Energy & Infrastructure Alert | May.21.2020
A permitting program that is important to developers and environmentalists is in turmoil after a series of judicial actions in the Keystone XL Pipeline case. On April 15, 2020, the United States District Court for the District of Montana vacated Nationwide Permit 12 (“NWP 12”), citing failure by the United States Army Corps of Engineers (“USACE”) to properly consider impacts upon species and habitats protected under the Endangered Species Act (“ESA”). On May 11, 2020, the same Montana District Court issued a modified ruling prohibiting the use of NWP 12, which limited the effect of the decision to new oil and gas pipeline projects. The defendant parties in the case filed appeals of the April 15 and May 11, 2020, rulings on May 13, 2020.
In the near term, the USACE and energy industry intervenors are seeking to stay the Montana District Court’s May 11, 2020, order. The Ninth Circuit Court of Appeals rejected motions for an emergency stay on May 15, 2020. As a result, NWP 12 is currently unavailable for new oil and gas pipeline projects. The Ninth Circuit’s decision on the merits of the case, however, could expand the impact on the wetland permit program to other industry sectors or limit the use of other nationwide permits (“NWPs”). Briefing of the requests for a stay is set to be completed by May 22, 2020, and briefing of the appeals is due on September 21, 2020, meaning that the NWP program may remain uncertain for months into the future.
The USACE regulates the discharge of dredged or fill material into waters of the United States, including wetlands, under §404 of the Clean Water Act and/or §10 of the Rivers and Harbors Act. NWP 12 authorizes the construction, maintenance, repair and removal of utility lines and associated facilities if the loss of wetlands is no more than ½ acre for each single and complete project. The USACE defines a utility line as “any pipe or pipeline for the transportation of any gaseous, liquid, liquescent, or slurry substance, for any purpose, and any cable, line, or wire for the transmission for any purpose of electrical energy, telephone, and telegraph messages, and internet, radio, and television communication.” NWP 12 is widely used for projects other than pipelines, including the installation of electrical lines for renewable energy projects. NWP 12 is one of 52 NWPs available to authorize impacts to federally recognized wetlands (and other protected waters of the United States). NWPs often allow a project to proceed with wetland impacts with minimal paperwork and often no agency review.
The court’s original ruling vacated NWP 12; therefore, it was no longer valid or available to authorize wetland impacts from utility line projects. In the absence of NWP 12, utilities and project sponsors would either need to route utilities around wetland areas or obtain another type of permit. If NWP 12 cannot be used, and an alternative NWP is not available for a project, then the regulated entity would need to obtain an individual permit, a process that is time consuming, cumbersome and expensive.
The court’s original ruling was based on the USACE’s failure to properly consider impacts upon endangered species at a programmatic level when NWP 12 was approved. Section 7(a)(2) of the ESA requires the USACE to consult with other federal agencies if the activities under a wetlands permit are likely to jeopardize the continued existence of any listed species or destroy or adversely modify any designated critical habitat. The court held that the USACE should have conducted the ESA consultation prior to the 2017 reissuance of NWP 12 rather than making a determination that the NWP 12 would cause “no effect.” The court found the USACE’s determination that the reissuance of NWP 12 has “no effect” on listed species or critical habitat—without the required consultation—to be arbitrary and capricious, citing evidence suggesting that reissuance of NWP 12 may, in fact, affect listed species or critical habitat. As a result, the court vacated NWP 12 and remanded NWP 12 back to the USACE for a programmatic consultation under §7(a)(2) of the ESA.
Although other NWPs were not addressed by the court, they could be subject to challenges on the same basis as NWP 12, because other NWPs address possible impacts to protected species and habitats in the same way as NWP 12. The basis upon which the court invalidated NWP 12 therefore theoretically applies with equal force to the remaining NWPs.
In its modified ruling, the court concluded that limiting the decision to prohibit only the use of NWP 12 for new oil and gas pipelines would be more appropriate to the dispute before the court. The court explained that the plaintiffs’ arguments focused on the impacts to species and habitats posed by the construction of major oil and gas pipeline projects, and that potential impacts from other uses of NWP 12 do not involve the same level of potential risk. As a result of the court’s limited vacatur of NWP 12, other types of projects previously covered by NWP 12 remain eligible to use it.
The underlying basis for the Montana District Court's ruling was the failure of the USACE to properly account for protected species in issuing NWP 12. While the modified ruling attempts to separate new oil and gas pipeline projects from other kinds of projects, the court did not provide substantial detail for the distinction between new oil and gas pipelines and other types of utility projects covered by NWP 12.
The lack of explanation concerning the basis for singling out new oil and gas pipeline projects does not explain why other projects eligible for NWP 12 should be treated differently. The court’s rationale (regarding failure to consider protected species and habitats) appears to apply to other NWP 12 projects. Accordingly, the Ninth Circuit could resolve the pending appeal in a manner that vacates NWP 12 for all uses, not just for new oil and gas pipeline projects. In addition, because the underlying reason for vacating NWP 12 is applicable to all NWPs, it is possible that the Ninth Circuit’s decision could pave the way for the invalidation of other NWPs.
For now, any developer of a project other than a new oil or gas pipeline can utilize NWP 12 and other NWPs to cross federally regulated wetlands. That situation could change, either as a result of the Ninth Circuit’s decision concerning the stay request or as a result of the appeal of the underlying ruling. Any project currently under construction or contemplating construction would be best served by completing any wetlands-related work eligible under any of the NWPs before the Ninth Circuit rules on the merits of the appeals.
 Northern Plains Resource Council, et al., v. USACE, Case No. CV-19-44-GF-BMM. TC Energy Corporation and TransCanada Keystone Pipeline LP, the State of Montana and the American Gas Association have intervened along with a number of environmental groups, including the Sierra Club, National Resources Defense Council and Center for Biological Diversity.
 For example, it may be possible to use other NWPs in routing utility projects through wetlands, such as NWP 14 (Linear Transportation Projects).
 An individual permit triggers the federal National Environmental Policy Act and is technically and administratively more complex.
 The court’s decision fully recognized that individual uses of NWP 12 may involve endangered species review. Pursuant to general condition 18 of NWP 12, a proposed user needs to submit a pre-construction notification (“PCN”) to the USACE district engineer if the proposed activity might affect a listed species or critical habitat. In reviewing that PCN, the USACE consults with the United States Fish & Wildlife Service or the National Marine Fisheries Service under §7(a)(2) of the ESA. The court characterized this process as a delegation to regulated entities of the initial evaluation of whether protected species or habitat would be adversely affected by the activity, and found that the potential adverse impacts of such delegation had not been appropriately considered when NWP 12 was reauthorized in 2017.