On July 6, Judge James Boasberg of the U.S. District Court for the District of Columbia ruled that Energy Transfer’s Dakota Access Pipeline (DAPL) must cease operations and be emptied of oil until the U.S. Army Corps of Engineers can complete a full environmental impact statement (EIS)—a 13-plus month process.
A D.C. appeals court July 14 issued a temporary administrative stay on the shutdown order to allow for additional time before making a decision on the appeal. This ruling must be overturned to ensure the integrity of our nation’s regulatory processes.
Boasberg’s decision comes after more than three years of safe operation since the pipeline came into service, and is the latest development in the four-year political and legal battle between a small sect of vocal activists and America’s energy industry and economy. This ruling has shown how judicial activism and deficient argumentation can create a dangerous precedent that discourages infrastructure investment, rewards unsubstantiated opposition, and cements regulatory imbalance.
The ruling misrepresents DAPL’s long history. The decision to vacate the pipeline’s easement rests on the concern that allowing operations to continue would create an unacceptable moral hazard. In his opinion, Boasberg writes that “[i]f projections of financial distress are sufficient to prevent vacatur, the Court fears that agencies and third parties may choose to devote as many resources as early as possible to a challenged project—and then claim disruption in light of such investments.”
This theory is inconsistent with the facts of the case in question. DAPL underwent a years-long environmental review process by the U.S. Army Corps of Engineers prior to also receiving separate approvals from four state regulators and local counties. That process, culminating in a 1,200 page long environmental assessment, yielded a “Finding of No Significant Impact” or “FONSI.” If that assessment was inadequate, it is not because there was an attempt to circumvent or exploit the regulatory process.
An Unreasonable Burden on Energy Companies to Placate Future Opposition
Boasberg’s desire to avert an imaginary moral hazard created a real one. By elevating the “controversy” factor to the point of allowing it to decide the case, he placed an unreasonable burden on energy companies to placate all future opposition on any projects or investments or risk having permits withdrawn, incentivizing preventative activism. The resulting economic harm to America’s infrastructure will be substantial.
In his ruling, Boasberg seems to acknowledge some of the short-term costs of his decision, and yet proceeds to move forward knowing the casualties of his reasoning. He writes, “the Court does not take lightly the serious effects that a DAPL shutdown could have for many states, companies, and workers. Losing jobs and revenue, particularly in a highly uncertain economic environment, is no small burden.”
However, he fails to account for long-term downstream effects, including the dangerous precedent set and the exacerbation of an existing trend of reduced infrastructure investment. He also fails to acknowledge the regulatory uncertainty introduced by his concerns over imaginary hazards, not found by the extensive regulatory review of four states and many local counties.
The day before the DAPL ruling was issued, Dominion Energy and Duke Energy canceled their Atlantic Coast Pipeline project after four years of development, citing legal costs incurred by fighting continuous environmental lawsuits. There can be little doubt that these two events in sequence will lead to the withdrawal and suspension of investment from the industry as a whole. As a result, jobs and much needed economic development will be lost in many parts of the country.
The fundamental failure of the DAPL ruling is that it subordinates logic and justice to the attainment of a desired political outcome. It succeeds in making an example of the pipeline without providing operators a clearer sense of their specific obligations, except that they should strive to quell all opposition or risk having permits suspended after years of safe operations. The pipeline’s developer, Energy Transfer, met or exceeded all permitting requirements as outlined by state and federal regulators. They followed the rules. Regulatory uncertainty thwarts valuable projects.
Given the impossibility of assuaging all controversy, pipeline operators can expect a wave of lawsuits in the future that cite the DAPL ruling as precedent. Even those in favor of the preparation of an EIS should be disappointed by the decision for how recklessly it endangers infrastructure investment at a time when the energy industry and our economy is more vulnerable than ever. In forcing DAPL to suspend operations, the decision discards regulatory balance and legitimizes meritless opposition.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Patrice Douglas is an attorney and former chairman of the Oklahoma Corporation Commission.