FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SOUTH COAST AIR QUALITY
MANAGEMENT DISTRICT,
Petitioner,
v.
FEDERAL ENERGY REGULATORY
COMMISSION, No. 08-72265
Respondent, FERC Nos.
and CP06-61-000
PUBLIC UTILITIES CP06-61-001
CP06-61-002
COMMISSION OF THE STATE OF CP06-61-003
CALIFORNIA; SEMPRA LNG CP06-61-004
MARKETING CORP.; NORTH BAJA
PIPELINE, LLC; SHELL ENERGY OPINION
NORTH AMERICA (U.S. L.P.); SAN
DIEGO GAS & ELECTRIC COMPANY;
SOUTHERN CALIFORNIA GAS
COMPANY,
Intervenors.
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Argued and Submitted
November 2, 2009—San Francisco, California
Filed September 9, 2010
Before: Michael Daly Hawkins and Sidney R. Thomas,
Circuit Judges, and Edward R. Korman,* District Judge.
*The Honorable Edward R. Korman, Senior United States District
Court Judge, Eastern District of New York, sitting by designation.
13803
13804 SOUTH COAST AIR QUALITY v. FERC
Opinion by Judge Korman
SOUTH COAST AIR QUALITY v. FERC 13807
COUNSEL
Daniel P. Selmi, Los Angeles, California, and Deborah L.
Keeth, Shute, Mihaly & Weinberger, San Francisco, Califor-
nia, for the petitioner.
Holly E. Cafer, Federal Energy Regulatory Commission,
Washington, D.C., for the respondent.
Harvey Y. Morris, San Francisco, California, for Intervenor
Public Utilities Commission of the State of California.
John R. Ellis, Los Angeles, California, for Intervenors South-
ern California Gas Company and San Diego Gas & Electric
Company.
Catherine E. Stetson and Lee A. Alexander, Hogan & Hartson
LLP, Washington, D.C., for Intervenor North Baja Pipeline,
LLC.
13808 SOUTH COAST AIR QUALITY v. FERC
William D. Rapp, Sempra Energy, San Diego, California, for
Intervenor Sempra LNG Marketing Corp.
Jeffrey D. Watkiss, Bracewell & Giuliani, Washington, D.C.,
for Intervenor Shell Energy North America (US), L.P.
OPINION
KORMAN, District Judge:
Natural gas is generally regarded as the cleanest conven-
tional fossil fuel. Nevertheless, as the dispute that forms the
basis of this appeal demonstrates, the burning of this energy
source releases air pollutants—namely, nitrogen oxides
(NOx), the precursors that lead to the chemical formation of
ozone and particulate matter, two federally-regulated pollu-
tants and the focus of this litigation. The Wobbe Index (“WI”)
is a measure of natural gas interchangeability. It is based on
the heating value and specific gravity of the gas, and often
referenced as a proxy for natural gas quality. Gas with a
higher WI number produces more heat because it burns hotter
than gas with a lower number. As the WI of a quantity of gas
increases, the NOx emissions from the gas increase as well.
The WI of gas may vary depending on its source—the gas
historically burned in California originates exclusively in
North America, and the five-year historical WI average for
gas used in the Basin Region of Southern California (“Basin”)
is 1332. Foreign-sourced natural gas, on the other hand, often
has an average WI that is higher than that of domestic
sources, but may be commingled or blended with other gasses
to lower that value.
Foreign-sourced liquefied natural gas arrives in North
America in condensed form after having been shipped on
tankers. On arrival, it is regasified at terminals and ultimately
transported through pipelines to end users. North Baja Pipe-
SOUTH COAST AIR QUALITY v. FERC 13809
line, LLC (“North Baja”) operates an interstate natural gas
pipeline system that extends eighty miles from an intercon-
nection with El Paso Natural Gas Company near Ehrenberg,
Arizona, through southeast California to the international bor-
der between Yuma, Arizona and Mexicali, North Baja Mex-
ico, and currently transports gas in the southbound direction
only. It commenced the underlying proceeding on February 7,
2006 by applying for a certificate of public convenience and
necessity with the Federal Energy Regulatory Commission
(“FERC”) pursuant to Section 7(c) of the Natural Gas Act, 15
U.S.C. § 717(f)(c). The certificate would authorize the expan-
sion and modification of North Baja’s existing pipeline sys-
tem to allow for the transport of foreign-sourced natural gas
in the opposite direction, from Mexico northbound into the
Basin.
The Basin consists principally of four counties—Orange
County and the non-desert portions of Los Angeles, River-
side, and San Bernardino Counties—that comprise the juris-
dictional area of South Coast Air Quality Management
District (“South Coast”). Once completed, the expanded pipe-
line would have the capacity to transport gas into the Califor-
nia system through an interconnection with Southern
California Gas Company (“SoCalGas”), a public utility corpo-
ration that delivers gas throughout the Basin.
In 2007, FERC released an environmental impact statement
(“EIS”) for the project, the purpose of which was to detail and
consider any environmental impacts associated with the North
Baja pipeline project. FERC filed the EIS with the Environ-
mental Protection Agency (“EPA”) and included responses to
all comments received during the public comment period.
Both South Coast and the EPA filed written responses to this
document. South Coast, which had intervened in the proceed-
ings, claimed that FERC was in violation of its duties under
the National Environmental Policy Act (“NEPA”), 42 U.S.C.
§§ 4321-4370f, the Clean Air Act, 42 U.S.C. §§ 7401-7671q,
and the Natural Gas Act. Specifically, South Coast alleged
13810 SOUTH COAST AIR QUALITY v. FERC
that FERC’s EIS only examined the environmental impact
relating to the construction and operation of the new pipeline
itself, and urged FERC to also consider the impact of the
emissions resulting from the eventual use of the pipeline’s gas
by consumers in the Basin and to adopt measures to mitigate
that impact.
