioners?

[00:00:21] Speaker 02:
I reserve five minutes for rebuttal.

[00:00:24] Speaker 02:
The question before the Court today is narrow.

[00:00:27] Speaker 02:
Once DOE decided to conduct additional analysis on rehearing, did DOE carry out that analysis arbitrarily, and did it sufficiently explain its new conclusions?

[00:00:40] Speaker 02:
I'd like to focus primarily today on the problems that arise from DOE's failure to clearly explain what conclusion it reached,

[00:00:48] Speaker 02:
as to the project's climate harms, how those harms factored into its decision to approve the exports, as well as DOE's uneven handling of harms and benefits.

[00:01:00] Speaker 02:
In order to assess potential climate harms, DOE conducted a study that held multiple variables constant and focused primarily on the effect that market substitution would have on possible climate harms.

[00:01:14] Speaker 02:
At one end of the spectrum,

[00:01:16] Speaker 02:
DOE assumed that all of the gas exported from Alaska LNG would substitute for gas that would have otherwise been produced in the lower 48 states.

[00:01:27] Speaker 02:
On the other end of the spectrum, DOE assumed that all of the gas produced by Alaska LNG would be additive to global LNG markets.

[00:01:37] Speaker 02:
Based on those two extremes, DOE calculated two equally extreme amounts of potential greenhouse gas emissions that could result

[00:01:46] Speaker 02:
from the project, and at the same time, however, concluded that neither extreme was likely to actually occur.

[00:01:55] Speaker 02:
DOE, however, did nothing to try to narrow that gap.

[00:01:59] Speaker 02:
it concluded in order 3643C that on the one hand, the uncertainty was too great to allow it to reach a definitive conclusion as to climate harms.

[00:02:12] Speaker 02:
But then in the following sentence, a sentence that has no analysis, no citation to the record, no explanation, it concluded that in DOE's judgment, the substitution value was likely closer to the perfect substitution end of the spectrum

[00:02:29] Speaker 02:
And therefore, the climate harms would not be as bad as under the other at the other extreme.

[00:02:36] Speaker 04:
Ms.

[00:02:36] Speaker 04:
Naismith, what is DLE supposed to do if it concludes?

[00:02:42] Speaker 04:
We're quite confident that there will be economic benefits.

[00:02:47] Speaker 04:
We're just not sure whether there will be environmental harms.

[00:02:50] Speaker 04:
It's highly speculative.

[00:02:53] Speaker 02:
Your Honor, the problem here is that the uncertainty as to

[00:02:58] Speaker 02:
the extent and the nature of those economic benefits exists equally with respect to the substitution problem on each side.

[00:03:07] Speaker 02:
And DOE didn't acknowledge that.

[00:03:09] Speaker 02:
So the record before this court is that those economic benefits were assessed based not on uncertainty and not on a recognition that, well, we think there are going to be economic benefits, but we don't know how much.

[00:03:22] Speaker 02:
This record before the court today

[00:03:25] Speaker 02:
has several values ascribed to not an uncertain range of potential substitution, but in fact, a very definitive point.

[00:03:34] Speaker 02:
A very definitive point that was done by the nearest study of 33 percent.

[00:03:38] Speaker 04:
Let's get to the nearest study in a second, but I'm just wondering, say it's not this case, but in a hypothetical case.

[00:03:48] Speaker 04:
DOE and its expertise concludes that there will almost certainly be significant economic benefits.

[00:03:59] Speaker 04:
And it concludes that there may not be significant environmental harms because the environmental harms are quite speculative.

[00:04:12] Speaker 04:
What's DOE supposed to do in that situation?

[00:04:15] Speaker 02:
So in that situation, and again, your honor, that's not the record that is before this court, because what they would have to do is if the uncertainty that exists as to the harms also exists as to the benefits, they have to grapple with that.

[00:04:29] Speaker 02:
And they'd have to come out, they might come out the other side saying,

[00:04:32] Speaker 02:
We're not really sure what the net GDP effect of this is going to be.

[00:04:36] Speaker 02:
We're not really sure whether we're just shifting jobs from Louisiana and Texas to Alaska.

[00:04:41] Speaker 04:
Do you still find the hypothetical a little bit?

[00:04:44] Speaker 04:
I mean, I get that they would have to grapple with it and explain, but it seems especially with the natural gas acts presumption in favor of gas.

[00:04:56] Speaker 04:
that if there are going to be economic benefits and if it's merely speculative whether there will be environmental harms that DOE in that situation at least may authorize the export.

[00:05:13] Speaker 04:
Is that fair?

[00:05:15] Speaker 02:
If, again, if the record truly grappled with the issues that did not.

[00:05:19] Speaker 04:
If it's reasonably explained.

[00:05:21] Speaker 02:
If it is reasonably explained.

[00:05:22] Speaker 02:
Okay.

[00:05:22] Speaker 04:
And then, and now let me go to where I think you want to go, which is the NERA economic data.

[00:05:29] Speaker 04:
Yes.

[00:05:29] Speaker 04:
And I, I see how that makes the environmental harms.

[00:05:35] Speaker 04:
I see that if you don't trust that data, it makes the environmental harms highly speculative.

[00:05:39] Speaker 04:
There's this wide range.

[00:05:41] Speaker 04:
Maybe it's going to drastically increase greenhouse gases.

[00:05:44] Speaker 04:
Maybe it's going to actually improve the greenhouse gas situation.

[00:05:48] Speaker 04:
Those are the two extremes.

[00:05:50] Speaker 04:
But I don't see how the nearer data makes the economic benefit equally speculative or speculative at all, at least in terms of whether there will be significant economic data.

