Update on Pipeline Projects

The Keystone XL pipeline always seem to garner the headlines, especially last month when the Nebraska Public Service Commission gave the developer the final regulatory approval needed to proceed with construction of the last leg of the project. However, several other pipelines also have been in the news this fall.

Atlantic Coast Pipeline

This pipeline, certificated by the Federal Energy Regulatory Commission (FERC) in mid-October, is designed to move domestically produced natural gas from north-central West Virginia to markets in eastern Virginia and North Carolina. Not surprisingly, though, the 600-mile project met with significant resistance, including the filing of petitions for rehearing of the FERC’s October order. In determining that the pipeline sponsor had met all relevant criteria for a certificate of construction, the FERC related that it had evaluated the Atlantic Coast application in accordance with a revised certificate policy. It explained that under the old policy, a certificate would be awarded only if the applicant could prove a public need for its proposed facilities, which need was to be demonstrated by documenting that a certain percentage of the pipeline’s capacity was already subscribed under a longterm service agreement or precedent. Under the FERC’s updated certificate policy, however, that public need can be shown through other factors, such as demand projections or cost savings estimates.

In the case of the Atlantic Coast Pipeline, the FERC found that the developer had shown that there was growing demand for natural gas in Virginia and North Carolina where the pipeline would end and that the transport of fracked gas from the Mid-Atlantic area would give customers a cost-competitive supply option. At the same time, however, the developer had pointed to long-term firm requirements contracts it had entered into with six shippers that accounted for more than 95% of the pipeline’s capacity. In the FERC’s view, those positive factors outweighed some of the drawbacks cited by opponents. Among the flaws so reported were that the Atlantic Coast Pipeline was but one of several proposed pipeline projects in the Mid-Atlantic, such that the FERC should be examining the proposals on a regionwide basis, not just on an individual case-by-case basis.

Protesting parties also asserted that the developer had not shown that the Appalachian Basin could produce enough fracked gas to support the pipeline. They further questioned the efficacy of the long-term shipper commitments in that five of the six are affiliated with the pipeline’s sponsor. In dismissing those claims, the FERC expounded that its function is not to assess one pipeline applicant’s abilities in comparison to another’s and issue a certificate only to the one it deems superior. Moreover, the commission said, allegations about insufficient supply from the Appalachian Basin were misplaced since the new pipeline will be interconnected with other interstate pipelines. As to the shippers’ association with the Atlantic Coast Pipeline developer, the FERC stated that agreements with affiliates present no problems as long as such arrangements do not result in undue discrimination against a nonaffiliate. Re Atlantic Coast Pipeline, LLC et al., Docket Nos. CP15-554-000 et al., 161 FERC ¶ 61,042, Oct. 13, 2017 (F.E.R.C.).

It should be noted that several parties requested rehearing of the FERC’s decision granting the pipeline a certificate, which appeal should have been addressed by now. Just this past Monday, however, the FERC voted to “toll” the rehearing proceeding, which had the effect of giving itself a 30-day extension of time to consider the rehearing requests. While receipt of a certificate from the FERC is a prerequisite for initiating construction, it is not the only requirement. Also needed are approvals from each state’s water quality agency. That is, before construction on a pipeline can begin, an appropriate state agency must certify that the proposed facility is unlikely to violate the state’s water quality standards. At times it is before such authorities that opponents have been the most vocal. In North Carolina, for instance, after project maps revealed that the Atlantic Coast Pipeline would require numerous stream crossings that obviously could affect downstream water quality both during construction and later, there was an outcry that more information was needed about the possible impact of the proposed pipeline on state waters. That led North Carolina’s Division of Water Resources to demand that the developer provide it with a more detailed account of how the project would protect water bodies that it crosses and how it would restore water quality at any location adversely affected by the project (DWR Project No. 14-0957 v2).