Shortly thereafter, FERC issued an order approving the
project, which authorized the construction of new facilities to
allow for the northward flow of gas. North Baja Pipeline,
LLC, 121 FERC ¶ 61,010 (Oct. 2, 2007), reh’g denied, 123
FERC ¶ 61,073 (Apr. 24, 2008). The order confirmed FERC’s
earlier environmental review and adopted twenty-one enumer-
ated environmental conditions relating to the construction of
the pipeline and its continued transport of gas. FERC also
required that the North Baja pipeline only deliver gas that
meets the strictest gas quality standards imposed by state reg-
ulatory agencies on downstream end-users and pipelines,
which, in light of California’s gas standards, meant that the
North Baja gas could not exceed a WI level of 1385. FERC
found that compliance with these standards “should not result
in a material increase in air pollutant emissions and, therefore,
should not result in material changes in air quality in the
Basin.”
Moreover, although South Coast had argued previously for
a maximum WI of 1360 in California, FERC observed that
“[t]he record contains no analysis or evidence showing a
material change in air quality impacts as a result of the con-
sumption of natural gas with a WI of 1385 . . . compared to
that of [South Coast’s] proposed WI limit of 1360.”
South Coast, acting alone, filed a Request for Rehearing of
FERC’s Order. FERC denied the request and South Coast
filed the instant petition for review.
I. Regulatory Background
Before turning to the arguments in this case, we briefly out-
line the statutory and regulatory history of the natural gas
SOUTH COAST AIR QUALITY v. FERC 13811
industry in order to provide the background for FERC’s role
in regulating the burning of natural gas in California. “By
1938, in a series of Commerce Clause cases, the Supreme
Court established that states could regulate the intrastate and
interstate transportation and sale of natural gas to ultimate
consumers . . . .” Mich. Consol. Gas Co. v. Panhandle E. Pipe
Line Co., 887 F.2d 1295, 1299 (6th Cir. 1989). The states,
however, “could not reach indirect sales for resale, such as a
pipeline’s sale to [a local distribution company] for resale.”
Id. This inability to regulate wholesale interstate transactions
created a “regulatory void,” Gen. Motors Corp. v. Tracy, 519
U.S. 278, 292 (1997), and “handicapped their ability to regu-
late the natural gas industry and left consumers at the mercy
of producers and pipeline companies,” Mich. Consol. Gas,
887 F.2d at 1299 (citing Panhandle E. Pipe Line Co. v. Pub.
Serv. Comm’n of Indiana, 332 U.S. 507, 515-16 (1947)).
In response, Congress passed the Natural Gas Act, “a com-
prehensive scheme of federal regulation of ‘all wholesales of
natural gas in interstate commerce.’ ” Northern Natural Gas
Co. v. State Corp. Comm’n, 372 U.S. 84, 91 (1963) (quoting
Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 682
(1954)). Through the Natural Gas Act, Congress “ ‘meant to
create a comprehensive and effective regulatory scheme’ of
dual state and federal authority.” Fed. Power Comm’n v. La.
Power & Light Co., 406 U.S. 621, 631 (1972) (quoting Pan-
handle E. Pipe Line, 332 U.S. at 520). It accomplished this by
granting FERC exclusive jurisdiction to “fill the regulatory
void” described above. Gen. Motors, 519 U.S. at 292; Mich.
Consol. Gas, 887 F.2d at 1299.1 In Section 1(b) of the Natural
Gas Act, Congress vested FERC with authority over just three
1
Natural Gas Act jurisdiction was originally delegated to the Federal
Power Commission (“FPC”). In 1977, the FPC was renamed FERC pursu-
ant to the Department of Energy Organization Act. Pub. L. No. 95-97, 91
Stat 565. Though cases decided prior to 1977 refer only to the FPC, for
purposes of this opinion, the name “FERC” will be used to indicate either
FERC or its predecessor agency, the FPC.
13812 SOUTH COAST AIR QUALITY v. FERC
domestic areas: 1) the “transportation of natural gas in inter-
state commerce,” 2) the “sale in interstate commerce of natu-
ral gas for resale,” and 3) “natural-gas companies engaged in
such transportation or sale.” 15 U.S.C. § 717(b). Notably
however, the Natural Gas Act specifically exempted from fed-
eral regulation the “local distribution of natural gas” i.e., the
means by which end users obtain their gas. Id.; see also Fed.
Power Comm’n v. Transcon. Gas Pipe Line Corp., 365 U.S.
1, 27 (1961); Panhandle E. Pipeline, 332 U.S. at 516. Simi-
larly, section 1(c) of the Natural Gas Act, the so-called “Hin-
shaw Amendment,” “exempts from FERC regulation
intrastate pipelines [such as SoCalGas] that operate exclu-
sively in one State and with rates and service regulated by the
State.” Gen. Motors, 519 U.S. at 284 n.3.
Federal regulation by FERC “was to be broadly comple-
mentary to that reserved to the States, so that there would be
no ‘gaps’ for private interests to subvert the public welfare.”
Louisiana Power & Light Co., 406 U.S. at 631. But, while
FERC’s and the states’ respective areas of jurisdiction were
designed to coordinate with each other, United States v. Pub.
Utils. Comm’n, 345 U.S. 295, 311 (1953), “Congress meant
to draw a bright line easily ascertained, between state and fed-
eral jurisdiction,” Fed. Power Comm’n v. S. Cal. Edison Co.,
376 U.S. 205, 215 (1964). Significantly, FERC’s authority
“was drawn very meticulously and has been interpreted nar-
rowly to affect only those areas that were outside of the
states’ regulatory reach at the time it was passed.” Mich. Con-
sol. Gas, 887 F.2d at 1299 (emphasis added) (citing Schn-
eidewind v. ANR Pipeline Co., 485 U.S. 293, 305 (1988);
Panhandle E. Pipe Line, 332 U.S. at 516-17; Fed. Power
Comm’n v. Hope Natural Gas Co., 320 U.S. 591, 610 (1944)).