[00:06:01] Speaker 04:
And here's why, and then you can tell me why you think I'm wrong.

[00:06:05] Speaker 04:
If we don't know the foreign market substitution effect, if that foreign market substitution effect is highly speculative, it seems like there's still going to be significant economic benefits, whether it's a large effect or a small effect, because if the foreign market substitution effect is high,

[00:06:24] Speaker 04:
then it's going to mean a lot more domestic gas, which will drive down gas prices for Americans.

[00:06:29] Speaker 04:
That's a significant economic benefit.

[00:06:31] Speaker 04:
And if the foreign market substitution is low, then it means we're going to have a lot more exports.

[00:06:37] Speaker 04:
And that itself, trade balance and security for our allies, is a significant benefit.

[00:06:43] Speaker 04:
So the NERA data doesn't cast doubt on whether there will be significant economic benefit.

[00:06:49] Speaker 04:
It's going to be benefit either way.

[00:06:51] Speaker 04:
It does cast doubt.

[00:06:53] Speaker 04:
if to the extent it's speculative and we can't rely on it, that would cast doubt on whether we can know whether the environmental effects will be significant or not, because if the nearer data is unreliable, then we've got this wild range and we're not sure exactly where we should be.

[00:07:08] Speaker 02:
So a few responses to that to unpack some of what Your Honor just said.

[00:07:14] Speaker 02:
So first of all, the extent of substitution that DOE looked at here was the extent to which

[00:07:22] Speaker 02:
Gas from the lower 48 states would substitute for gas from Ellen from Alaska LNG.

[00:07:28] Speaker 02:
And while it is possible that gas from other parts of the world could substitute the specific climate numbers that DOE came up with here were predicated on not is the gas going to come from Qatar.

[00:07:41] Speaker 02:
But is the gas going to come from Louisiana or Texas?

[00:07:44] Speaker 02:
The numbers that they came up with, the analysis they chose to do here, what we have in the record is there is a climate benefit to not having to schlep gas from Louisiana and Texas all the way to Asia.

[00:07:58] Speaker 02:
So we have to take that as the given here, even though there are other potential

[00:08:03] Speaker 02:
uncertainties that weren't really referenced as the centerpiece of this climate analysis that DOE opted to do.

[00:08:12] Speaker 02:
So when we are looking at that substitution effect, there is a potential for a pretty different economic benefits picture, depending on where you are in the extent of the substitution, because there is not necessarily any net benefit to GDP if the gas would have been produced anyway.

[00:08:31] Speaker 02:
there is not necessarily any net job creation if the gas would have been produced anyway and the economic picture DOE would have had to grapple with in its order not to say there's no benefit at all but the picture is very different and at that point DOE is essentially picking and choosing amongst regional winners and losers.

[00:08:50] Speaker 04:
I guess I take it that DOE was using the lower 48 as a proxy for the foreign market substitution but I don't understand how

[00:09:01] Speaker 04:
If the end result is a lot more gas in the United States, not leaving the United States, it just seems like if supply is greatly increased, then prices are going to go down.

[00:09:15] Speaker 02:
That's not actually necessarily true, Your Honor, and this starts to get beyond what's in the record, but actually greater exports have been shown to drastically increase consumer prices at home.

[00:09:26] Speaker 06:
I want to ask you, if I may, about the idea that

[00:09:30] Speaker 06:
environmental harm is speculative.

[00:09:33] Speaker 06:
And let me just see whether you agree with this.

[00:09:37] Speaker 06:
I'm getting these numbers from the undersecretary of energy in charge of science during the Obama administration that the Earth's atmosphere consists of mainly of nitrogen and oxygen.

[00:09:51] Speaker 06:
You agree with that, right?

[00:09:53] Speaker 06:
That makes up 99% of the Earth's atmosphere.

[00:09:57] Speaker 06:
The rest,

[00:09:59] Speaker 06:
of 1% is mostly argon, which is inert gas.

[00:10:05] Speaker 06:
Among the remainder, the largest greenhouse gas is water vapor.

[00:10:12] Speaker 06:
And that leaves 0.0001 for carbon dioxide, which is what you're worried about.

[00:10:23] Speaker 06:
And we're talking about the entire world, not just a port in Alaska.

[00:10:29] Speaker 06:
So how can it, I mean, it seems to me absolutely impossible if those numbers are correct, and they are, I think they are, that any kind of a burning of the gas coming out of Prudhoe Bay is going to have even the slightest wrinkle of an effect on global climate.

[00:10:50] Speaker 06:
Where is Mr. Coonan, the undersecretary, wrong about that?

[00:10:58] Speaker 02:
Well, Your Honor, I can't speak to the specific data you gave.

[00:11:01] Speaker 06:
You talk about harm.

[00:11:03] Speaker 06:
What is the harm?

[00:11:04] Speaker 02:
So the harm is that global warming and climate change is a quintessential collective action problem.

[00:11:12] Speaker 02:
It is not the case that any one actor by themselves is ever going to be responsible for either tipping the balance one way or the other in terms of causing all of climate change or solving all of climate change.

[00:11:24] Speaker 02:
But what we have to do to solve climate change, what every climate scientist with adequate credentials has said we have to do is to stop.

[00:11:36] Speaker 06:
Mr. Coonan is a professor at Cal Tech now.

[00:11:40] Speaker 06:
He also is the head of three or four of the most prestigious scientific organizations on the planet.

[00:11:49] Speaker 06:
Is he a credible scientist?

[00:11:52] Speaker 06:
Because he doesn't agree with what you just said.

[00:11:55] Speaker 02:
Your Honor, I can't speak to the credibility of one person.

