Power & Pipes

FERC, CFTC, and State Energy Law Developments

It’s been a difficult several days for the oil industry. First, the Biden administration revoked the border-crossing permit for the Keystone XL pipeline on January 20. Another executive order, among other things, directed the secretary of the US Department of the Interior to pause oil and natural gas leases on public lands and offshore waters pending a review of leasing practices. And on January 26, the US Court of Appeals for the DC Circuit affirmed a district court’s decision to vacate an easement vital to the Dakota Access Pipeline (DAPL or the pipeline) that had been granted by the Army Corps of Engineers (Corps). But the court, however, reversed the lower court’s order that required the pipeline to cease operations. Accordingly, the pipeline may continue to operate while the Corps decides what to do about Dakota Access’s trespass. Separately, however, local Native American tribes have sought an injunction before the district court, the briefing for which ended earlier this month.


Stretching for nearly 1,200 miles, DAPL transports crude oil from the Bakken oil field in the Dakotas to Illinois, where it connects with another pipeline running to Texas. DAPL’s path requires that it cross a one-mile stretch of Lake Oahe, an artificial lake between North and South Dakota created by a dam in the Missouri River and owned by the United States. And because it crosses a mile of federal property, DAPL requires an easement from the Corps. Operating since 2017 after obtaining the easement in February 2017, DAPL transports an estimated 40% of the Bakken's oil output per day. DAPL runs adjacent to and well below two other pipelines that cross the river.

Local Native American tribes, who use the waters of Lake Oahe, and environmental groups have objected to DAPL on the grounds that in the event of a pipeline rupture under Lake Oahe, an oil discharge would impair their ability to use and enjoy these waters. One tribe’s border is half a mile from the pipeline’s path. Accordingly, DAPL has been subject to extensive litigation since the Corps published its final environmental assessment in July 2016, which found among other things that under the National Environmental Policy Act (NEPA), the Corps did not have prepare an environmental impact statement (EIS), but only the shorter environmental assessment, to grant the easement.

Despite an unsuccessful attempt by the tribes to enjoin construction in 2016, political pressure caused the Corps to reverse course and it decided to prepare an EIS. But in early 2017, the Corps again reversed course and decided to not prepare the EIS, and subsequently issued an easement to cross Lake Oahe in February 2017. Another attempt by the tribes to enjoin construction failed, and the tribes then argued that NEPA required the Corps to prepare an EIS.

Though at first the district court largely upheld the Corps’ decision to grant the easement, it remanded the easement decision to address three deficiencies in the Corps’ work. On remand, the Corps had to consider pursuant to NEPA whether the project's effects were likely to be “highly controversial” as well as the impact of a hypothetical oil spill on the local tribes’ fishing and hunting rights and the environmental justice effects of the project.

District Court Vacates DAPL’s Easement and Orders Cessation of Operations

In February 2019, the Corps completed its remand and maintained no EIS was required. In March 2020, the district court disagreed, finding that NEPA required the Corps to prepare an EIS because the project’s effects were “highly controversial.” The district court relied on a 2019 decision by the DC Circuit, issued after the Corps completed the remand, in National Parks Conservation Association v. Semonite, 916 F.3d 1075, 1082 (D.C. Cir. 2019). Semonite held that an agency does not fulfill its duty under NEPA and escape the need to prepare an EIS by addressing concerns raised during the NEPA process, but must actually resolve the controversy. And the district court found four points of controversy remained: the efficacy of DAPL’s leak detection system, the level of consideration given to the operator’s safety record, insufficient consideration given to the impact of the region’s harsh winters on spill response efforts, and the Corps’ estimate of a worst-case discharge. Because the court held that the Corps failed to resolve these controversies, NEPA required an EIS.

