[00:00:00] Speaker 00: Case number 24, 1099 et al, Sierra Club and Appalachian Voices Petitioners, Federal Energy Regulatory Commission. [00:00:09] Speaker 00: Mr. Gall for the petitioners, Mr. Schaener for the respondent, Mr. Super for the interview. [00:00:18] Speaker 00: Morning. [00:00:20] Speaker 05: Morning. [00:00:22] Speaker 01: You can proceed when you're ready. [00:00:24] Speaker 05: Good morning, Your Honors, and may it please the Court, Spencer Gall, on behalf of the Petitioners. [00:00:28] Speaker 05: With me at Council's table is my colleague Delaney King. [00:00:31] Speaker 05: I would like to reserve three minutes for rebuttal, if I may. [00:00:35] Speaker 05: This case challenges FERC's approval of a gas pipeline in Tennessee called the Cumberland Project. [00:00:41] Speaker 05: The project was proposed and justified for the sole purpose of supplying fuel to a new federal power plant called the Cumberland Gas Plant. [00:00:49] Speaker 05: And burning the gas that the project would transport would produce over two and a half million tons of greenhouse gas emissions each year for decades. [00:00:58] Speaker 05: We're here because FERC's decision to approve the project was made without reasoned and independent consideration of its environmental and economic consequences. [00:01:07] Speaker 05: FERC's decision was arbitrary, capricious, and contrary to law for three primary reasons. [00:01:12] Speaker 05: First, as a basic violation of the APA, FERC made and repeatedly relied on contradictory statements about the no action alternative that rendered arbitrary FERC's belief the project would reduce downstream emissions. [00:01:27] Speaker 05: Second, FERC violated NEPA in part because it failed to take a hard look at downstream greenhouse gas emissions, and also in part because it failed to consider holistically the project and the Cumberland gas plant based on their functional interdependence. [00:01:41] Speaker 05: And finally, FERC violated the Natural Gas Act and the APA because it refused to engage with record evidence that the project would contribute to harm for captive electricity rate payers in the region based on FERC's mistaken belief that it could not consider that evidence. [00:01:57] Speaker 05: Before FERC can approve a project under Section 7 of the Natural Gas Act, it's required to balance the project's harms and benefits and reach an affirmative finding that the project will be required by the public convenience and necessity. [00:02:10] Speaker 05: And FERC's errors in this case skewed its balancing exercise. [00:02:14] Speaker 05: Its arbitrary belief that the project would reduce emissions went on the benefits side of the ledger. [00:02:20] Speaker 05: And FERC left off the ledger entirely evidence of economic harm that should have borne on its ultimate decision based on a flawed rationale that it could not consider it. [00:02:29] Speaker 05: Because the balance was skewed, FERC's decision was arbitrary. [00:02:32] Speaker 05: And we ask that the court vacate the orders and send this case back to FERC. [00:02:37] Speaker 06: On your first point and just [00:02:39] Speaker 06: Looking at the big picture, this case just looks a lot like Citizens Action Coalition. [00:02:48] Speaker 06: There's a regulator other than FERC wants a coal plant to be retired and a gas plant to take its place, which is a good thing environmentally. [00:03:03] Speaker 06: And in order to do that, FERC needs to approve a small [00:03:08] Speaker 06: extension off an existing pipeline. [00:03:12] Speaker 06: And on the alternative point, we said, um, for doesn't get to second guess the generator decision, which seems like that's what you really want here. [00:03:26] Speaker 06: And, um, [00:03:30] Speaker 06: It's just a very straightforward analysis. [00:03:33] Speaker 06: They need the pipeline so that the gas plant can work. [00:03:39] Speaker 05: Well, I agree that they need the pipeline so that the gas plant can work, although I think that there are four important distinctions between this case and Citizens Action that actually demonstrate why we win here. [00:03:50] Speaker 05: One of them is FERC's internal inconsistencies, which was not a factor that was present in Citizens Action. [00:03:56] Speaker 05: And I'll get to that in a moment because I want to address your NEPA questions directly. [00:04:01] Speaker 05: The first big difference between the Citizens Action case and this case is that here the record does not [00:04:07] Speaker 05: show that coal retirement depends on the availability of a gas plant or a gas pipeline. [00:04:13] Speaker 05: And this is a really unusual case because TVA is an unusual utility. [00:04:17] Speaker 05: It's a federal utility with its own obligations under NEPA. [00:04:21] Speaker 05: And so we know what TVA would do absent this gas plant. [00:04:26] Speaker 05: It still would retire the coal plant and replace it with one of the other two options that TVA was required by law to disclose, neither of which involved a new pipeline and one of which didn't involve fossil fuels at all. [00:04:37] Speaker 01: If I may just briefly interject that the crediting, you know, it seems to me the causal analysis is saying, okay, why are you crediting the pipeline pipeline as [00:04:49] Speaker 01: in concert with the gas plant for relative improvements over the coal plant. [00:04:57] Speaker 01: But does it matter if the same crediting is being done with respect to each of the other alternatives? [00:05:03] Speaker 01: And as I read the record, it was. [00:05:05] Speaker 01: So I guess I'm not sure. [00:05:06] Speaker 01: I mean, I understand at some conceptual level your point that they say it's going to be retired, they say it's not going to be retired. [00:05:14] Speaker 01: How does that actually cash out? [00:05:19] Speaker 05: Well, I think one of the ways that it cashes out, and this goes to the inconsistencies, is that not only did they flip-flop about whether it would be retired or not retired, and they being FERC's description in this instance, but also in paragraph 33 of the rehearing order, you can see that FERC relied on its belief that the project would reduce downstream greenhouse gas emissions as a basis for finding that it was environmentally acceptable and therefore would be in the public convenience and necessity, or at least not contrary to it. [00:05:47] Speaker 05: And certainly FERC's inconsistencies undermine that and render that conclusion arbitrary. [00:05:53] Speaker 05: And one reason for this is that FERC relied here on TVA's admissions analysis, which presupposed that in their no action alternative. [00:06:03] Speaker 01: Which order are you talking about? [00:06:04] Speaker 01: Which page of the JA? [00:06:05] Speaker 05: The JA page is, I believe, pardon me, JA 73, which is paragraph 33 of the rehearing order. [00:06:17] Speaker 05: One of the fundamental mismatches here in the emissions analysis is simply that FERC treated as part of its no action alternative, the retirement of the coal plant as a fait accompli. [00:06:28] Speaker 05: In most cases, there were some inconsistent statements throughout [00:06:31] Speaker 05: that would bear on the coal plant, but mostly the inconsistencies were grounded in whether it would be replaced by a gas plant. [00:06:37] Speaker 05: The problem, though, is that the no-action scenario in which the coal plant retires is diametrically opposed to the no-action alternative that formed the baseline for the emissions analysis that FERC used. [00:06:50] Speaker 05: The record makes clear that FERC borrowed its emissions analysis from TVA, and that TVA's no-action alternative presupposed that the coal plants would continue operating absent some decision on the part of TVA. [00:07:03] Speaker 05: Now, that may have been all well and good for TVA, and I'm not here to litigate that. [00:07:07] Speaker 05: But the problem with it here is that FERC had a different no-action baseline that formed the backbone of its environmental analysis. [00:07:15] Speaker 06: But, I mean, I think you are re-litigating it. [00:07:19] Speaker 06: at least implicitly, you want to call into question TVA's decision to, you love the decision to retire the coal plant, you want to call into question their decision to replace it with the gas plant. [00:07:39] Speaker 06: That may be true. [00:07:41] Speaker 06: And that's fine. [00:07:42] Speaker 06: But you do that challenging the TVA action, not challenging FERC's action on the pipeline. [00:07:48] Speaker 05: Correct. [00:07:49] Speaker 05: I agree with that entirely. [00:07:50] Speaker 05: To come back to your question about the comparison to citizens action, I submit that citizens action stands for the proposition that in this circumstance, FERC has to accurately account for what the utility will do in the no action scenario. [00:08:03] Speaker 06: For what? [00:08:03] Speaker 05: FERC has to accurately account for what the utility TVA will do if FERC doesn't approve the pipeline. [00:08:09] Speaker 06: And in the citizen's action case, part of what- And if FERC, no action here means no pipeline. [00:08:18] Speaker 06: Not this one, not another one, just no pipeline. [00:08:21] Speaker 06: And FERC says, if there's no pipeline, the gas plant can't work. [00:08:28] Speaker 06: And that defeats the purpose of this project, which is to supply gas to the gas plant. [00:08:36] Speaker 06: Which is a purpose that citizens action says is not unreasonably narrow. [00:08:41] Speaker 06: Because FERC