As the Supreme Court has held:
The [Natural Gas Act], though extending federal reg-
ulation, had no purpose or effect to cut down state
power. On the contrary, perhaps its primary purpose
was to aid in making state regulation effective, by
SOUTH COAST AIR QUALITY v. FERC 13813
adding the weight of federal regulation to supple-
ment and reinforce it in the gap created by the prior
decisions. The Act was drawn with meticulous
regard for the continued exercise of state power, not
to handicap or dilute it in any way.
Panhandle E. Pipe Line, 332 U.S. at 517-18 (footnote omit-
ted).
Courts have strictly enforced this delineation between state
and federal power. Particularly apposite is Altamont Gas
Transmission Company v. FERC, 92 F.3d 1239 (D.C. Cir.
1996), in which the D.C. Circuit held that FERC had
exceeded its jurisdiction by promulgating orders explicitly
intended to affect the local rate-setting for an intrastate “Hin-
shaw” pipeline, an action that undisputedly fell within the
State of California’s sole jurisdiction. Id. at 1246-47. The
D.C. Circuit explained that FERC had no authority “to do
indirectly what it could not do directly.” Id. at 1248. It con-
cluded:
Although [FERC] ordinarily has the authority to
consider a matter beyond its jurisdiction if the matter
affects jurisdictional sales—at least if there would
otherwise be a regulatory gap—here there is no such
gap but, on the contrary, an express congressional
reservation of jurisdiction to another body.
Id.; see also Colorado Interstate Gas Co. v. Fed. Power
Comm’n, 185 F.2d 357, 360 (3d Cir. 1950).
In sum, the history and judicial construction of the Natural
Gas Act suggest that all aspects related to the direct consump-
tion of gas—such as passing tariffs that set the quality of gas
to be burned by direct end-users—remain within the exclusive
purview of the states. Against this backdrop, we now turn to
the issue of FERC’s obligation under NEPA to consider the
environmental impact of the end-use burning of gas in the
13814 SOUTH COAST AIR QUALITY v. FERC
Basin—an area within the jurisdiction of the State of Califor-
nia, and more particularly, of the Public Utilities Commission
of the State of California (“CPUC”), and which FERC is
without power to regulate.
II. Discussion
A. NEPA
[1] NEPA establishes a “national policy [to] encourage
productive and enjoyable harmony between man and his envi-
ronment,” and was intended to promote “the understanding of
the ecological systems and natural resources important to the”
United States. 42 U.S.C. § 4321. It requires a federal agency,
“to the fullest extent possible,” to prepare a detailed EIS
regarding the environmental impact of “major Federal actions
significantly affecting the quality of the human environment,”
42 U.S.C. § 4332(2)(C)(I), with “major Federal actions”
defined as including “actions with effects that may be major
and which are potentially subject to Federal control and
responsibility.” 40 C.F.R. § 1508.18 (2003).
The purpose of NEPA is twofold: 1) to ensure that the
agency proposing major federal action “will have available,
and will carefully consider, detailed information concerning
significant environmental impacts,” Robertson v. Methow
Valley Citizens Council, 490 U.S. 332, 349 (1989), and 2) to
guarantee that the relevant information will be made available
to the larger public audience. See 42 U.S.C. § 4332(2)(C).
Notably, however, “NEPA itself does not mandate particular
results” in order to accomplish these ends. Robertson, 490
U.S. at 350. Rather, it imposes only procedural requirements
on federal agencies to undertake analysis of the environmental
impact of their proposals and actions. Id. at 349-50; see also
James J. Hoecker, The NEPA Mandate and Federal Regula-
tion of the Natural Gas Industry, 13 Energy L.J. 265, 265
(1992) (“NEPA is more procedural than prophylactic.”).
Moreover, NEPA may not be used to broaden FERC’s
SOUTH COAST AIR QUALITY v. FERC 13815
congressionally-limited role. See Natural Res. Def. Council,
Inc. v. U.S. EPA, 822 F.2d 104, 129 (D.C. Cir. 1987)
(“NEPA, as a procedural device, does not work a broadening
of the agency’s substantive powers”); Cape May Greene, Inc.
v. Warren, 698 F.2d 179, 188 (3d Cir. 1983) (“[NEPA] does
not expand the jurisdiction of an agency beyond that set forth
in its organic statute . . . .”)
We review FERC’s substantive NEPA decisions under the
arbitrary and capricious standard, for the purpose of determin-
ing that the agency “has adequately considered and disclosed
the environmental impact of its actions.” Am. Rivers v. FERC,
201 F.3d 1186, 1194-95 (9th Cir. 1999) (quoting Ass’n of
Pub. Agency Customers, Inc. v. Bonneville Power Admin.,
126 F.3d 1158, 1183 (9th Cir. 1997); see also Nat’l Parks &
Conservation Ass’n v. U.S. Dep’t of Transp., 222 F.3d 677,
680 (9th Cir. 2000) (A court will approve an EIS if it contains
“a reasonably thorough discussion.”).
South Coast argues that when FERC approved the North
Baja pipeline project, it was required under NEPA to analyze
the environmental impacts of emissions resulting from the
burning of gas supplied by the pipeline to consumers in the
Basin. The adequacy of FERC’s NEPA analysis involves two
separate issues. The first is whether FERC was obligated to
consider the environmental impact of the emissions caused by
the burning of North Baja gas by end users in the Basin. The
second is whether, assuming FERC was obligated to do so, it
adequately considered the impact in its EIS. We need not
resolve the first question. While FERC argues that it was not
obligated to address the potential impact of the end-use of
North Baja gas in its NEPA analysis, it explicitly stated in its
Order Denying Rehearing that it had considered that impact
in its 250-page EIS. Under these circumstances, we turn
directly to the issue of the adequacy of the EIS in this regard.
