Without question, the growing abundance of natural gas and the hydraulic fracturing process that has made it available have been a “game changer” for the energy industry – and have generated increased ire from the environmental community.
Having seen their direct attempts to stop fracking activities fall flat as traditional common-law claims under nuisance, trespass, negligence or strict liability measures, opponents of natural gas development have begun to realize that it may be easier to attack other natural gas infrastructure such as pipelines and liquefied natural gas terminals.
These facilities, unlike drilling projects, often must obtain federal approval under the Natural Gas Act (NGA), the Clean Water Act (CWA), and the Endangered Species Act (ESA), triggering the National Environmental Policy Act (NEPA) review, which has historically been a litigation gold mine for anti-development groups.
As a result, companies seeking federal approval for natural gas infrastructure should be diligent in developing the administrative permitting record to ensure that any federal permit can survive a potential challenge in court.
NEPA is the oldest – and perhaps most litigated – federal environmental statute, so unsurprisingly, natural gas opponents are looking for ways to get a NEPA hook into the otherwise non-federal practice of fracking. One early example of this strategy arose in August 2011 when the Delaware Riverkeeper Network and other environmental groups sued the Delaware River Basin Commission (DRBC) over its draft regulations governing natural gas development in the Delaware River Basin.
The DRBC is a hybrid federal/state agency with authority over all projects affecting the Delaware River Basin’s water resources. In May 2010, DRBC began developing regulations to govern its oversight of natural gas projects in the basin. The environmental groups sued DRBC, claiming the regulations constituted major federal action under NEPA, requiring detailed analysis of the environmental impacts of natural gas development. The Eastern District of New York concluded the lawsuit was premature since the regulations were still in development and threw out the case, thus avoiding the thorny issue of whether NEPA even applies to the DRBC.
Next, environmental groups challenged the Federal Energy Regulatory Commission’s (FERC) approval of the Central New York Oil & Gas Company (CNYOG) interstate pipeline project, which would provide access to interstate markets for natural gas from Pennsylvania’s Marcellus Shale. In November 2011, the commission issued a certificate of public convenience and necessity under Section 7(c) of the NGA to construct and operate the pipeline. FERC’s environmental assessment concluded that the pipeline would pose no significant environmental impact.
In February 2012, the Sierra Club and Earthjustice filed for a stay of FERC’s order in the 2nd Circuit, arguing that the commission had violated NEPA by dismissing the impacts of shale gas development as too speculative to consider in its assessment. To the surprise of many observers, the court granted a temporary stay of construction activity, sending shock waves through the industry. Just 11 days later, the court lifted the stay after pipeline lawyers re-evaluated the administrative record and rehabilitated FERC’s initial briefs.
Though the environmental groups’ challenge failed, the 2nd Circuit’s temporary stay sounded an alarm that such suits could impede other pipeline development projects in the future.
Other interstate pipelines are experiencing similar arguments in FERC proceedings. In June 2012, the Sierra Club and other environmental groups requested rehearing of FERC’s decision to issue a CPCN for a new Texas Eastern Transmission pipeline that would supply natural gas to the New York borough of Manhattan, claiming that FERC’s NEPA analysis was inadequate.
As with the CNYOG pipeline, the Sierra Club asserted that FERC failed to adequately consider the Texas Eastern pipeline’s impacts on Marcellus Shale gas production. FERC responded that because the future development of Marcellus Shale gas is unpredictable and dependent on state authorizations, and the proposed pipeline would draw on multiple sources, the relationship was too attenuated and uncertain to merit in-depth analysis.
The Sierra Club also criticized FERC’s consideration of radon exposure from Marcellus Shale gas. Radon is a naturally occurring radioactive gas with a half-life of 3.8 days. The radon content of Marcellus Shale gas has become a focal point for opponents of its development, with critics claiming that the radon can reach end-users before it has time to sufficiently decay, causing lung cancer and other health problems.
Proponents counter that the radon breaks down during transmission and is diluted by natural gas from other sources before it reaches end-users. The Sierra Club argued that FERC’s analysis relied on outdated studies and unfounded assumptions regarding the decay and dilution of radon during transmission. In response, FERC pointed to several studies directly disputing those touted by the Sierra Club.
Environmental groups are also looking beyond pipeline projects for other federal avenues to forestall natural gas development. A likely target is the expected boom of LNG export terminals, which will increasingly replace import terminals as domestic production grows. A recent Sierra Club report foreshadowed this strategy in no uncertain terms, calling for no less than a “full NEPA environmental impact analysis looking programmatically at export.”