At the other end of the spectrum was the West Virginia Department of Environmental Protection, which displayed a different view. It elected in early December to waive its statutorily provided chance to review the potential impact of the project on the state’s streams and rivers, thus clearing the way for construction to start on the project in that state, even as the petitions for rehearing of FERC’s certificate order remain pending. The State Water Control Board (SWCB) in Virginia took a middle-of-the-road approach to the Atlantic Coast Pipeline on December 12, when it certified that it was doubtful that the project would violate state water quality standards but nevertheless placed a hold on its decision going into effect until such time as the Virginia Department of Environmental Quality completed its own assessment of the pipeline plan. According to published accounts, the SWCB has encountered various protest groups during its recent meetings, with most alleging that the SWCB was not fulfilling its duties by issuing a ruling when the associated environmental impact analysis has not yet been conducted.

Given the lack of a comprehensive environmental impact statement, the opponents argued that there was no foundation upon which to ground the SWCB’s conclusion of a “reasonable assurance” that Virginia’s waterways would not be damaged during construction or beyond. Indeed, the SWCB itself appeared to be divided, with the vote on certifying the Atlantic Coast Pipeline being 4 to 3. The closeness of the vote contributed to the last-minute compromise decision which acknowledged certification but delayed actual effectuation of such.

Atlantic Sunrise Pipeline

In early November, opponents of this pipeline scored a victory when the U.S. Court of Appeals for the District of Columbia Circuit denied the pipeline sponsor’s petition for lifting of an emergency stay on construction. The Atlantic Sunrise line is being built by Transcontinental Gas Pipe Line Company (Transco) for the shipment of fracked gas from the Marcellus Shale Formation in northern Pennsylvania to other pipeline facilities in states in the Mid- Atlantic and the South. Because the proposed pipeline route extends across 200 miles and involves the clear-cutting of a number of forested sites as well as disturbance of many wetlands, the project has been the focus of numerous protests.

Those challenging the pipeline range from local community advocates in Pennsylvania and Maryland to nationwide groups, including the Sierra Club. In lobbying against the project, the opponents have pointed out that the FERC had granted a permit for the pipeline’s construction prior to completing a full and comprehensive environmental assessment of the project. In seeking the emergency stay on pipeline construction activity in late October, the Pennsylvania chapter of the Sierra Club had asserted that Transco had been “rushing the process” and had turned a deaf ear to the many, many citizen concerns that have been voiced about the project. Finding some merit in those arguments, the court had issued an emergency stay on November 6, which was promptly appealed by the developer.

But in a short, one-page decision, the court refused to lift the injunction, reinforcing its tacit agreement that Transco should not be allowed to take a shortcut around established protocols for determining the extent of any environmental impacts and for providing an opportunity for local community input. However, the court emphasized that the stay applied only to construction work within Pennsylvania and did not preclude associated projects in other states from going forward. Allegheny Defense Project et al. v. Federal Energy Regulatory Commission, No. 17-1098, Nov. 8, 2017 (D.C. Cir.).

Exactly a month after the court had first stayed work on the pipeline, the FERC weighed in on the controversy, affirming a February 2017 decision in which it had authorized Transco to construct, lease, and operate the Atlantic Sunrise facilities. The FERC’s order denying rehearing of its February ruling came in response to requests for reconsideration filed by the same parties that sought a stay of construction activities in court. In upholding its February findings, the FERC said that the intervenors had been unable to prove irreparable harm if work on the project was commenced. The commission also dismissed arguments that no need for the pipeline had been shown. According to the FERC, the record demonstrated a growing need for natural gas along the southern half of the Atlantic Seaboard. As an example, the commission pointed to a need for the fracked gas in Maryland, where a liquefied natural gas export project has been under development and nearing completion. Re Transcontinental Gas Pipe Line Co., LLC, Docket Nos. CP15-138-001, CP15-138-004, 161 FERC ¶ 61,250, Dec. 6, 2017 (F.E.R.C.).