1. FERC’s Analysis
FERC evaluated the effects of the pipeline construction
project in both a draft and final EIS, and a proposed land use
13816 SOUTH COAST AIR QUALITY v. FERC
plan amendment prepared jointly with the California State
Lands Commission. FERC made its draft EIS available to the
public, publishing it in the Federal Register, mailing it to
approximately 1,000 interested parties, including federal,
state, and local governmental agencies, elected officials,
Native American tribes, and affected landowners, and circu-
lating it for public comment for a period of ninety days. In
addition, two public meetings were held in California to
solicit comments on the statement.
After nearly two years of preparation and public input,
FERC released its final EIS, which acknowledged concerns of
commentators that “the introduction of the [foreign-sourced
liquefied natural gas] would substantially increase emissions
of the ozone precursor NOx in the South Coast Air Basin,
directly affecting air quality and making attainment of the
Federal air quality standards more difficult.” After acknowl-
edging that there exists the potential for environmental effects
stemming from the North Baja project, FERC determined that
the North Baja pipeline certificate should be conditioned on
compliance with CPUC’s maximum WI level of 1385. Specif-
ically, FERC’s final EIS required North Baja to “only deliver
gas that meets the strictest applicable gas quality standards
imposed by state regulatory agencies on downstream [local
distribution companies] and pipelines.”
[2] Based on CPUC’s earlier gas quality findings, which
lowered the maximum WI for gas burned in California from
1437 to 1385, FERC determined that “consumption of [gas]
transported by North Baja and meeting CPUC’s WI standard
of 1385 or less, by definition, should not result in a material
increase in air pollutant emissions,” regardless of the type or
source of natural gas entering the Basin by way of the North
Baja pipeline (emphasis added). In sum, in its EIS, FERC
explicitly considered the environmental impact of down-
stream emissions and imposed what it reasonably believed to
be effective measures to mitigate the impact.
SOUTH COAST AIR QUALITY v. FERC 13817
[3] Significantly, in its comments on FERC’s draft EIS, the
EPA had specifically suggested that the final EIS should “ad-
dress the North Baja’s commitment to provide a supply of
natural gas within a specific range. One alternative is to
require that the natural gas meet, within some level of vari-
ability, the quality of natural gas currently flowing in the
Southwest natural gas transmission pipeline.” By requiring
North Baja gas to conform to the gas quality standards set by
CPUC, which represent a 4% deviation from the historic WI
average of gas flowing in California, FERC did what was rec-
ommended by the EPA. While this may not have alleviated all
of the EPA’s concerns, FERC satisfied its obligation to “con-
sider the views of other agencies,” even though it was “not
obligated to defer to that agency’s view.” See Fuel Safe Wash.
v. FERC, 389 F.3d 1313, 1332 (10th Cir. 2004). We observe
that the EPA has not intervened in this case in support of
South Coast, even though FERC is an independent regulatory
agency.
[4] Moreover, FERC’s analysis was reasonably thorough,
given circumstances that suggest a significant amount of
uncertainty regarding the issue of the ultimate impact of burn-
ing imported natural gas delivered by North Baja. Specifi-
cally, in its Certificate Order, FERC states that “[t]he factors
necessary for an analysis of whether and how the end use of
the gas transported by North Baja will impact air quality . . .
are unknowable at this time.” FERC identified several
unknown variables, including: 1) the WI for the gas ultimately
delivered to the Basin, due to blending of gasses with differ-
ent WI values that will occur both at the North Baja facilities
and within the California gas distribution system itself; and 2)
the eventual end-users of the gas in the Basin area and the
quantity of gas consumed. Nevertheless, South Coast argues
that FERC did not go far enough in its emissions analysis and
argues “that substantial and quantifiable details of the pro-
posed gas usage are available to FERC.”
This assertion is inconsistent with the position South Coast
took in the proceedings before CPUC, where it advocated on
13818 SOUTH COAST AIR QUALITY v. FERC
behalf of a 2% deviation from the five-year historical average
in California, rather than the 4% deviation that CPUC ulti-
mately adopted, because “the effects of introducing higher WI
gas are uncertain, and . . . the two percent band would pre-
serve the status quo while additional research and studies are
performed on the environmental effects of burning high WI
gas.” CPUC agreed with South Coast’s assessment “that fur-
ther research is needed to fully understand the impacts of
higher Wobbe Index gas on emissions and end-use equipment
performance.”
The uncertainty regarding the effects of introducing higher
WI gas into the Basin is also reflected in conditions placed by
another California agency on the North Baja project. Some
additional background is required at this point. FERC’s
approval was not the only one required here. Because the
pipeline’s construction required a right-of-way over land
owned by the State of California, the California State Lands
Commission also had to approve an amendment to North
Baja’s existing right-of-way lease, and file a statement under
the California Environmental Quality Act (“CEQA”), Califor-
nia’s equivalent of a NEPA statement. The California State
Lands Commission ultimately approved the amendment to the
right-of-way, subject to the following condition requiring
North Baja to study the air quality impacts in the
[Basin] of using gas with a higher WI than is pres-
ently used in the [Basin]. This condition requires
North Baja to measure NOx emissions directly attrib-
utable to any incremental increases in the WI of gas
used in the [Basin] resulting from the operation of
North Baja’s pipeline, to determine appropriate mea-
sures to mitigate such increases in NOx emissions,
and to implement those mitigation measures
approved by the [California State Lands Commis-
sion].
