Natural gas pipeline permitting process uncertainty following court decisions and agency proposals

Emil Barth's picture
Emil Barth, Special Counsel, Baker Botts LLP
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In the past several months, federal court decisions and proposals by the White House Council on Environmental Quality (CEQ) and the Environmental Protection Agency (EPA) have created uncertainty regarding how the permitting process for natural gas pipelines authorized by the Federal Energy Regulatory Commission (FERC) will look going forward.

The Washington, DC federal appeals court issued two key decisions affecting natural gas pipeline permitting.  In the first case, Hoopa Valley Tribe v. FERC, the court held in January that the state’s ability to review a FERC-permitted hydroelectric project under the federal Clean Water Act had been waived because the state failed to act within the statutory one-year deadline.  The court found that the state’s agreement with the project to repeatedly extend the deadline was null and void because it thwarted Congress’ express directive that a state must act on an application within one year.  This case was closely watched by the natural gas industry because many pipelines require state Clean Water Act certifications, and states, particularly in the Northeast, have used the Clean Water Act review process to hinder the development of pipeline infrastructure. 

In the second case, Birckhead v. FERC, the court issued an opinion in June rejecting a challenge to a FERC certificate authorizing construction of pipeline expansion on procedural grounds, but warning FERC that its review of upstream and downstream greenhouse gas emissions under the National Environmental Policy Act (NEPA) was inadequate under the court’s decision in Sierra Club v. FERC, a 2017 decision concerning the Sabal Trail pipeline.  The court indicated that FERC is required to make greater effort to obtain information on greenhouse gas emissions from production activities and from downstream combustion of the gas by end-users, and then make a determination whether those emissions are an “indirect” effect of the pipeline project because they are “reasonably foreseeable.” 

Both of these decisions have been followed by agency proposals.  The EPA announced a proposed rule on August 8 that would streamline the Clean Water Act state certification process by, among other things, specifying the requirements for submitting a certification request that starts the one-year clock.  It would also clarify the scope of the state’s review and its authority to condition permits.  This proposed rule would help prevent delays in review and overbroad permit conditions, but states will continue to retain their statutory authority to issue or deny certification.  CEQ also announced proposed draft guidance on June 21 that would require agencies to examine upstream and downstream emissions from a project if there is a “sufficiently close causal relationship,” not merely a “but for” relationship.  The proposed guidance also would provide that agencies are not required to quantify such emissions “where information necessary for quantification is unavailable, not of high quality, or the complexity of identifying emissions would make quantification overly speculative.”  Neither the EPA proposed rule or the draft CEQ guidance has yet been finalized, but legal challenges to both are likely once they are issued or applied in review of a project. 

Where does all of this leave pipeline developers today?  While the Hoopa Valley decision and the EPA’s proposed rule can be considered positive developments, they are not a panacea for preventing states from obstructing projects.  States still retain the authority to deny Clean Water Act certifications and thus can effectively block a project from proceeding.  And requiring states to act strictly within one-year may potentially limit the ability of the state, interested parties, and the developer from negotiating and reaching a settlement of water quality issues.  Thus, states may be more likely to deny water quality certifications.  The upside, however, is that a state cannot wait several years before issuing a denial and thus the project developer can begin the appeals process for a denial sooner. 

FERC review of greenhouse cases similarly presents a more complicated landscape for projects.  There are likely to be conflicts between what the court said in Birckhead about a broader, more searching review of upstream and downstream emissions by FERC and the more limited approach that CEQ proposes in the draft guidance.  This suggests that more litigation concerning the scope of review is almost certain.  And at FERC, with Commissioner LeFleur leaving and another open seat yet to be filled, the conflict among the Commissioners on the scope of review for emissions will likely continue and could potentially reach an impasse if any of the Commissioners recuse themselves from a pipeline certificate proceeding. 

Because the issues are far-reaching and draw the attention of industry and advocacy groups and other interested parties that intervene in permitting proceedings, a pipeline developer may find itself in the position of having its project reviewed in the next precedent-setting proceeding at FERC and in the courts.  The recommendation for pipeline developers is careful preparation and strategic analysis.  This entails early planning with counsel and environmental consultants to identify and proactively address these issues, mapping out how the different permitting processes will interact with one another, undertaking pre-application outreach to stakeholders, FERC staff, and state regulators who administer the Clean Water Act certification programs, and anticipating potential litigation.  Participating in agency rulemakings and understanding the implications of final rules and guidance in real-time when they are issued will also be critical to a successful permitting process. 

 

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