 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued May 6, 2019                 Decided September 6, 2019

                         No. 18-1248

                   CITY OF OBERLIN, OHIO,
                         PETITIONER

                              v.

        FEDERAL ENERGY REGULATORY COMMISSION,
                     RESPONDENT

             NEXUS GAS TRANSMISSION, LLC,
                    INTERVENOR


                 Consolidated with 18-1261


             On Petitions for Review of Orders of
         the Federal Energy Regulatory Commission


     Carolyn Elefant argued the cause for petitioners. With her
on the briefs were Aaron Ridenbaugh and David A. Mucklow.

    Carol J. Banta, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief were James P. Danly, General Counsel,
and Robert H. Solomon, Solicitor.
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     David A. Super argued the cause for intervenor. With him
on the brief were Kevin A. Ewing and Britt Cass Steckman.

    Before: ROGERS, SRINIVASAN, and WILKINS, Circuit
Judges.

    Opinion for the Court filed by Circuit Judge WILKINS.

    Concurring Opinion filed by Circuit Judge ROGERS.


     WILKINS, Circuit Judge: In reviewing an agency’s
justifications for its actions, principles of administrative law
demand, sensibly, that we strike a balance. On the one hand,
we must not micromanage. Agencies are the experts and
requiring full exposition at every turn would impede their
ability to carry out their specialized statutory duties. On the
other hand, we must insist on reasoned justifications.

     The instant matter asks us, once again, to perform this
balancing act. Petitioners are the City of Oberlin, Ohio, and the
Coalition to Reroute Nexus, an organization of landowners.
They ask us to vacate the Federal Energy Regulatory
Commission’s order authorizing Nexus Gas Transmission,
LLC, to construct and operate an interstate natural gas pipeline
and exercise the right of eminent domain to acquire any
necessary rights-of-way. Petitioners also ask us to vacate the
Commission’s order denying their requests for rehearing. In
short, Petitioners complain that the Commission’s orders
allowed the pipeline to transect their properties, to their
properties’ detriment, and gave Nexus the right to condemn
certain easements over their objections.




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      Petitioners raise many arguments, the vast majority of
which we reject. We agree with them, however, that the
Commission failed to adequately justify its determination that
it is lawful to credit Nexus’s contracts with foreign shippers
serving foreign customers as evidence of market demand for
the interstate pipeline. Accordingly, we remand without
vacatur to the Commission for further explanation of this
determination.

                                I.

     The Natural Gas Act, 52 Stat. 821 (1938) (codified as
amended at 15 U.S.C. §§ 717-717z), vests authority in the
Commission to regulate the transportation and sale of natural
gas in interstate commerce. In passing it, Congress had two
principal aims: “encourag[ing] the orderly development of
plentiful supplies of . . . natural gas at reasonable prices,”
Minisink Residents for Envtl. Pres. & Safety v. FERC, 762 F.3d
97, 101 (D.C. Cir. 2014) (quoting NAACP v. Fed. Power
Comm’n, 425 U.S. 662, 669-70 (1976)) (alteration in original),
and “protect[ing] consumers against exploitation at the hands
of natural gas companies,” id. (quoting Fed. Power Comm’n v.
Hope Nat. Gas Co., 320 U.S. 591, 610 (1944)) (alteration in
original).

     Section 7 of the Act requires an entity seeking to construct
or extend an interstate pipeline for the transportation of natural
gas to obtain from the Commission a “certificate of public
convenience and necessity.” 15 U.S.C. § 717f(c)(1)(A). In a
policy statement, the Commission set forth the criteria it
considers in reviewing an application for a Section 7 certificate.
Certification of New Interstate Nat. Gas Pipeline Facilities, 88
FERC ¶ 61,227 (Sept. 15, 1999), clarified, 90 FERC ¶ 61,128
(Feb. 9, 2000), further clarified, 92 FERC ¶ 61,094 (July 28,


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2000) (“Certificate Policy Statement”). First, an applicant must
demonstrate that it is “prepared to develop the project without
relying on subsidization by the sponsor’s existing customers.”
88 FERC at 61,750. If the applicant makes this showing, the
Commission will issue a certificate of public convenience and
necessity only if a project’s public benefits (such as meeting
unserved market demand) outweigh its adverse effects (such as
a deleterious environmental impact on the surrounding
community). 90 FERC at 61,396. If the Commission issues a
Section 7 certificate to an applicant, the Act confers on the
certificate holder the right to “exercise . . . eminent domain” to
acquire any land necessary to the project’s completion. 15
U.S.C. § 717f(h).

