Trump's fast-tracking of oil pipelines hits legal roadblocks
All three have been stalled by successful legal challenges by environmental groups alleging the administration failed to apply the regulatory scrutiny required under the law.
The Republican administration tried to accelerate permits for two multi-billion-dollar natural gas lines and jumpstart the long-stalled Keystone XL crude oil pipeline that would start in Canada. Judges halted construction on all three over the past two years, ruling that the administration granted permits without conducting adequate studies or providing enough alternatives to protect endangered species or national forests.
The delays have caused the two giant gas pipelines - Dominion Energy Inc’s Atlantic Coast and EQM Midstream Partners LP’s Mountain Valley - to increase their cost estimates by hundreds of millions of dollars, according to the companies. The Atlantic Coast pipeline may never be completed unless the U.S. Supreme Court overturns a lower-court decision blocking its planned route, analysts said.
Lawsuits alleging regulatory lapses are not new, but they were unsuccessful during the administration of Trump’s predecessor, Democrat Barack Obama. Plaintiffs lost five separate lawsuits alleging regulatory failures during Obama’s administration, according to a Reuters review of court filings for major interstate gas pipes built since 2010.
“Environmental groups definitely have been going after these pipelines more aggressively,” said Amy Vazquez, Houston-based partner at the law firm of Jones Walker, who specializes in energy litigation. “It’s probably because they’re having a fair bit of success.”
The White House declined to comment. An Energy Department spokeswoman did not comment on the litigation but said the administration remains committed to streamlining energy infrastructure development.
D.J. Gerken, senior attorney with the Southern Environmental Law Center in Asheville, North Carolina, represented the Sierra Club and other environmental groups in cases challenging the Atlantic Coast pipeline. He said the administration’s rush to help industry move faster invited the legal challenges.
“Pressure from the utilities that stand to benefit from this project and the Trump administration produced flawed permits,” he said.
‘MYSTERIOUS’ REGULATORY REVERSAL
In the case of Dominion’s 600-mile (966-km) Atlantic Coast gas pipeline, from West Virginia to North Carolina, the U.S. Forest Service originally expressed skepticism about the project in 2016 when Obama was president, requesting alternative designs. But after Trump took office, the Forest Service changed course, and issued permits and a waiver for the line to cross the Appalachian Trail on national forestland in Virginia.
Petitioners including the Sierra Club, an environmental advocacy organization, sued the Forest Service, alleging the agency violated three federal acts in issuing a construction permit.
In December 2018, the U.S. Fourth Circuit Court of Appeals vacated the Forest Service decisions, with Judge Stephanie Thacker noting in her ruling that “the Forest Service’s serious environmental concerns that were suddenly, and mysteriously, assuaged in time to meet a private pipeline company’s deadlines.”
The court said the Forest Service lacked authority to allow Dominion to build across the Appalachian Trail, which is administered by the Department of Interior. The Forest Service declined to comment.
In July, in another Atlantic Coast case brought by groups including the Sierra Club and Defenders of Wildlife, the Fourth Circuit vacated a U.S. Fish and Wildlife Service permit. Chief Judge Roger Gregory ruled that the agency, in “fast-tracking” decisions, lost sight of its mandate to protect threatened species.
The U.S. Fish and Wildlife Service declined to comment.
Atlantic Coast’s original cost estimate of $6 billion to $6.5 billion has risen to $7 billion to $7.5 billion, the company said. The projected completion has shifted from late 2019 to late 2021.
The U.S. Supreme Court in October agreed to hear the Appalachian Trail case and could overrule the decision halting construction across that route.
Dominion has stopped construction on the pipe since December 2018. Spokesman Aaron Ruby said the company is confident the high court will rule in its favor and “uphold the longstanding precedent allowing pipeline crossings of the Appalachian Trail.”
RISING COSTS, LEGAL RISKS
The Fourth Circuit appeals court also stopped work on EQM’s 303-mile (488-km) Mountain Valley gas pipe from West Virginia to Virginia in June 2018, agreeing with the Sierra Club and other plaintiffs that permits issued by the Army Corps violated West Virginia rules related to stream crossings.
The state has since altered its rules, and the U.S. Army Corps of Engineers is in the process of issuing new permits for this pipeline and Atlantic Coast. But the Sierra Club is still challenging a Fish and Wildlife Service permit in a case that also is being heard by the Fourth Circuit.
EQM originally expected to complete Mountain Valley by the end of 2018 at a cost of $3.5 billion. The company said publicly that it expected the pipeline, which is mostly complete, will cost up to $5 billion and enter service in mid-2020.
Diana Charletta, chief operating officer at EQM, said that recent court decisions “have brought uncertainty and a high-level of scrutiny to the agencies’ decisions.”
Officials at both Dominion and EQM dispute that approvals were fast-tracked. Dominion pointed out that it filed its application to build Atlantic Coast in 2014.
“I don’t think any person can look at the regulatory review process for Atlantic Coast pipeline and say that it was fast-tracked,” said Ruby, the Dominion spokesman.