doesn't make the generator decisions. [00:08:45] Speaker 05: Right, and we haven't challenged the statement of purpose and need here. [00:08:48] Speaker 05: Nor are we suggesting that FERC has an independent obligation to consider non-jurisdictional alternatives. [00:08:54] Speaker 06: OK, so if you haven't challenged the statement of need, because that does run you into citizens action, the analysis of the no action thing here is just [00:09:05] Speaker 06: It's perfectly straightforward. [00:09:07] Speaker 06: No pipeline, no gas plant. [00:09:10] Speaker 06: And that defeats the purpose of the project. [00:09:14] Speaker 05: That's right. [00:09:15] Speaker 05: But FERC's obligation under the Natural Gas Act is to approve a project only upon an affirmative finding that it will be required by the present or future public convenience and necessity. [00:09:25] Speaker 05: And so at least with respect to FERC's inconsistencies, FERC relied on its belief that the project would reduce emissions in the course of reaching that approval. [00:09:34] Speaker 05: And this is, I think, most evident in paragraph 33 in the rehearing order at JA 073. [00:09:42] Speaker 05: What is important about this is not simply that there is this interplay between the gas plant and the coal plant and the pipeline, but that when FERC has to make an affirmative finding that the project is or will be required, it has to do that in a reasoned way. [00:09:56] Speaker 05: A Section 7 certificate confers the power of eminent domain, and members of my clients have been dragged into condemnation proceedings because their properties are in the path of this pipeline. [00:10:06] Speaker 05: So we submit that the least we should demand of an agency wielding that kind of authority [00:10:11] Speaker 05: is that its decision be internally consistent and not bedeviled by errors that we submit are present here. [00:10:16] Speaker 01: You had mentioned that there were four bases on which you would distinguish Citizens Action Coalition and we've gotten you a little bit bogged down in one. [00:10:25] Speaker 01: If you could just lay out the other three. [00:10:27] Speaker 01: Sure. [00:10:27] Speaker 01: That would be helpful. [00:10:28] Speaker 05: Thank you. [00:10:28] Speaker 05: I think I've mentioned two of them. [00:10:30] Speaker 05: The first is the inconsistencies that were not present in Citizens Action and are present here. [00:10:35] Speaker 05: The last three relate to the NEPA sort of merits, so to speak. [00:10:39] Speaker 05: And one of them is that the record here does not suggest that gas availability or a gas plant at all is a necessary precondition to coal retirement. [00:10:49] Speaker 05: As as I said, you know TVA is a unique utility and that it has its own statutory obligation to identify alternatives that are technologically and economically feasible and capable of meeting its purpose and need. [00:11:02] Speaker 05: And so in this unique circumstance, we know that TVA had other options to pursue. [00:11:07] Speaker 01: So that, I'm sorry, I should let you lay them out and then I'll ask you my question. [00:11:13] Speaker 05: OK, thank you. [00:11:13] Speaker 05: The third reason is that unlike Citizens Action here, FERC staff made a finding that there would be no other pipeline that was capable of meeting TVA's demand for 245,040 decatherms of gas per day. [00:11:25] Speaker 05: And that appears in the record at JA191, the EIS finds that there's no other pipeline or pipeline company in the region capable of this. [00:11:35] Speaker 05: And FERC credited that finding in the certificate order at paragraph 58 at JA29, and in the rehearing order at paragraph 21, which begins on JA062. [00:11:46] Speaker 06: And the final reason I'm sorry, just what's the problem with that? [00:11:51] Speaker 06: Just so I get what it is. [00:11:55] Speaker 05: One of the no action sort of scenarios that FERC evaluated in the Citizens Action case was the likelihood that some other company would come along and build the pipeline and that the gas plant would come along anyway. [00:12:07] Speaker 05: And those facts aren't present here because FERC made a contrary finding that unlike that case and unlike the Alaska LNG case, there was not likely to be another pipeline that could come along. [00:12:16] Speaker 05: Give us four and then we'll. [00:12:19] Speaker 05: And the final reason is that the [00:12:23] Speaker 05: We submit that citizens action was animated by concerns about federalism and overstepping a state regulators role. [00:12:29] Speaker 05: And there are no federalism concerns here because TVA is an unregulated federal utility. [00:12:39] Speaker 06: On the second point. [00:12:43] Speaker 06: And maybe I'm I'm sorry if I'm repeating myself, but that just takes us back to. [00:12:50] Speaker 06: TVA's decision. [00:12:53] Speaker 06: TVA is looking at options before them. [00:12:57] Speaker 06: One, their no action is continue with the coal plant, which they don't like. [00:13:04] Speaker 06: And then they look at three alternatives, two are gas, one is solar. [00:13:08] Speaker 06: And they make a decision like their [00:13:12] Speaker 06: Preferred alternative is retired coal and replace it with one plant on site as opposed to the two elsewhere. [00:13:23] Speaker 06: That's true. [00:13:24] Speaker 05: That's just FERC takes that as a given. [00:13:29] Speaker 05: Well, I don't think FERC can take that as a given, though. [00:13:32] Speaker 05: The no action alternative under NEPA has to account for the predictable actions that others will take if the commission doesn't act or if the agency in question doesn't act. [00:13:42] Speaker 05: And here, the facts are uniquely that we know what TVA would do in the no action scenario. [00:13:48] Speaker 05: That's not second guessing. [00:13:50] Speaker 06: If FERC had taken no action in citizen's action, there would be no pipeline, and there could be no gas plant. [00:13:59] Speaker 06: and the coal plan would have to keep running or they'd have to come up with some other solar or other alternative. [00:14:09] Speaker 06: And our answer to that was that FERC doesn't get to second-guess the generation decisions of another regulator. [00:14:19] Speaker 05: I think there are two important differences. [00:14:21] Speaker 05: One is that in Citizens Action, FERC found that another pipeline could come along and supply this gas plant. [00:14:27] Speaker 05: That's your third point. [00:14:30] Speaker 05: That is my third. [00:14:31] Speaker 05: It's related to my third point, but I think it's important here. [00:14:34] Speaker 05: I guess I'm just not sure. [00:14:36] Speaker 06: I'm not sure what the relevance of that is. [00:14:39] Speaker 06: I mean, FERC here has the proposed alternative, which is whatever, 32 miles off Tennessee gas. [00:14:49] Speaker 06: And then they look at alternative facilities and alternative routes, and they say this is the best one. [00:14:56] Speaker 05: That's right. [00:14:57] Speaker 05: But an agency's obligation under NEPA is to account for the predictable actions that others will take if they take no action. [00:15:04] Speaker 05: And this is congruent with the court's discussion in the citizen's action opinion. [00:15:09] Speaker 05: And what we propose is that on this record, it's clear that this coal plant is retiring anyway. [00:15:15] Speaker 05: And unlike citizen's action, we're not asking FERC to sort of re-examine the other alternatives that a utility could choose. [00:15:22] Speaker 05: We're simply asking it to take TVA at its word about what would happen here. [00:15:27] Speaker 05: The final point I really want to make on this. [00:15:29] Speaker 01: What about TVA's decision making process makes you think that they didn't? [00:15:35] Speaker 01: I mean, TVA [00:15:38] Speaker 01: is the source, I think, of FERC's assumption that the coal plant was going to be retired. [00:15:44] Speaker 01: So whether you think of it as the coal plant retirement as causing each of the alternatives that TVA thought about or as independent, the different alternatives got, first of all, beyond, bracketing whether it's beyond the scope of what FERC's considering, [00:16:07] Speaker 01: If each of those different consider, like if the causation is attributed equally, the causation of the closing of the coal plant is considered equally with respect to any other alternative generation system, how does that skew the balancing and the public interest determination that FERC made here? [00:16:35] Speaker 05: Well, we don't think that the causation principles and the facts that are present here allow FERC to attribute to this gas pipeline the retirement of the aging coal plant. [00:16:46] Speaker 01: I understand that. [00:16:47] Speaker 01: But what I'm saying is, assuming that was error, the TVA also attributed the benefit of retiring the coal plant [00:16:58] Speaker 01: to other alternatives that were before it. [00:17:03] Speaker 01: And so when you look at the environmental offset, it's even higher from some of the other alternatives. [00:17:12] Speaker 01: So it's not like that decision making was skewed. [00:17:17] Speaker 01: You could net out the coal plant from all of the alternatives, and then relatively speaking, they would [00:17:26] Speaker 01: have similar degrees of advantage or disadvantage. [00:17:30] Speaker 01: So I guess I'm not understanding what your argument is about how that bears on the decision before FERC. [00:17:37] Speaker 05: Well, I think it bears on