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Environment & Energy Report

Dakota Access Pipeline Fate Uncertain After Court Hearing (1)

Nov. 4, 2020, 4:58 PM; Updated: Nov. 4, 2020, 5:59 PM

Dakota Access pipeline supporters faced a tough bench Wednesday in the latest round of a long-running legal feud over the project’s future, with federal judges appearing to lean in favor of requiring additional environmental review but conflicted on other issues.

The U.S. Court of Appeals for the District of Columbia Circuit heard two hours of oral arguments on whether a lower court erred when it concluded federal regulators’ approval of the contentious oil project fell short of the National Environmental Policy Act.

A final ruling against Dakota Access and the Army Corps of Engineers could make it easier for the Standing Rock Sioux Tribe and other Indigenous opponents to ultimately shut the pipeline down amid further environmental review.

The three-judge panel hearing the case Wednesday swiftly drilled into questions about whether the Army Corps properly considered oil spill risks from Dakota Access. At least two judges seemed skeptical of the government’s arguments on that question, but the panel seemed unsure about what consequences should follow.

The hearing became heated at times. Gibson Dunn & Crutcher LLP attorney Miguel A. Estrada, representing Dakota Access, at one point described Indigenous challengers as “not-in-my-backyard neighbors” without expertise to dispute the spill risks, a characterization that earned a quick rebuke from Judge Patricia A. Millett, who said Estrada was brushing off sovereign tribes.

A D.C. Circuit win for the tribes could bolster the odds that a federal district court or a future Democratic administration—should former Vice President Joe Biden win the presidential election—would require Dakota Access to temporarily halt operations.

The court will likely rule on the case late this year or early next year. If the Army Corps and Dakota Access lose, they may take the dispute to the U.S. Supreme Court.

Oil Spill Risk

The judges focused most of their questions on review requirements under the National Environmental Policy Act, and whether controversy over Dakota Access’s impacts required a more in-depth environmental review than what the Army Corps conducted.

Under NEPA regulations, agencies must perform a detailed environmental impact statement, or EIS, when a project’s impacts are “highly controversial.” The D.C. Circuit issued a key precedent last year in National Parks Conservation Association v. Semonite that clarified the requirement, explaining that agencies must complete an EIS to address technical disputes about projects.

The U.S. District Court for the District of Columbia relied heavily on that standard earlier this year when it required an EIS for Dakota Access. Justice Department lawyer James A. Maysonett, representing the Army Corps, argued Wednesday that the lower court misapplied the precedent and ignored the low risk of an oil spill from the Dakota Access pipeline.

But at least two judges on the panel—Millett and Judge David A. Tatel—seemed dissatisfied with the argument, pointing to the tribes’ arguments that pipeline operator Energy Transfer LP has a record of oil spills not fully addressed by the Army Corps in its analysis.

“Did the Corps actually find that there wasn’t a controversy? Where did it actually find that?” Tatel asked. Millett pressed the government lawyer with a similar line of inquiry, questioning whether the Army Corps conducted “the kind of controversy-eliminating analysis that is at least convincing.”

Tatel authored the 2019 precedent that informed the district court ruling against Dakota Access, and Millett joined it. Senior Judge David B. Sentelle, who wasn’t involved in Semonite, also sat on Wednesday’s panel.

Legal Saga

Dakota Access has been mired in litigation since the Army Corps issued critical approvals in 2016. Thousands of Indigenous and environmental advocates descended on North Dakota to oppose the project’s route, just a half-mile from the Standing Rock Indian Reservation and beneath a major drinking water source for tribes.

The Obama administration responded to the public outcry by withholding a final permit and starting an additional layer of environmental review. President Donald Trump reversed course as soon as he took office, paving the way for construction to wrap up and oil to flow through the pipeline by spring 2017.

The federal district court has issued two major decisions against the project, ruling that the Army Corps of Engineers violated NEPA in both its original analysis of the pipeline’s impacts, and the court-ordered supplement that followed.

But District Judge James E. Boasberg stopped short of ordering Dakota Access to shut down until July, when he scrapped a key easement for the pipeline and issued an unprecedented order that would have forced the pipeline to halt the flow of oil during a new review process. The D.C. Circuit later sidelined that shutdown order for not applying the proper legal standard, but agreed to a speedy review of the district court’s underlying legal conclusions.

Scrapping the Permit

The arguments in the D.C. Circuit included lengthy discussion of whether the district court overstepped in vacating that key easement, even if it was right in its conclusion of NEPA violations.

Estrada argued that the Army Corps “exhaustively considered” the pipeline’s potential impacts, and that the district court’s decision focused on discrete issues that don’t merit invalidating the easement. Legal precedent allows judges to weigh the impacts of tossing a permit against the severity of NEPA violations and the disruptive consequences of vacatur.

Tatel appeared unconvinced. If the D.C. Circuit agrees with the district court that an in-depth EIS is required, he asked, “doesn’t that essentially require the vacatur of the easement until the EIS is done?” Tatel stressed, however, that the panel can’t revisit the D.C. Circuit’s earlier decision to toss the shutdown order.

Earthjustice attorney Jan Hasselman, representing the tribes, seemed frustrated by the statement, saying, “we think that there is a major unanswered question, that it hasn’t been resolved, and so I hope to at least have the opportunity to take my best shot.”

He argued that vacating the easement without ordering a shutdown would upend the court’s typical approach of scrapping federal actions that violate NEPA and the Administrative Procedure Act.

Shutdown Threats

While the D.C. Circuit appeal is pending, the tribes are still attempting to halt Dakota Access in district court. They filed a renewed shutdown request last month, calling on Boasberg to issue a fresh directive under the legal standard the appeals court said was required.

The pipeline, which moves oil from North Dakota to Illinois, is currently encroaching on federal land thanks to the district court’s order scrapping a key federal easement.

Millett grilled Estrada on why Dakota Access previously argued that vacating the easement would have devastating impacts, and is now arguing that oil can continue to flow even without an easement. Estrada responded that the easement is an important property right for the company.

The Army Corps has agreed to forgo any enforcement action against Dakota Access for the encroachment for now, but has said it’s still reviewing its next steps.

The case is Standing Rock Sioux Tribe v. Army Corps of Engineers, D.C. Cir., No. 20-5197, oral argument held 11/4/20.

(Additional reporting throughout.)

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloomberglaw.com

To contact the editor responsible for this story: Anna Yukhananov at ayukhananov@bloombergindustry.com

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