EFFORT TO REVIVE KEYSTONE STALLS
TC Energy Corp’s $8 billion Keystone XL pipeline, originally blocked by Obama in 2015, was revived by Trump in 2017 with the issuance of a presidential permit for the line, which would ship crude from Canada to the U.S. Gulf Coast.
Federal Judge Brian Morris in Montana blocked work on the pipe in November 2018, citing a lack of due diligence by federal regulators regarding greenhouse gas emissions and Native American land rights.
The Trump administration tried to circumvent that ruling by rescinding its original presidential permit and issuing a new one in March. That second permit now faces legal challenges from Native American groups.
TC Energy said it continues to monitor U.S. legal and regulatory issues while it plans construction. “We are committed to Keystone XL as it remains an important project for our company and for North America,” said Terry Cunha, spokesman for TC Energy.
Canadian producer Suncor Energy said in early September that the uncertain U.S. political landscape makes it unclear that the pipeline will be built. “That’s one a lot of people are doing soul-searching about right now,” said Suncor CEO Mark Little.
Reporting by Scott DiSavino and Stephanie Kelly; Editing by David Gaffen and Brian Thevenot
Why Duke Energy CEO is optimistic work will resume on halted $7.8B Atlantic Coast Pipeline
By John Downey – Senior Staff Writer, Charlotte Business Journal
May 9, 2019, 5:05pm EDT
Pipe laid for the Atlantic Coast Pipeline last November near Dry Branch Stream in the West Virginia Mountains.
PIPELINE CSI
The full Fourth Circuit Court of Appeals held a hearing today to review a decision made by a three-judge panel in January that has halted construction of the $7.8 billion Atlantic Coast Pipeline.
Duke Energy Corp. executives said Thursday they expect the hearing to clear the way for putting key approvals for the pipeline back in place by this summer. That should allow construction of the 600-mile project — a joint venture by Dominion Energy Inc. (NYSE: D), Duke (NYSE: DUK) and The Southern Company (NYSE: SO) — to resume construction on some sections by the fall.
Duke CEO Lynn Good acknowledged that a separate 4th Circuit ruling, which essentially holds that the pipeline must get permission of the U.S. Congress to cross the Appalachian Trail, remains in place. She told analysts on a conference call that Duke and its partners expect to appeal that ruling to the U.S. Supreme Court early this summer, and they hope the Trump Administration will support their appeal. She said that construction on parts of the pipeline not impacted by the Appalachian Trail decision will be able to proceed once the other case, which involves an environmental permit from the U.S. Fish and Wildlife Service, is resolved.
D.J. Gerken, an attorney for the Southern Environmental Law Center, who was in Richmond, Virginia, for the arguments, says that is overly optimistic.
Leaving aside whether the environmental groups that SELC represents ultimately prevail in the Fish and Wildlife case, the Federal Energy Regulatory Commission could hold the ban on construction along the entire pipeline in place once that case is resolved.
Convoluted situation
Gerken says FERC has in the past held that construction of a pipeline cannot proceed until the project has secured right-of-way along the entire proposed route. That means the still-pending decision on right-of-way to cross the Appalachian Trail could lead the agency to hold off on allowing construction to move forward.
The current legal situation for the pipeline, designed to transport fracked natural gas from the Utica and Marcellus shale fields of the north and Midwest from West Virginia to southeastern North Carolina, is convoluted.
Thursday's hearing involved an order by a 4th Circuit panel that held the Fish and Wildlife improperly issued what is know as a "take order" for certain endangered species along the pipeline route. The order is supposed to consider all environmental factors to determine a limit on how much damage can be done to the species and allow it to continue to thrive.
Good said the partners expect the court to rule within 90 days whether the three-judge panel erred in its January ruling. She said that even if the court upholds that ruling, the partners believe the problems can be corrected "over a one to two-month period" and a new order can be issued, giving the project all the environmental approvals it needs.
Discussions continue
Gerken says that is a reasonable timeline. But he notes that his groups are arguing that the pipeline route will jeopardize two species — the rusty patched bumblebee and the clubshell mussel. If the court agrees, it could disallow the route and force the project back to the drawing board.
And he notes that the U.S. Park Service withdrew its permit for the pipeline to cross the Blue Ridge Parkway after the Fish and Wildlife decision was struck down. Duke expects the parkway permit to be reissued once a valid Fish and Wildlife order is in place. But Gerken says that is not certain.
The issue involving the Appalachian Trail focuses on whether the U.S. Forest Service had the authority to allow the pipeline to cross the trail. The 4th Circuit ruled late last year that it did not, holding that only Congress had that authority. A related issue is whether the Forest Service could permit the pipeline to cross the Monongahela and George Washington national forests.
"A petition seeking the Supreme Court review will be filed this summer. We’re optimistic that the government will support it," Good said. "And so, we’ll see milestones over the course of the summer on that item."
As that advances, she said, the pipeline is working with customers who have agreed to transport gas through the pipeline to determine the timing and costs for construction of the project, done in phases working around the trail issue.
"Those discussions will continue over the course of the year as well," she said.
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