the decision before FERC for two reasons. [00:17:41] Speaker 05: And one of them not to retread is that we don't think causation principles allow FERC to find a decrease here, and FERC relied on a decrease in making its decision. [00:17:50] Speaker 05: The second is that FERC's review of this project and the gas plant [00:17:54] Speaker 05: vis-a-vis the alternative options that TVA would pursue in the no action scenario. [00:18:00] Speaker 05: And again, I want to be clear, we're not suggesting that FERC can reimagine other alternatives beyond those that were for TVA. [00:18:07] Speaker 05: But FERC's cramped review and taking simply TVA's record of decision, which came before as a fait accompli, left FERC without a comparative basis to evaluate the differences that you're talking about here, Judge Pillard. [00:18:22] Speaker 05: So the court's mini-sync decision [00:18:24] Speaker 05: identifies that the Natural Gas Act requires some analysis of alternatives beyond just the application that is for the commission. [00:18:32] Speaker 05: And here, we think that if FERC had had a sort of a fulsome understanding of the alternatives in question and what TVA would do in the no action scenario, its analysis would have revealed that this pipeline actually came with a tremendous opportunity cost. [00:18:48] Speaker 05: And that's part of, we think, why it matters. [00:18:51] Speaker 05: There is a separate discussion here as well about the economic considerations, but I see that I'm out of time. [00:18:56] Speaker 01: Can we ask about the economic considerations? [00:19:00] Speaker 01: And I have questions for Fork about this. [00:19:04] Speaker 01: Am I right that one considers precedent agreements in part, one wants to look at whether there's market need. [00:19:11] Speaker 01: And as I understand it, the market need inquiry is about protecting ratepayers from being saddled with costs that aren't shown to be going to be paid by others, as opposed to the captive ratepayers. [00:19:33] Speaker 01: And I guess I don't really understand how, I don't think this is an argument you particularly made, but how a precedent agreement where there were no other bidders, there's no other market. [00:19:45] Speaker 01: I mean, as Judge Katz just said, everybody is pretty straightforward. [00:19:49] Speaker 01: If there's going to be a gas plant, it's going to need this pipeline. [00:19:53] Speaker 01: It's unlike where you have [00:19:55] Speaker 01: pipeline going into a pipeline system, and there are shippers that need more capacity, and they're willing to pay for it. [00:20:05] Speaker 01: I mean, this is a dedicated project. [00:20:10] Speaker 01: What's your understanding of precedent agreement and what role it plays? [00:20:15] Speaker 05: So I think what's important here is that FERC credited the precedent agreement as dispositive on the question of market need and public benefit. [00:20:24] Speaker 05: And I agree that this is an unusual situation with respect to need in the sort of no subsidy [00:20:32] Speaker 05: But what's important here is that the precedent agreement was bedeviled by errors because it flowed from a process that was uneconomic and had its own inconsistencies and problems. [00:20:46] Speaker 05: And so as an indicator of public benefit in particular, we think the precedent agreement lacked probative value and that FERC failed to confront evidence and argument that would have undermined or should have raised red flags. [00:21:03] Speaker 01: Can you be more concrete if you were, you know, what is the problem? [00:21:07] Speaker 01: What harm has caused to whom? [00:21:08] Speaker 01: Why? [00:21:09] Speaker 05: The problem here is that the TVA decision to build the gas plant was predicated on was predicated on problems. [00:21:17] Speaker 05: And the record before FERC contained evidence from EPA and others documenting concerns that the gas plant was approved on the basis of inaccurate underlying economic information and perhaps most problematically, [00:21:29] Speaker 05: ignored $860 million worth of tax credits that would have accrued to captive electricity rate payers in the region. [00:21:36] Speaker 05: And we submit that FERC's authority under Section 7 encompasses public interest factors like consumer cost beyond its direct regulatory jurisdiction, as this court identified in the Office of Consumer Council case, and that its power to weigh the public interest in its corresponding statutory obligation to do that gave FERC no ability to avoid [00:21:59] Speaker 05: confronting this evidence on jurisdictional grounds. [00:22:01] Speaker 05: Now, whatever other things FERC might have said about this evidence is not in question in this case, because FERC wrongly believed that it could not consider it. [00:22:10] Speaker 01: Why wasn't that really information for TVA to consider as opposed to for FERC? [00:22:17] Speaker 01: Because really, it comes to FERC that TVA has [00:22:21] Speaker 01: looked at the array of options and made its choices and should have probably considered those benefits. [00:22:29] Speaker 05: I think it's information for both of them to consider. [00:22:32] Speaker 05: Nothing about the Natural Gas Act or the TVA Act or any other provision of law that any party in this case has identified would suggest that Congress intended for FERC to be a sidekick to TVA. [00:22:44] Speaker 05: So I grant you that TVA had its own decision to make, and that we may have gripes with that that are better litigated elsewhere. [00:22:50] Speaker 05: But FERC had an independent obligation to discharge its responsibilities under Section 7 of the Natural Gas Act. [00:22:58] Speaker 05: And for that reason, it couldn't simply turn a blind eye to this evidence. [00:23:03] Speaker 01: And what should it have done if it properly took account of those subsidies? [00:23:11] Speaker 01: Where would it take account of them, and what would it have done? [00:23:14] Speaker 05: Well, again, I want to be clear. [00:23:15] Speaker 05: We're not arguing that this precedent agreement means that existing customers of the Tennessee gas pipeline lateral will subsidize this. [00:23:22] Speaker 05: The problem accrues to captive electricity rate payers at the region. [00:23:26] Speaker 05: And what FERC should have done is confront this evidence. [00:23:30] Speaker 05: And it could have come up with reasons to weigh it but not give it this positive weight or not credit it at all. [00:23:37] Speaker 05: I mean, it's possible for you to imagine a variety of scenarios in which an agency could make [00:23:42] Speaker 05: a reasoned decision that didn't treat this kind of evidence as dispositive. [00:23:46] Speaker 05: But it's not reasoned for FERC to simply refuse to confront it at all. [00:23:52] Speaker 01: The distinction you just made was it's captive rate payers will pay for it, not? [00:23:57] Speaker 05: Captive electricity rate payers will pay for it, not captive rate payers that are in a sort of downstream of a pipeline vis-a-vis a local distribution company or something like that. [00:24:07] Speaker 05: Like the facts in the Spire case or the New Jersey Conservation Foundation case. [00:24:14] Speaker 01: And you made an argument about connected action. [00:24:20] Speaker 01: Why in the end does that matter if the same downstream consequences are calculated under the rubric of the connected? [00:24:32] Speaker 01: No. [00:24:34] Speaker 01: Cumulative, thank you. [00:24:35] Speaker 01: Cumulative effects. [00:24:38] Speaker 01: The information is out there. [00:24:40] Speaker 01: It's maybe not packaged entirely correctly, but what, you know, materially, in terms of decision-making, distortion, or the like, what difference does it make whether FERC improperly failed to see these as connected actions? [00:25:01] Speaker 05: I think there are two elements of prejudice to this. [00:25:03] Speaker 05: And one relates to this cumulative effects concept that you raised. [00:25:07] Speaker 05: In this case, cumulative effects doesn't ameliorate the prejudice. [00:25:11] Speaker 05: It just illustrates FERC taking a side on, or I should say it illustrates one example of FERC's inconsistencies about the no action alternative. [00:25:19] Speaker 05: Because treating the gas plant and the corresponding effects from it as a past, present, or reasonably foreseeable future action presupposes that they will occur. [00:25:28] Speaker 05: And this is one of the things that FERC was internally inconsistent about. [00:25:31] Speaker 01: Why does it depend on connectedness or not? [00:25:33] Speaker 05: Well, we don't think it depends on connectedness. [00:25:35] Speaker 01: But that was my question. [00:25:37] Speaker 05: I'm sorry. [00:25:37] Speaker 05: I may have misunderstood. [00:25:38] Speaker 05: Can you? [00:25:40] Speaker 01: Why is it material? [00:25:41] Speaker 01: Assuming FERC made an error in failing to see the plant and the pipeline as connected actions, why is that material to the decision before [00:25:55] Speaker 01: that we're reviewing. [00:25:56] Speaker 05: Understood. [00:25:57] Speaker 05: It's material, I think, in two ways. [00:25:59] Speaker 05: One way is that failure is directly responsible for FERC's confusion about the no action alternative. [00:26:07] Speaker 05: And on this question, I actually think that the lead agency regulation discussion, separate from the connected actions regulation, is really illustrative. [00:26:16] Speaker 05: Because to the extent that FERC felt confusion about what TVA