Key Takeaways
- The D.C. Circuit has interpreted the Supreme Court’s decision in Seven County to mean that even effects from different components of the same large project can be considered “indirect” so as to not be considered under NEPA analysis.
- FERC can, if explained reasonably, limit its jurisdiction over parts of a project and indirectly exclude consideration of portions of the project from NEPA analysis.
- Clients can increase their chances of limiting NEPA analyses for a project that FERC oversees by submitting approval for only some portions of the project where other portions of the same project may be excluded from FERC’s jurisdiction.
The D.C. Circuit issued its first precedential opinion interpreting the recent Supreme Court decision Seven County Infrastructure Coalition v. Eagle County, Colorado, 145 S. Ct. 1497 (2025).[i] The court affirmed the Federal Energy Regulatory Commission’s (FERC) order limiting its jurisdiction to only part of a planned pipeline to be constructed across the U.S. border but traversing only a single U.S. state, meaning the National Environmental Policy Act (NEPA) effects it had to consider were appropriately limited to the border-crossing segment of the project over which FERC retained jurisdiction. Any environmental effects of the remainder of the pipeline were “indirect” and not considered.
Case Summary
Facts and Procedural History
The case concerns FERC’s approval of a facility’s construction in Hudspeth County, Texas. The facility was part of a larger system, the Saguaro Pipeline, which would start in Texas, cross the U.S. border and connect to a Mexican pipeline transporting natural gas to the Gulf of California.[ii]
Although the pipeline is completely contiguous, the court recognized that it could be viewed as consisting of three segments: the Connector Pipeline (connecting the Waha Hub gas price-reporting and index point in Texas to a facility at the Mexico border); the 1,000-foot-long Border Facility (linking the Connector Pipeline to the Sierra Madre Pipeline across the Rio Grande into Mexico); and the Sierra Madre Pipeline (starting at the U.S.-Mexico border and ending on the Mexican coast).[iii]
When the parties brought the matter before FERC in 2024, the agency held that it had jurisdiction over only the 1,000-foot Border Facility portion of the project, approved that segment and permitted it to go forward based on a NEPA analysis of that segment alone.[iv] FERC declined to exercise jurisdiction over the Connector Pipeline under Section 3 and found that it had no jurisdiction over it under Section 7 of the Natural Gas Act (NGA).[v] FERC approved the Border Facility, finding it had minimal environmental effects, after conducting an Environmental Assessment of the project.[vi]
The petitioners challenged the approval in the D.C. Circuit later that year.[vii] In it, the petitioners asserted that FERC was required to exercise jurisdiction over the Connector Pipeline and that as part of its NEPA analysis, FERC (1) should have considered the environmental impact of the Connector Pipeline regardless of jurisdiction and (2) failed to appropriately consider alternatives to the project as proposed.[viii]
Analysis
The D.C. Circuit began by briefly summarizing the types of authority that FERC traditionally can exercise and, importantly, can decline to exercise. This included NGA Section 3 jurisdiction, over natural gas that crosses the U.S. border, and NGA Section 7 jurisdiction, when it instead crosses state lines.[ix] Notably, FERC can cede its Section 3 authority and, as the D.C. Circuit pointed out, “almost invariably” does so.[x]
The court noted the standard of review for FERC’s orders is whether they were arbitrary and capricious—or, put differently, if its actions were “reasonable and reasonably explained.”[xi] It then recited the standard under Seven County, stating that “FERC has ‘broad latitude’ to decide ‘where to draw the line’ in considering environmental effects, and ‘substantial discretion’ to determine what constitute ‘feasible alternatives.’”[xii] The court also exercises “substantial deference” regarding “‘agency choices’ that ‘fall within a broad zone of reasonableness.’”[xiii]
First, the D.C. Circuit held that FERC’s decision to decline exercising jurisdiction under Section 3 was “reasonable and reasonably explained.”[xiv] The court pointed out that FERC has often similarly limited its Section 3 authority.[xv] In fact, FERC cited three decades’ worth of “remarkably consistent” precedent declining to regulate long intrastate pipelines extending from the border.[xvi] The court noted that, before declining to exercise jurisdiction, FERC often looks to whether a state regulatory body such as the Texas Railroad Commission will fill the void.[xvii]
Notably, the court found that these reasons were enough to uphold FERC’s decision, despite FERC also providing several “incorrect statements” that wrongly interpreted Section 3 in its “potpourri of reasons why it didn’t regulate the Connector Pipeline.”[xviii]
The D.C. Circuit also addressed the petitioners’ argument that Section 7 applied because the pipeline was “going to transport” interstate natural gas “at some unknown time in the future.”[xix] The court found that the Waha Hub from which the pipeline begins is merely a “pricing center,” not a mixed-source reservoir of interstate gas into which all pipelines tap, and that “FERC found that the Waha Hub does not indiscriminately mix interstate and intrastate gas.”[xx] The parties proposing the pipeline construction represented to FERC that all gas transported will be produced in Texas.[xxi] The court noted that those parties are allowed to later seek FERC authorization and transport interstate gas—but that option does not create Section 7 jurisdiction over the pipeline now.[xxii] The petitioners can wait to challenge any later decision to transport interstate gas.[xxiii] The petitioners’ assertion that the pipeline’s whole purpose was to transport interstate gas was also rejected—though the pipeline was not yet utilizing its full capacity, it had access to nearly double the pipeline’s capacity of intrastate gas.[xxiv]