In a subsequent decision, the district court then vacated the easement. And “[a]lthough mindful of the disruption such a shutdown will cause,” the district court nevertheless concluded that legal precedent “coupled with the seriousness of the [Corps’] deficiencies outweighs the negative effects of halting the oil flow for the thirteen months that the [Corp] believes the creation of an EIS will take.” The court reasoned the appropriate remedy for unlawful agency action is usually vacatur and that in the DC Circuit, vacatur is the standard remedy for NEPA violations. The court noted that the Corps estimated it would take 13 months to complete the EIS, and not the 3.6 years it normally takes, and that without vacatur, the Corps would lack incentive to timely complete an EIS. Further, the district court ordered DAPL’s operator to empty the pipeline within 30 days.

Subsequent DC Circuit decisions stayed the district court’s order to empty the pipeline until it could hear the case on the merits.

Decision on Appeal

In a 3-0 ruling on January 27, the DC Circuit agreed that the Corps acted unlawfully by not preparing an EIS, and affirmed the vacatur of DAPL’s easement, but reversed the order to empty the pipeline.

The regulations implementing NEPA outline 10 factors that should be considered to determine whether a project has significant impact that could require preparing an EIS. Only one factor, “[t]he degree to which the effects on the quality of the human environment are likely to be highly controversial,” was at issue here. And the DC Circuit agreed that implicating even one factor could require an EIS.

Agreeing with the district court, the DC Circuit held that “[t]he question is not whether the Corps attempted to resolve the controversy, but whether it succeeded.” That is, whether the Corps has convinced the court that it “has materially addressed and resolved serious objections.” The DC Circuit also gave credence to the tribes’ sovereign status with “stewardship responsibility,” distinguishing them from “quintessential . . . not-in-my-backyard neighbors.” Accordingly, the tribes’ objections merited equivalent status to other non–federal government agencies whose objections were deemed as generating controversy.

Turning to the specific controversies raised by the tribes, the DC Circuit agreed that the Corps failed to address adequately those controversies. For example, the DC Circuit found that the tribes’ criticism regarding the potential for undetected slow pinhole leaks was not evaluated, and its explanation for why not was unavailing. At bottom, the DC Circuit concurred that the Corps did not sufficiently address this and other concerns raised by the tribes that would show it had resolved the controversy.

Regarding the remedy to empty the pipeline, the DC Circuit first noted that in other cases where the Corps has failed to make a convincing case of why an EIS is not required, it has ordered an EIS. Further, the DC Circuit held that the ordinary practice is to vacate an unlawful agency action, especially as here, where the Corps would likely not resolve the controversies on remand. Further, the DC Circuit also agreed that the district court properly considered the disruptive nature of a vacatur. And the DC Circuit also reasoned that because it is not ordering a shutdown, then arguments of disruptive consequences have been “undercut significantly.”

In a “win” for Dakota Access, the DC Circuit found that the district court did not make the requisite findings to issue an injunction and thus reversed the shutdown order. That is, if a district court could enjoin an action simply by characterizing it as a “consequence of vacatur,” it would circumvent the US Supreme Court’s instruction that an injunction should issue under the traditional test. The court also noted that unlike in previous cases where vacatur would end the unlawful action, here, the pipeline is a physical structure that will remain on federal property regardless of whether the pipeline is emptied. But the win may be ephemeral. Because as the DC Circuit noted, the Corps, to vindicate its property rights, may order the pipeline to cease operations, and because the tribes have a petition before district court seeking an injunction. Fully briefed, a decision could come any day.

Expected Actions

Dakota Access may seek an en banc rehearing before the full DC Circuit. Alternatively, it may appeal the decision to the Supreme Court. Dakota Access has not indicated whether it will take either action, but Dakota Access will likely pursue further legal avenues to protect its nearly four-year old pipeline.

After the district court’s March order, the Corps started to prepare an EIS. An EIS is expected this summer, after which the Corps could regrant the easement. But it could deny the easement too. And at present, DAPL is trespassing on government property. The Corps has been investigating its legal options, but has yet to decide how to respond, and had indicated it was waiting for the DC Circuit’s ruling before making a decision. And separately, the tribes’ petition for injunctive relief remains pending before the district court. The issue has been briefed fully, and the district court may issue its ruling any day. That is, there are two avenues by which the pipeline may be ordered to cease, and Dakota Access must prevail before both the Corps and the district court to keep the oil flowing.


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