Dakota Access Pipeline

In an October ruling, the U.S. District Court for the District of Columbia entered yet another order in the dispute over the Dakota Access project, observing that the legal maneuverings in the case have “taken nearly as many twists and turns as the 1,200-mile pipeline itself.” In the most recent decision, the Standing Rock Sioux Tribe renewed its objections to the path of the pipeline, especially where it passes under that part of the Missouri River known as Lake Oahe, which the tribe considers sacred. More particularly, the plaintiffs alleged that the U.S. Army Corps of Engineers had still not performed the comprehensive environmental impact assessment that the court had ordered last spring after finding that even though the Corps may have “substantially complied” with the National Environmental Protection Act (NEPA) in its initial overview of the pipeline plan, there remained serious deficiencies in its evaluation. Given the continued noncompliance by the Corps, the tribe asked the court to vacate the Corps’ environmental conclusions and likewise vacate the easement granted the pipeline developer by the Corps, which easement had been based on its NEPA determination.

The court appeared sympathetic to the tribe’s ongoing frustrations with the pipeline project, admonishing the Corps for not giving “serious consideration” to the errors the court had previously identified in the environmental assessment. To that end, the court stated that the Corps should not have treated the court’s prior holdings as merely a directive to fill out the proper paper work on a post hoc basis. The court reiterated that the standards for review set forth in NEPA cannot be “reduced to a bureaucratic formality.”

As such, the court once again told the Corps that it must revisit its NEPA conclusions and come back with more detailed findings. However, deeming it more probable than not that the Corps will be able to substantiate its prior determinations as to minimal impacts from the pipeline, the court held that vacatur of the Corps’ NEPA ruling would not be an appropriate remedy. At the same time, though, the court indicated that it expects to see the parties again, in that the tribe was unlikely to be any more satisfied with the Corps’ next presentation than it had been with the past ones. Standing Rock Sioux Tribe and Cheyenne River Sioux Tribe v. U.S. Army Corps of Engineers and Dakota Access, LLC, Civil Action Nos. 16-1534 (JEB) et al., Oct. 11, 2017 (D.D.C.).

In the meantime, the developer of the Dakota Access Pipeline, Energy Transfer Partners (ETP), filed suit against several environmental advocacy groups it holds responsible for inciting the ongoing protests by the Standing Rock Sioux Tribe and others. In the complaint lodged against Greenpeace International and others in a federal district court in North Dakota, ETP accuses the group of “putative” motives and of being a “wolfpack” of corruption. Invoking the Racketeer Influenced and Corrupt Organizations Act (RICO), the plaintiffs claim that Greenpeace was an “illegal enterprise” that had engaged in a widespread conspiracy to defame the pipeline and ETP. The developer contended that RICO violations had occurred inasmuch as Greenpeace had led the way in promoting a misinformation campaign about the project. Although the complainants admit in their filing that the pipeline is now complete and operational, they allege that the defendants’ actions had cost them billions of dollars in damages, which they are now seeking to recover from the named defendants. Energy Transfer Equity, L.P. and Energy Transfer Partners, L.P. v. Greenpeace International et al., Case 1:17-cv-00173-CSM (W.D.N.D.).

Keystone XL Pipeline

Just before Thanksgiving, 2017, TransCanada Keystone Pipeline, L.P. received from the Nebraska Public Service Commission the final permit needed to complete an extension of its existing Keystone Pipeline. However, the route approved by the commission was not the one preferred by the developer. Moreover, the commission’s vote to allow the project to go forward was close, with two commissioners dissenting. The route adopted by the commission was one of two alternative siting plans that had been presented by Trans-Canada. In listing a different route as its preferred one, the pipeline had explained that the preferred route would more easily align with the route authorized by South Dakota regulators and would be a few miles shorter.

In opting for the alternative plan, the commission stated that the few extra miles would not make any appreciable difference in cost or time for the project. And, it noted, the alternate route had the benefit of facilitating greater co-location with the existing Keystone system. That would help minimize any environmental impacts on Nebraska lands, it said. Nevertheless, the commission added that all mitigation and reclamation commitments TransCanada had made with respect to its preferred route would still apply to the alternative route chosen. The two dissenting commissioners, Crystal Rhoades and Mary Ridder, indicated in their separate statements that while the alternate route approved may have been the lesser of three evils, it still did not alleviate their concerns about the damage that might be inflicted in the ecologically sensitive Sandhills area of the state. The two maintained that other viable routes existed, such as along Interstate 90, which would have enabled the pipeline to avoid the Sandhills region.