     As part of the Section 7 certificating process, before
approving an interstate gas pipeline the Commission must
complete an environmental review of the proposed project
under the National Environmental Policy Act (“NEPA”), 42
U.S.C. § 4321 et seq. Specifically, for federal actions of
requisite significance (including the issuance of a Section 7
certificate), NEPA requires an agency to prepare an
Environmental Impact Statement, § 4332(C), in which the
agency must “identify the reasonable alternatives to the
contemplated action and . . . . look hard at the environmental
effects of [its] decision,” including a project’s impact on public
safety. Corridor H Alts., Inc. v. Slater, 166 F.3d 368, 374 (D.C.
Cir. 1999) (citation omitted).

     Lastly, we note that the Commission has limited authority
to regulate the import and export of natural gas under Section
3 of the Act, 15 U.S.C. § 717b. See generally EarthReports,
Inc. v. FERC, 828 F.3d 949, 952-53 (D.C. Cir. 2016). Section
3 provides that no person shall import or export natural gas
“without first having secured an order of the Commission


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authorizing it to do so,” and it instructs that the Commission
shall issue such an order unless its finds that the import or
export “will not be consistent with the public interest.” 15
U.S.C. § 717b(a). As the Commission has explained, however,
Congress transferred Section 3’s regulatory function to the
Secretary of Energy. See Rover Pipeline, LLC, 158 FERC ¶
61,109, ¶ 49 n.43 (Feb. 2, 2017) (citing 42 U.S.C. § 7151(b)).
Subsequently, the Secretary delegated back to the Commission
the narrow authority to approve or disapprove the construction
and siting of facilities where natural gas will be imported or
exported. Id. (citing U.S. Dep’t of Energy, Delegation Order
No. 00-004.00A, § 1.21.A (eff. May 16, 2006)). But the
Secretary retains exclusive authority to approve or disapprove
the import and export of natural gas. Id.

                               II.

     On November 20, 2015, Nexus sought from the
Commission authorization under Section 7 to build and operate
approximately 257 miles of a new natural gas pipeline to
transport 1.5 million dekatherms per day (“dth/day”) of
Appalachian Basin shale gas to consuming markets in northern
Ohio, southeastern Michigan, and Ontario, Canada. The
pipeline begins and ends in the United States; it extends from
Hanover Township in Columbiana County, Ohio, to Ypsilanti
Township in Washtenaw County, Michigan. In marketing the
pipeline from 2012 through 2015, Nexus entered into precedent
agreements – i.e., long-term contracts – with eight different
entities, for 885,000 dth/day, or 59%, of the pipeline’s 1.5
million dth/day capacity. Of the eight entities Nexus contracted
with, four are affiliates of the pipeline’s sponsors, and two are
“Canadian companies serving customers in Canada.” Resp’t’s
Br. 28 (citing J.A. 1228). Nexus’s precedent agreements with
the Canadian shippers are for a total of 260,000 dth/day. Id.


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     On August 25, 2017, the Commission issued an order
granting Nexus a Section 7 certificate of public convenience
and necessity. See Nexus Gas Transmission, LLC, 160 FERC ¶
61,022 (Aug. 25, 2017); J.A. 1036-123. And on July 25, 2018,
the Commission issued an order denying Petitioners’ requests
for rehearing. See Nexus Gas Transmission, LLC, 164 FERC ¶
61,054 (July 25, 2018); J.A. 1206-89. In its orders, the
Commission made three determinations that are especially
relevant to Petitioners’ challenges. First, it found that Nexus’s
precedent agreements were “the best evidence” that the
pipeline served unmet market demand. Id. at 1218. Second, it
approved Nexus’s proposed 14% return on equity, subject to
the condition that Nexus design its initial customer rate based
on a hypothetical capital structure of 50% equity and 50% debt.
Id. at 1233. Third, it found that the pipeline does not “represent
a significant safety risk to the public.” Id. at 1259.

     On October 2, 2017 (i.e., after the Commission issued
Nexus a Section 7 certificate but before it denied Petitioners’
requests for rehearing), Nexus filed a condemnation action,
pursuant to Section 7, see 15 U.S.C. § 717f(h), against
Petitioners in the Northern District of Ohio. On December 28,
2017, the district court found that Nexus had the right to
exercise eminent domain to condemn certain easements over
Petitioners’ properties. See Nexus Gas Transmission, LLC v.
City of Green, No. 5:17-cv-2062, 2017 WL 6624511, at *3
(N.D. Ohio Dec. 28, 2017), appeal dismissed, 2018 WL
2072616 (6th Cir. Feb. 9, 2018). Shortly thereafter, Nexus
exercised that right. See Pet’rs’ Br., Standing Addendum 3.

    In September 2018, Petitioners filed the instant matter.
They ask us to vacate the Commission’s order of August 25,
2017, granting Nexus a Section 7 certificate, as well as its order


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of July 25, 2018, denying Petitioners’ requests for rehearing.
On May 6, 2019, we heard oral argument. Thereafter, based on
certain post-argument events, Nexus filed a motion to dismiss
for lack of subject matter jurisdiction, which, for reasons
explained below, we denied.