[00:11:58] Speaker 06:
I can say that the vast... He has 300 peer review papers.

[00:12:03] Speaker 06:
Is that enough?

[00:12:05] Speaker 02:
I can't answer that question, Your Honor.

[00:12:06] Speaker 02:
I'm sorry, but the vast, vast amount of climate

[00:12:09] Speaker 02:
opinions with respect to what we have to do to address the calamity that is climate change is to stop emitting carbon dioxide and methane, and this project would be responsible for millions of tons of carbon dioxide as well as methane leakage.

[00:12:26] Speaker 04:
I understand, and you're representing, among other groups, Sierra Club, even though you're Earth Justice.

[00:12:37] Speaker 04:
I understand that a Sierra Club goal is to reduce greenhouse gases, and I understand, let's assume for the sake of argument, that by prevailing in this suit, you would succeed in reducing greenhouse gases, and therefore further your organizations, one of your organizations' emissions.

[00:12:59] Speaker 04:
It seems like the Natural Gas Act is an odd vehicle to do that.

[00:13:06] Speaker 04:
because Sierra Club wants no expansion of natural gas.

[00:13:16] Speaker 04:
They want no additional exports of natural gas.

[00:13:21] Speaker 04:
And it's all over their website.

[00:13:22] Speaker 04:
Just to give one quote, Sierra Club is working across communities to stop the expansion of the oil and gas industry.

[00:13:29] Speaker 04:
You can click a link.

[00:13:30] Speaker 04:
It will write your member of Congress and tell them how terrible it is that natural gas is being exported.

[00:13:35] Speaker 04:
But the statute that you've chosen as your vehicle to challenge this project is a statute that presumes export of natural gas.

[00:13:44] Speaker 04:
Our court has said it creates a presumption in favor of exports.

[00:13:48] Speaker 04:
So it just seems like if you were doing a Clean Air Act suit, I get how that may or may not be a good vehicle depending on the particular case.

[00:13:58] Speaker 04:
But it just seems like in almost every case and maybe every case about exports, if your goal was to just not have

[00:14:05] Speaker 04:
exports, the NGA is a really odd vehicle to try to accomplish that.

[00:14:11] Speaker 02:
Your Honor, the Natural Gas Act does not say that all exports should be approved.

[00:14:16] Speaker 02:
It gives DOE responsibility for exercising... But it does assume that some will be approved.

[00:14:22] Speaker 02:
Yes.

[00:14:22] Speaker 04:
And you don't want any approved.

[00:14:24] Speaker 02:
At this point, Your Honor, DOE has never said no to any exports.

[00:14:28] Speaker 02:
It would be what we are seeking in this case is for DOE to

[00:14:32] Speaker 02:
comply with the Administrative Procedures Act, the National Environmental Policy Act, and the Natural Gas Act to provide a coherent record and explain the basis of its decision, and it has not done that here.

[00:14:45] Speaker 04:
And Ms.

[00:14:45] Speaker 04:
Naismith, I'm not blaming you for this, what I view as sort of tension between the NGA as a vehicle and the goal of the suit, but I do wonder what would it take for

[00:15:01] Speaker 04:
an export of natural gas project to be legal under the NGA, according to you.

[00:15:11] Speaker 02:
We could start with an accurate and clear underlying record in which DOE adequately assessed the harms on the one side and the benefits of the other.

[00:15:22] Speaker 04:
And has that ever happened in the past 10 years, 15 years?

[00:15:27] Speaker 02:
I can't speak to every single record that's out there, Your Honor.

[00:15:30] Speaker 04:
Can you point to a single under the Obama, Trump, Biden administrations, can you point to a single natural gas export project that you think was legal under the NGA?

[00:15:43] Speaker 02:
Again, Your Honor, there are too many for me to be able to answer that question.

[00:15:47] Speaker 02:
I can say in this case that that underlying

[00:15:52] Speaker 02:
analysis and explanation of what did DOE look at?

[00:15:57] Speaker 02:
Did it in fact look at the underlying data and record in an arbitrary fashion?

[00:16:06] Speaker 02:
Here again, you have an order that says on the one hand, here are two extremes.

[00:16:11] Speaker 02:
We don't think either extreme is right.

[00:16:13] Speaker 02:
We're not going to bother to try to get to a number that's right.

[00:16:16] Speaker 02:
We're going to say on the one hand that there's uncertainty, so we can't come to a conclusion.

[00:16:21] Speaker 02:
But then in the next sentence, we're going to say, oh, but in our judgment, we think it's closer to the perfect substitution side of the spectrum, which leaves anyone in the public, no matter what their aim,

[00:16:32] Speaker 02:
completely unclear as to what this decision really was and how DOE got there.

[00:16:38] Speaker 03:
And irrespective of what... Well, one of the things DOE says on the point you were just raising is that there is a fairly extensive analysis of market factors and reasons why LNG might cause substitution or not in the target export countries.

[00:16:56] Speaker 03:
And they call that their qualitative analysis.

[00:16:59] Speaker 03:
What's your response to that?

[00:17:00] Speaker 02:
So the response to that is, Your Honor, that most of that's in the brief.

[00:17:03] Speaker 02:
It's not actually in the underlying order.

[00:17:05] Speaker 03:
No, I think there's about five pages of it in the SEIS about market conditions in Japan, China, et cetera, et cetera.

[00:17:13] Speaker 02:
Yes, but the SEIS does not come to the same conclusion or come even close to the same conclusion as in the order.

[00:17:18] Speaker 02:
The SEIS expressly does not say what the order says, which is we think it's closer to one side versus the other.

