Originally published for customers November 5, 2025.
What’s the issue?
The Fifth Circuit upheld FERC’s GTN Xpress order, affirming FERC’s denial of rolled-in rate treatment and upholding its NEPA analysis.
Why does it matter?
Rolled-in rates would have let GTN spread costs across all shippers, and the case is the first application of Seven County to FERC outside of the D.C. Circuit.
What’s our view?
The ruling shows how fact-specific FERC’s analysis is in defining expansion, replacement, and reliability projects for rates analysis, and shows the Fifth Circuit’s generous view of FERC discretion in NEPA analysis post Seven County.
The Fifth Circuit upheld FERC’s GTN Xpress order, affirming FERC’s denial of rolled-in rate treatment and upholding its NEPA analysis. Rolled-in rates would have let GTN spread costs across all shippers, and the case is the first application of Seven County to FERC outside of the D.C. Circuit. The ruling shows how fact-specific FERC’s analysis is in defining expansion, replacement, and reliability projects for rates analysis, and shows the Fifth Circuit’s generous view of FERC discretion in NEPA analysis post Seven County.
Under FERC policy, pipelines must generally be able to finance new expansion projects without subsidizing them through existing customers. That usually means using incremental pricing, where expansion shippers (not the broader rate base) cover project costs. Rolled-in rates, by contrast, allow project costs to be added to the pipeline’s overall rate base and recovered from all shippers.
FERC sets rates at two points: initial rates which are meant to “hold the line” until a later rate case. Initial rates must be “in the public interest,” a lower bar than the “just and reasonable” standard that applies in section 4 rate cases. Pipelines can request a predetermination that rates will be rolled in at the initial stage, as GTN did. At issue here was FERC’s denial of that request.
On appeal, GTN argued that FERC had effectively adopted two unwritten rules: first, that the Commission presumptively grants predeterminations for compressor replacements that are routine facility upgrades under section 2.55(b) of FERC’s regulations; and second, that rolled-in rate treatment is always appropriate for facilities improving reliability to existing customers. The court found both claims unsupported.
On the first, the panel held that GTN “overreads FERC’s precedent to state that the agency has a policy to presumptively grant predeterminations for section 2.55(b) replacements.” Predeterminations remain discretionary, and FERC’s decision to defer cost allocation to a later section 4 rate case was within its authority. The court found that the cases GTN cited were factually distinct: each either split costs between existing and expansion shippers or involved in-kind replacements with no added capacity. The court agreed with FERC that GTN Xpress fit neither category.
The court also held GTN overread FERC’s precedent on reliability. The cases GTN cited to approving rolled-in recovery for reliability improvements did not involve rolling costs of excess or unused replacement capacity into existing rates, and the project “accumulated far greater excess capacity than necessary to replace its old compressors.” The court reasoned that explaining why so much additional power was needed was better left for the section 4 rate case.
For developers, the takeaway is clear: when a project blends reliability and expansion, with benefits split between existing and new expansion customers, FERC will likely defer rolled-in treatment and isolate incremental costs until it sees the full record. The outcome depends on facts, not formula.
The Fifth Circuit also tested how far Seven County’s logic could stretch under NEPA.
The court upheld FERC’s decision to treat the project expansion and earlier section 2.55(b) compressor replacements as separate actions (not “connected actions”) even though they involved the same stations. GTN first notified FERC in early 2020 that it would replace compressors under section 2.55(b), a provision allowing in-kind upgrades without a new certificate if they do not increase capacity. Four months later, GTN filed a section 7 application to expand capacity at those same sites. Riverkeeper argued that this segmentation violated NEPA’s “connected actions” test, but the court held that FERC’s line-drawing was reasonable and consistent with Seven County.
The court also rejected Riverkeeper’s claim that FERC failed to include a no-action alternative.
Petitioners argued that FERC’s EIS never analyzed one. The Fifth Circuit disagreed, pointing to FERC’s statement in the EIS that the alternative “is not a reasonable alternative because it does not meet the purpose of the Project.” After Seven County, the court noted, “[w]hether a particular report is detailed enough in a particular case itself requires the exercise of agency discretion.” Because FERC concluded that the no-action option failed to meet the project’s purpose, the decision still met NEPA’s procedural standard, even though it wasn’t a detailed discussion.
Comparing this case with other post-Seven County decisions like Cumberland shows slightly different calibrations, but a consistent throughline of agency discretion. In Cumberland, the D.C. Circuit applied Seven County but did not reach the connected-actions question because the power plant facilities at issue were outside FERC’s jurisdiction. But the court noted that, even if FERC asserted jurisdiction, there was no analytical gap as the record already included TVA’s EIS analyzing the plant and pipeline together. By contrast, the Fifth Circuit appears more willing to treat line-drawing itself as the analysis, finding FERC’s segmentation and limited no-action discussion sufficient without further justification. Across these cases, FERC’s choice of where — and whether — to assert jurisdiction remains squarely within its discretion.
In sum, the Fifth Circuit affirmed FERC’s discretion on two fronts: environmental boundaries and economic ones. Together, the holdings show how the same principle — deference to FERC’s line-drawing — is alive and well in both environmental and economic review.
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