would do in the no action scenario, [00:26:22] Speaker 05: FERC has only itself to blame for not initiating a cooperative process with a broader scope of review and simply asking that question of TVA. [00:26:31] Speaker 05: And the second question goes to something that you raised a few minutes ago, which is the sort of comparative benefits of all of the action alternatives that were before TVA. [00:26:41] Speaker 05: If FERC's review had been properly scoped and had accounted for the functional interdependence of the pipeline and the gas plant, it would have observed the opportunity cost from the perspective of emissions that building this [00:26:56] Speaker 05: option would have brought about versus building something like the alternative seed that TVA studied, which was the solar storage option. [00:27:04] Speaker 01: I'm not following that because it did calculate effectively the same emissions under the rubric of cumulative effects as opposed to the effects of a connected action. [00:27:19] Speaker 01: And therefore, it weighed those. [00:27:22] Speaker 01: And it could see that there would be [00:27:26] Speaker 01: way less environmental harm from some of the other options. [00:27:32] Speaker 01: So it knew that when it made the choice. [00:27:35] Speaker 05: It did know that when it made the choice, but treating these, as I said, as cumulative presupposes that they will occur. [00:27:41] Speaker 05: And part of what's gone wrong here is simply that FERC didn't take a side on what would happen if it didn't approve this pipeline. [00:27:53] Speaker 04: So you gave two reasons when Judge Pillard asked why any mistake on the connected action question would be material. [00:28:05] Speaker 04: Let's say that we disagree with those two reasons. [00:28:10] Speaker 04: It seems like then at that point, any connected action mistake would be harmless. [00:28:15] Speaker 04: Do you concede that? [00:28:18] Speaker 05: Well, I wouldn't concede that the connected actions mistake is harmless because I think it's directly responsible for the confusion that FERC had below and the cramped scope of alternatives. [00:28:27] Speaker 05: But netting out those two options. [00:28:29] Speaker 04: We don't agree with you that there was important confusion. [00:28:31] Speaker 04: And let's say we don't agree with you that there was a cramped scope below. [00:28:36] Speaker 04: Then yes, I agree that that would be harmless in those circumstances, Judge Walker. [00:28:39] Speaker 04: I appreciate that. [00:28:40] Speaker 04: And then if I could go back to your discussion about the precedent agreement, I'm just wondering if there's any [00:28:48] Speaker 04: I was going to say precedent, but then that's confusing. [00:28:50] Speaker 04: Any court decision that does what you're asking us to do, as I understand it, what you're asking us to do is say that the precedent agreement is not enough to show economic need. [00:29:01] Speaker 04: And I understand that the court has sometimes said that a precedent agreement is not enough when there's evidence of self-dealing. [00:29:12] Speaker 04: But outside of the self-dealing context, has the court ever said that, [00:29:18] Speaker 04: Precedent agreement is not enough to show economic need. [00:29:21] Speaker 05: The two cases that I'm aware of are the Spire case, Environmental Defense Fund, which is the sort of seminal self-dealing case, and the New Jersey Conservation Foundation case. [00:29:29] Speaker 05: The first one sounds like a self-dealing. [00:29:31] Speaker 05: I agree. [00:29:31] Speaker 05: And I don't think that New Jersey Conservation Foundation is self-dealing in the sense that it involved self-dealing or improper motive on the part of the pipeline company. [00:29:41] Speaker 05: What was concerning in the New Jersey Conservation Foundation case was that the local distribution companies were operating in a way that had a market incentive for them to enter precedent agreements that, as far as the transportation company, the pipeline company was concerned, were perfectly fine, but that they had this backdrop motive where they could reap profits at the expense of their captive rate. [00:30:02] Speaker 05: That's not the context here. [00:30:03] Speaker 05: No, I agree. [00:30:04] Speaker 05: So outside that context, I'm not aware of a case that does this. [00:30:09] Speaker 05: We think this is simply a fact-specific application of those principles, which is that when FERC is confronted with this evidence, it ultimately has to respond with a non-arbitrary reason. [00:30:19] Speaker 05: And here, we think that FERC's rationale, which was that simply it could not inquire into this evidence, was not reasoned. [00:30:27] Speaker 04: Fair enough. [00:30:30] Speaker 04: I wonder, in the past, if you had to guess, in the past 10 years, how many environmental impact statements have been, final environmental impact statements have been done for natural gas pipelines? [00:30:48] Speaker 05: Your honor, I'm not even sure I would get close to the bullseye. [00:30:52] Speaker 05: I would agree it would be- Sound like more than 100? [00:30:54] Speaker 05: In the past 10 years, more than 100, well, I don't, you know, NEPA documents, environmental impact statements, and environmental assessments together. [00:31:02] Speaker 05: That sounds like a ballpark. [00:31:05] Speaker 05: I haven't. [00:31:08] Speaker 05: For purposes of this argument, I can say more than 100 sounds right. [00:31:10] Speaker 05: I don't want to. [00:31:12] Speaker 04: I won't hold you to it. [00:31:16] Speaker 04: What I'm wondering is whether it's more than 100 or less than 100. [00:31:22] Speaker 04: Can you point to any of those environmental impact statements that you think were adequate? [00:31:32] Speaker 05: Not off the top of my head, your honor. [00:31:36] Speaker 05: Unless the court has any further questions. [00:31:38] Speaker 06: Yeah, can I just take you back to inconsistency? [00:31:43] Speaker 06: Yes, it's you know, I look at the. [00:31:47] Speaker 06: discussion of no action, no action alternative, and seems fine to me for reasons we've discussed, you say, well, yes, but there's a separate issue of internal inconsistency. [00:32:01] Speaker 06: So I want to make sure I understand it. [00:32:06] Speaker 06: As I understand it, the main inconsistency you see [00:32:12] Speaker 06: is between the sentence in the in the rehearing order, the sentence of paragraph 19. [00:32:20] Speaker 06: If the commission selects the no action alternative, [00:32:27] Speaker 06: the Cumberland project facilities would not be constructed, the potential impacts from TVA's construction and operation of the gas plant would not occur, and the project's objectives would not be met. [00:32:39] Speaker 06: That sentence versus a sentence in paragraph 63, which is the discussion of interconnectedness, in which FERC says TVA will retire [00:32:56] Speaker 06: fossil plant and construct and operate the gas plant with or without the Cumberland project. [00:33:02] Speaker 05: Is that do I have that right? [00:33:04] Speaker 05: I think that that is the most flagrant example of the inconsistencies. [00:33:08] Speaker 05: And so it's one that got a lot of air time in our brief, but there are other. [00:33:11] Speaker 06: Okay, so let's just because when I parsed it and [00:33:20] Speaker 06: maybe one shouldn't read agency orders as if they were statutes. [00:33:24] Speaker 06: But when I parsed it, I thought they were reconcilable because the first statement says, effectively says, no pipeline, supply gas, no gas plant, objectives of the project are defeated. [00:33:44] Speaker 06: And the second, [00:33:47] Speaker 06: One says TVA will go forward with or without the Cumberland project, which is this pipeline. [00:34:01] Speaker 06: And this is in the context of discussing what's the term, independent utility. [00:34:10] Speaker 06: So they're saying the gas plant has independent utility because [00:34:17] Speaker 06: If they don't build this pipeline, someone will build another one. [00:34:22] Speaker 06: Those seem to me not inconsistent. [00:34:28] Speaker 05: what do I have wrong? [00:34:29] Speaker 05: Well, I think it's inconsistent to say they will build this pipeline, pardon me, they will build this gas plant and operate it, you know, with or without this pipeline because someone will build another one. [00:34:38] Speaker 05: That to me is inconsistent from the discussion in paragraph 19 that says if we choose the no action alternative, the potential impacts from the construction and operation would not occur. [00:34:48] Speaker 06: No action is a term of art which in the CIS means not this pipeline, not any pipeline. [00:34:57] Speaker 06: not any other pipeline? [00:34:59] Speaker 05: I think in circumstances where the predictable actions of others could include the development of another pipeline, as was the case in Citizens Action, maybe the answer would be different. [00:35:10] Speaker 05: But here, FERC found in the EIS, I believe at JA191, that there is no other pipeline that's capable of meeting this need. [00:35:24] Speaker 06: after looking at system alternatives and route alternatives. [00:35:29] Speaker 05: After looking at system alternatives and route alternatives, that's right. [00:35:32] Speaker 05: And looking at the capacity on the other systems, the other pipeline systems, ANR and ETNG that were available in the region, FERC staff concluded and FERC accredited that none of those other systems could supply this