[00:17:25] Speaker 02:
And that it's telling because the order doesn't cite back to the SEIS at all in drawing that conclusion.

[00:17:32] Speaker 02:
And the attempts to explain that conclusion in the order, at least in the briefs, is also telling in that it points to a whole bunch of things including, for example, the policy statement on export authorization extensions.

[00:17:47] Speaker 02:
that the brief tries to use as a basis for bolstering that conclusion, that in fact the Order 3643D says, well, no, that policy statement's not relevant here.

[00:17:58] Speaker 02:
So there isn't a clear explanation of, again, trying to say this is extreme, we don't think either end of the spectrum is correct.

[00:18:06] Speaker 02:
Let's try to narrow it down and if they do truly think that it's closer to the end of the perfect substitution, then explain that.

[00:18:15] Speaker 02:
Say that clearly in the order and then explain why in a situate and then to go to the, I realize I'm very much over time, but to go to then the imbalance problem is if that's the side of the spectrum that DOE thinks we're on,

[00:18:28] Speaker 02:
That's not the side of the spectrum that the benefits analysis was done on.

[00:18:32] Speaker 02:
The side of the spectrum the benefits analysis was done on was the other end of the spectrum where lower, where there would be much higher climate harms than what DOE seems to be thinking is likely here.

[00:18:44] Speaker 02:
So you have this incredibly unbalanced muddled record which fundamentally

[00:18:49] Speaker 02:
leads to the inability of the public or anyone else with an inability to know, well, is DOE thinking that we're closer to one end than the other, and that's what's really going on here?

[00:19:00] Speaker 02:
Or are they just okay with a decision where the climate harms could be anything, and they're not gonna do anything to try to narrow that gap?

[00:19:09] Speaker 02:
If the uncertainty was truly that great, and to go back to Judge Walker, some of what you were raising earlier,

[00:19:14] Speaker 02:
What should have happened here is for them to say that without this guessing game of, well, we think it's closer to one side or the other, to say it's too uncertain.

[00:19:23] Speaker 02:
We would disagree with that.

[00:19:24] Speaker 02:
But if that would be where DOE sits, they could have then also then said, okay, so we're now disavowing the NERO study.

[00:19:32] Speaker 02:
We don't think that was accurate for reasons that, again, are not particularly clear in the order and are much more present in the post-hoc rationalizations of the brief.

[00:19:40] Speaker 02:
But to say then, for both sides of the equation, it's too uncertain.

[00:19:44] Speaker 02:
So this project could have incredibly high climate harms in a world of additive, but also actually higher economic benefits than what the nearest study even contemplated.

[00:19:56] Speaker 04:
What if I think it's reasonable that the agency concluded that the near data is too outdated to be useful?

[00:20:07] Speaker 04:
I can see how that

[00:20:10] Speaker 04:
just for the sake of argument, would undermine the economic analysis that they did in the original decision.

[00:20:21] Speaker 04:
But that part of the decision, I think, is not before us, wasn't challenged on rehearing by you, isn't something that we can really address here.

[00:20:34] Speaker 02:
It is, Your Honor, for the simple reason that at the time

[00:20:37] Speaker 02:
the original rehearing request was filed, we didn't have the benefit of any analysis on the harm side.

[00:20:45] Speaker 02:
DOE is the one that opened the door to say, well, everything is so uncertain because of market substitution.

[00:20:51] Speaker 02:
That line of reasoning was not in the record at the time the original rehearing request was filed, and therefore Sierra Club and anyone else could not have been in a position to say, well, wait a second, you're not treating the entire record consistently.

[00:21:06] Speaker 02:
If DOE had simply said, for example, we're going to use the NERA numbers, we're going to come up with what we're going to be consistent, we're going to use that number, and here is our climate harms, this would be a completely different case.

[00:21:17] Speaker 02:
But they opened the door by how they went about doing the climate harm analysis.

[00:21:25] Speaker 04:
Thank you very much.

[00:21:27] Speaker 04:
We'll give you time on rebuttal.

[00:21:29] Speaker 02:
Thank you, Your Honors.

[00:21:38] Speaker 07:
Good morning, Your Honors.

[00:21:39] Speaker 07:
May it please the Court, John Smeltzer for the Department of Energy.

[00:21:42] Speaker 07:
Your Honors, the Department of Energy took a hard look at all of the environmental impacts in this case, including climate impacts.

[00:21:50] Speaker 07:
And they reasonably concluded, based on that hard look, that the environmental impacts did not overcome project benefits and did not outweigh or overcome the presumption in favor of exports.

[00:22:03] Speaker 07:
And we think those judgments are entitled to this Court's deference.

[00:22:07] Speaker 04:
Did the original economic decision, economic benefits analysis depend on the NERA data?

[00:22:16] Speaker 07:
The NERA data was cited as part of the presentation by the project proponent.

[00:22:21] Speaker 07:
The analysis wasn't disputed, and so it was part of the conclusion.

[00:22:26] Speaker 04:
Is there an argument that its use, even if it was in hindsight erroneous, was harmless error?

[00:22:34] Speaker 07:
erroneous use in what, in what context?

[00:22:36] Speaker 04:
Well, imagine that because the near data is now so outdated, it doesn't actually inform, uh, anything useful.

[00:22:46] Speaker 04:
Uh, if, is there an argument that, well, because it's outdated, perhaps, uh, it would, it, perhaps it should not have been in the economic analysis, but it wasn't material.

[00:23:02] Speaker 04:
even before it was outdated, and so any use was harmless.

[00:23:08] Speaker 07:
I think that's a fair way to look at it, Your Honor.