[5] In sum, FERC’s EIS contains a reasonably thorough
discussion of the environmental impact of its actions, based
SOUTH COAST AIR QUALITY v. FERC 13819
on information then available to it. Consequently, NEPA’s
goal of “informed agency action” has been met. See Swanson
v. U.S. Forest Serv., 87 F.3d 339, 343 (9th Cir. 1996); see
also Border Power Plant Working Group v. Dep’t of Energy,
467 F. Supp. 2d 1040, 1059 (S.D. Cal. 2006) (“If the EIS con-
tains a reasonably thorough discussion, the court will approve
the EIS even though it may disagree with the agency’s con-
clusion.” (internal quotation marks omitted)).
2. The CPUC Proceedings
Because FERC adopted CPUC gas quality standards, South
Coast has launched a collateral attack on those standards in an
effort to show that FERC’s reliance on them was arbitrary and
capricious. CPUC first adopted the standards during proceed-
ings that were commenced based on indications that “there
may not be sufficient natural gas supplies or infrastructure to
meet the long-term needs of the state[ ],” and at which CPUC
determined that liquefied natural gas may prove to be an
important new source of natural gas supply to California.
CPUC then went on to address the impact of gas quality,
expressing “concern[ ] with the potential impacts of high
Wobbe gas on emissions,” and stating that its goal was “to
responsibly determine the impacts of any recommended
changes [in WI standards] on safety, end-use performance,
and air quality.”
Ultimately, CPUC adopted an upper WI limit of 1385 for
gas burned in California, lower than the previous allowable
maximum of 1437. It found that any air quality impact as a
result of a maximum WI limit of 1400 “would be negligible,
and at the maximum level of 1385 would be tiny and incre-
mental,” and a “1360 maximum Wobbe Index would unnec-
essarily constrain California’s natural gas supplies.”
Regarding the introduction of liquefied natural gas into Cali-
fornia, CPUC also observed that “[t]he truth of the matter is
that no one can predict with any certainty what the specific
quality of the regasified [gas] will be, when and if it ever
13820 SOUTH COAST AIR QUALITY v. FERC
enters California’s gas supply system, except to say that it
will be within the [CPUC’s] permissible Wobbe Index range
of 1279-1385.”
In reaching the conclusion that the 1385 level was optimal
for achieving the dual purposes of supplying natural gas to
California at reasonable prices while mitigating any environ-
ment damage caused from harmful resulting emissions, CPUC
relied on the work of NGC+ Interchangeability Work Group
(“NGC+”), an industry-wide technical work group that
included representatives of all major segments of the natural
gas industry, which was formed to address, inter alia, the “in-
terchangeability” issues associated with liquefied natural gas.
NGC+ published a paper, dated February 28, 2005, called the
“White Paper on Natural Gas Interchangeability and Non-
Combustion End Use” (“White Paper”). In the White Paper,
NGC+ defines the term “interchangeability” as “[t]he ability
to substitute one gaseous fuel for another in a combustion
application without . . . materially increasing air pollutant
emissions.” The stated purpose of the White Paper was “to
define acceptable ranges of natural gas characteristics that can
be consumed by end users while maintaining safety, reliabil-
ity, and environmental performance.” In light of this purpose,
the White Paper recommended the adoption of “[a] range of
plus and minus 4%” from the local historical WI average,
subject to an overall maximum WI of 1400, along with addi-
tional testing.2
[6] CPUC rejected the maximum WI level of 1400 as too
high, and acknowledged that “[f]urther research is needed to
fully understand the impacts of higher [WI] gas on emissions
2
In its official policy statement regarding natural gas interchangeability,
FERC explicitly endorsed the NGC+ White Paper, stating that “pipelines
and their customers are strongly encouraged to use the Natural Gas Coun-
cil Plus (NGC+) interim guidelines . . . as a common reference point for
resolving gas quality and interchangeability issues.” Natural Gas Inter-
changeability, 115 FERC ¶ 61,325, 62,156 (June 15, 2006).
SOUTH COAST AIR QUALITY v. FERC 13821
and end-use equipment performance.” Moreover, it concluded
that developers of liquefied natural gas “need regulatory cer-
tainty today to design and build [liquefied natural gas] import
projects and arrange for sources of [liquefied natural gas] sup-
ply.” Accordingly, it concluded that it “should adopt a gas
quality standard that is consistent with the best information
currently available.” In setting new WI levels, CPUC also rec-
ognized that factors other than WI may play a large role in
protecting California’s air quality.
CPUC’s observation has proven to be prophetic. Because
of the recent discovery of huge natural gas reserves within the
United States, which are already being tapped, today
“[i]mport terminals for [liquefied natural gas] sit virtually
empty, and the prospects that the U.S. will become even more
dependent on foreign imports are receding.” Amy Myers
Jaffe, Shale Gas Will Rock the World, Wall St. J., May 10,
2010. This is echoed in a description of the circumstances one
year earlier. See Ben Casselman, U.S. Fields Go From Bust
to Boom, Wall St. J., April 30, 2009, at A1 (“Liquefied-
natural-gas imports plunged [in 2008], leaving import termi-
nals nearly idle.”).3
[7] Even if CPUC’s conclusions were somehow incorrect,
however, this fact would not affect our decision regarding
FERC, whose reliance on the CPUC findings must simply be
reasonable. See Fuel Safe Wash., 389 F.3d at 1332; Nat’l
Parks & Conservation Ass’n, 222 F.3d at 680. Indeed, in Fuel
Safe Washington v. FERC, the Tenth Circuit held that FERC’s
reliance in its EIS on a uniform building code was reasonable,
notwithstanding the fact that the EPA and the State of Wash-
3
During oral argument, South Coast’s attorney asserted that the current
sources of domestic natural gas, the Permian Basin and San Juan Basin,
were almost exhausted, and that the only source of natural gas for these
areas in the future would be foreign-sourced liquiefied natural gas. When
asked about the recent large discoveries of domestic natural gas, he dis-
claimed any knowledge.
