Power & Pipes

FERC, CFTC, and State Energy Law Developments

Recent developments over the last several weeks have intensified the ongoing struggle between the current administration of President Donald Trump and the federal judicial system concerning energy policy as it relates to the exploration and production of crude oil and natural gas. Below is a brief summary of these latest events.

Trump Issues New Presidential Permit Authorizing Construction of Keystone XL Pipeline

In the latest saga of the proposed Keystone XL pipeline, US District Court Judge Brian Morris, sitting in the Great Falls Division of the District of Montana, issued an order on November 8, 2018, blocking early construction efforts on the project. In a case filed by several environmental groups, including the Indigenous Environmental Network, Judge Morris ruled that the environmental reviews conducted by the US Department of State had failed to consider the cumulative greenhouse gas emissions impacts of the Keystone XL project when combined with the expansion of another proposed Canadian pipeline, and also that the reviews failed to take into account updated information on the risk of leaks or spills. Accordingly, the court halted any further activities “in furtherance of the construction or operation of Keystone.”

On March 29, President Trump issued an updated presidential permit authorizing construction of Keystone XL. The permit granted TransCanada Keystone Pipeline L.P. permission to “construct, connect, operate, and maintain pipeline facilities at the international border of the United States and Canada at Phillips County, Montana, for the import of oil from Canada to the United States.” The move by the White House was widely seen as a response to the prior order from Judge Morris and an effort to restart construction efforts for the pipeline, which has been a topic of debate for well over a decade.

Federal Court Strikes Down Trump’s Cancellation of Obama-Era Lease Withdrawals

The Outer Continental Shelf Lands Act (OCSLA) generally controls the leasing of lands offshore from the US coast in connection with oil and gas exploration. The OCSLA authorizes the US president to “withdraw from disposition any of the unleased lands of the Outer Continental Shelf.” President Barack Obama issued several directives in 2015 and 2016 withdrawing a number of areas as eligible for leasing under the OCSLA. On April 28, 2017, President Trump issued an executive order revoking the withdrawals of his predecessor.

Several public interest groups immediately filed suit challenging President Trump’s executive order, arguing that the OCSLA gave the president the authority to withdraw public lands from being eligible for leasing but not to revoke such a withdrawal. On March 29, 2019, US District Court Judge Sharon Gleason, siting in the District of Alaska, ruled in favor of the plaintiffs, finding that President Trump’s order exceeded presidential authority under the OCSLA. Judge Gleason held that only Congress has the authority to revoke a prior presidential withdrawal. Many industry observers are waiting anxiously to see whether Congress will instead take steps to accomplish the same shift in policy that President Trump’s executive order sought to implement.

Federal Court Temporarily Halts BLM Oil and Gas Leasing Activity in Wyoming

On March 19, the US District Court for the District of Columbia found[1] that the United States Bureau of Land Management (BLM) violated federal law by not sufficiently considering climate change when authorizing certain oil and gas leasing of federal land in Wyoming.[2] The court held that the National Environmental Policy Act (NEPA) required BLM to engage in a more robust analysis of the quantity and quality of greenhouse gas (GHG) emissions from oil and gas drilling and downstream use. Accordingly, the court halted the BLM’s authorization activity with respect to the leases while BLM reevaluates the climate change impact associated with drilling. The decision could upend the traditional approach the BLM, and other federal agencies tasked with analogous oversight, use to examine the environmental impact of oil and gas production and development on climate change.

Two nonprofit organizations asserted that the level of detail provided by several environmental assessments (EAs) and findings of no significant impact (FONSIs) released by BLM, at the leasing stage for oil and gas development in Wyoming, did not sufficiently account for climate impacts from GHG emissions. They therefore asked the district court to set aside the leases pending further environmental analyses.

Under the Mineral Leasing Act, the Federal Land Policy and Management Act, and NEPA, BLM must, among other things, consider the environmental consequences of its approvals at various stages of oil and gas development on federal land, one of which is the leasing stage. NEPA specifically mandates that an agency must prepare an environmental impact statement (EIS)—a robust assessment of the environmental impact resulting from proposed actions. Alternatively, agencies may explain why an EIS is not needed by preparing a less detailed report called an environmental assessment and separately issuing a finding that there will be no significant impact to the environment resulting from the action—FONSI, for short. Although less robust, an EA (much like an EIS) must take a “hard look” at the environmental consequences of a proposed action, including its direct, indirect, and cumulative effects.

Although the decision was aimed at BLM’s analyses, it’s unclear whether the scope of the decision was limited. Language used in the decision indicates that it could have a larger impact on many federal agencies. The district court framed the issue as a “case [which] concerns the attention the government must give climate change when taking action that may increase its effects.”[3] Depending on that scope, similarly situated development projects could face additional risks or setbacks associated with the decision. Given that possibility, it would come as no surprise if the defendants in the proceeding sought review by the DC Circuit Court of Appeals.

[1] Wildearth Guardians v. Zinke, Memorandum Opinion, Case No. 16-1724 (D. D.C. Mar. 19, 2019) (hereinafter, Memorandum Opinion).

[2] Although the petitioners originally complained about leases in Utah and Colorado as well, this decision was limited to the BLM decisions affecting leases in Wyoming. See id. at p. 8.

[3] Id. at p. 1 (emphasis added).