[00:23:11] Speaker 07:
Ultimately, the economic determination of economic benefits was not disputed.

[00:23:16] Speaker 07:
What the NERO model showed in general was that there would be an overall net increase in U.S.

[00:23:24] Speaker 07:
LNG exports, that Alaska exports wouldn't totally displace exports from the lower 48 states.

[00:23:33] Speaker 07:
DOE did not put a precise number on economic benefits, just like with respect to climate impacts.

[00:23:40] Speaker 07:
They just made a general determination that there would likely be not a complete displacement, but overall net economic benefits.

[00:23:49] Speaker 07:
So I think the NERA model is not disputed.

[00:23:52] Speaker 07:
I think Sierra Club essentially agrees that the likelihood is that there would be net increase in exports, and so it was perfectly

[00:24:01] Speaker 07:
usable and not disputed for what it was presented for.

[00:24:04] Speaker 07:
The key problem with the NERA model for purposes of market substitution is it doesn't address market substitution at all.

[00:24:11] Speaker 07:
The NERA model addresses the U.S.

[00:24:14] Speaker 07:
domestic market and domestic exports.

[00:24:17] Speaker 07:
you can model those sorts of things based on certain data that can be valid for purposes of trying to assess the export market and export demand.

[00:24:26] Speaker 07:
But that didn't, the near model doesn't go and determine, you know, what is going to happen in the target export markets, what's going to happen in Japan or China or India or South Korea if they import

[00:24:40] Speaker 07:
LNG from Alaska.

[00:24:42] Speaker 07:
What fuels are they not going to use?

[00:24:44] Speaker 07:
Is it going to displace coal?

[00:24:46] Speaker 07:
Is it going to displace other LNG?

[00:24:49] Speaker 07:
Is it going to displace renewables?

[00:24:51] Speaker 07:
All of those determinations in the foreign export markets are going to depend on market conditions in those markets.

[00:24:57] Speaker 07:
It's going to depend on technologies, and it's going to depend on economic and environmental policy in those nations.

[00:25:03] Speaker 07:
Each of those nations is going to determine

[00:25:05] Speaker 07:
for itself, you know, how their future economy is going to develop, and those are inherently difficult to predict, right?

[00:25:15] Speaker 04:
The NERID data doesn't inform that.

[00:25:17] Speaker 07:
The NERID data doesn't look at the market substitution in the foreign markets.

[00:25:20] Speaker 07:
It just looks at export demand, right?

[00:25:23] Speaker 03:
Is there anywhere in the record that we could look to where DOE said

[00:25:27] Speaker 03:
the things that you just said?

[00:25:29] Speaker 07:
Well, the NERA model's in the record.

[00:25:31] Speaker 07:
Right.

[00:25:31] Speaker 07:
Correct.

[00:25:32] Speaker 07:
And it's cited in our brief.

[00:25:34] Speaker 07:
You can see at the end.

[00:25:35] Speaker 07:
It's in the Joint Appendix, so you can look at it.

[00:25:38] Speaker 07:
DOE, when they were proffered the NERA model, they said that the overall data is out of date, and they also said that it didn't meet the burden, right?

[00:25:48] Speaker 07:
It doesn't

[00:25:51] Speaker 07:
it didn't improve the problem.

[00:25:54] Speaker 07:
DOE defined the problem as needing data on market substitution in foreign markets.

[00:26:01] Speaker 07:
You can look at the model, it doesn't have that, and DOE specifically said when it was proffered that it didn't arise to the level, it didn't make this more accurate, it didn't solve the problem of the inherent uncertainty.

[00:26:13] Speaker 07:
of modeling these sorts of things.

[00:26:17] Speaker 03:
I suppose what they would say in response is the one specific thing in the final rehearing denial is that it's outdated, it's based on a time when the LNG market was far less developed and so we can't basically rely on it for the extent of

[00:26:34] Speaker 03:
economic benefits and at the same time when we have the section of the order describing the economic benefits, the only underlying data for that comes from the nearest study.

[00:26:44] Speaker 03:
So what again, what's the explanation of why that's not inconsistent?

[00:26:48] Speaker 07:
The economic data wasn't disputed.

[00:26:51] Speaker 07:
the idea that there are benefits.

[00:26:53] Speaker 07:
And it's not disputed that there's likely to be an overall increase in US LNG exports.

[00:27:01] Speaker 07:
The NERA model just gives you a number as to what the projection is going to be.

[00:27:06] Speaker 03:
I appreciate that.

[00:27:07] Speaker 03:
And I guess the concern is that when, at the end of the order, the DOE says we weighed the acknowledged but uncertain climate impacts against the economic benefits and find that this doesn't outweigh this,

[00:27:21] Speaker 03:
And now you're telling me they really didn't have in their head anything about the magnitude of the benefits.

[00:27:27] Speaker 03:
Why is that not a .

[00:27:29] Speaker 03:
.

[00:27:29] Speaker 03:
.

[00:27:29] Speaker 03:
?

[00:27:29] Speaker 07:
They specifically say in the rehearing order that there are uncertainties on both sides and they didn't put definite numbers on the economic benefits either.

[00:27:38] Speaker 07:
What I think they were getting at is sort of what Judge Walker was discussing, that the uncertainties about substitution effects create much more uncertainties than the uncertainties in relation to economic benefits.

[00:27:51] Speaker 07:
What DOE did when it

[00:27:54] Speaker 07:
weighed benefits and harms was to assume in both cases that all of, that the project would be built and that all of the exports would happen, right?

[00:28:04] Speaker 07:
And then in that context, you're going to get the benefits of trade, you're going to get the economic benefits.