                              III.

     We have jurisdiction over the petitions pursuant to the
Natural Gas Act. See 15 U.S.C. § 717r(b). Under the statute,
any party that is “aggrieved” by an order of the Commission
may petition for review of that order, so long as they first seek
rehearing with the Commission. Id. § 717r(a)-(b). Petitioners
meet these criteria. They sought rehearing of the Commission’s
order granting Nexus a Section 7 certificate, and we have held
that landowners like Petitioners, who are “forced to choose
between selling to a FERC-certified developer and undergoing
eminent domain proceedings,” are “‘aggrieved’ within the
meaning of the Act.” Sierra Club v. FERC, 867 F.3d 1357,
1365 (D.C. Cir. 2017) (citing B&J Oil & Gas v. FERC, 353
F.3d 71, 75 (D.C. Cir. 2004)).

     Before proceeding, however, we must also discharge our
“independent duty to ensure that at least one petitioner has
standing under Article III of the Constitution.” Sierra Club,
867 F.3d at 1365 (internal citation omitted). To establish
Article III standing, a petitioner “must have (1) suffered an
injury in fact, (2) that is fairly traceable to the challenged
conduct of the defendant, and (3) that is likely to be redressed
by a favorable judicial decision.” Spokeo, Inc. v. Robbins, 136
S. Ct. 1540, 1547 (2016) (internal citation omitted).

   In its motion to dismiss submitted after oral argument,
Nexus argues that Petitioners no longer suffer redressable


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injuries in fact. According to Nexus, this is because, since oral
argument, Petitioners and Nexus executed easement
agreements that settled the issue of compensation for Nexus’s
takings, see Pet’rs’ Response to Motion to Dismiss, Exhibits 2,
6, and thereafter the parties entered into joint notices and
stipulations of dismissal in the condemnation action in the
Northern District of Ohio, see id. Exhibits 3, 7.

      The law of our circuit is clear that a landowner is injured
in fact when she is put to the choice of having to either reach
an agreement with a pipeline seeking to access her property or
have her property condemned. See Gunpowder Riverkeeper v.
FERC, 807 F.3d 267, 271-72 (D.C. Cir. 2015) (“[A] landowner
made subject to eminent domain by a decision of the
Commission has been injured in fact because the landowner
will be forced either to sell its property to the pipeline company
or to suffer the property to be taken through eminent domain.”)
(internal citation omitted); see also B&J Oil, 353 F.3d at 75
(“[Petitioner] unquestionably suffers from an injury-in-fact. As
a result of the Commission’s orders, [petitioner] . . . must either
sell its land to [the pipeline] or allow [the pipeline] to take its
property through eminent domain. . . . That [the pipeline]
ultimately will compensate [petitioner] for its property does
nothing to erase [petitioner’s] legally cognizable injury.”).
Accordingly, the fact that the parties reached an agreement as
to compensation for Nexus’s takings does nothing to vitiate
Petitioners’ injuries to their property interests.1 In addition,
Petitioners’ injuries are directly traceable to the Commission’s
orders (because the orders permitted the pipeline to transect
1
 We note, too, that the joint stipulations of dismissal that the parties
executed explicitly provide that the dismissal of the claims in the
condemnation action “shall have no application” to Petitioners’
claims in the instant matter. Pet’rs’ Resp. to Mot. to Dismiss 8
(quoting Exs. 3, 7).


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their land and authorized Nexus to condemn it), and if we
vacate those orders Petitioners’ injuries are likely to be
redressed, see Nexus Gas Transmission, LLC, 162 FERC ¶
61,011, at P 7 (2018) (“[T]o the extent that [Nexus] elects to
proceed with construction, it bears the risk that . . . our orders
will be overturned on appeal. If this were to occur, [Nexus]
might not be able to utilize any new facilities and could be
required to remove them or to undertake further remediation.”).
We find, therefore, that Petitioners have Article III standing to
bring the petitions.

                               IV.

     We must set aside a decision of the Commission if it is
arbitrary and capricious or otherwise contrary to law. TNA
Merch. Projects, Inc. v. FERC, 857 F.3d 354, 358 (D.C. Cir.
2017). Accordingly, where an agency’s “explanation is lacking
or inadequate, the court must remand for an adequate
explanation of the agency’s decision and policy.” BP Energy
Co. v. FERC, 828 F.3d 959, 965 (D.C. Cir. 2016) (citing Maher
Terminals LLC v. Fed. Mar. Comm’n, 816 F.3d 888, 892 (D.C.
Cir. 2016)). The Commission’s factual findings are conclusive
“if supported by substantial evidence.” 15 U.S.C. 717r(b).

                               A.

    Petitioners argue that the Commission’s finding that
Nexus’s precedent agreements are the “best evidence” of
project need, see J.A. 1218, is not supported by substantial
evidence. In support of this argument, Petitioners wage a three-
pronged attack.

