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Environment & Energy Report

EPA Water Rule Won’t Speed Up New Oil, Gas Pipeline Projects (1)

June 8, 2020, 10:00 AMUpdated: June 8, 2020, 4:21 PM

A new EPA water rule to curtail state vetoes won’t necessarily ease the path for new oil and gas interstate pipeline projects, energy analysts and lawyers say.

They say this is partly due to the sharp decline in oil and gas linked to the coronavirus pandemic. But the hurdles also come from a federal court’s suspension of the Clean Water Act Nationwide Permit 12, or NWP 12, that would allow developers to dredge and fill wetlands and stream crossings in order to lay pipelines.

Without a nationwide permit, pipeline builders have no choice to seek the more time-consuming and expensive individual Clean Water Act permits from the U.S. Army Corps of Engineers that apply to each water crossing.

Forcing applicants to pursue individual permits—pending the outcome of a months-long Ninth Circuit review of the nationwide injunction—will increase costs and delays in project approvals, according to Sarah Peterman Bell, a Farella Braun + Martel LLP attorney said June 4.

A year ago, the Environmental Protection Agency’s water quality certification rule, released June 1 (RIN: 2040-AF86), would have been welcome, said Larry Liebesman, a former Justice Department environmental lawyer.

But with the suspension of Nationwide Permit 12, “everything is up in the air,” said Liebesman, now at the environmental and water permitting firm of Dawson & Associates.

Ninth Circuit Kibosh

Oil and gas companies the week of June 1 welcomed the EPA’s rule, which narrows the scope of state reviews of pipeline crossings to focus on direct water quality impacts, and not on indirect impacts such as a warming climate. Such reviews are mandated under Section 401 of the Clean Water Act.

The law requires pipeline developers to obtain state approval while, or before, they seek individual dredge-and-fill permits for actual construction. These approvals may come with added conditions to protect streams and wetlands.

But the U.S. Court of Appeals for the Ninth Circuit put a kibosh on plans for new oil and gas pipelines by refusing to lift the stay on Nationwide Permit 12, while the court reviews the decision of a federal district court in Montana to vacate it.

Enbridge Inc., which is building a Line 3 oil pipeline in the Upper Midwest, said it was reviewing the EPA rule for potential impacts to new projects.

Dominion Energy’s Atlantic Coast pipeline remains unaffected by the EPA rule because Virginia certified the project a year ago. Company spokeswoman Ann E. Nallo said Dominion is monitoring the developments in the nationwide permits case for any impacts to its projects.

One-Year Limit

The EPA’s rule gave states a one-year deadline to veto projects requiring federal licenses or permits, like the dredge-and-fill permits.

“So having some certainty around the scope and timing of the 401 process is important regardless of the status of NWP 12,” said Cynthia Taub, a partner with the Washington office of Steptoe & Johnson LLP.

Paul Beard II, a partner with the Los Angeles office of Fisher Broyles LLP, said the EPA’s rule will help “cushion the blow” from the Ninth Circuit’s permit ruling for many pipeline and utility projects.

Despite having to apply for individual dredge-and-fill permits, “proponents will enjoy greater certainty and more timely responses on certification requests that they would have received from the patchwork of state rules for certification that they formerly labored under,” Beard said.

Of course, “when that relief will come is anybody’s guess,” Beard said, as many states and environmental groups are gearing up to challenge the EPA rule when it takes effect 60 days after publication.

“It’s difficult to envision a successful challenge, as the rule hews closely to the text of and legislative intent behind the certification provisions of the Clean Water Act,” Beard added, calling any constitutional argument against it as bordering on “frivolous.”

Speed Up Denials?

In contrast, Brandon Barnes, a Bloomberg Intelligence analyst, said the EPA rule limiting the state review process to one year will help, but won’t make the regulatory process move any faster.

“I think it just speeds up the denials in the states where this matters,” Barnes said.

But Steptoe & Johnson’s Taub said the EPA rule will lead to fewer state denials, because the EPA has narrowed the scope of reasons states could veto a project.

State approvals have been more of an issue for natural gas pipelines on the East Coast than for oil pipelines in the Midwest, Christine Tezak, managing director for research at ClearView Energy Partners LLC, said in an interview.

“The rule is prospective so it doesn’t apply to past denials, but may become relevant to the PennEast pipeline after it has resolved its eminent domain issues in the Supreme Court,” she added.

PennEast Pipeline Co. LLC is locked in a separate legal dispute with New Jersey over using state land for the project. The pipeline company is asking the U.S. Supreme Court to step in after a lower court blocked the planned land seizure.

Of course, states can still deny certifications for legitimate reasons outlined in the EPA rule, Tezak said.

Beyond any permit issues, “these developers face challenges in market demand softening because of Covid-19, as well as states moving away from building new natural gas plants as part of plans to ‘green up’ their power portfolios by retaining nuclear power and adding lower-emitting sources like renewable energy,” she said.

(Adds Beard quote in paragraph 17. A previous version fixed reference to Clean Water Act in third paragraph.)

To contact the reporter on this story: Amena H. Saiyid in Washington at asaiyid@bloombergindustry.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Anna Yukhananov at ayukhananov@bloombergindustry.com

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