[00:28:12] Speaker 07:
What you don't know necessarily is the climate impacts because you don't know whether the fuel's going to India to replace coal or to Korea to replace LNG from some other market or to replace renewables.

[00:28:29] Speaker 07:
But DOE made a considered judgment, right?

[00:28:32] Speaker 07:
Ultimately, they looked at the

[00:28:34] Speaker 07:
They didn't just rest on their two numerical models, right?

[00:28:39] Speaker 07:
The models of all the emissions, the greenhouse gas emissions that would cause from the entirety of the project, which they looked at in several ways.

[00:28:48] Speaker 07:
They didn't stop there.

[00:28:49] Speaker 07:
They didn't stop with the comparison.

[00:28:51] Speaker 07:
The comparison helped inform their analysis, of course, by showing that, and it goes to the point of economic benefits, right?

[00:28:58] Speaker 07:
If there's no increase in overall US LNG exports and only displacement,

[00:29:05] Speaker 07:
You still have a benefit, right, in terms of climate impacts because it's undisputed in that context, right, that be lower carbon footprint because of the way carbon or the natural gas is produced in Alaska and the shorter transportation distance.

[00:29:23] Speaker 07:
So that still all supports, right, the overall balancing.

[00:29:27] Speaker 03:
Can I also just ask you to directly respond to one of their other major arguments, which is essentially that there's a key finding that we think the climate impacts are likely to be closer to the best case scenario than the worst case scenario.

[00:29:44] Speaker 03:
I'm paraphrasing.

[00:29:45] Speaker 03:
But they say the reason, the rationale for saying it's likely to be closer to the one no action alternative is unexplained.

[00:29:54] Speaker 03:
What would you, you know, offer in response to that?

[00:29:57] Speaker 07:
Well, I'd say that the analysis is in the record, and it's in the part of the record that Your Honor already pointed to.

[00:30:03] Speaker 07:
It's in the life cycle analysis in the qualitative discussion of markets, and there is an extensive discussion

[00:30:10] Speaker 07:
in the record from Joint Appendix 992 to 1000 where it talks about each of the import countries and what their challenges are and the overall goal of net zero by 2050 and the role that increased natural gas exports can help play in even meeting that target, right?

[00:30:35] Speaker 07:
So there's a lot of analysis that shows that there is

[00:30:39] Speaker 07:
will be a continuing demand for LNG exports.

[00:30:44] Speaker 07:
And there is also in the record, in that same place, and then also with respect to the policy change in the Federal Register about the export authorization overhang.

[00:30:58] Speaker 07:
There is indication that the U.S.

[00:31:00] Speaker 07:
markets, there's lots of supply, either from the lower 48 in the economic analysis, in

[00:31:09] Speaker 07:
in the life cycle analysis, they talk about other exporting countries also ramping up supply.

[00:31:16] Speaker 07:
So there's reasons to believe, right, that there would be a substitution effect with respect to LNG.

[00:31:26] Speaker 07:
And what DOE said qualitatively, though, ultimately,

[00:31:30] Speaker 07:
is they don't think it's gonna be a one-to-one.

[00:31:33] Speaker 07:
They said it's probably gonna substitute, especially over the long term, for a mix of fuels, including renewables and conservation efforts.

[00:31:43] Speaker 07:
But what they said is in the near to the medium term, it's most likely to be closer to.

[00:31:48] Speaker 07:
But they also said it's most likely to be net negative.

[00:31:51] Speaker 07:
They didn't put the rosiest fixture on this.

[00:31:55] Speaker 07:
The project was originally proposed as a project

[00:31:59] Speaker 07:
that would provide net benefits by the proponent, right, because it's going to displace coal.

[00:32:05] Speaker 07:
DOE didn't make the finding that it would necessarily do that.

[00:32:08] Speaker 07:
I mean, there's obviously the opportunity to do that in certain markets, but DOE ultimately, in their qualitative judgment, agreed that it's likely to be net negative.

[00:32:17] Speaker 07:
What DOED ultimately determined though, right, it was too speculative to determine these things numerically for part of numeric modeling.

[00:32:29] Speaker 07:
And this issue has already been addressed by this court.

[00:32:34] Speaker 07:
In the Freeport case,

[00:32:35] Speaker 07:
which is in the Federal Register 867 of F3rd 189.

[00:32:40] Speaker 07:
This court looks specifically at this question of modeling of market substitution effects in foreign markets.

[00:32:47] Speaker 07:
This court looked at it in two places in that ruling.

[00:32:50] Speaker 07:
at pages 198 through 199 and at page 202.

[00:32:55] Speaker 07:
On page 202, this court specifically responded to the argument that DOE had failed in that case to look at the replacement of renewables or market substitution effects with respect to renewables in foreign markets.

[00:33:10] Speaker 07:
And this court specifically affirmed DOE's judgment that it wouldn't, by trying to model those impacts, it didn't have the data that would make that sufficiently reliable.

[00:33:21] Speaker 07:
And you affirmed DOE's judgment in that regard.

[00:33:26] Speaker 04:
I think there's an argument that it was fine for you to rely on the economic conclusion that you reached before the supplemental environmental impact statement.

[00:33:35] Speaker 04:
Assume for the sake of this question that you should have reweighed the economic benefits after you conducted the supplemental environmental impact statement.

[00:33:52] Speaker 04:
Is it the case that Sierra Club didn't ask the Department of Energy to reweigh the economic benefits after conducting the supplemental environmental impact statement?

[00:34:03] Speaker 07:
Well, I think their argument, Your Honor, is that we put a thumb on the scale, that we didn't look at the benefits in the same, the benefits and the harms in the same way and looked at the uncertainties differently.