    First, Petitioners assert that the Commission contravened
its Certificate Policy Statement by relying on Nexus’s


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precedent agreements for “a paltry 59 percent of new capacity”
as the best evidence of project need. Pet’rs’ Br. 24-25.
Specifically, Petitioners contend that the policy statement only
allows precedent agreements to serve as “strong evidence of
market demand” when they represent “most of the new
capacity” of the pipeline and that 59% is not “most of the new
capacity.” Id. (citing 88 FERC at 61,749). But that argument is
fundamentally misguided: the Certificate Policy Statement
imposes no bright-line rule about when precedent agreements
may be persuasive evidence of market demand. Instead, it lays
out a flexible inquiry that allows the Commission to consider a
wide variety of evidence to determine the public benefits of the
project. And here, the Commission engaged in that broad-
ranging inquiry reasonably. Although the precedent
agreements represented only 59% of Nexus’s capacity, the
Commission determined that existing pipelines could not
absorb that amount of gas. See J.A. 1050-53, 1219-20. Given
that analysis, the Commission reasonably concluded under the
Certificate Policy Statement that the precedent agreements –
which firmly established that there was more demand for
natural gas in the Nexus pipeline’s delivery region than
existing pipelines could meet – were the best evidence of
project need.

     Second, Petitioners assert, Nexus’s precedent agreements
are not meaningful evidence of project need because half of
them are with affiliates of the pipeline’s sponsors. According
to Petitioners, this is problematic because affiliate agreements
“are not necessarily the product of arms-length negotiations.”
Pet’rs’ Br. 25-26. This argument, too, is without merit. The
Commission rationally explained that it fully credited Nexus’s
precedent agreements with affiliates because it found no
evidence of self-dealing (a finding Petitioners do not dispute),
and because Nexus bears the risk for any unsubscribed


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capacity. See J.A. 1125. Moreover, as the Commission
explained, when it ended its policy of requiring pipelines to
demonstrate a specific subscription rate, “it was reducing ‘the
significance of whether the [precedent agreements] are with
affiliated or unaffiliated shippers.’” J.A. 1224 (quoting 88
FERC at 61,748). Consistent with this, this Court has also
recognized that “it is Commission policy to not look behind
precedent or service agreements to make judgments about the
needs of individual shippers.” Myersville Citizens for a Rural
Cmty., Inc., v. FERC, 783 F.3d 1301, 1311 (D.C. Cir. 2015)
(quoting Dominion Transmission, Inc., 141 FERC ¶ 61,1240,
at P 66 (Dec. 12, 2012)); see also Appalachian Voices v. FERC,
No. 17-1271, 2019 WL 847199, at *1 (D.C. Cir. Feb. 19, 2019)
(holding that the Commission “reasonably explained that ‘[a]n
affiliated shipper’s need for new capacity and its obligation to
pay for such service under a binding contract are not lessened
just because it is affiliated with the project sponsor’”) (quoting
Mountain Valley Pipeline, LLC, 161 FERC ¶ 61,043, ¶ 45 (Oct.
13, 2017)) (alteration in original).

     Third, Petitioners argue, Nexus’s precedent agreements
are not strong evidence of market demand because a substantial
portion of them are dedicated for export. In Petitioners’ view,
because the Secretary of Energy authorizes exports under
Section 3 of the Act, the Commission may not use precedent
agreements for export “to justify project need under Section 7
[,] which governs certificates for projects in interstate
commerce.” Pet’rs’ Br. 21. Moreover, Petitioners contend,
because Section 7 confers on a certificate holder the right to
exercise eminent domain, crediting export agreements toward
a Section 7 finding of project need runs afoul of the Takings
Clause, as a private pipeline selling gas to foreign shippers
serving foreign customers does not serve a “public use” within
the meaning of the Fifth Amendment. Id. at 36 (quoting U.S.


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CONST. amend. V (“[P]rivate property [shall not] be taken for
public use, without just compensation.”)).

     This argument raises legitimate questions, which the
Commission has heretofore failed to adequately answer. On the
record before us, two of Nexus’s precedent agreements for a
total of 260,000 dth/day are, as the Commission concedes, with
“Canadian companies serving customers in Canada.” Resp’t’s
Br. 12 (citing J.A. 1228). If the Commission excluded these
agreements from its Section 7 analysis of project need, Nexus
would have precedent agreements for only 625,000 dth/day, or
approximately 41.6% of its 1.5 million dth/day capacity. And
because the Commission never considered whether the public
benefits of the Nexus pipeline would outweigh its adverse
impacts if it were only subscribed for 625,000 dth/day (a
substantial decrease from the analyzed 805,000 dth/day), we
may affirm its finding of public convenience and necessity only
if the Commission’s inclusion of the export precedent
agreements in its analysis was proper.

