Litigation Tactics Receive Some Court Support in Appeals Involving MVP and ACP
The various environmental groups that oppose LNG and pipeline development in this country are creative in their efforts to stop the development of the nation's gas infrastructure. Over the course of the last few years, we have seen a number of objections gain some level of court approval that can result in slowing (not stopping) development, but the court victories have been short-lived as FERC and the industry adjust their processes, which means there are always new tactics to consider. Just this past week, new lines of attack have gained traction with the courts reviewing Dominion's Atlantic Coast Pipeline (ACP) and EQT/NextEra's Mountain Valley Pipeline (MVP) projects. With these and many other permitting issues swirling around, other project developers and the value chain need to be aware of how the following litigation issues may impact the projects in which they are interested:
- Deficient endangered species reviews by the U.S. Fish and Wildlife Service;
- Judicial appeals of FERC Certificates before FERC rules on rehearing requests; and
- Upstream and downstream greenhouse gas impacts.
New Tactics Get Some Surprising Traction Against ACP and MVP
Just last week, two new issues raised by opponents received positive reinforcement from two different courts. As we have previously reported, a recent approach has been to challenge every federal permit required for a project. That strategy appears to have found a weak point in the U.S. Fish and Wildlife Service's (FWS) incidental take statement for ACP. Just five days after hearing oral arguments on a challenge to the FWS's review of that project, the Fourth Circuit issued an order that would not just remand the FWS's decision for further consideration, but would vacate that decision. As we explained in the DC Circuit case involving Enbridge/NextEra's Sabal Trail, though, an order by an appellate court does not have any real world effect until the court issues the "mandate" implementing its order.
As followers of the Sabal Trail saga know, the mandate does not typically issue until any rehearing requests are denied. Therefore, absent the court issuing a stay of construction, the order will have no impact until the time for filing rehearing requests expires at the end of June, but maybe even later than that, if any rehearing requests are filed. While some have speculated that FERC will respond to requests from the appellants to halt all construction in the meantime, we do not expect FERC to do that, as that action would give force to a decision that the court's own rules indicate is not yet final.
The other surprising decision last week arose in an appeal to the DC Circuit challenging the certificate order approving Mountain Valley Pipeline. Despite FERC issuing a tolling order to provide itself more time to rule on the numerous rehearing requests, environmental groups appealed the certificate order to the DC Circuit. In what is usually a routine motion in such cases, FERC asked the court to hold the entire appeal in abeyance until FERC could rule on the pending rehearing requests. In particular, FERC asked the court to not require the filing of the certified index to the record (a procedural requirement) until FERC had a chance to rule on the rehearing requests.
FERC indicated in its request that ordering it to file the index before it could rule on the pending rehearing requests could limit the actions FERC might take in such a rehearing order to those that do not "modify or set aside" its initial order. The court denied FERC's request, but did give FERC thirty more days in which to file the index. The court may be hoping this encourages FERC to rule on the rehearing requests in the next thirty days. This may be another situation (as discussed below) where the DC Circuit is growing increasingly frustrated with the timeframe of responses at FERC. As such, the court may be using its own rules to encourage FERC to move.
Some Objections Work, While Others Do Not
When the national environmental groups first began actively opposing pipeline projects, an early line of attack was on the supposed "segmentation" of a single project to avoid a more thorough environmental review. A companion argument to this attack was one that focused on FERC's failure to assess the "cumulative impacts" of projects it was approving.
This tactic won approval from the DC Circuit when it remanded a decision to FERC with instructions to do a more complete cumulative impact study for a series of projects that had been built by Kinder Morgan's Tennessee Gas Pipeline. During the 17 months FERC took to complete the required analysis (a timeframe which may be influencing more recent cases before the DC Circuit), Tennessee completed all of the projects without any delay. Since that one "win" for the environmental groups, the issue hasn't been useful for project opponents, primarily because FERC and the project developers refined their response to the claim and made minor adjustments to the review process.
Growth of Participation by Major Public Interest Groups
Another issue raised by the major public interest groups involved the upstream GHG impact "induced" by the construction of a new pipeline and the "downstream" GHG impact from the gas being delivered for its intended purpose. Despite repeated complaints that FERC had failed to calculate the upstream GHG impacts, FERC has steadfastly refused to engage on that issue and, to date, the courts have not been troubled by that stance.
Last year, with respect to Sabal Trail and its related projects, the DC Circuit faulted FERC for not quantifying the projects' downstream GHG impact when it knew that most of the gas was headed toward gas-fired electric generation stations. Perhaps, due to the time it took FERC to respond to the remand in the Tennessee case, the DC Circuit didn't just remand that case but also "vacated" the FERC certificate. The DC Circuit's action kept FERC's feet to the proverbial fire to conduct its reassessment, which FERC completed days before the court issued its "mandate," which is the act that makes the order effective.
The GHG issue is still alive, however, but perhaps not in the way the environmental groups would have expected. When FERC issued its Notice of Inquiry (NOI) with regard to its Certificate Policy Statement, this was one of the issues for which it sought input. Apparently, Commissioners LaFleur and Glick thought that this meant the rest of the Commission was open to a more robust analysis. Last Friday, FERC issued an order affirming the certificate for Dominion's New Market Project. In that decision, FERC said that it would no longer prepare estimates of upstream or downstream GHG impacts when such impacts are neither cumulative nor indirect impacts of the proposed pipeline project. This led Commissioners LaFleur and Glick to dissent in the case, with both charging that the majority decision was a change in FERC's policy, which should not have been made while the comment period was open on the NOI. Some have speculated that this decision may mean FERC intends to appeal the Sabal Trail decision to the United States Supreme Court, but the time to do that expired earlier this month. However, the Dominion decision may encourage the industry to file comments to the NOI urging FERC to abandon all GHG analysis as being unhelpful to the overall process.
The continued creativity of these major environmental groups is a risk to any project in which they take an interest. The LawIQ project profile page indicates the number of such major groups that have commented on a project and can be an early warning sign of issues that could lie ahead for a project. Our continuing coverage of the new avenues of attack can keep our subscribers aware of the changing tactics so that pipeline proponents can anticipate and mitigate them in pending proceedings.
Insights Coming Next
A review of the comments filed in response to FERC's Notice of Inquiry regarding Accumulated Deferred Income Tax (ADIT). And why it is important in the ongoing MLP regulatory upheaval; and,
An update on trends related to Certificate Proceedings. What are the volume trends year over year, types, and geographic patterns? What do these trends mean for midstream infrastructure capacity?