[00:34:16] Speaker 04:
But they never asked you to reweigh the analysis for the economic benefits.

[00:34:21] Speaker 04:
No.

[00:34:21] Speaker 07:
What they asked is that we go back and use some sort of modeling for, to do some sort of market substitution modeling for purposes of the climate change analysis.

[00:34:31] Speaker 07:
Right.

[00:34:32] Speaker ?:
Okay.

[00:34:33] Speaker 04:
Any questions?

[00:34:35] Speaker 04:
No.

[00:34:35] Speaker 04:
Thank you.

[00:34:45] Speaker 05:
Thank you.

[00:34:45] Speaker 05:
May it please the court, my name is Howard Nelson.

[00:34:47] Speaker 05:
I represent Intervena Alaska Gasline Development Corporation, which is a public corporation of the state of Alaska.

[00:34:54] Speaker 05:
Now, petitioners say that uncertainty of harms and benefits exists equally.

[00:34:59] Speaker 05:
Well, these uncertainties that they discuss in their brief are not the same.

[00:35:06] Speaker 05:
The uncertainties with respect to harm stem from this issue of substitutability of fuel and displacement.

[00:35:15] Speaker 05:
And they say, well, DOE should have narrowed it down, the specific quantification.

[00:35:22] Speaker 05:
Well, that's what the court and Sierra Club, I call it Sierra Club flex, that's what they said DOE cannot do.

[00:35:28] Speaker 05:
because it's infeasible and impractical and speculative.

[00:35:31] Speaker 05:
Now on the other hand, the benefits, most of the benefits have nothing to do with the uncertainty of displacement or substitutability.

[00:35:41] Speaker 05:
The benefits in terms of regional benefits, employment opportunities, income, increased tax base, security to our nation and to our allies, they have nothing to do with displacement.

[00:35:54] Speaker 05:
Those could be quantified and that's what was done.

[00:35:57] Speaker 03:
It seems like the strongest argument for them would be on the saying GDP will increase.

[00:36:02] Speaker 03:
That is based on ideas about substitution, right?

[00:36:05] Speaker 05:
in part, but the GDP also increases, I think.

[00:36:09] Speaker 05:
I mean, you have a lot of economic activity that's ongoing as a result of the construction and operation of these facilities.

[00:36:16] Speaker 05:
It's a huge benefit to the economy of Alaska.

[00:36:19] Speaker 05:
Now, the uncertainty of benefits, their argument is that because there's uncertainty about market need for the project, and therefore uncertainty about whether the project will be built,

[00:36:34] Speaker 05:
That's a different uncertainty.

[00:36:37] Speaker 05:
Now that argument, we believe, conflates and confuses DOE's obligations under the NGA and under NEPA.

[00:36:46] Speaker 05:
Under section three of the NGA, DOE is obligated to weigh the benefits and burdens of their export authorization if the project is built.

[00:36:58] Speaker 05:
Any uncertainty that results from

[00:37:00] Speaker 05:
you know, whether there's market need for the project or whether it will be built is simply not a consideration for DOE under the Natural Gas Act.

[00:37:09] Speaker 05:
If the project is not built, there won't be any burdens or benefits.

[00:37:16] Speaker 05:
And so with respect to the uncertainty created by market need,

[00:37:25] Speaker 05:
That is an obligation, the uncertainty, I'm sorry, DO is examination of harm resulting if the project is not built, that stems from the obligation under a duty to examine a no-action alternative under NEPA.

[00:37:45] Speaker 05:
And under NEPA, there is no obligation to examine benefits at all or to weigh those benefits against harm.

[00:37:53] Speaker 05:
So whichever way you look at it, there's really no balancing an uneven application that has to be done.

[00:38:02] Speaker 03:
Council, your brief has a discussion of the impacts of a vacant order from this court.

[00:38:10] Speaker 03:
Are you able to tell us anything about the current status of the project?

[00:38:14] Speaker 05:
Yes, there have been and there continue to be ongoing discussions with investors to try to get investment for the project and also with off-take customers.

[00:38:28] Speaker 05:
If we get into the issue of a vacator, if this authorization were to be vacated, that would be an extreme obstacle to this project.

[00:38:39] Speaker 05:
Investors are not going to put up $45 million and risk their capital if there's uncertainty with respect to this project.

[00:38:52] Speaker 04:
Wouldn't there still be uncertainty even if we remand it without Packarder?

[00:38:56] Speaker 05:
Certainly, there would be uncertainty, but there would be a lot more uncertainty if there was a vacator.

[00:39:01] Speaker 04:
Thank you, Mr. Nelson.

[00:39:02] Speaker 05:
Thank you.

[00:39:10] Speaker 04:
I think Ms.

[00:39:10] Speaker 04:
Naismith asked for five minutes, so we'll give her the five minutes.

[00:39:13] Speaker 02:
Thank you, Your Honor.

[00:39:13] Speaker 02:
Appreciate it.

[00:39:15] Speaker 02:
I wanted to just start by clarifying a few things with respect to the NERA data, which the department at one place does say is outdated,

[00:39:25] Speaker 02:
One of the points that we made is if it's so outdated, then why not update it?

[00:39:30] Speaker 02:
Again, the problem with what DOE did here is to calculate these two very extreme values and then claim it could do nothing to reduce the uncertainty.

[00:39:37] Speaker 02:
If the problem is simply that the numbers are off and need to be updated, then update it.

[00:39:43] Speaker 02:
What councils for DOE went through in terms of what the nearest study doesn't do,

[00:39:48] Speaker 02:
is again, not actually in the record and not what the climate harm assessment that DOE did, did either.