     But the Commission never explained why it is lawful to
credit demand for export capacity in issuing a Section 7
certificate to an interstate pipeline. In response to Petitioners’
argument that it is not, the Commission simply recited its
findings that: (1) a substantial amount of the pipeline’s
subscribed capacity is for domestic consumption; (2) all
shipper commitments have secondary delivery rights within the
United States; and (3) Nexus’s application listed eleven
interconnections with potential customers. J.A. 1228-29. But
these facts do not explain why it is lawful for the Commission
to predicate a Section 7 finding of project need on precedent
agreements with foreign shippers serving foreign customers.
Section 7 states that the Commission may issue a certificate of
public convenience and necessity for “the transportation in


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interstate commerce,” § 717f(c)(2) (emphasis added), and we
have explicitly refused to “interpret ‘interstate commerce’”
within the context of the Act “so as to include foreign
commerce,” Border Pipe Line Co. v. Fed. Power Comm’n, 171
F.2d 149, 152 (D.C. Cir. 1948). See also Distrigas Corp. v.
Fed. Power Comm’n, 495 F.2d 1057, 1063 (D.C. Cir. 1974)
(reaffirming Border Pipe Line).

     Moreover, in response to Petitioners’ argument that
relying on demand for export in issuing a Section 7 certificate
runs afoul of the Takings Clause, the Commission merely
stated that it has previously addressed this issue and offered
citation to authority. J.A. 1229 (collecting FERC cases). But
just one of the FERC cases the Commission cites addressed the
specific question of whether predicating a Section 7 finding of
project need on precedent agreements for export contravenes
the Takings Clause. See Transcon. Gas Pipe Line Co., 161
FERC ¶ 61,250 (Dec. 6, 2017), at ¶¶ 30-35. Furthermore, in
that single case, the Commission relied on the inadequate
explanation that such a circumstance does not present a
Takings Clause problem because: once the Commission
determines that a pipeline is required by the public convenience
and necessity, Section 7 authorizes the certificate holder to
exercise the right of eminent domain, and “Congress did not
suggest that there was a further test . . . such that certain
certificated pipelines furthered a public use . . . while others did
not.” Id. ¶¶ 31-32. This reasoning begs the unanswered
question of whether – given the fact that Section 7 authorizes
the use of eminent domain – it is lawful for the Commission to




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credit precedent agreements for export toward a finding that a
pipeline is required by the public convenience and necessity.2

     When pressed on this issue at oral argument, the
Commission again did not explain why it is lawful to credit
precedent agreements for export in issuing a Section 7
certificate for the construction and operation of an interstate
pipeline. See Oral Arg. 16:45-28:10. Rather, the Commission
repeated that, in approving Nexus’s application, it was
“looking at the benefits to the domestic markets.” Oral Arg.
27:34-39. As we have explained, this statement has no
explanatory value with respect to the question of why it is
lawful for the Commission, as it did here, to predicate a Section
7 finding of need for an interstate pipeline on a pipeline’s
precedent agreements for export. 3

    Accordingly, we remand to the Commission for further
explanation of why – under the Act, the Takings Clause, and
2
  We acknowledge that, in Transcontinental Gas, in an attempt to
fortify its reasoning, the Commission also “note[d]” that before any
gas is exported, the Department of Energy, pursuant to Section 3 of
the Act, would first “need to find that such exportation is not
inconsistent with the public interest.” Id. at 34 (citing 15 U.S.C. §
717b(a)). True. It is insufficient, however, to simply assume that such
a finding under Section 3, which does not authorize the exercise of
eminent domain, is somehow equivalent to a finding that a given
export constitutes a public use within the meaning of the Takings
Clause.
3
  To the extent that Petitioners argue that the Commission can never
lawfully issue a Section 7 certificate where a pipeline has precedent
agreements for export, see Pet’rs’ Br. 33-35, we note that we
disagree. We disagree because a pipeline may clearly be required by
the public convenience and necessity independent of any of its
precedent agreements for export. But, as explained, the Commission
has not made any finding to that effect in this case.


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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.

                                B.

      Petitioners also attack the Commission’s approval of the
specific formula that Nexus used to design its initial consumer
rate.

     As we had occasion to discuss relatively recently, one of
the Commission’s duties under the Act is to regulate the rates
pipelines charge their customers. See generally Sierra Club,
867 F.3d at 1376-79. As part of a Section 7 proceeding, the
Commission reviews a pipeline’s proposed initial rate and will
approve it if the agency finds that it is in the “public interest.”
Atl. Ref. Co. v. Pub. Serv. Comm’n, 360 U.S. 378, 390-91
(1959). A pipeline’s initial rate remains in place until
permanent “just and reasonable” rates are established pursuant
to ratemaking procedures under Sections 4 and 5 of the Act.
See Mo. Pub. Serv. Comm’n v. FERC, 601 F.3d 581, 583 (D.C.
Cir. 2010) (citing 15 U.S.C. §§ 717c-d).

