What the Fourth Circuit's Recent Decision Means for MVP, ACP and the Industry?

The Mountain Valley Pipeline (MVP) project continues to encounter challenges to its various federal permits. The same three judge panel of the US Court of Appeals for the Fourth Circuit that issued a stay against MVP with regard to the US Army Corps of Engineers' use of Nationwide Permit 12 within West Virginia recently vacated and remanded two federal agency decisions made by the Bureau of Land Management (BLM) and the US Forest Service. For now, the opinion has no immediate impact on construction.

However, we expect the project's opponents to seek a stay of construction along several miles of the route across a national forest. Even if such a stay is granted, MVP is likely already working with the two agencies to remedy the errors identified by the court. Provided such errors can be fixed promptly, the stay would then be lifted and construction through the forest could resume. A key factor to watch is how the court responds to the request filed to lift the stay issued in the case involving Nationwide Permit 12, which will likely be resolved in the next few weeks. How these stay requests are resolved will offer a window into the impact, if any, on MVP's in-service date.

The decision may be of concern for other projects, particularly the Atlantic Coast Pipeline (ACP) project, which faces a similar challenge to its crossing of another national forest. For the pipeline industry, this latest Fourth Circuit ruling is yet another example of federal litigation risks (a table of those pending for MVP and ACP is set forth below) creating uncertainty during the construction period. While this ruling only has precedential value within the court's jurisdiction, the Fourth Circuit is one of the most widely respected appellate courts, so it's possible that this decision may influence future rulings in other jurisdictions. To mitigate or avoid the impact of such events, project pipeline developers should work with other agencies to assure, as early as possible, that each and every approval is as appeal-proofed as it can be.

The Easement - Vacated and Remanded

The MVP project's proposed right of way will cross land managed by the Forest Service in the Jefferson National Forest in West Virginia and Virginia. However, when oil and gas pipeline rights of way are involved, the Department of the Interior's BLM is responsible for approving a requested easement, and the BLM must obtain the concurrence of the Forest Service to grant the necessary rights of way. As a result, on December 20, 2017, the BLM issued a Rule of Decision (ROD), with the concurrence of the Forest Service, granting a 30-year, 50-foot operational right of way and associated temporary use permits across 3.6 miles of the Jefferson National Forest.

In response to challenges by the Sierra Club and other environmental groups to the BLM's approvals, the court found that the BLM had failed to comply with the Mineral Leasing Act (MLA). In particular, the court found that the MLA requires the agency to find the proposed route co-locates with existing corridors to the extent "practical." The court found that the ROD relied on the Environmental Impact Statement (EIS) issued by the FERC on June 22, 2017 during the course of its review of the project, as is permitted, but that the EIS's alternatives analysis did not address this "practicality" requirement.

The Jefferson National Forest Plan

The court also found fault with the process used by the Forest Service to support its consent to the easement. To approve the project, the Forest Service was required to find that it complied with the Land Resource Management Plan governing the Jefferson National Forest, or to amend the Jefferson National Forest Plan such that the MVP project would be consistent with that plan. In its ROD filed on December 1, 2017 adopting required amendments, the Forest Service adopted the FERC EIS. The court faulted the Forest Service for failing to explain how its concerns about sedimentation issues had been addressed by the EIS. As a result, the court could not "conclude that the Forest Service undertook an independent review and determined that its comments and concerns were satisfied." The court found that the Forest Service had not only acted arbitrarily and capriciously in adopting the sedimentation analysis in the EIS, but also failed to adequately address the purpose of its proposed amendment to the Jefferson National Forest Plan. Consequently, the court found that the Forest Service had failed to properly provide its consent to the BLM.

What's Next for BLM and the Forest Service?

The Fourth Circuit's opinion should have no impact on the project's progress until the decision becomes final or the court issues a stay of construction, which would follow a process similar to that followed by MVP and the government in the challenge to the Army Corps permit, where the agency revised its decision in response to the stay and has asked the court to lift that stay. However, the time required to address the remanded decisions and conduct the necessary analyses may delay the construction of the portion of the project located in the Jefferson National Forest. The BLM and Forest Service will likely need to coordinate to issue revised RODs that will address the court's concerns.

While it appears that the Forest Service can fix the problems identified by the court without further input from MVP, BLM's practicality assessment may require engineering studies by MVP. The speed with which BLM can correct the errors identified by the court may depend on how quickly MVP can provide supplemental information to the BLM.

Impact on Atlantic Coast Pipeline Project and the Industry

In a similar turn of events, the Sierra Club and various other environmental organization petitioners filed challenges in June 2018 with the Fourth Circuit concerning the rights of way granted to ACP in the George Washington National Forest and the Monongahela National Forest. The Forest Service issued its final ROD to amend the forest plans on November 17, 2017. The petitioners claim that the ROD is flawed for reasons similar to those identified by the court in the MVP decision. As reflected in the table below, this challenge to the ACP rights of way is scheduled for oral argument on September 28, but, so far, there has been no request for a stay of construction.

While these cases are pending before the Fourth Circuit, there is a case challenging MVP's FERC certificate currently pending before the US Court of Appeals for the District of Columbia Circuit. In that case, the Sierra Club has filed for a stay of all project construction. While the Fourth Circuit granting a stay is problematic for projects in that geographic area, it would be even more problematic for MVP and the industry if the DC Circuit were to issue a stay in the case pending before it, because the DC Circuit has authority to hear all appeals of FERC certificates and not just for those located in a geographic area like the other circuit courts.

Key Pending Federal Cases Challenging Aspects of the MVP and ACP Projects

Insights Coming Soon

Overview of comments received on FERC's review of Certificate Policy Statement

Impact of recent rate case decisions on MLP income tax allowance

Insights You May Have Missed

Powelson Leaves and LaFleur Blooms-FERC Policy and Projects Stalled?

Is FERC Ignoring the Pleas of Oil Pipeline Shippers?