May 15, 2020

Will Construction of Oil and Gas Pipelines Stop or be Delayed? | Brownstein Hyatt Farber Schreck

Will Construction of Oil and Gas Pipelines Stop or be Delayed? | Brownstein Hyatt Farber Schreck

Being able to move oil and gas to markets is a priority for all exploration and production companies, and their distributors, and customers. Yesterday, a ruling from the U.S. District Court for the District of Montana, amending a previous order, held that a U.S. Army Corps of Engineers (“Corps”) nationwide permit used to authorize oil and gas pipelines was vacated due to failure to comply with Endangered Species Act (“ESA”) requirements. The order could shut down or significantly delay the construction of critical energy infrastructure nationwide.

At issue was Nationwide Permit 12 (“NWP 12”), a “dredge and fill” general permit issued by the Corps pursuant to Section 404(e) of the Clean Water Act. General permits authorize activities across the country that have only minimal individual and cumulative adverse environmental effects. NWP 12 authorizes discharges associated with the construction, maintenance, repair and removal of utility lines and associated facilities, which includes oil and gas pipelines, electrical lines, and internet, radio and television communication cables. Plaintiffs argued that regional conditions and project-level consultations under NWP 12 inadequately satisfied programmatic consultation under Section 7 of the ESA because they “fail to adequately analyze NWP 12’s cumulative impacts to listed species, like migratory birds, that cross regions.” Opinion at 3.

The court agreed, holding that major oil and gas pipelines, such as Keystone XL, “potentially affect numerous waterbodies and thereby involve precisely the kinds of cumulative impacts that should be addressed through programmatic consultation.” Opinion at 14. NWP 12 could therefore continue to enable new oil and gas pipeline construction that would seriously injure protected species and critical habitats. The court’s amended order did narrow the vacatur to allow certain minor projects to proceed; NWP 12 remains in place during remand for non-pipeline construction activities like broadband and fiber optic cables, and for routine maintenance, inspection and repair activities on existing NWP 12 projects. Opinion at 16, 18-19, 37-38. Nonetheless, the court significantly did not limit its partial vacatur of NWP 12 to the District of Montana, meaning it could have a nationwide impact of precluding or significantly delaying the construction of critical energy infrastructure.

What are the options for oil and gas pipeline construction? The litigation in this case was focused on oil and gas pipelines, particularly the Keystone XL pipeline, although NWP 12 covers an array of infrastructure. The court considered the varied uses of pipelines, and the need to continue maintenance and repair of existing pipelines. If an NWP will not be available for new oil and gas pipelines, such projects will need to obtain individual Clean Water Act Section 404 permits to authorize construction. An individual permit requires environmental reviews—either an Environmental Assessment or an Environmental Impact Study—as well as ESA consultations, and a demonstration of the need for the project and that its alignment is in the best location. These processes can add several months or years to the anticipated permit approvals for a new pipeline, introduce friction points and opportunities for challenges, and create greater uncertainty. Even more concerning, the court’s order could have serious impacts on other NWPs given their concurrent issuance and similar conditions.

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