     Nexus sought to design its initial rate based on a 14%
return on equity (“ROE”) and a hypothetical capital structure
of 60% equity and 40% debt. See J.A. 1234; see generally
Sierra Club, 867 F.3d at 1376 (“Like most businesses, a
pipeline company is funded by both equity (i.e., investments
made by shareholders) and debt. A pipeline’s ratio of equity
financing to debt financing is called its ‘capital structure.’”)
(internal citations omitted). The Commission, however, did not
accept Nexus’s proposal. Rather, it approved Nexus’s proposed



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ROE of 14% but only on the condition that Nexus design its
initial rate according to a hypothetical capital structure of 50%
equity and 50% debt. J.A. 1236. In other words, in forcing
Nexus to design its initial rate according to a 50:50, as opposed
to 60:40, equity to debt ratio, the Commission “require[d] the
pipeline to charge a lower rate than it had originally requested.”
Sierra Club, 867 F.3d at 1378.

     But Petitioners are not satisfied with the Commission’s
effort to reign in Nexus’s initial rate. They argue that a 14%
ROE is excessive, even assuming a 50:50 equity to debt ratio,
as compared to the returns on other utility investments that state
commissions have approved. See Pet’rs’ Br. 43 (citing J.A.
1778).4 Moreover, Petitioners contend, the Commission failed
to adequately explain why a 14% ROE and 50:50 equity to debt
ratio is appropriate for the Nexus pipeline specifically.
Petitioners point out that the Commission, in its order issuing
Nexus a Section 7 certificate, supported its approval of this
formula with nothing more than citation to FERC precedents
demonstrating that the Commission has previously approved a
14% ROE and 50:50 equity to debt ratio for new pipelines. Id.
(citing J.A. 1063). Moreover, Petitioners add, in its order
denying Petitioners’ requests for rehearing, the Commission
merely: (1) offered the generic observation that relatively
higher ROE’s are appropriate for new market entrants like

4
   In addition, Petitioners raise a half-hearted challenge to the
Commission’s very use of a hypothetical capital structure as a
mechanism by which to lower Nexus’s initial rate. As Petitioners
ultimately concede, however, “Sierra Club allows the Commission
to use a hypothetical capital structure to minimize rate impacts.”
Pet’rs’ Br. 45-46 (referring to Sierra Club, 867 F.3d at 1378 (“FERC
is allowed to . . . use a hypothetical capital structure to decrease a
pipeline’s proposed rates, in the interest of consumer protection.”)
(emphasis in original) (internal citation omitted)).


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Nexus because they face greater business risks than their
established counterparts; and (2) noted that Nexus bears the
financial risk for any unsubscribed capacity. Id. at 43-44 (citing
J.A. 1235-36). But nowhere, Petitioners emphasize, has the
Commission explained “why a flat 14 percent return should
apply to all new pipelines irrespective of geographic location,
size and cost and need [sic].” Id. at 43.

     In response, the Commission reiterates that its approval of
a 14% ROE and 50:50 equity to debt ratio was appropriate for
the Nexus pipeline because new pipelines are inherently
riskier, and Nexus bears responsibility for any unsubscribed
capacity. Resp’t’s Br. 41-42 (citing J.A. 1235-36).

     In Sierra Club, when considering the precise question
before us – i.e., whether the Commission was justified in
approving a 14% ROE based on a 50:50 equity to debt ratio for
a new pipeline on the ground that the Commission had done so
previously for new pipelines – we “confess[ed] to being
skeptical that a bare citation to precedent, derived from another
case and another pipeline, qualifies as the requisite ‘substantial
evidence.’” Sierra Club, 867 F.3d at 1378 (citing N.C. Utils.
Comm’n v. FERC, 42 F.3d 659, 664 (D.C. Cir. 1994) (“[N]aked
citation of prior authority for the use of a hypothetical [capital
structure] under one circumstance does not automatically
justify such in another.”)). Ultimately, however, we did not
reach this issue because we found that petitioner never properly
raised it, having “confin[ed] itself to attacking the use of a
hypothetical capital structure more generally.” Id.

    Here, by contrast, Petitioners, in their requests for
rehearing and opening brief, argued explicitly that the
Commission’s bare citation to precedent is inadequate to
support its finding that a 14% ROE based on a 50% equity and



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50% debt capital structure is appropriate for the Nexus
pipeline. See J.A. 1176; Pet’rs’ Br. 43-44. Thus, the issue is
properly before us.