volume of gas. [00:35:44] Speaker 05: So this isn't a situation where someone else is going to come along and build this pipeline. [00:35:49] Speaker 06: OK, thank you. [00:35:52] Speaker 01: Thank you. [00:35:53] Speaker 01: We'll give you a little bit of time for rebuttal, even though we kept you over. [00:35:57] Speaker 05: Thank you, Your Honor. [00:36:16] Speaker 03: Morning, Your Honors. [00:36:17] Speaker 03: May it please the Court, Houston Schaener, for the Federal Judiciary Commission. [00:36:21] Speaker 03: In Judge Katz's, I'd like to begin with this inconsistency. [00:36:25] Speaker 03: I think you hit the nail on the head here. [00:36:27] Speaker 03: In fact, the scope of the inconsistency is much smaller. [00:36:30] Speaker 03: While it is generally paragraph 19 versus paragraph 63, it's really only one phrase in paragraph 63, namely, the potential impacts from TVA's construction and operation of the Cumberland gas plant would not occur. [00:36:42] Speaker 06: Do you agree with my termination of the two? [00:36:46] Speaker 03: the two statements? [00:36:49] Speaker 03: To some degree, yes. [00:36:50] Speaker 03: It took me a while. [00:36:53] Speaker 03: There is, to some degree, I would say this statement in paragraph 19 is a characterization of the commission's downstream effects analysis. [00:37:02] Speaker 03: And that is, to some degree, inadvertent. [00:37:04] Speaker 03: But this is not where the core effects analysis is taking place. [00:37:08] Speaker 03: And my colleague on the other side, while he's certainly from Earth Record and very eloquent, [00:37:14] Speaker 03: We had no discussion of the actual substance of the downstream effects analysis, which has found an entirely different part of the hearing order, namely paragraphs 39 to 42. [00:37:21] Speaker 03: That's the core of this. [00:37:23] Speaker 03: The blue brief also tries to style the no action alternative argument as one about the downstream effects. [00:37:29] Speaker 03: But that effects analysis, again, simply does not hinge on these sort of 11 words. [00:37:36] Speaker 03: And I think it's also important to walk through the entire no action alternative section [00:37:41] Speaker 03: and really the rest of the order to understand that this one phrase is not any sort of fatal inconsistency in the context. [00:37:47] Speaker 03: Context makes clear exactly what the commission was doing and why that was coded. [00:37:51] Speaker 03: Actually, if you start at paragraph 18 beforehand, you will see on the last sentence, this is J61. [00:37:59] Speaker 03: The commission says an agency does not err by rejecting a no action alternative that would not fulfill the project's purpose. [00:38:06] Speaker 03: You then proceed to paragraph 19, [00:38:09] Speaker 03: And nearly every word of this, other than the phrase on which they latch, is about why the no-action alternative, namely rejecting the project, would not fulfill the project's purpose and need, namely supplying the gas plant. [00:38:23] Speaker 03: So it's clear that under cases like Center for Biological Diversity, the Commission had good grounds to reject the no-action alternative, and this phrase is not central to that. [00:38:31] Speaker 06: If I'm following this, just one more level of complication, which is apart from the 19 versus 63 issue, there's a garbling within 19 that the text accompanying note 56 is a little bit of a misquote from the EIS. [00:38:56] Speaker 06: But I'm not sure it matters because the general thrust of [00:39:03] Speaker 06: 17 through 22 is pretty clear, which is no pipeline. [00:39:08] Speaker 06: No pipeline. [00:39:10] Speaker 06: Gas plant can't run. [00:39:12] Speaker 06: Project purpose defeated. [00:39:14] Speaker 03: Yes. [00:39:14] Speaker 03: And I think we'll get to the downstream effects. [00:39:16] Speaker 03: There are some other questions there. [00:39:18] Speaker 03: But to answer your original question, that is correct. [00:39:20] Speaker 03: There's a slight inadvertent mischaracterization of the term proposed action in the impact statement. [00:39:26] Speaker 03: But that is not the linchpin of any part of the commission's analysis, including the no action alternative. [00:39:31] Speaker 03: I think it's also important to make sure to understand what the commission was doing here. [00:39:35] Speaker 03: You get the context, more further context, the new action alternative in the next two paragraphs. [00:39:41] Speaker 03: In paragraphs 20 and 21, the commission says more than once it is speculative to determine what other actions TVA might explore to serve its need for additional firm transportation. [00:39:51] Speaker 03: and gas supply that includes not only other possible pipelines, some of which may not exist yet or even be planned, or what TVA would have done absent the gas plant. [00:40:02] Speaker 03: So the commission is not making a determination whether or not necessarily the TVA would abandon the gas plant. [00:40:08] Speaker 03: They are saying, we're taking the gas plant a given, and we're taking TVA's decision as a given, and our effects analysis will launch off of that. [00:40:15] Speaker 01: So take it. [00:40:16] Speaker 01: I'm sorry. [00:40:17] Speaker 01: I finished your sentence. [00:40:17] Speaker 03: I didn't mean to interrupt you. [00:40:19] Speaker 03: The opening brief does not challenge the Commission's determinations in paragraphs 20 and 21. [00:40:24] Speaker 03: And it's, I think, very important to understand why the Commission refused to speculate here, as we know it in paragraph 20. [00:40:32] Speaker 03: is outside the scope of our jurisdiction to try to re-litigate these issues, Judge Gaps, as you mentioned, because to determine what alternatives TVA would pursue, whether that's another pipeline or another downstream generation option, means we have to replicate the entirety of TVA's lease cost system minimization planning and planning analysis, which is an incredibly complex portfolio-wide endeavor that does not involve just the gas plant. [00:40:58] Speaker 03: It involves things like [00:41:00] Speaker 03: operational risk, dispatch ability, reliability, dependability of the plants, other costs, direct outlays. [00:41:07] Speaker 03: And as my friend also mentioned, and it really is this petitioner's wants, they want us to put more emphasis on what he calls the opportunity cost of emissions. [00:41:16] Speaker 03: But TV had its own analysis, including life cycle analysis across its entire portfolio. [00:41:21] Speaker 03: And the commission is neither equipped for that, but more importantly, Congress, as citizen action tells us, [00:41:26] Speaker 03: explicitly prohibited the commission from trying to regulate downstream generation in this way. [00:41:33] Speaker 03: I would also note in passing, my friend claimed that citizens action is limited to incursion on state jurisdiction. [00:41:40] Speaker 03: That's not true if you look at the text of section 824B1. [00:41:43] Speaker 03: It simply says the commission has no jurisdiction over generation fully. [00:41:47] Speaker 03: And you also see some cases like A&R pipeline that say we may not intrude on another agency's regulatory authority where they have direct voice [00:41:55] Speaker 03: industry uses. [00:41:57] Speaker 01: It's factually distinguishable in material ways from all of those cases. [00:42:00] Speaker 01: And it puts everybody in a spot to deal with something novel. [00:42:04] Speaker 01: But I'm not following why a precedent agreement shows that costs are not being put on existing customers. [00:42:15] Speaker 01: Was there any entity other than TVA that bid during the open season process that's referenced in the record? [00:42:26] Speaker 03: I'm not aware of one. [00:42:27] Speaker 03: I may have to defer to Intervener Council on that. [00:42:29] Speaker 03: They would have better understanding of events that may have often happened before the commission's record. [00:42:34] Speaker 01: Although it's FERC's burden to show that there was market need, right? [00:42:39] Speaker 03: Yes. [00:42:39] Speaker 03: And here, there's no question that there's actual demand and market need for the pipeline. [00:42:44] Speaker 03: There is a gas plant downstream that's being constructed. [00:42:46] Speaker 03: TVA had already decided and selected the gas plant by the time of the commission's decision. [00:42:51] Speaker 03: So it's simply beyond dispute that there is demand and market need. [00:42:54] Speaker 03: The real question here is whether or not the commission thinks that the type of need downstream, particularly the type of generation resource, is bad as a policy matter, it should attempt to veto that. [00:43:04] Speaker 03: And we're told already by A&R Pipeline that we should not do that. [00:43:08] Speaker 01: Right. [00:43:09] Speaker 03: As well as Citizens Action. [00:43:12] Speaker 01: Why analyze the precedent agreement at all? [00:43:16] Speaker 01: seems like really at the heart of your analysis is TVA does planning. [00:43:22] Speaker 01: It makes decisions. [00:43:24] Speaker 01: We have no role in second guessing them. [00:43:28] Speaker 01: So if it says it wants to build a gas plant and that it needs pipeline to serve it, end of story. [00:43:36] Speaker 01: Why is that not the analysis? [00:43:37] Speaker 01: I'm just trying to understand. [00:43:38] Speaker 03: That is largely analysis. [00:43:40] Speaker 01: They're only accrediting the [00:43:42] Speaker 01: you know, the open, whatever it is, the open