[00:39:56] Speaker 02:
That climate study looked at solely putting aside the quantitative data that Judge Garcia referenced in the SEIS.

[00:40:05] Speaker 02:
If you look at the actual, where did we get these two numbers on climate?

[00:40:09] Speaker 02:
It does not look at what's going on in foreign markets.

[00:40:13] Speaker 02:
It looks at solely

[00:40:15] Speaker 02:
the extent to which displacement would occur as between Alaska and the lower 48 states.

[00:40:23] Speaker 06:
The SEIS quantitative data... May I... The harm that you're talking about is not a harm to any of your members, is it?

[00:40:35] Speaker 02:
It is, Your Honor.

[00:40:37] Speaker 06:
Well, you don't rely on that harm for standing purposes, do you?

[00:40:42] Speaker 02:
We rely on a variety of different harms, Your Honor.

[00:40:46] Speaker 02:
Right.

[00:40:46] Speaker 06:
Well, one of them is the effect on the beluga whales in Cook Inlet, right?

[00:40:51] Speaker 00:
Yes.

[00:40:51] Speaker 06:
But if they wanted to, if your members are interested in assessing that, all they have to do is look at the environmental impact statement that accompany FERC's authorization, because it's there in droves, right?

[00:41:08] Speaker 06:
Why do they need two environmental impact statements dealing with the same thing?

[00:41:12] Speaker 02:
Well, they don't, Your Honor, and DOE here agreed, and it is not in dispute that an additional analysis needed to be done because FERC's analysis is limited by FERC's authority under the Natural Gas Act to look at the effects of the terminal and the associated infrastructure.

[00:41:29] Speaker 02:
So FERC's analysis looked at the terminal and the pipeline that would connect the terminal up to the north slope.

[00:41:36] Speaker 02:
It did not look at the upstream effects, which we also based our standing claims on.

[00:41:41] Speaker 06:
But it did look at the downstream effects.

[00:41:43] Speaker 06:
It did look at the increased shipping.

[00:41:46] Speaker 02:
It looked at some of the increased shipping, Your Honor, but it did not look at the full extent of the downstream impacts.

[00:41:51] Speaker 02:
And that's why DOE concluded that it needed to do and no one disputed that DOE needed to do a supplemental analysis.

[00:42:00] Speaker 06:
The problem with dealing with the climate change is a harm for your members.

[00:42:06] Speaker 06:
is is that it's not imminent no matter how you cut it.

[00:42:12] Speaker 06:
Whatever would happen is 100 years away.

[00:42:15] Speaker 06:
50 years away.

[00:42:19] Speaker 06:
Correct.

[00:42:19] Speaker 06:
So you can't rely on that for standing.

[00:42:23] Speaker 02:
Your honor we are standing affidavits rely on concrete particularized injuries including what will occur.

[00:42:29] Speaker 02:
If the project goes forward and is both constructed and put into operation.

[00:42:37] Speaker 02:
To turn quickly though to the point Judge Garcia, you were making about the analysis that was in the supplemental impact statement, environmental impact statement that is this discussion of foreign markets.

[00:42:47] Speaker 02:
That discussion ranges through a wide set of factors and talks about how many things could point in different directions.

[00:42:54] Speaker 02:
It does not reach a conclusion.

[00:42:56] Speaker 02:
It does not say, and we think as a result of all of this quantitative discussion, where we fall in the spectrum of the two numbers that were put forth

[00:43:05] Speaker 02:
in the climate harm assessment.

[00:43:07] Speaker 02:
That conclusion is only in the order and again does not refer back.

[00:43:12] Speaker 02:
DOE could have said, let us go back and point to the SEIS and pick out all of these things.

[00:43:18] Speaker 02:
It didn't.

[00:43:19] Speaker 02:
It also didn't include things that council raised in briefing and again today about the findings of the overhang in the policy statement.

[00:43:26] Speaker 02:
As I mentioned earlier, DOE expressly said, that's not relevant here when it was raised by petitioners in other contexts.

[00:43:33] Speaker 02:
Very quickly, the finding also in DOE, Sierra Club VDOE being dispositive here in terms of uncertainty being a reason to just not do anything.

[00:43:44] Speaker 02:
That in that case is distinguishable and we make this point in our brief as to the fact that what was being disputed there is that DOE didn't include one variable, particularly specifically whether or not renewables were being considered downstream.

[00:44:00] Speaker 02:
It did not challenge the entire approach that DOE took in that instance, which is what we are doing here.

[00:44:08] Speaker 02:
With respect to the economic... You're coming close.

[00:44:12] Speaker 02:
My final point, with respect to the economic benefits, again,

[00:44:16] Speaker 02:
It is not in dispute that there will be some economic benefits.

[00:44:19] Speaker 02:
The question is, is the economic benefits that were referred to in the order and relied upon by DOE accurate?

[00:44:26] Speaker 02:
There may be benefits to the state of Alaska.

[00:44:29] Speaker 02:
But if we are dealing with 100% substitution, those benefits, therefore, are coming from somewhere else.

[00:44:35] Speaker 02:
They're net neutral.

[00:44:36] Speaker 02:
And therefore, what DOE should, under its standard of not simply having to say what's good for Alaska, but rather what is good for the entire US public,

[00:44:46] Speaker 02:
grapple with the fact that jobs are moving from one part of the country to another.

[00:44:50] Speaker 02:
We therefore ask this panel to remand and vacate.

[00:44:54] Speaker 02:
Thank you very much.

[00:44:55] Speaker 04:
Thank you for your eloquent argument.