     However, after a close examination of the record, we find
that the Commission’s explanation is hardly as bare as the
Petitioners suggest. The Commission did not simply cite its
precedent but applied its “established policy” balancing both
consumer and investor interests to the particular pipeline at
issue, J.A. 1233, and responded to Petitioners’ specific
objections. It explained the nature of initial rates, as distinct
from rates under NGA sections 4 and 5, specifically how
“Congress gave the Commission the discretion in section 7
certificate proceedings to approve initial rates that will ‘hold
the line’ and ‘ensure that the consuming public may be
protected’ while awaiting adjudication of just and reasonable
rates under the more time-consuming ratemaking sections of
the NGA.” J.A. 1233 (quoting Atl. Ref. Co. v. Pub. Serv.
Comm’n of N.Y., 360 U.S. 378, 390 (1950)). It explained the
different risks confronting existing pipelines and the greenfield
pipeline at issue, which faces increased business risks
(regulatory, contractual, and construction) and greater risks of
constructing and servicing new routes because it does not have
an existing revenue base, and why Petitioners’ reliance on state
proceedings was misplaced. J.A. 1234-35. It rejected
Petitioners’ argument that Nexus faced no risk for the
unsubscribed pipeline capacity because “Nexus faces a very
real risk that any unsubscribed capacity will reduce its ability
to meet its revenue requirement.” J.A. 1236. It also explained
that adjusting Nexus’s proposed hypothetical capital structure
reduced the impact of the ROE and thereby “ensures that
Nexus’s rates are on a level playing field with other greenfield
pipelines.” J.A. 1236. It concluded, on the record before it, that




                               18
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an ROE of 14% with an increased debt level would “hold the
line.” J.A. 1236.

     Notably, the Commission even provided an example of
how, under its policy, an existing pipeline seeking to expand
service would be required to use the ROE underlying its
existing system rates, tending to yield a lower rate in view of
the lower risk involved. J.A. 1234. In the example provided, an
existing pipeline’s ROE was 12.2 % rather than the requested
13.0%. Further, it noted that Nexus would be required to file a
cost and revenue study three years out that would provide data
by which the Commission and interested parties could
determine whether the rates remain just and reasonable. J.A.
1235. It is true that the Commission never discussed another
possible ROE, other than to reject the equity/debt ratio Nexus
initially proposed. See J.A. 1234. But we are ill-equipped to
second guess the Commission’s expert judgment that a 14%
ROE with 50/50 equity/debt capital structure will “hold the
line,” and on this record, we find no basis on which to conclude
the Commission’s explanation in response to Petitioners’
objections is inadequate. See BP Energy Co. v. FERC, 828 F.3d
959, 965 (D.C. Cir. 2016). Nor can we find that the
Commission “entirely failed to consider an important aspect of
the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.” Motor Veh. Mfrs. Ass’n of U.S.
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

     Accordingly, Petitioners’ attack on the Commission’s
approval of the specific formula that Nexus used to design its
initial consumer rate is unsuccessful.




                              19
                               20

                               C.

    Finally, Petitioners raise two arguments attacking the
Commission’s finding that the pipeline does not “represent a
significant safety risk to the public.” J.A. 1259. We reject both.

    First, Petitioners argue, the Commission impermissibly
delegated its obligations under NEPA to independently review
the pipeline’s potential adverse impacts on public safety.
Specifically, Petitioners contend, within its Environmental
Impact Statement (“EIS”), the Commission over relied on
Nexus’s commitment to comply with safety standards
promulgated by the Pipeline and Hazardous Materials Safety
Administration, a division of the Department of Transportation
(“DOT”).

     Petitioners are wrong. As they concede, see Pet’rs’ Br. 50,
DOT has exclusive authority to establish safety standards for
natural gas pipelines, see Memorandum of Understanding
Between DOT and FERC Regarding Natural Gas
Transportation                                         Facilities,
https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/docs/19
93_DOT_FERC.pdf. And we have held that it is reasonable for
the Commission to reference such standards as a component of
its review of a pipeline’s safety risks, see EarthReports, 828
F.3d at 958, which is exactly what the Commission did here. In
a thorough analysis, see J.A. 1019-43, the Commission
explained in detail how Nexus’s compliance with DOT
standards would address the specific safety concerns that
commenters raised. See, e.g., J.A. 1028 (“The DOT regulations
specified in 49 CFR 192 require that pipeline operators
establish and maintain liaison with appropriate fire, police, and
public officials . . . .”). Moreover, the Commission enumerated
specific actions Nexus committed to take to account for safety


                               20
                              21

risks that DOT regulations might not fully address. See, e.g.,
J.A. 1028 (“In addition to the DOT-required surveys described
previously, Nexus . . . would monitor portions of its pipeline
system using a supervisory control and data acquisition
system.”). Accordingly, the Commission fulfilled its duty to
independently consider the pipeline’s safety risks and, in so
doing, it considered DOT regulations in an appropriate fashion.