The dissenting commissioners also drew attention to the fact that although TransCanada had included the alternative route in its application papers, it had made it known that it did not regard the route as a truly feasible option, in effect discarding it from further consideration. As a result, the two pointed out, a formal environmental impact assessment had never even been performed for the route ultimately selected by the majority, nor had other state agencies reviewed the route with any particularity. In addition, they expressed reservations about whether the concerns of local landowners had been fully taken into account. The Nebraska commission released its decision just a few days after a major leak occurred in a segment of the original Keystone pipeline in South Dakota. Reports listed the leak as spilling approximately 210,000 gallons (or 5,000 barrels) of oil. Although some opponents of the Keystone XL project cited the massive leak as yet another reason for the Nebraska commission to withhold approval of the new pipeline, the commission said that was not a factor in its decision. The commission clarified that it had to base its ruling on the record before it, not on post-hearing events. Re TransCanada Keystone Pipeline, L.P., Application No. OP-0003, Nov. 20, 2017 (Neb. P.S.C.).

Mountain Valley Pipeline

The circumstances surrounding the Mountain Valley Pipeline are similar to those for the Atlantic Coast Pipeline in that the Mountain Valley project would track from West Virginia to Virginia and has engendered heated debate at the two states’ respective water resource agencies. Another similarity is that the FERC granted a certificate to the Mountain Valley facility in October in tandem with the one awarded the Atlantic Coast Pipeline, with the FERC reciting virtually identical reasoning. Re Mountain Valley Pipeline, LLC and Equitrans, L.P., Docket Nos. CP16-10-000, CP16-13-000, 161 FERC ¶ 61,043, Oct. 13, 2017 (F.E.R.C.).

Moreover, just as with the Atlantic Coast project, the Virginia SWCB was split about the propriety of deeming the project compliant with state water quality requirements prior to completion of a full water quality study. However, the vote on Mountain Valley, which came one week before the decision on Atlantic Coast, was not quite as close, being 5 to 2, rather than 4 to 3. In looking at the Mountain Valley proposal, the SWCB conceded that there was some confusion about responsibility for the water impact analysis. It explained that the Virginia Department of Environmental Quality (DEQ) had opted to cede that task to the U.S. Army Corps of Engineers. But because the DEQ has a more stringent set of standards than does the Corps, and because the Corps has yet to tender its findings, opponents had objected to the SWCB proceeding with its own decision. In an effort to address those concerns, the SWCB attached a number of conditions to its certification of the project. Meanwhile, the West Virginia Department of Environmental Protection (DEP) was embroiled in its own controversy, first ruling one way on the Mountain Valley Pipeline and then another. Back in March, the DEP had certified the project as compliant with applicable water quality standards.

But six months later, the agency did an about-face and asked a federal appeals court for leave to rescind the earlier certification and revisit its initial assessment, a request the court granted. Some speculated that the DEP moved to evaluate anew the project’s potential impacts on water quality only after various environmental advocacy groups filed suit against the DEP. Regardless of its motive, however, it was unprecedented for a state agency to seek to revoke its own water impact assessment in a pipeline certification proceeding, especially six months down the road. But then, creating more drama, the DEP did another abrupt aboutface, choosing to forgo its opportunity to do a more in-depth review of the Mountain Valley Pipeline’s possible effects on state waters.

In the end, the DEP was consistent in its actions between the Atlantic Coast and Mountain Valley projects, waiving its chance to pursue a full environmental review. While a number of parties contesting both the Mountain Valley and Atlantic Coast pipelines have vowed to take legal action to stop the projects, it appears unlikely that a judicial remedy could be obtained prior to construction on the pipelines commencing, inasmuch as both projects already have certificates from the FERC and have received water quality certification from state agencies as well, lukewarm though they may be.