13822 SOUTH COAST AIR QUALITY v. FERC
ington Department of Natural Resources thought otherwise.
389 F.3d at 1332. Here, the CPUC determination was the
product of a lengthy decision making process subject to ample
challenges by South Coast. Accordingly, we cannot say that
FERC’s reliance on these previous state agency findings was
in any way unreasonable or an abuse of discretion.
Nor is there any merit to South Coast’s claim that CPUC
has shirked its responsibility to conduct an environmental
analysis of Basin emissions, or that FERC and CPUC are
engaged in an “environmentally deceptive game of mutual
avoidance.” Specifically, South Coast points to statements
made by CPUC in 2006, which South Coast now claims illus-
trate CPUC’s belief that FERC is the agency responsible for
conducting the appropriate environmental review. This argu-
ment, however, mischaracterizes the position taken by CPUC.
The statement at issue is taken from the 2006 CPUC order
which reduced the maximum WI of gas burned in California
from 1437 to 1385. In the course of concluding that this
action did not require an environmental impact analysis under
California law, CPUC stated:
It should be noted that, under certain circumstances,
the authority to conduct environmental review will
lie with agencies and public entities other than the
[CPUC]. For example, in 2005, Congress amended
the federal [Natural Gas Act] to expressly grant
[FERC] the exclusive authority over the siting, con-
struction, expansion or operation of [liquefied natu-
ral gas] terminals . . . In addition, if state land would
be utilized for [liquefied natural gas] operations,
those state or local agencies which administer the
use of, and public trust obligations for, such state
lands would also retain jurisdiction.
This statement was not a disavowal by CPUC of its obligation
to conduct an environmental review of emissions at the proper
time—rather, it simply recognizes that, although the exercise
SOUTH COAST AIR QUALITY v. FERC 13823
in which it was engaged did not require an environmental
analysis, there will be times when other agencies, such as
FERC, may conduct environmental reviews in addition to
those of CPUC. Indeed, as we have already observed, the Cal-
ifornia State Lands Commission prepared its own environ-
mental impact statement pursuant to CEQA with respect to
the North Baja project, and, in approving an amendment to
North Baja’s right-of-way lease, it reserved the right to exer-
cise continuing control over the quality of gas flowing
through the pipeline. As far as the record shows, the adequacy
of the CSLC’s statement under CEQA was not challenged in
California.
Unlike the California State Lands Commission, CPUC was
not being asked to approve any aspect of the North Baja pipe-
line project. Instead, it was engaging in a process which actu-
ally lowered the maximum allowable WI of gas burned in
California from 1437 to 1385—a determination that, by its
very nature, did not constitute an adverse environmental
impact and thus, at least on its own, did not require an envi-
ronmental impact statement. Indeed, CPUC, in its own words,
“did not grant any license, permit or approval for any specific
gas supply project, and . . . did not authorize the construction
or approve siting of any particular new . . . terminals or
receiving stations.” Rather, it was merely “establish[ing] basic
ground rules, including stricter gas quality specifications . . .
and other terms and conditions of access for any pipeline or
gas supply that may connect to California utility systems in
the future.” (emphasis added). These ground rules “in no way
foreclosed the possibility of a future revision to the gas qual-
ity standards,” and expressly provided an avenue for inter-
ested parties to propose modifications to the gas quality
specifications if additional future studies suggest that CPUC
should revise its standards.
Contrary to South Coast’s claim, this record does not
evince a scheme of mutual avoidance on the part of FERC
and CPUC with regard to the conducting of appropriate envi-
13824 SOUTH COAST AIR QUALITY v. FERC
ronmental analysis in California. More significantly, as we
have already discussed, the California State Lands Commis-
sion not only filed an environmental impact statement, the
adequacy of which was never challenged in California, it also
conditioned its approval of the right-of-way on its continuing
oversight of the quality of the natural gas passing through the
pipeline.4 Rather than evincing a scheme of mutual avoidance,
the conduct of the two California administrative agencies and
FERC, taken together, illustrate that appropriate environmen-
tal analysis was conducted based on the information available.
There is one last observation regarding the proceedings
before CPUC. South Coast played a large role in those pro-
ceedings, proposing a WI cap of 1360—a 2% difference from
CPUC’s chosen upper limit. Nevertheless, as FERC observed,
“[t]he record contains no analysis or evidence showing a
material change in air quality impacts as a result of the con-
sumption of natural gas with a WI of 1385—the upper limit
established by the CPUC—compared to that of [South
Coast’s] proposed WI limit of 1360. Therefore, there is no
justification for [South Coast’s] proposed two percent band,
which would make it more difficult for SoCalGas and end
users to find economical gas supplies and therefore could lead
to increased consumption of other fuels associated with
greater emissions.”
3. Collateral Estoppel
FERC argues that South Coast is collaterally estopped from
attacking the CPUC determination. This argument is based on
the Supreme Court of California’s denial of South Coast’s
petition for review of that determination. South Coast Air
Quality Mgmt. Dist. v. Cal. Pub. Utils. Comm’n, No.
S151156, 2008 Cal. LEXIS 8866 (July 16, 2008). We agree
4
The joint EIS filed by FERC and the California State Lands Commis-
sion was deemed by the latter to have complied with CEQA requirements
at a meeting held on July 13, 2007.