season and the existence of a precedent agreement, which seems to me a performative formality. [00:43:53] Speaker 01: Is that wrong? [00:43:54] Speaker 03: Well, it's not a formality. [00:43:54] Speaker 01: There's something about it that shows that there was competition, that there is some kind of, you know, somebody who could have gotten the delivery elsewise is choosing this as the cheapest way to get it. [00:44:10] Speaker 03: The Commission Certificate Policy Statement, which this Court has affirmed in many cases, and has affirmed the Commission's application in many cases, says that we will take, or says that the precedent agreements are important evidence of market need, and that is important to the Commission's overall benefit balancing analysis. [00:44:26] Speaker 03: It's only one part of it. [00:44:27] Speaker 03: We look at the project. [00:44:29] Speaker 01: It bears not at all here, am I wrong? [00:44:31] Speaker 01: That's what I'm trying to get your [00:44:34] Speaker 03: It's quite clear that there is a social benefit to the pipeline because there is market need for the pipeline. [00:44:41] Speaker 03: Project need, there's demand. [00:44:42] Speaker 03: And that's also relevant, by the way, to the pipelines. [00:44:45] Speaker 03: If they have other certain types of customers, the commission also looks at rates, rate effects of the pipeline, how they structure their rates or their incremental rates. [00:44:52] Speaker 03: Are they spreading costs to other customers who may already exist? [00:44:56] Speaker 03: And that can be important with the precedent agreement too. [00:44:59] Speaker 03: But it's black letter law that precedent agreements are important evidence of project need. [00:45:03] Speaker 03: and benefited under the Natural Gas Act and thus substantial evidence of that. [00:45:07] Speaker 03: And that's all we need here. [00:45:08] Speaker 03: As Judge Walker alluded to, there are cases in which the commission might look behind or needs to look behind the precedent agreement, but those exceptions are vanishingly small. [00:45:18] Speaker 03: Like an EDF Spire, the environmental defense fund case, there were two affiliated entities, the purchaser and the pipeline company, who had essentially some version of self-dealing. [00:45:28] Speaker 03: No one disputes that that's not the case. [00:45:30] Speaker 03: No one claims that's the case here. [00:45:32] Speaker 03: And in New Jersey Conservation Foundation, the court ultimately held that there were some concerns about how the local distribution companies would use the gas or what their motives were. [00:45:44] Speaker 03: But that's not relevant here at all because there's no downstream local distribution company buying this. [00:45:48] Speaker 03: And importantly, there's nothing like, this case is much more like Citizens Action where we have an explicit statutory prohibition on trying to regulate downstream generation in terms of its use of the gas. [00:45:59] Speaker 01: The difficulty is that it's FERC's responsibility to make sure that burdens aren't being placed, that avoidable burdens, excess burdens aren't being placed on existing ratepayers. [00:46:13] Speaker 01: And the petitioners here point to the... [00:46:16] Speaker 01: the absence of a state regulator that is focused on that. [00:46:21] Speaker 01: And your brief says, oh, but it's congressionally regulated, but not for this issue, not for existing customer overpayment. [00:46:30] Speaker 01: And the precedent agreement doesn't really seem to speak to it. [00:46:33] Speaker 01: We have a distinctive monopoly TVA here in federal [00:46:43] Speaker 01: entity. [00:46:45] Speaker 01: So I guess, in my view, what I would expect to see in FERC's order is some explanation how FERC can discharge its obligation. [00:46:59] Speaker 01: And TVA is sitting pretty, I mean, I'm being tendentious. [00:47:03] Speaker 01: Well, it's the scope of the obligation. [00:47:06] Speaker 01: that TVA says, well, we're going to do a portfolio of generation types, and this is one of them. [00:47:13] Speaker 01: And the question for FERC on behalf of the ratepayers is, well, why should we be confident that that integrated planning process [00:47:26] Speaker 01: who thought about rate payers with respect to this gas plant and the pipeline that serves it. [00:47:34] Speaker 01: I think that's your obligation, is it not? [00:47:37] Speaker 03: As explained in paragraphs 14 and 15 of the rehearing order and also paragraph 15 of the certificate order. [00:47:43] Speaker 03: Congress has said that that decision is made by TVA and we are not to intrude on it. [00:47:48] Speaker 01: So why doesn't the order say we have no role in looking at market need or looking at costs to rate payers of TVA? [00:47:58] Speaker 01: Because that is TVA's [00:48:02] Speaker 01: responsibility. [00:48:03] Speaker 01: It's outside our jurisdiction. [00:48:05] Speaker 01: TVA did its integrated planning process and we got nothing more to say. [00:48:09] Speaker 03: I think most simply we need to make sure that the pipeline company isn't going to build a pipeline that it quickly abandons. [00:48:14] Speaker 03: We need to make sure that there is some that the pipeline company will not build a pipeline that it immediately abandons. [00:48:19] Speaker 03: The relevance immediately abandons. [00:48:21] Speaker 03: I'm sorry if you can't hear me. [00:48:23] Speaker 03: The critical issue here really is, is there demand for the pipeline itself? [00:48:29] Speaker 03: We're looking at that. [00:48:29] Speaker 03: That's true. [00:48:30] Speaker 03: And this is really more relevant to the pipeline company. [00:48:32] Speaker 03: Is their project going to be self-sustaining? [00:48:35] Speaker 03: Is there an economic motive for the project? [00:48:37] Speaker 03: But we know that here. [00:48:38] Speaker 03: That's not in dispute. [00:48:40] Speaker 03: If I may also, I would like to quickly touch on the downstream effects analysis, because I believe this is also quite important. [00:48:46] Speaker 03: My friend claims that there is no evidence that the [00:48:50] Speaker 03: coal, the retirement of the coal plant depends on replacement. [00:48:55] Speaker 03: I respectfully disagree. [00:48:56] Speaker 03: That is simply counterfactual. [00:48:58] Speaker 03: TVA's record of decision from GA 348 to 351 entertains a no action alternative, including retirement of the coal, I'm sorry, continued operation of the coal units past the point of decision. [00:49:10] Speaker 03: So TVA was considering retirement up to the point where it selected alternative A, which is the gas plant. [00:49:16] Speaker 03: Now, TVA does not tell us in the Record of Decision what the second option would be and one reason why the Commission refused to speculate here. [00:49:23] Speaker 03: We do not know what TVA would do absent alternative A because they simply have not told us. [00:49:28] Speaker 03: But the record is also clear, not only in the Record of Decision, but in the Commission's impact statement at Jade 190 and also even from decisions like even in Blue Reef page 29, you'll see the Commission's opinion in Kern River. [00:49:43] Speaker 03: They say, they point out there the commission looked to statements saying that the coal plant would continue to operate. [00:49:48] Speaker 03: If you also look at GA 417, appendix B to the TVA impact statement, you will see the exact same language. [00:49:55] Speaker 03: Without the gas plant, TVA will be forced to operate the coal units to some degree. [00:49:59] Speaker 03: Maybe not permanently, we're not certain of that. [00:50:02] Speaker 03: There's also simply no evidence in the record that TVA fully committed before the record of decision to retire the coal plant. [00:50:10] Speaker 03: Now, in paragraphs 40 to 42, [00:50:13] Speaker 03: The commission does recognize that TVA had already decided to both retire the coal plant and replace it with the gas plant. [00:50:21] Speaker 03: That's not a problem from downstream effects analysis because Citizens Action tells us that the practical reality of these situations is that the large downstream infrastructure projects are the dogs that wax the tail. [00:50:33] Speaker 03: It's not the pipeline. [00:50:34] Speaker 03: So these are almost always, something like a gas plant is almost always decided before the pipeline gets approved and built. [00:50:40] Speaker 03: And so to recognize downstream effects analysis and comply with stable trail, we simply have to take that decision as a given and understand that we're supplying fuel to those entities. [00:50:51] Speaker 06: What is the justification, assuming that you can net out for savings from retiring coal plant, what's the justification for extending that 20 years? [00:51:06] Speaker 06: I thought I saw some indication in the record [00:51:11] Speaker 06: apart from any question of replacement, that those coal plants were very old, nearing the end of their useful life, and they wouldn't, no matter what happens, they wouldn't last beyond 2035. [00:51:28] Speaker 03: There are suggestions in the record that TVA might like to retire some of its coal units by 2035, but there is no hard and fast commitment, and TVA notes at JA190 [00:51:40] Speaker 03: I'm sorry, this is the commission's impact statement at J190, but in more detail at JA365, the TVA impact statement, that these are not hard and fast. [00:51:49] Speaker 03: Sorry, I'm sorry, where? [00:51:50] Speaker 03: I'm sorry, JA365. [00:51:52] Speaker 03: Which is what document? [00:51:53] Speaker 03: This is the TVA impact statement. [00:51:56] Speaker ?: Okay. [00:51:57] Speaker 03: Got it. [00:51:58] Speaker 03: TBA had not made a decision in 2019 that on January 1st, 2035, they were going to switch off every coal plant across the entire system, come what may, at the risk of something like blackouts. [00:52:11] Speaker 03: Those retirements depend on generation. [00:52:13] Speaker 03: The retirement of coal unit one at the Cumberland facilities specifically depends on the TBA's approval of the gas plant and the record of decision. [00:52:21] Speaker 03: And in fact, the JA citations I just give you indicate that TBA's overall plan [00:52:27] Speaker 03: As a reference in the IRP, it's sort of soft target goals. [00:52:30] Speaker 03: It's high level portfolio mixes. [00:52:33] Speaker 03: They depend on getting all of these retirements to go correctly in sequence without delay. [00:52:38] Speaker 01: Of course, but the question really is assuming there's going to be something picking up the slack here. [00:52:43] Speaker 01: The gas plant. [00:52:46] Speaker 01: Why would we assume in addressing the sort of, in establishing a baseline against which the benefits of the gas plant are measured that there would be 20 years as opposed to the, I mean, you know, all the planet as opposed to 10 or less. [00:53:06] Speaker 01: TVA is saying, you know, ideally, I mean, we have a replacement, which we have. [00:53:11] Speaker 01: we're going to retire this. [00:53:13] Speaker 01: Maybe even sooner. [00:53:14] Speaker 01: I think one of the reasons they chose gas over some of the other alternatives is because they could get it online quickly. [00:53:19] Speaker 01: And that means the prospects for retiring the coal plant were more prompt, no? [00:53:25] Speaker 03: Well, it's quite possible the TVA without the gas plant would continue to operate the coal plants indefinitely. [00:53:31] Speaker 03: As explained in record decision, the no action alternative. [00:53:33] Speaker 01: That's not the situation. [00:53:34] Speaker 01: The situation is assuming the gas plant comes on, [00:53:37] Speaker 01: What is the appropriate offset? [00:53:40] Speaker 01: And I have this shared Judge Katz's question with the assuming that there's an offset. [00:53:46] Speaker 01: Why would it go on indefinitely? [00:53:49] Speaker 01: Doesn't make sense. [00:53:50] Speaker 03: So the gas plant has a 20-year contract. [00:53:52] Speaker 03: That's the precedent agreement. [00:53:53] Speaker 03: And the commission used that as the best measuring stick we have, because we have no crystal ball in inquiry. [00:53:58] Speaker 03: We don't know for certain what's going to happen in 2035. [00:54:00] Speaker 06: That's a great argument for not extending gas emissions more than 20 years. [00:54:04] Speaker 03: I'm not sure it's an argument. [00:54:06] Speaker 03: That's correct. [00:54:07] Speaker 03: What we're really asking then, if I understand Judge Pillard's question correctly, [00:54:11] Speaker 03: is why are we not assuming that the coal plant would retire at some specific date? [00:54:16] Speaker 03: And that is simply because TVA has never told us that. [00:54:18] Speaker 01: I mean, you say, you know, there's no hard and fast, but there's a good understanding of the reasonable life of the plant. [00:54:25] Speaker 03: So I would disagree on that. [00:54:27] Speaker 03: My friend likes to allude to certain statements in the record, but they're simply planning assumptions. [00:54:31] Speaker 03: And as Judge Sudden tells us in Kentucky Coal Association, and if you just read the basic language in the TVA's 2019 integrated resource plan, [00:54:39] Speaker 03: There is no firm commitment to retire the co-plant at a certain date. [00:54:43] Speaker 03: And part of that is because TVA has an incredibly complex analysis. [00:54:46] Speaker 03: They need a good point in time to conduct its least cost system planning. [00:54:50] Speaker 03: Because those different units depend on the state of the system at any one time. [00:54:54] Speaker 03: Also keep in mind, they're drawing on statements from the 2019 IRP, Integrated Resource Plan. [00:55:00] Speaker 03: That plan gets updated roughly every four years. [00:55:03] Speaker 03: So there will be a new one. [00:55:04] Speaker 03: I believe there already was a new one issued in 2023. [00:55:07] Speaker 03: a new one in 2027, a new one in 2031, a new one in 2035. [00:55:11] Speaker 03: There is no guarantee that TVA's retirement target dates continue out to that point. [00:55:15] Speaker 03: If you look at the record of decision, specifically when TVA's record of decision at JA 349 discusses the new action alternative, you'll see that they'll have to make large investments to keep the coal plant running. [00:55:26] Speaker 03: But that actually may be a reason to keep the coal plant running if they sink a bunch of costs into it. [00:55:31] Speaker 03: Otherwise, they have stranded assets on this coal plant. [00:55:36] Speaker 01: point to anything in the IRP, the IRP process that provides the assurance that I was looking for that the lowest cost to ratepayers is guaranteed. [00:55:50] Speaker 01: or is weighted appropriately. [00:55:53] Speaker 03: So the record of decision describes alternative A as the best overall solution. [00:55:59] Speaker 03: And that is across a wide variety of costs. [00:56:02] Speaker 03: So costs in TVA sense do not necessarily include direct outlays or direct payments by downstream ratepayers. [00:56:09] Speaker 03: They also include social costs. [00:56:12] Speaker 03: like environmental costs or indirect costs, and also risks, including risks to the system. [00:56:17] Speaker 03: And looking at all of that together, this sort of multifactorial analysis, TVA concluded that alternative A is best for everyone, and it's under its service territory over the long term. [00:56:29] Speaker 03: And that is such a complex endeavor, and one that Congress has said is committed to TVA's discretion only, that the commission has no role to do that, whether it's under the natural gas section seven analysis, connected to actions doctrine, [00:56:42] Speaker 03: or the downstream effects analysis or the no action alternative. [00:56:46] Speaker 03: And that principle largely resolves most of the claims in this case. [00:56:50] Speaker 03: And I see I'm out of time. [00:56:52] Speaker 03: If I can answer any questions, I'd really happy to do so. [00:56:54] Speaker 01: Thank you. [00:56:55] Speaker 03: Thank you. [00:57:02] Speaker 02: These are the board. [00:57:03] Speaker 02: David Super on behalf of the interveners. [00:57:06] Speaker 02: I think I'd like to start on the [00:57:09] Speaker 02: the precedent agreement issue. [00:57:11] Speaker 02: And Judge Walker, you're exactly correct. [00:57:13] Speaker 02: There's no case from this court that comes even close to supporting the argument that Sierra Club is making here that this precedent agreement, that the court should look behind the precedent agreement as a showing of market need. [00:57:29] Speaker 02: And, Judge Pillard, I think there might be a slight conflation between the market need for the gas plant and the market need for the pipeline. [00:57:40] Speaker 02: Precedent agreement is relied upon as evidence of the market need for the pipeline only It's a 100% commitment full capacity all the gas that will be shipped via that pipeline will go To the new to the new gas plant and that is that is a that's a full showing of market need and I think it's important to point out that while Sierra Club reports to be looking out for the interests of [00:58:08] Speaker 02: The customers, the customers here are actually represented in this case, the Tennessee Valley Public Power Association. [00:58:18] Speaker 02: They are the customers of TVA. [00:58:21] Speaker 02: We're talking about 153 consumer owned and community owned local power companies that they are the customers and they are fully supportive of this pipeline. [00:58:31] Speaker 02: And that was reflected by FERC in their certificate order. [00:58:35] Speaker 02: in footnote 15 on on J five and six. [00:58:39] Speaker 01: And is there any control on what the local power companies can charge the end users? [00:58:45] Speaker 02: Well, the the local power companies. [00:58:49] Speaker 02: Well, the entire TVA approach, of course, is regulated, regulated by Congress, and they have TVA has a statutory mandate to provide least cost services. [00:59:02] Speaker 02: Now, there's no allegation in this case that [00:59:05] Speaker 02: The local power companies that are customers of TVA are not providing fair and reasonable rates to their customers. [00:59:14] Speaker 02: Sierra Club hasn't even alleged that. [00:59:16] Speaker 02: So this is not a case like the New Jersey conservation case, where there's any kind of allegation of customers not being given a fair deal. [00:59:27] Speaker 01: is in the sense that I think what the petitioners here are claiming is that had the analysis been done more fully, that there were other alternatives that would have been cheaper for the ultimate repairs. [00:59:45] Speaker 02: But again, that's. [00:59:46] Speaker 01: What I'm curious about is I agree with you that it appears in the situation with TVA [00:59:56] Speaker 01: that the buck kind of stops with the integrated planning? [01:00:03] Speaker 02: Plan. [01:00:04] Speaker 01: Integrated resource plan. [01:00:05] Speaker 02: Yeah, integrated resource