Oberlin Pipeline Challege Ends at DC Circuit Court of Appeal

by: Joseph Grather
18 Jul 2022

“Tin soldiers and Nixon’s coming
We’re finally on our own
This summer I hear the drumming
Four dead in Ohio….”

Ohio, Crosby Stills Nash & Young (Neil Young).

Well, it’s not as drastic as “four dead in Ohio”, but I love the tune and the City of Oberlin’s appeal is now dead (unless miraculously revived by the Supreme Court).

On July 8, 2022, Federal Circuit Court Judge Rao issued an opinion in the case of City of Oberlin v. Federal Energy Regulatory Commission (FERC).  In short, FERC issued a Certificate of Public Convenience and Necessity (Certificate) to NEXUS Gas Transmission to construct a natural gas pipeline from Ohio to Michigan.  The City of Oberlin “petitioned for review claiming, among other things, that FERC did not adequately justify its reliance on agreements to transport gas ultimately bound for export to Canada as evidence of need for the pipeline.” The Circuit Court agreed and remanded to FERC, but did not vacate the Certificate.  On remand, “FERC explained its decision. FERC also clarified that it would have granted the certificate even without considering the export agreements.”

The City of Oberlin appealed again, arguing that FERC’s decision was arbitrary capricious or “contrary to law and that its decision violates the Takings Clause.”  The Circuit Court disagreed:

“FERC’s justification for considering the agreements to transport gas bound for export is well reasoned and comports with both the Natural Gas Act and the Takings Clause. FERC’s alternative explanation that it would have granted Nexus a certificate even without considering the export agreements also passes muster. We deny the petition.” Slip op. at 3.

The crux of the case was whether FERC inappropriately credited two precedent agreements with Canadian Companies serving Canadian customers as part of its economic benefit analysis.  The City of Oberlin aptly argued that the inclusion of export contracts was inappropriate because export certificates were governed by a separate section of the Natural Gas Act (15 USC Sec. 717b) that did not authorize eminent domain.  Again, the Circuit Court found merit in the argument and “therefore remand[ed] to the Commission for further explanation of why—under the Act, the Takings Clause, and the precedent of this Court and the Supreme Court—it is lawful to credit precedent agreements with foreign shippers serving foreign customers toward a finding that an interstate pipeline is required by the public convenience and necessity under Section 7 of the Act.” Id. at 607–08. We did not vacate FERC’s order because we found “it plausible that the Commission will be
able to supply the explanations required, and vacatur of the Commission’s orders would be quite disruptive, as the Nexus pipeline is currently operational.” Id. at 611.

We’re going to skip to the takings clause analysis – – – you can read the opinion and come to your own conclusions about whether the Circuit Court was bootstrapping because the pipeline was already built and operating.

“Under the Takings Clause, for the exercise of eminent domain to be legitimate, the property must be seized for “public use.” U.S. CONST. amend. V. The Supreme Court has held that property taken for a “public purpose” qualifies. Kelo v. City of New London, 545 U.S. 469, 480 (2005). And courts must look to the legislature’s judgment about whether a taking is for a 16 public purpose. Id. “[S]o long as the taking is rationally related to a conceivable public purpose,” it is constitutional.”  (Hint- When a Court introduces the takings clause with such a broad brush, you know the government action will be sustained.)  The Circuit Court found that FERC’s decision was supported by a multi-factored analysis, part of which was the questionable export contracts.

The Circuit Court also credited FERC’s alternative rationale, which excluded the export contracts from consideration. The domestic demand for additional capacity was demonstrated and the “Nexus Project was needed to alleviate a bottleneck in the capacity to transport gas from the Appalachian Basin and to increase supply to Midwestern markets.”

In the end, “because FERC’s explanation on remand from this court was reasonable and because its decision comported with the Natural Gas Act and the Takings Clause, we deny the City’s

In light of this decision, unless review is sought before the U.S. Supreme Court, this is the end of the road for challenges to this pipeline project.   Since it is already constructed, it is unlike the path followed by several other recent pipeline projects, which staved off court challenges, only to abruptly cancel themselves after “winning” in court such as the PennEast pipeline project, or the Atlantic Coast pipeline project before it.