SOUTH COAST AIR QUALITY v. FERC 13825
that a summary denial by the Supreme Court of California “of
a petition for review of an order of [CPUC] is a decision on
the merits both as to the law and the facts presented in the
review proceeding.” People v. W. Air Lines, Inc., 268 P.2d
723, 728 (Cal. 1954), appeal dismissed sub nom, W. Air
Lines, Inc. v. California, 348 U.S. 859 (1955). We also agree
that, even though FERC was not a party to the proceeding, it
may invoke the doctrine of collateral estoppel with respect to
both findings of fact and conclusions of law, see Bernhard v.
Bank of Am. Nat’l Trust & Sav. Ass’n, 122 P.2d 892, 894-95
(Cal. 1942), although as to the latter, “the prior determination
is not conclusive either if injustice would result or if the pub-
lic interest requires that relitigation not be foreclosed,” Con-
sumers Lobby Against Monopolies v. Pub. Utils. Comm’n,
603 P.2d 41, 47 (Cal. 1979). Nevertheless, based on the fore-
going discussion of the CPUC proceedings, it is not necessary
for us to address the merits of the collateral estoppel defense.5
B. Natural Gas Act
[8] We now turn to whether FERC violated the Natural
Gas Act (“NGA”), which grants FERC the power to authorize
interstate pipeline projects. 15 U.S.C. § 717f. When evaluat-
ing a proposal for a certificate of public necessity and conve-
nience under NGA Section 7, FERC has acknowledged that
it must balance a number of factors to determine “that the pro-
posed service, sale, operation, construction, extension, or
acquisition, to the extent authorized by the certificate, is or
will be required by the present or future public convenience
5
South Coast also contends that the burning of North Baja gas in the
Basin is a “connected action.” The Council on Environmental Quality reg-
ulations provide that the “scope of environmental impact statements . . .
shall consider . . . [c]onnected actions, which means that they are closely
related and therefore should be discussed in the same impact statement.”
40 C.F.R. § 1508.25(a)(1). Because we find that FERC appropriately con-
sidered these emissions in its EIS, we need not decide here whether the
end use of North Baja gas is a “connected action” within the meaning of
40 C.F.R. § 1508.25(a)(1).
13826 SOUTH COAST AIR QUALITY v. FERC
and necessity.” 15 U.S.C. § 717f(e). FERC must consider all
factors bearing on the public interest consistent with its man-
date to fulfill the statutory purpose of the NGA, which is to
encourage the development of adequate natural gas supplies
at reasonable prices. “Among the factors that [FERC] consid-
ers in the balancing process are the proposal’s market support,
economic, operational, and competitive benefits, and environ-
mental impact.” Certification of New Interstate Natural Gas
Pipeline Facilities, 88 FERC ¶ 61227, 61743 (Sept. 15,
1999). We may uphold FERC’s factual determinations under
the NGA if supported by “substantial evidence,” which is
defined as “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.” Bear Lake
Watch, 324 F.3d at 1076 (internal quotations omitted).
[9] As already discussed, to the extent that the information
was available, FERC adequately considered the environmen-
tal effects of end-use consumption of North Baja gas when it
conditioned its certificate on the pipeline “only deliver[ing]
gas that meets the strictest applicable gas quality standards
imposed by state regulatory agencies on downstream [local
distribution companies] and pipelines.” Moreover, FERC
determined that, despite South Coast’s concerns about air
quality, “approval of North Baja’s expansion project under
the NGA is nevertheless sound policy as it will increase gas
supplies, thereby serving to make natural gas more economi-
cal, and, consequently, a relatively attractive fuel when com-
pared to more environmentally damaging alternatives.” Thus,
since “Congress has vested considerable discretion” in FERC
under the NGA, “the burden is upon petitioners to show that
it has been abused.” Cal. Gas Producers Ass’n v. Fed. Power
Comm’n, 383 F.2d 645, 648 (9th Cir. 1967). Here, FERC
determined that approval of the North Baja pipeline project,
as conditioned upon compliance with the CPUC’s gas quality
standards, would serve the public interest. This finding is sup-
ported by the substantial evidence discussed above. Accord-
ingly, South Coast has failed to meet its burden of showing
that FERC abused its discretion under the NGA.
SOUTH COAST AIR QUALITY v. FERC 13827
C. Clean Air Act
[10] The Clean Air Act (“CAA”) imposes specific require-
ments on federal agencies whose actions may affect state
efforts to attain the national ambient air quality standards.
Under the CAA, if a federal agency’s actions will likely result
in “direct” or “indirect” emissions exceeding a certain EPA-
mandated threshold, the agency must prepare a conformity
analysis looking at the effects and must mitigate the project’s
emissions. 40 C.F.R. § § 93.150(b), 93.153(a)-(b). FERC
never filed a conformity analysis relating to the North Baja
project, thus we must consider whether the end-use emissions
of the project are either “direct” or “indirect” as defined by
the statute. We review FERC’s determinations under the CAA
using the arbitrary and capricious standard. See Vigil v.
Leavitt, 381 F.3d 826, 833 (9th Cir. 2004). Because the EPA,
not FERC, is the agency charged with administering the
CAA, FERC’s legal interpretations of the Act are reviewed de
novo. Cal. Trout, Inc. v. FERC, 313 F.3d 1131, 1133-34 (9th
Cir. 2002).
The EPA’s rules define “direct emissions” as emissions of
a criteria pollutant “that are caused or initiated by the Federal
action and occur at the same time and place as the action.” 40
C.F.R. § 93.152. “Indirect emissions” are those that
(1) Are caused by the Federal action, but may occur
later in time and/or may be farther removed in dis-
tance from the action itself but are still reasonably
foreseeable; and
(2) The Federal agency can practicably control and
will maintain control over due to a continuing pro-
gram responsibility of the Federal agency.
Id. (emphasis added).
