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Environmental Reforms Impacting Energy Infrastructure

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The year 2020 brought with it the culmination of several key rulemakings and court decisions impacting the development and operation of energy infrastructure.  This short piece highlights several of these key developments.

The Clean Water Act

Clean Water Act Section 404

Some of the most significant regulatory and judicial developments related to the Clean Water Act (“CWA”) arise from Section 404, which requires a permit to discharge dredge or fill materials into navigable waters.  These “404 permits” are often necessary to build linear projects like transmission lines and pipelines crossing streams or wetlands.  Obtaining an individual Section 404 permit typically is a long and costly process in its own right, not to mention that the individual permit process routinely triggers other federal reviews under the National Environmental Policy Act (“NEPA”), Endangered Species Act (“ESA”), and National Historic Preservation Act (“NHPA”).  Section 404, however, provides a streamlined process through its nationwide permit (“NWP”) program for qualifying activities, including utility line construction (“NWP 12”).

Presently, a pending challenge to NWP 12 threatens to disrupt energy companies’ reliance on that other NWPs.  In reviewing a challenge to the Keystone XL Pipeline, the U.S. District Court for the District of Montana concluded that the U.S. Army Corps of Engineers violated Section 7 of the Endangered Species Act (“ESA”) by not completing a programmatic consultation before issuing NWP 12, and therefore vacated and enjoined the use of NWP 12 for new oil and gas pipelines.  While the U.S. Supreme Court has stayed pending appeal the vacatur and injunction of NWP 12 (except as applied to the Keystone XL Pipeline), the U.S. Court of Appeals for the Ninth Circuit will determine whether the ESA required the Corps to complete a programmatic consultation before issuing NWP 12.

The Ninth Circuit’s future decision will implicate other NWPs because the Corps generally does not complete programmatic consultations when issuing NWPs.  For example, the Corps recently reissued certain NWPs, which included segmenting the activities covered under NWP 12 into three separate NWPs—NWP 12 (oil and gas pipelines and related facilities), NWP 57 (electric utility line and telecommunications activities), and NWP 58 (utility lines conveying other substances like potable water, sewage, wastewater, and non-petrochemical industrial products).  As a result, if the Ninth Circuit determines that the ESA requires the Corps to complete ESA programmatic consultation before issuing an NWP, then there will be a strong basis to challenge these recently reissued and other NWPs.

Clean Water Act Section 401

CWA Section 401 also is important for energy infrastructure development.  Under Section 401, when a federal 404 permit is issued for an activity that may cause a discharge of a pollutant into navigable waters, the state where the discharge occurs must also “certify” compliance with the state water quality standards.  Under CWA Section 401, states must issue a decision on an application for water quality certification within a reasonable period of time not to exceed one year, or the proposed activity may proceed without certification.

Some states have bypassed the one-year deadline of Section 401 by threatening to deny an application for certification unless the applicant withdrew and resubmitted its application to restart the clock on the one-year deadline.  Using this tactic, several states have delayed for years their decisions on certification applications for projects that are unpopular in their respective jurisdictions.  For example, after delaying for over five years its decision on whether to issue a water quality certification for Millennium Bulk Terminals—Longview’s proposed shipping terminal on the Columbia River to export coal, the Washington State Department of Ecology issued a decision denying certification with prejudice.  Litigation challenging this decision has been ongoing for the past three years.

Last summer, the Environmental Protection Agency (“EPA”)—which is responsible for administering the federal regulatory program for CWA Section 401—comprehensively updated its regulations implementing that statutory provision.  The Section 401 Rule includes many amendments designed to increase regulatory certainty for applicants, including changes that prevent states from circumventing the one-year deadline for issuing a certification decision and that prevent states from considering factors and imposing conditions that are insufficiently related to water quality requirements.

While there are lawsuits challenging this new rule in multiple courts, no court reached a final decision on the merits of the 401 reform rule before President Biden took office.  As of the writing of this article, it is anticipated that the Biden Administration likely will seek to stay the litigation and develop a new rulemaking to repeal or modify the Section 401 Rule.     

The National Environmental Policy Act

Additional relevant 2020 regulatory developments relate to NEPA.  Last summer, the Council on Environmental Quality (“CEQ”) comprehensively updated its regulations implementing NEPA for the first time since their inception over forty years ago.

The NEPA rule is intended to streamline environmental reviews.  The rule, for example, directs agencies to begin the scoping process for a proposed action before publishing a notice of intent and as soon as possible.  The rule also imposes presumptive page and time limitations for NEPA reviews.  Besides adopting measures to streamline the NEPA process, the rule also seeks to provide applicants with greater certainty by imposing requirements on would-be litigants (e.g., an express requirement that a potential litigant identify legal issues for the agency before suing because of that issue).

There are multiple pending lawsuits challenging CEQ’s NEPA rule.  As with the CWA Section 401 Rule, the new administration likely will seek to stay these lawsuits while CEQ works on repealing in part or whole its recent NEPA rule. 

Wildlife Developments

Finally, there also have been several meaningful developments related to wildlife.  Last summer, for example, the U.S. District Court for the Southern District of New York vacated the U.S. Department of the Interior’s guidance that interpreted the Migratory Bird Treaty Act (“MBTA”) to not prohibit the incidental taking or killing of migratory birds.  Separately, lawsuits challenging the U.S. Fish and Wildlife Service (“FWS”) and the National Marine Fisheries Service’s (collectively, “the Services”) broad revisions to their regulations implementing Sections 4 and 7 of the ESA remain pending.  As of the writing of this article, it is anticipated that the Biden Administration likely will seek to stay the litigation and develop a new rulemaking to repeal or modify these rules.

On the rulemaking front, and despite the recent decision invalidating its guidance on the issue, FWS adopted a final rule concluding that the MBTA does not prohibit the incidental taking or killing of migratory birds.  The Services also adopted joint ESA regulations defining “habitat” and outlining the process for excluding areas for critical habitat designations.  Each of these rulemakings are very recent and narrow in scope, meaning the new Administration likely will seek to quickly nullify their effectiveness.

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