The game does not allow me to make the below shown federation. I'm not sure why. It's the shortest path between the selected buildings as far as I can tell.
I do get an error but I can't make sense of the suggested satellite placement.
Discussions
Bug/Question: forming federation not allowed
The path with the green stroke connects the selected planets with one less satellite.
It's not very intuitive, because the path with the green stroke is not a valid federation either (since planets + satellites can be removed from it), but if you check the FAQ on federations (linked in the rules for GP) it should clarify hopefully.
It's not the shortest path. The shortest path would require going through your buildings on the south. Note however that isn't a legal federation either, as it would include unnecessary buildings. Which means you cannot make a fed using these 4 buildings at all.