plan. [01:00:08] Speaker 01: So it seems sort of a little window dressing to say, oh, and there was a precedent agreement. [01:00:14] Speaker 01: Of course there was, because this was planned to meet the needs of this plant, right? [01:00:19] Speaker 01: So it doesn't seem to me that that is showing anything other than what's already the case, which is that there's an underlying planning process that landed on [01:00:31] Speaker 01: among a portfolio of generation facilities that landed on a gas plant as an appropriate one. [01:00:38] Speaker 02: Right. [01:00:39] Speaker 02: I mean, two thoughts. [01:00:40] Speaker 02: From the standpoint of market need for the pipeline, I think it simply shows that this is a very easy case that there was market need. [01:00:46] Speaker 01: Just when we get rationales that don't, you know, I mean, I know they're applying their policy statement, but it's helpful for court to have a more of a like, does it make sense kind of reasoning? [01:00:58] Speaker 01: And to me, that doesn't really [01:01:00] Speaker 01: sense. [01:01:01] Speaker 02: Understood. [01:01:01] Speaker 02: I think the real disconnect with Sierra Club's argument is they truly are attacking TVA's decision to replace the retired coal unit with a gas plant and that is entirely beyond FERC's jurisdiction. [01:01:20] Speaker 02: FERC has no jurisdiction whatsoever over that decision. [01:01:23] Speaker 02: Congress left that decision in the hands of TVA and indeed Sierra Club and other [01:01:29] Speaker 02: plaintiffs are challenging that decision in the Middle District of Tennessee in a case that was filed 18 months ago, I believe. [01:01:39] Speaker 02: I see I'm out of time unless there are any questions. [01:01:41] Speaker 01: It's just, it's odd because it is FERC's obligation to think about whether rate payers are kind of sitting ducks and going to be overcharged. [01:01:51] Speaker 01: And it seems like in this situation, it's not clear why they're not. [01:01:56] Speaker 01: except to the extent that their interests are kind of generally folded into the to the TARP. [01:02:03] Speaker 01: But it's hard to pinpoint anything that kind of documents and really substantiates how that happened. [01:02:11] Speaker 01: And again, that's. [01:02:14] Speaker 01: Down, you know. [01:02:16] Speaker 01: Done. [01:02:16] Speaker 02: I think the comfort we can take is that Congress, through the TV Act, directed TVA [01:02:23] Speaker 02: to make those determinations. [01:02:24] Speaker 02: And FERC simply has no jurisdiction to second guess the determinations that TVA makes. [01:02:32] Speaker 02: Thanks. [01:02:33] Speaker 02: Thank you. [01:02:39] Speaker 01: All right. [01:02:39] Speaker 01: There was some reservation of time for rebuttal. [01:02:42] Speaker 01: Three minutes. [01:02:44] Speaker 05: Thank you, Your Honors. [01:02:46] Speaker 05: I'd like to start with this question about the 2035 retirement deadline. [01:02:52] Speaker 05: FERC has suggested that we need to come forward with some evidence that TVA had affirmatively and firmly committed to a retirement by 2035 before there would be some analytical problem with their extrapolation of offsets for 20 years. [01:03:07] Speaker 05: That flips the burden of recent decision making on its head. [01:03:10] Speaker 05: The simple fact is that there is nothing in this record save for [01:03:15] Speaker 05: TVA's discussion of the no action alternative in its process, which was continued operation of coal, from which FERC could conclude that the offsets should persist beyond 2035. [01:03:30] Speaker 05: And in all events, even as TVA's system is a fleet wide question about coal retirement following the 2019 IRP and the aging coal fleet evaluation, [01:03:42] Speaker 05: The JA at page 65 footnote 1, which is a part of TVA's environmental impact statement, indicates that these units are the ones that are going first. [01:03:51] Speaker 05: So there is simply no way for FERC to have rationally concluded that this particular coal plant would operate through 2035 or beyond. [01:04:02] Speaker 05: And if they had looked for that evidence, they would not have located it. [01:04:07] Speaker 05: All of that. [01:04:07] Speaker 05: Sorry, what's the? [01:04:09] Speaker 06: aside the question of who bears the burden of justification, assume I just want to look through the record and figure out what's in there about whether these plants would have to stop in 10 years regardless. [01:04:25] Speaker 06: What's the best you have on that? [01:04:27] Speaker 05: I would refer you to J I've got a couple for you. [01:04:30] Speaker 05: I would refer you to J a 365, which is part of 365. [01:04:34] Speaker 05: That's right. [01:04:35] Speaker 05: This is TVA's final environmental impact statement and it identifies the phased 2035 retirement plans for the entire cold fleet. [01:04:44] Speaker 05: It illustrates that coal is too risky for TVA and that this plant in particular, the Cumberland fossil plant, which is sometimes abbreviated as CUF in the materials, is a significant contributor to fleet wide risk. [01:04:58] Speaker 05: And that in footnote one, that even if replacement capacity for C.U.F., the Cumberland Fossil Plant, is delayed, that's still the coal plant that is going to retire first in all of TVA's phased coal retirements. [01:05:13] Speaker 05: I would also point you to JA348, which is TVA's record of decision. [01:05:20] Speaker 05: This discusses that coal end-of-life planning came after the 2019 IRP and came out of the 2019 IRP. [01:05:28] Speaker 05: And so to the extent that the IRP anticipates continued operation of some or all of these coal units, it's simply because TVA followed that up with a study in which it said, as a matter of fact, we can't continue to operate all of these indefinitely. [01:05:43] Speaker 05: We need to have a plan in place to retire them. [01:05:46] Speaker 05: And we pointed in our brief to the aging coal fleet evaluation, which is included in the joint appendix at 445. [01:05:52] Speaker 05: This is the aging coal fleet study that came out of the IRP and this illustrates at page 445 that [01:06:00] Speaker 05: Even in the most conservative coal extended scenario, the CUF units are fully retired by 2031. [01:06:08] Speaker 05: And this is a two-unit coal plant. [01:06:12] Speaker 05: And one of the units is going to go a few years before the other one. [01:06:15] Speaker 05: So had FERC looked, it could not have located evidence that the coal plant would continue to operate past 2035. [01:06:24] Speaker 05: I see that I'm over time. [01:06:25] Speaker 05: So unless the court has other questions, we would ask that you grant the petition. [01:06:28] Speaker 01: Any response to the accusation that what you're raising here really belongs in the Tennessee case? [01:06:36] Speaker 05: I do. [01:06:37] Speaker 05: And I think it points to the A&R pipeline case that my colleague on the other side mentioned. [01:06:42] Speaker 05: This is not a circumstance where we are asking FERC to exercise jurisdiction that Congress has assigned to another agency. [01:06:50] Speaker 05: This is a circumstance where we are asking FERC to exercise its own jurisdiction, not as a subordinate to TVA, but as an independent agency with its own set of obligations, to consider all factors bearing on the public interest, which this court and the Supreme Court have held extend to matters [01:07:06] Speaker 05: beyond FERC's direct regulatory jurisdiction. [01:07:10] Speaker 05: And so whatever else FERC might have said about the weight it assigned to TVA's decisional process or the extent to which it found it compelling, it was not reason for FERC to say that it could not inquire just because TVA is the ship. [01:07:26] Speaker 01: Thank you. [01:07:27] Speaker 04: Sorry. [01:07:29] Speaker 04: You mentioned JA 445. [01:07:32] Speaker 04: And there are some references to 2040 not 2035, or sorry, not yet not 2035. [01:07:38] Speaker 04: And what I can tell it looks like it's saying 2035 we better so maybe that's your point, but if it's, if it's imagining that retirement like might happen in 2040 how is it. [01:07:50] Speaker 04: proof that the retirement will definitely happen in 2035. [01:07:52] Speaker 05: So looking at the 2045 scenario, I think it's a row. [01:07:56] Speaker 05: In the columns that illustrate the different years in that scenario, CUF 1 and CUF 2 are listed for retirement no later than 2031. [01:08:07] Speaker 05: And so when we're talking about this specific coal plant, as opposed to TVA's coal fleet writ large, we submit that this page supports the principle that it would have had to retire before 2035. [01:08:20] Speaker 05: And it matters for the reason that is illustrated on page 35 of our opening brief, which is that even if [01:08:27] Speaker 05: TVA had, pardon me, even if FERC had appropriately credited the project for a decade of emissions offsets, the number would still be an increase on net in downstream emissions and not a decrease as FERC believed. [01:08:40] Speaker 06: Sorry, the plants we're talking about are CUF 1 and 2. [01:08:43] Speaker 05: That's correct. [01:08:43] Speaker 05: So they're the same plant. [01:08:44] Speaker 05: And then those are just two of the different coal generating units at that facility, Your Honor. [01:08:52] Speaker 05: Unless the court has any further questions, we would ask that you vacate the orders and grant the petitions. [01:08:57] Speaker 01: Thank you. [01:08:58] Speaker 01: The case is submitted.