Accordingly, our inquiry focuses on whether the emissions
at issue are “indirect emissions” under the statutory definition
13828 SOUTH COAST AIR QUALITY v. FERC
supplied by 40 C.F.R. § 93.152. “Unlike the regulations
implementing NEPA, the EPA’s CAA regulations have
defined the term ‘[c]aused by.’ ” Dep’t of Transp. v. Public
Citizen, 541 U.S. 752, 772 (2004) (alterations in original).
Specifically, indirect emissions are “caused by” a Federal
action if the “emissions . . . would not . . . occur in the
absence of the Federal action.” Id. (alterations in original); 40
C.F.R. § 93.152. Thus, “for purposes of evaluating causation
in the conformity review process, some sort of ‘but for’ cau-
sation is sufficient.” Pub. Citizen, 541 U.S. at 772. Here,
FERC has stated in its order issuing North Baja’s certificate
that, “but for North Baja’s project, vaporized [liquefied natu-
ral gas] delivered from the [Baja] Terminal would not be
burned by domestic end users” in the Basin. Under these cir-
cumstances, FERC’s approval of the North Baja pipeline
clearly serves as the “but for” cause of downstream emissions
resulting from the burning of North Baja gas.
[11] Our analysis, however, does not end there. The EPA’s
rules also require any indirect emissions caused by FERC’s
authorization to be “reasonably foreseeable,” and for FERC to
“practicably control” the emissions and “maintain control . . .
due to a continuing program responsibility.” 40 C.F.R.
§ 93.152; Pub. Citizen, 541 U.S. at 772. More specifically, the
EPA’s regulations provide that neither the language of the
CAA “nor [EPA’s] regulation requires that a federal agency
attempt to ‘leverage’ its legal authority to influence or control
nonfederal activities that it cannot practicably control, or that
are not subject to a continuing program responsibility, or that
lie outside the agency’s legal authority.” Determining Confor-
mity of Gen. Fed. Actions to State or Fed. Implementation
Plans, 58 Fed. Reg. 63214, 63221 (1993).
First, South Coast contends that FERC exercises practica-
ble and continuing control over emissions, as evidenced by
the fact that FERC imposed conditions on the pipeline project
that require North Baja, inter alia, to report back to FERC
regarding its progress in implementing the conditions. South
SOUTH COAST AIR QUALITY v. FERC 13829
Coast further argues that FERC’s conditions also require
North Baja to conform its precedent agreements with its pipe-
line shippers in the future. This, South Coast argues, creates
a “continuing program responsibility” over emissions on the
part of FERC.
FERC’s conditions create a requirement that transported
gas comply with the WI standards set by CPUC, the agency
that has exclusive authority to set such guidelines. The mere
fact that North Baja must conform to these standards in the
future, however, does not give rise to a “continuing program
responsibility” on the part of FERC. Indeed, the condition
states that all gas must meet “the strictest applicable gas qual-
ity standards imposed by state regulatory agencies.” This con-
dition contemplates that such standards may change in the
future, and these changes rest in the hands of the appropriate
“state regulatory agency”—in this case, CPUC and the Cali-
fornia State Lands Commission. Of course, as previously
noted, the latter agency included provisions in the amendment
to its right-of-way lease that permits it to exercise practicable
and continuing control over the quality of gas that flows
through the pipeline.
[12] Moreover, even if FERC retains continuing control
over the burning of North Baja gas, the indirect emissions in
this case are not reasonably foreseeable, as FERC reasonably
determined in its Rehearing Order. “Reasonably foreseeable”
emissions are defined as “projected future indirect emissions
that are identifiable at the time the conformity determination
is made; the location of such emissions is known and the
emissions are quantifiable.” 40 C.F.R. § 51.852.
South Coast contends that there was sufficient detail about
the North Baja gas project for FERC to analyze the effects of
its burning. Specifically, it lists the factors that it claims were
available to FERC at the time of its authorization, including:
1) the amount of gas the pipeline will transfer; 2) the purchas-
ers and shippers who will buy the gas; 3) the WI of the gas;
13830 SOUTH COAST AIR QUALITY v. FERC
4) the expected NOx emissions that will result from the gas’s
consumption; and 5) the environmental harm that will result
from that consumption.
This information is significantly less than meets the eye.
While the North Baja pipeline has the ability to transport 2.7
billion cubic feet per day, this amount represents its maximum
capacity, not the actual amount of gas that it will carry, which
will be determined based on its availability and the demand
for the gas by end users in Arizona and California—a consid-
eration that may very well be impacted by the extraordinary
discoveries of natural gas in the United States. See Jaffe,
supra. While North Baja has entered into twenty-year prece-
dent agreements with shippers, again, these contracts merely
set forth the maximum amount of gas that may be transported
using the pipeline, not the amount of gas that will ultimately
be shipped.
[13] Moreover, while South Coast correctly states that the
gas quality of the North Baja gas “would be up to a 1385
Wobbe Index,” this number does not take into account any
blending or conditioning of gases that may occur in either the
North Baja pipeline itself or the California pipeline system,
nor does it reflect the WI of gas in the Basin at the time it is
actually burned. Indeed, because the actual WI of the North
Baja gas by the time it reaches the Basin is unknown at this
time, the expected NOx emissions and resulting environmental
harm that may occur are equally unknown. Again, even South
Coast acknowledged this uncertainty during its challenge to
the CPUC proceedings. Consequently, the emissions that may
result from the consumptive burning of North Baja gas are not
reasonably foreseeable within the definition provided by the
EPA’s regulations.
[14] Because the CAA does not require that FERC attempt
to “leverage its legal authority to influence or control” state
air quality issues, and because there remains substantial
uncertainty regarding the eventual burning of North Baja gas,
SOUTH COAST AIR QUALITY v. FERC 13831
FERC is not obligated to perform a full conformity determi-
nation regarding such burning under the CAA.
III. Conclusion
South Coast’s petition for review is denied.