INSIGHT: Ninth Circuit Denies Stay of Keystone XL Permit Decision

Several weeks ago a Montana federal district court judge issued an order halting the Keystone XL Pipeline project.

On May 28, the U.S. Court of Appeals for the Ninth Circuit denied the government and Keystone’s request to stay the decision while the appeal is pending, finding they had not sufficiently demonstrated they will succeed on the merits and are being irreparably harmed in the meantime.

If the Ninth Circuit ultimately affirms the order, developers of infrastructure projects, including oil and natural gas pipeline projects, will likely see many of their projects slowed or halted.

Judge Brian Morris concluded the U.S. Army Corps of Engineers abrogated its responsibility under the Endangered Species Act by reissuing a general permit in 2017, commonly referred to as Nationwide Permit 12, without first consulting with the U.S. Fish and Wildlife Service.

Morris initially vacated the general permit altogether, which wreaked nationwide havoc for existing and pending projects relying upon the general permit, but later revised his order to limit the vacatur and injunction to dredge or fill activities associated with the construction of new oil and gas pipelines.

As it currently stands, Nationwide Permit 12 remains in effect for other activities, including the construction, maintenance, repair, and removal of utility lines and associated facilities.

Single Permit Covers Similar Activities

Nationwide Permits, like all environmental general permits, authorize the Corps to issue a single permit to cover similar types of minor activities determined to cause only minimal environmental effects separately and cumulatively. Coverage applies once the applicant demonstrates that its proposed activities are covered by the relevant Nationwide Permit.

The 52 nationwide permits issued by the Corps in 2017 include NWP 14 for transportation projects, NWP 15 for bridge construction and NWP 12 which covers utility lines and associated facilities, including oil and gas pipelines. NWP 12 covers projects impacting not greater than one-half an acre of wetlands or waters of the United States, but the Corps defines “project” to mean each individual water crossing, not the overall project.

The Endangered Species Act requires the Corps to determine “at the earliest possible time” whether any action it takes involving Nationwide Permit 12 “may affect” endangered or threatened species or critical habitat, and if so, consult with the U.S. Fish and Wildlife Service. The Corps and the U.S Fish and Wildlife Service performed this consultation prior to the Corps’ issuing the permit in 2007 and 2012.

Under the Trump administration in 2017, the Corps opted not to consult prior to issuing any of the outstanding nationwide permits, determining instead that because any such effects would be analyzed on a project-specific basis under General Condition 18 (GC 18), one of the 32 general conditions included in all nationwide permits, the permits by themselves would have “no effect” on listed species or critical habitats.

Morris disagreed with the Corps finding and rejected the Corp’s reliance on GC 18. He concluded that failure to consult with the U.S Fish and Wildlife Service prior to issuing the general permit risked piecemeal destruction of endangered species and habitats.

He noted that when it reissued Nationwide Permit 12 in 2017, the Corps stated that discharges authorized by the permit “will result in a minor incremental contribution to the cumulative effects to wetlands, streams, and other aquatic resources in the United States,” which the court found sufficient to meet the low threshold established by the Endangered Species Act for consultation associated with any activity that may affect listed species or habitat. The court also relied on plaintiffs’ experts’ predictions on the effect the Project would have on listed species and critical habitats.

Immense Financial Impact

If the Ninth Circuit upholds the district court’s decision, it will have an immense financial impact on Keystone XL and other oil and gas pipeline projects not parties to the suit. Each of these projects will need to apply for individual permits, which are expensive and often taking years to obtain. Keystone XL has estimated that it could face a one-year delay, resulting in a loss of approximately $1.3 billion between 2023 and 2024.

Different courts following Morris’ reasoning, could vacate and enjoin new projects being performed under NWP 12 or other NWPs, such as transportation projects under NWP 14 or bridge projects under NWP 15, since the Corps in 2017 opted not to consult with other agencies, instead relying on GC 18 in each instance.

Undoubtedly a decision by the Ninth Circuit upholding Morris’ decision to vacate Nationwide Permit 12, in whole or in part, will lead to further legal challenges, during the pendency of which industry will be left with the options of postponing or cancelling projects due to cost and uncertainty, or applying for individual permits, resulting in project delays and increased expenditures. None of these alternatives will benefit the nation’s urgent need to jump start the economy or create jobs.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Pamela Goodwin is a partner at Saul Ewing Arnstein & Lehr where she chairs the Environmental Practice Group and represents clients in the energy, oil and gas, solid waste, agriculture and many other industries in matters involving environmental permitting, counseling and litigation. Drawing on more than 30 years of experience, she assists with acquisition, development and siting of pipeline landfills, power plants, solar and wind projects.

Sunu Pillai is an attorney with Saul Ewing Arnstein & Lehr where he counsels construction and energy industry clients on issues throughout the project life-cycle, from contract formation through dispute resolution. Having worked in the construction industry as an engineer, project manager and claims consultant prior to his legal career, Pillai has a deep understanding of issues related to construction disputes. He is also an arbitrator with American Arbitration Association.