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INSIGHT: High Court Pipeline Ruling Positive Headwind to Industry

July 17, 2020, 8:01 AM

For the second time in less than a month, the U.S. Supreme Court paved the way for ongoing pipeline development.

On July 6 it lifted the portion of a Montana district court’s order that had foreclosed the pipeline industry from prospectively relying upon a commonly used general Clean Water Act permit issued by the Army Corps of Engineers (Corps) known as a Nationwide Permit 12 (NWP12).

The district court’s order, which the U.S. Court of Appeals for the Ninth Circuit refused to stay, had the potential to considerably slow new oil and gas pipeline construction across the U.S. The stay granted by the Supreme Court does not apply to the Keystone XL pipeline project, the subject of the Montana lawsuit.

That development comes on the heels of the court’s ruling in June affirming the U.S. Forest Service’s authority to allow projects to cross beneath the Appalachian Trail, and is welcome news to the energy industry. But the decision does not decide the underlying issue associated with the NWP 12 challenge, leaving individual pipeline companies to decide for themselves whether to rely upon that general permit going forward.

The Montana case involves a challenge to Keystone XL’s reliance upon NWP 12, because the Corps did not consult with other agencies under the Endangered Species Act before reissuing the permit in 2017. The judge initially went beyond the relief plaintiffs sought, which related to Keystone XL, by vacating and enjoining NWP 12 altogether.

On reconsideration, the judge revised his order by limiting it to Keystone XL and all new oil and gas pipelines. Keystone XL, joined by amicus supporters who took issue with the district court’s authority to vacate a federal permit, appealed the case to the Ninth Circuit.

The Supreme Court’s stay mitigates the impact of the district court’s decision for projects other than Keystone XL, and the Ninth Circuit’s refusal to stay that decision during the appeals process.

Order Leaves Unanswered Questions

The Supreme Court’s order does not indicate how the court may rule on the substantive issues raised in the suit should it decide to hear an appeal from the Ninth Circuit’s final decision in the case. Hence it does not preclude the possibility that another court may follow the Montana district court by enjoining another pipeline project that relies upon NWP 12.

The order precludes Keystone XL from proceeding with construction without an individual permit, which the company estimates could result in a one-year delay, and a loss of approximately $1.3 billion.

Neither does the order provide the court’s reasoning. But the standard used by the court under its rules for deciding requests for stays of lower court’s decisions is a useful place to consider whether this means the court is likely to entertain an appeal, and what issues may interest the court if it agrees to consider the merits of the case down the road.

In issuing the stay, the court’s rules required the court to consider whether four Justices are likely to vote to grant certiorari if the court of appeals rules against the applicant, whether five Justices would likely conclude that the court below wrongly decided the case, and finally whether the applicant’s asserted injury outweighs the harm to the other parties or the public.

Nationwide Injunctions

Should the court be asked to hear a challenge to the final decision from the Ninth Circuit, its issuance of the stay suggests the current members of the court would be inclined to hear the case. What aspect of the case is of interest to the court is impossible to know, but given its make up, it is conceivable that it is interested in deciding the recurring issue of whether a district court may award, through nationwide injunctions, equitable remedies that extend beyond the injuries asserted by the plaintiff.

Critics of nationwide injunctions point out that courts should adjudicate only the rights of the parties before them, and should not address the rights and obligations of other parties.

The Montanan district court’s order granted relief to some nonparties, while also harming other non-parties, including the stakeholders in pipeline construction projects that had relied on this permit. These nonparties arguably did not have notice or a fair opportunity to be heard.

It is also conceivable that the court’s decision could be based on the narrower legal issue of whether the plaintiffs have standing with regard to oil and gas pipelines other than the Keystone XL project, i.e., whether they have suffered an injury or harm due to those projects. It could also be based on an evidentiary issue of whether the declarations submitted by plaintiffs, which formed the basis of the injunction, was untimely. Either of these will provide a narrower basis for the decision, which could have minimal impact outside of this litigation.

In the meantime, the stay mitigates the immediate financial impact to the pipeline industry of the lower court decision, even if the Ninth Circuit ultimately upholds it. However, the prospect of similar challenges in the interim may lead project developers to apply for individual permits, and absorb the costs of the resultant delay.

The legal uncertainty also extends to other industries, including transportation projects under NWP 14 or bridge projects under NWP 15, since the Corps in 2017 opted not to consult with other agencies on these permits as well. These industry groups may also be weighing the cost benefits of applying for individual permits against the timing impacts on their projects, as well as potential litigation risks.

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.