In April 2012, FERC gave the go-ahead to an export facility at the Sabine Pass LNG import terminal in Louisiana. The Sierra Club objected, arguing the commission inadequately considered the additional shale gas production and air and water pollution that could result from increased gas exports. FERC concluded it would be impractical to consider how much gas would come from shale production and how much, if any, would be new production attributable to Sabine Pass.
However, recent Environmental Protection Agency (EPA) comments on FERC’s upcoming NEPA analysis for the proposed Dominion LNG export facility at Cove Point in Maryland may push the Commission toward the Sierra Club’s approach. EPA directed FERC to address the terminal’s indirect effects related to gas drilling and combustion, including the extent to which the terminal, along with others nationwide, could increase the demand for natural gas extraction and construction of new pipelines.
Endangered Species Act Challenges
NEPA is not the only tool in natural gas opponents’ tool box. The ESA has also proved to be an effective litigation weapon. In October 2012, the 9th Circuit overturned the federal government’s approval of the 678-mile Ruby Pipeline under the Act’s consultation provisions.
FERC had initiated consultations with the U.S. Fish and Wildlife Service (FWS) under the ESA’s Section 7, which requires that federal agencies ensure that their actions are not likely to jeopardize listed species. FWS suggested that the Ruby Pipeline project incorporate a number of mitigation measures as part of FERC’s approval.
FERC adopted the measures in a letter of agreement with Ruby Pipeline, but did not incorporate them as part of the “agency action” – making them enforceable by FERC – but not FWS. Nonetheless, the service relied on that letter to issue a “no jeopardy” biological opinion in support of FERC’s approval of the project, concluding that it would not violate the ESA.
The Center for Biological Diversity (CBD) sued, claiming the biological opinion was invalid, because it relied on protective measures that FWS could not enforce. The 9th Circuit agreed, noting that while Ruby Pipeline could face stiff penalties for ignoring the mitigation measures, the decision to impose those penalties was solely within FERC’s discretion. Only enforcement by FWS can ensure that other agencies will not harm the listed species.
The decision’s immediate impact is unclear since the Ruby Pipeline was completed and put into service several months before the court’s ruling, but its precedential impact is, nonetheless, significant. Under this opinion, mitigation measures arising from Section 7 consultation must either become part of the project itself or become a condition of the biological opinion, making them enforceable by FWS – and, more importantly, by third parties under the ESA’s citizen suit provisions.
Clean Water Act Challenges
Environmental groups also hope to slow natural gas development through the CWA by invalidating the U.S. Army Corps of Engineers’ nationwide permit (NWP) program which streamlines CWA permitting for projects with minimal environmental impacts. In June 2012, the Sierra Club challenged NWP 12, which authorizes certain activities related to the construction of utility lines, pipelines, and associated facilities.
The environmental group argued that NWP 12 was authorized in violation of NEPA, because the Corps failed to examine NWP 12’s overall impacts or explain its finding of no significant environmental impact.
Although the Western District of Oklahoma denied the Sierra Club’s motion for a preliminary injunction, indicating the suit is unlikely to succeed on the merits, the corps may soon face another challenge to the NWP program on a larger scale. In August 2012, CBD took the first step toward filing suit by notifying the corps of its intent to challenge the entire NWP program. CBD alleged that by reauthorizing the program, the corps violated Section 7 of the ESA, because it never completed consultation with FWS and ignored its consultations with the National Marine Fisheries Service, which determined the program could jeopardize listed species.
If successful, either suit would have significant implications, resulting in the suspension or revocation of any invalidated NWPs and requiring pipeline developers to obtain individual Section 404 permits for their projects.
Energy companies undergoing the federal approval process for new infrastructure projects already must navigate an increasingly complex array of laws and regulations. They also need to be knowledgeable about opponents’ attempts to use provisions of several environmental statutes to thwart several projects under development. They should work with counsel to ensure that they build a solid administrative permitting record in an effort to anticipate and withstand similar legal challenges.
Deidre G. Duncan is a partner in Hunton & Williams LLP’s Washington, DC office. Her practice focuses on environmental, energy, and administrative law with an emphasis on permitting, compliance and litigation related to CWA, ESA, NEPA and other environmental statutes. She can be reached at email@example.com.