In Sierra Club v. United States Dep’t of Transportation[1], a panel of the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated and remanded a final rule[2] issued by the Department of Transportation (“DOT”) permitting the transportation of liquefied natural gas (“LNG”) in approved rail cars. The final rule was subsequently stayed and never took effect.
DOT Rulemaking & the Sierra Club Decision
The rulemaking proceeding began with an executive order published on April 10, 2019. Then President Trump directed the Secretary of Transportation to propose a rule to permit LNG to be transported in approved rail cars within 100 days from the date of the executive order and to finalize the rule within thirteen months.[3] DOT subsequently issued a proposed rule that would permit the transportation of LNG by rail in DOT-113 rail cars. The proposed rule proposed no limit on the number of cars to be used to transport LNG on a single train and imposed no mandatory speed limit. The proposed rule also included a preliminary environmental assessment finding that the proposed rule would have no significant environmental impact.[4]
The proposed rule was challenged by environmental organizations, states, and the National Transportation Safety Board, all citing potentially grave risks related to potential explosions or fires related to transportation of LNG by rail and separately arguing that the proposed rule failed to mitigate those risks.[5]
In July 2020, the DOT modified the final rule in several respects. The Court summarizes the changes as follows:
The final Rule authorizes transportation of LNG by rail, but it differs from the Proposed Rule in several respects. First, the final LNG Rule imposes new requirements for the outer tank of approved railcars: The outer tank must be both thicker and made of stronger steel than that used in existing 120W cars. Specifically, the tanks must be 9/16″ thick, rather than the current minimum of 7/16″. The outer tank also must be made of TC-128 Grade B normalized steel, which is less likely to crack or puncture than the steel typically used in DOT-113 cars. Second, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) boosted the maximum filling density from 32.5% to 37.3%. Finally, the LNG Rule includes additional operating controls to promote safety: (1) Tank cars carrying LNG must be equipped with remote monitoring devices for detecting and reporting each car’s internal pressure and location; (2) Any train with at least 20 LNG tank cars in a continuous block or with 35 such cars throughout the train must be equipped with advanced braking capabilities; and (3) PHMSA adopted the routing requirements of 49 C.F.R. § 172.820, which require railroads to consider safety risk factors, such as population density, when analyzing potential routes for transporting LNG.[6]
The final rule reiterated the finding that the rule would have no significant environmental impact. As a result, no environmental impact statement was prepared. The petitions for review that are the subject of the Sierra Club case followed.
The Court determined that the case was ripe for review even though the rule had never been finalized and was at the time of the decision stayed.[7]
The Court affirmed that each class of petitioners had requisite standing to pursue its appeal.[8]
On the merits, the Court found that the final rule authorizing transportation of LNG by rail was arbitrary and capricious:
[Petitioners] claim that PHMSA failed to take a hard look at how the LNG Rule would affect public safety and therefore violated [National Environmental Policy Act (“NEPA”)]. In support of their argument, they note that PHMSA disregarded the checkered safety record of the 120W tank car and ignored the risks of including numerous cars of LNG within a single train without any required speed limit. We agree and vacate the LNG Rule.[9]
The Court’s decision in this respect was very narrow. The error was not preparing an Environmental Impact Study (“EIS”). The Court explained:
In this case, PHMSA determined that an EIS was not required because authorizing LNG transport by rail under the LNG Rule would have no significant impact on the environment. But the record reflects that transporting LNG by rail poses a low-probability but high-consequence risk of a derailment that could seriously harm the environment: A breach of one or more rail cars containing LNG could cause an explosion, an inferno, or the spread of a freezing, flammable, suffocating vapor cloud. The real possibility of such catastrophes significantly affects the quality of the human environment. For that reason, NEPA required PHMSA to prepare an EIS.[10]
The Court reminded observers that the scope of NEPA review is itself narrow:
NEPA is “primarily information-forcing,” so it “directs agencies only to look hard at the environmental effects of their decisions, and not to take one type of action or another.” Sierra Club v. FERC, 867 F.3d 1357, 1367 (D.C. Cir. 2017) (cleaned up). After preparing an EIS, the agency will be best positioned to determine whether the environmental risk is worth taking. Any future legal challenges to the substance of that decision would then be brought under some other statute, not NEPA. Because we vacate the instant LNG Rule due to PHMSA’s failure to prepare an EIS, such questions are left for another day.[11]
Takeaways for Future Regulatory Reforms
The challenges the Court elected not to address are also significant. These include variations on the argument that the DOT’s modification to the standards applied to the cars to be used to transport LNG by rail after the notice of proposed rulemaking was issued violated the notice and comment provisions of the Administrative Procedure Act and the public participation requirement of NEPA, as well as arguments related to the failure to take into account environmental justice concerns and the impact of LNG transport by rail on greenhouse gas emissions. At least some of these challenges (perhaps variations of all) could be deployed against future regulatory reform efforts. For example, in Liquid Energy Pipeline Ass’n v. FERC[12], a panel of the D.C. Circuit vacated a Federal Energy Regulatory Commission (“FERC”) oil pipeline index rule that was modified on rehearing by FERC without being subjected to another round of notice and comment rulemaking.
For those industry stakeholders who support, wholly or in part, regulatory reform initiatives, this decision highlights the need to anticipate and to address alleged administrative process flaws at an early stage in policy development to ensure that any such concerns are fully addressed and resolved on the administrative record. The failure to do so can delay or undermine entirely proposed changes, regardless of their public policy bona fides. It will likely not be enough to wait and hope that affected departments and agencies who are managing multiple initiatives and challenges will have the time and resources to develop a full and adequate administrative record that can withstand judicial review. All affected stakeholders need to take affirmative steps to ensure that procedural missteps do not take on outsized consequences.
[1] No. 20-1317, 2025 WL 223869 (D.C. Cir. Jan. 17, 2025).
[2] Hazardous Materials: Liquefied Natural Gas by Rail, 85 Fed. Reg. 44,994 (July 24, 2020).
[3] Sierra Club at *2 (citing Executive Order 13,868, 84 Fed Reg. 15,495, 1497 (April 10, 2019)).
[4] Id. at **2-3.
[5] Id.
[6] Id. at *3
[7] The Court also found that the stay did not moot the case. “Voluntary cessation does not moot a case unless it is absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.” Id. at 5 ( citing West Virginia v. EPA, 142 S.Ct. 2587, 2602 (2022)).
[8] Id. at **6-7.
[9] Id. at *7.
[10] Id. at *8.
[11] Id. *10, n. 6.
[12] 109 F.4th 543 (D.C. Cir. 2024).