The D.C. Circuit then applied Seven County deference to FERC’s NEPA analysis and found that FERC’s determinations met the applicable standards.[xxv]
Because FERC declined to exercise authority over the Connector Pipeline, this narrowed the scope of the environmental effects that FERC considered under NEPA to the Border Facility’s effects and allowed FERC to use the more-streamlined Environmental Assessment mechanism rather than an Environmental Impact Statement.[xxvi] And by defining the objective of the pipeline project as connecting the Connector Pipeline to the Sierra Madre Pipeline, FERC tightly constrained the range of alternatives that could be considered under NEPA. This narrowed scope led the petitioners to accuse FERC of “gerrymandering” the “purpose and need” of the project in its Environmental Assessment that permitted “only one feasible alternative: the Border Facility as proposed.”[xxvii] But the court reviewed the decision with “substantial deference” and rejected the petitioners’ challenges to FERC’s analysis of alternatives.[xxviii] The court held that FERC properly based its decision to approve the Border Facility on the requesting parties’ “needs and goals” to “link the Connector Pipeline to the Sierra Madre Pipeline across the Texas-Mexico border.”[xxix]
Additionally, the petitioners argued that FERC “should have considered the upstream environmental impacts of the Connector Pipeline.”[xxx] But the D.C. Circuit rejected that position, finding that it “runs headlong” into the Seven County holding, which allows FERC to draw “a manageable line” around the effects of projects that it is to consider, and it need not consider those “separate in time or place.”[xxxi] This is a decision to which courts “must remain deferential.”[xxxii] As the court emphasized, “[t]he Supreme Court has shut the courthouse door to NEPA nitpicking” based on “causally attenuated indirect effects.”[xxxiii] The Connector Pipeline’s upstream effects were appropriately excluded under this standard; FERC drew a “reasonable” line at the Border Facility, since it had initially “reasonably declined Section 3 jurisdiction” over the Connector Pipeline.[xxxiv]
Key Takeaways
This decision demonstrates the potential breadth of Seven County’s application to NEPA analysis; even effects from different components of the same large project could be considered “indirect,” and the parts of the project can be sufficiently “separate in time and place” to preclude NEPA analysis of all parts of the same project. Separately, the effect of Seven County’s application can be accentuated in cases where even if an agency could exercise jurisdiction over parts of a proposed project, it reasonably explains its decision to exercise cooperative federalism or rely on state regulators to do so. In that instance, the environmental aspects of the proposed project over which the agency did not exercise jurisdiction may then be reasonably excluded from the scope of the required NEPA analysis.
This holding has its limits, though, because FERC’s discretion to cede jurisdiction over natural gas pipeline projects is generally limited to the NGA Section 3 context and does not extend to pipelines over which FERC has authority under Section 7. When declining to exercise jurisdiction over portions of a pipeline project under Section 3, FERC reasonably can decline to consider the environmental effects of the portions over which it declines to exercise jurisdiction if they are outside FERC’s Section 7 jurisdiction, as was the case here. And agency discretion to consider indirect effects has not been eliminated from NEPA analysis altogether.[xxxv]
Practically speaking, though, entities may be able to frame a request to FERC to approve a limited part of a project if FERC could reasonably decline to exercise jurisdiction over the rest. In doing so, entities can increase their chances of limiting the scope of required NEPA analysis.
[i] Sierra Club v. FERC, __ F.4th ___, No. 24-1199, 2025 WL 2178519, at *1 (D.C. Cir. Aug. 1, 2025).
[ii] Id. at *2.
[iii] Id.
[iv] Saguaro Connector Pipeline, LLC,186 FERC ¶ 61,114(2024), order on reh’g, 188 FERC ¶ 61,029 (2024).
[v] Id.
[vi] Id.
[vii] Id.
[viii] Though the petitioners also argued that FERC’s order was arbitrary and capricious, the court summarily rejected this contention. See id. at *8.
[ix] Id. at *1–2.
[x] Id. at *2.
[xi] Id. at *3 (quoting Ala. Mun. Distribs. Grp. v. FERC, 100 F.4th 207, 210, 212 (D.C. Cir. 2024)).
[xii] Id. (quoting Seven Cnty. Infrastructure Coal. v. Eagle Cnty., Colorado, 145 S. Ct. 1497, 1512–13 (2025)).
[xiii] Id. (quoting Seven Cnty., 145 S. Ct. at 1512–13).
[xiv] Id. at *4.
[xv] Id.
[xvi] Id.
[xvii] Id.
[xviii] Id.
[xix] Id. at *5.
[xx] Id. (emphasis removed).
[xxi] Id. at *6.
[xxii] Id.
[xxiii] Id. at *8.
[xxiv] Id. at *7.
[xxv] Id. at *8–10.
[xxvi] Id. at *8–9.
[xxvii] Id. at *8.
[xxviii] Id. at *9 (quoting Seven Cnty., 145 S. Ct. at 1513).
[xxix] Id. (quoting Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190, 196 (D.C. Cir. 1991) (Thomas, J.)).
[xxx] Id. at *10.
[xxxi] Id. (quoting Seven Cnty., 145 S. Ct. at 1517).
[xxxii] Id. (quoting Seven Cnty., 145 S. Ct. at 1517).
[xxxiii] Id.
[xxxiv] Id.
[xxxv] Seven Cnty., 145 S. Ct. 1497, 1515 (“To be clear, the environmental effects of the project at issue may fall within NEPA even if those effects might extend outside the geographical territory of the project . . . . Those so-called indirect effects can sometimes fall within NEPA . . . .”).
[View source.]