     Second, Petitioners contend, the Commission arbitrarily
failed to consider moving the pipeline away from residences
and buildings. This is not so. As an initial matter, as the
Commission pointed out, see J.A. 1025, DOT regulations do
not require natural gas pipelines to remain a minimum distance
from residences or buildings. DOT has, however, developed a
classification system that grades each segment of a pipeline
based on population density at a given segment’s location, see
49 C.F.R. § 192.5, and subjects “high consequence areas,” i.e.,
pipeline segments close to more densely populated areas, to
stricter safety standards, see id. §§ 192.903, 192.907, 192 App.
E. In accordance with this regulatory scheme, the Commission
accounted for every mile of the Nexus pipeline. See J.A. 1020-
27. Accordingly, although the Commission may not have
considered the pipeline’s proximity to buildings and residences
in precisely the way Petitioners would prefer, Petitioners’
argument that the Commission arbitrarily failed to consider this
issue is unfounded.




                              21
                               22

                               V.

     Before concluding, we offer a word regarding our remedy.
“The decision to vacate depends on two factors: the likelihood
that ‘deficiencies’ in an order can be redressed on remand, even
if the agency reaches the same result, and the ‘disruptive
consequences’ of vacatur.” Black Oak Energy, LLC v. FERC,
725 F.3d 230, 244 (D.C. Cir. 2013) (quoting Allied-Signal, Inc.
v. U.S. Nuclear Regulatory Comm’n, 988 F.2d 146, 150-51
(D.C. Cir. 1993)). Accordingly, we remand without vacatur,
because we find 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.

                               ***
     For the foregoing reasons we grant in part and deny in part
the petitions for review. We grant the petitions insofar as we
remand without vacatur to the Commission for further
explanation of why it is lawful to credit precedent agreements
for export toward a Section 7 finding that an interstate pipeline
is required by the public convenience and necessity. We deny
the petitions in all other respects.

                                                    So ordered.




                               22
     ROGERS, Circuit Judge, concurring.           This court has
recently reaffirmed its understanding that the Commission acts
lawfully under the Natural Gas Act (“the Act”) in granting a
Section 7 certification of public convenience and necessity
when “much of the [imported] gas will be used for domestic
consumption.” Town of Weymouth v. FERC, 2018 WL
6921213, at *1 (D.C. Cir. Dec. 27, 2018) (unpubl.). This
harkens back to the court’s recognition that “the Commission
has long regarded Section 3’s public interest standard and
Section 7’s public convenience and necessity standard as
substantially equivalent.” Distrigas Corp. v. FERC, 495 F.2d
1057, 1065 (D.C. Cir. 1974) (noting FERC Opinion 613).
There, the court declined to overrule Border Pipe Line Co. v.
FPC, 171 F.2d 149, 150–51 (D.C. Cir. 1948), where the court
held the power commission lacked jurisdiction under Section 7
to regulate a company located in Texas that transported gas
exclusively to Mexico, drawing on the historical distinction
between “interstate commerce” and “exports.” In Distrigas,
495 F.2d at 1063, the court “agree[d] with the Commission that
neither the language nor the legislative history of the Act’s
interstate commerce definition unambiguously establishes the
correctness of the Border construction.” It stated that it “would
not hesitate” to overrule Border Pipe Line if it were convinced
that that case’s interpretation of Section 7 “would inevitably
place imports of natural gas into the sort of regulatory gap” that
the Act was designed to fill. Id. at 1063–64. But the court
concluded there was no regulatory gap over imported gas
entering an existing pipeline because FERC had “plenary and
elastic” authority under Section 3 to place conditions —
including conditions substantively equivalent to Section 7
certification requirements — on imported gas. Id. at 1064.

     In neither Distrigas nor Border Pipe Line was the issue
precisely the same as in the instant case, namely, whether the
Commission has authority under Section 7 to consider in
certification proceedings precedent agreements with a foreign
shipper in evaluating market need for a new pipeline to be
                               2
located exclusively within the United States. Whether, absent
congressional action, a similar workaround as the court applied
in Distrigas, or other approach for concluding the Commission
had jurisdiction to consider two Canadian shippers’ precedent
agreements where a significant amount of that gas was
expected to be used domestically, would be possible remains
to be seen. Here, the Commission’s findings regarding the
need for and the nature of the NEXUS pipeline are supported
by substantial evidence in the record considered as a whole,
and the Commission reasonably explained that petitioners
mischaracterized the extent to which the project may be used
to export gas. See Rehg Order ¶ 45; Resp’t’s Br. 28. So
understood, it appears on this record that the question on
remand is whether the Commission’s “substantial equivalence”
interpretation is contrary to the Act. I join the remand to allow
the Commission the opportunity to provide an explanation of
its authority to rely in Section 7 certification proceedings on
precedent agreements with foreign shippers serving foreign as
well as domestic customers.
