Keystone XL Ruling Paralyzes Infrastructure Permit Process

Law360 (May 29, 2020, 3:29 PM EDT) --
Tom Magness
Tom Magness
Patrice Douglas
Patrice Douglas
In a troubling ruling last month, a judge for the U.S. District Court for the District of Montana revoked key water permits for the Keystone XL crude oil pipeline, siding with project opponents and environmental activists and expanding his ruling beyond what even the activists sought.

Despite almost a decade of environmental review, Judge Brian Morris determined the U.S. Army Corps of Engineers did not adequately consider the potential effects of the project on endangered species that live in the water bodies the pipeline would cross. The proposed 1,200 mile pipeline would transport crude oil from the sands in western Canada to Nebraska before being distributed to consumers across the United States.

The district court's ruling presents serious concern for the future of American energy and infrastructure development. In addition to pulling permits for Keystone XL, the ruling indefinitely suspended the Corps' ability to authorize any dredge or fill activities under Nationwide Permit 12, or NWP 12 — issued under the Clean Water Act — which applies to pipelines, transmission lines and cables that traverse federally regulated waterways.

The Corps joined with other federal officials in emphasizing the widespread ramifications of the ruling, arguing in a recent filing that the "Court's remedies have nationwide effect, are extremely disruptive, and are contrary to the public interest." On May 11, Judge Morris upheld his ruling, but narrowed its purview to allow the Corps to authorize "non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects." The Corps filed notice two days later seeking to appeal the order.

While narrowing the scope of the ruling was a step in the right direction, the effect of the ruling halts fossil fuel projects under NWP 12 alleging "the threat of such destruction from oil and gas pipelines proves substantial." From a decade-long permitting process being nullified to a district judge making nationwide energy policy, this ruling presents multiple layers of concern that will surely have infrastructure developers thinking twice.

Keystone XL

Keystone XL's permits were approved in 2017 under NWP 12. This permit is intended to streamline the regulatory process by first ascertaining if a project meets broad-stroke requirements, and then conducting a methodical review of special considerations.

Such nationwide permits are updated every five years and are key to cutting red tape and allowing nationwide infrastructure development to efficiently move forward. Army Corps personnel complied with all relevant procedures in their review of Keystone XL, working with the project developer to mitigate significant impacts and to ensure the pipeline adheres to rigorous standards meant to protect sensitive areas.

Keystone XL was permitted only after nearly a decade of thorough planning and vetting that included careful consideration to ensure each of the many permitting criteria were met. In order to proceed with this project, Army Corps professionals worked with applicants to ensure minimal cumulative adverse impacts to the aquatic environment — a key requirement of NWP 12.

The Army Corps of Engineers is a nonpartisan organization comprised of career professionals whose mission is informed by evidence, not politics. They make decisions based on the best available science and professional judgment.

They are not beholden to the political climate of the moment, seeking every means to protect the nation's aquatic resources, while allowing reasonable development through fair and balanced decision-making. This approach should instill confidence in the legitimacy of their findings.

Judicial Interpretation vs. Judicial Activism

This ruling introduces a new level of uncertainty in an already uncertain environment, for an industry that has been ravaged by the coronavirus pandemic and an ill-timed global oil price war.

Rather than second-guessing the dedicated professionals that have been tasked with studying and permitting our nation's infrastructure, it is critical that we extend our full trust to these regulators. Regulatory consistency is essential.

This type of action — pulling permits for a project years after they were issued, and after construction is already well underway — undermines the tried and true regulatory process. Energy developers will think twice before investing hundreds of millions of dollars in infrastructure here in the United States.

Further, it is important to note that the plaintiffs in this case did not seek a nationwide injunction. In fact, the plaintiffs explicitly stated that they "have not sought to have NWP 12 broadly enjoined." Instead, they sought to enjoin only "activities in furtherance of Keystone XL's construction."

Investors, developers and bankers measure risk. These individuals, in addition to federal regulators, have been operating on a vastly different interpretation of NWP 12 for years. If district court rulings like Northern Plains Resource Council v. U.S. Army Corps of Engineers are allowed to dictate nationwide policy, significant and unnecessary risk is introduced.

If left intact, this decision will thwart investment and hinder development for decades to come — with consumers ultimately paying the price.

The New Normal?

This playbook for activism against our nation's energy infrastructure is becoming all too common. Interest groups have successfully delayed Keystone XL for more than a decade, mounting legal challenges and calling for increased permitting hurdles.

We have seen similar challenges with the Dakota Access Pipeline, another crude oil pipeline that received a similar setback from a federal court in March. Despite nearly three years of safe operation, the court ordered the Army Corps to conduct further environmental review. Activists now call for the pipeline to be shut down until the additional review is completed, which will likely take several years.

Now is not the time to be gambling with our nation's energy infrastructure. The recent rulings on Keystone XL and Dakota Access not only undermine the entire process, but risk our energy and economic security when we need it most. COVID-19 has already introduced unprecedented challenges to the American economy.

The American energy industry has been deemed essential by the U.S. Department of Homeland Security for good reason: It is responsible for keeping our homes warm, hospitals powered and supply chain networks operating. Now more than ever before, policymakers, regulators and even our judges have a duty to provide consistent and transparent processes that ensure infrastructure development has a meaningful path forward.

Tom Magness is a strategic adviser to Grow America's Infrastructure Now, and formerly served as a commander in the U.S. Army Corps of Engineers.

Patrice Douglas is of counsel at Spencer Fane LLP, and formerly served as chairman of the Oklahoma Corporation Commission.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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