The White House issued a new Executive Order (EO) on April 10, 2019 intended to ‘revise the process for the development and issuance of Presidential Permits’ for certain cross border energy infrastructure. The EO limits the opportunity and timeframe for federal agencies, states or Indian tribes to comment on Presidential Permit applications for oil, water or sewage pipelines and other border crossing infrastructure such as bridges, rail and surface roads. The new EO clarifies that the ultimate decision to grant or deny such permits remains with the President (that authority was previously delegated to the State Department).
The Executive Order (EO) “Promoting Energy Infrastructure and Economic Growth,” issued by the White House on April 10, 2019 has primarily been heralded as an effort to prevent states from blocking pipelines under their Clean Water Act Section 401 certification authority. President Trump addressed a number of other energy issues in the same Executive Order, however, all attempting to remove barriers to energy projects in the U.S. As summarized below, these include a call for updating regulations governing LNG facility safety regulations, addressing sunset provisions in agreements for energy infrastructure on federal lands, and requesting reports assessing impediments to fuel supply in New England and export efforts in West Coast, and ways to promote economic growth in Appalachia.
President Trump recently issued two much anticipated Executive Orders aimed to streamline the permitting of U.S. energy infrastructure. One Executive Order (EO) focuses primarily on Clean Water Act (CWA) state issued water quality certifications and associated EPA guidance and regulations. In “Executive Order on Promoting Energy Infrastructure and Economic Growth,” the Administration takes aim at “outdated Federal guidance and regulations” under Section 401 of the CWA that are “causing confusion and uncertainty and are hindering the development of energy infrastructure.” While states and environmental organizations are concerned that the EO will limit a state’s authority under the CWA, the impact of the EO at least initially appears to be limited, as the statute and the case law on point already establish certain limits regardless of the EO. What remains to be seen is the import of any proposed rulemakings issued as a result of this EO, or whether these issues prompt any legislation that proposes to amend Section 401 of the CWA.
In advance of a Senate Commerce Committee Hearing on reauthorization of the Pipeline Safety Act, Senators Markey, Warren, and Blumenthal announced legislation to address distribution pipelines and risks associated with the September 2018 Merrimack Valley incident. The Leonel Rondon Pipeline Safety Act of 2019, named after a man who died in the incident, would impact various aspects of distribution pipelines, including emergency response, integrity management, operation and maintenance, safety management systems, and recordkeeping. Further, for all pipeline operators the bill would increase civil penalties under the statute by a factor of 100, from $200,000 per day to $2 million per day and for a maximum of $2 million to $200 million for a related series of events. Even though the majority of the bill’s provisions are limited to distribution pipelines, certain of these proposals could be expanded more broadly during the reauthorization process to apply to gathering and transmission pipelines.
The first Congressional Hearing on Pipeline Safety Act Reauthorization for 2019 was held this week before the House Transportation and Infrastructure Committee. The Hearing did not have as much drama as last summer’s Hearing before the same Committee, where PHMSA Administrator Skip Elliott was asked sharply to explain why the Agency had failed to fulfill so many Congressional mandates and National Transportation Safety Board (NTSB) Recommendations. In his written testimony at this week’s Hearing, Administrator Elliott stated that “When I spoke [here] last year, I heard clearly from [Committee] members that finalizing outstanding Congressional mandates must be a top priority.” The Committee staff report issued for the Hearing listed 12 “unmet mandates,” and Administrator Elliott’s written testimony conceded that PHMSA yet to address 8 mandates from the 2011 Pipeline Safety Act (PSA) reauthorization, and another 4 from the 2016 PSA reauthorization. Of that dozen outstanding mandates, 4 relate to reports and 8 involve rulemaking. Jennifer Homendy, a member of the NTSB, testified that the NTSB has 24 “open” recommendations to PHMSA, several on the Board’s “most wanted” list for completion. Homendy previously served as the Democratic Staff Director of the Subcommittee on Railroads, Pipelines, and Hazardous Materials for the House Transportation and Infrastructure Committee.
For at least the past 35 years, federal courts have generally allowed an administrative agency’s interpretation of a regulation or statute that it administers to prevail when challenged by a member of the regulated community or any other interested party. The ‘agency deference’ doctrine has been questioned in recent years, however, and a new case pending review before the Supreme Court may reverse or revise the doctrine as it relates to an agency’s interpretation of its own regulation. Whether a court defers to an agency’s interpretation of a statute or regulation defines the standard of review with which it will review the Agency’s decision. For that reason, whether agency deference remains in place or not, regulated entities should focus on the importance of creating a record for judicial review of agency action. Continue Reading The Importance of Creating A Record for Judicial Review of Agency Action
The Federal Energy Regulatory Commission (FERC) issued a Certificate of Convenience and Public Necessity to the Mountain Valley pipeline project in 2017, authorizing new construction of a 300-mile natural gas pipeline through West Virginia and Virginia. Several environmental and citizen groups challenged the FERC decision in the D.C. Circuit Court of Appeals. Among many issues raised, the petitioners argued that FERC failed to properly consider downstream impacts on climate change resulting from the combustion of gas transported by the new pipeline, as required by the Court’s 2017 decision in Sierra Club v. FERC. On February 19, 2019, the D.C. Circuit issued a short (five page) decision in the Mountain Valley case, Appalachian Voices et al v. FERC . The decision summarily dismissed all sixteen of the petitioners’ challenges to FERC’s Order.
DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a Final Rule titled “Oil Spill Response Plans and Information Sharing for High Hazard Flammable Trains.” Among other requirements, certain rail trains carrying petroleum oil will be required to prepare comprehensive oil spill response plans to address a worst case discharge. Modifications to the existing rules become effective 180 days after publication in the Federal Register (including development of new spill response plans), but incorporation of certain publications by reference is approved within 30 days. The rule is promulgated in coordination with the Federal Railroad Administration (FRA) and is intended to implement directives in the Fixing America’s Surface Transportation Act of 2015 (FAST Act) and other mandates.
Under the rule, Comprehensive Oil Spill Response Plans (COSRPs) must address a ‘worst case discharge’ (WCD) and will be required for any train that has more than 20 continuous cars carrying petroleum oil, or 35 cars spread throughout any one train. A WCD is defined as an incident with potential to release 300,000 gallons or more of petroleum oil, or 15% of the amount of oil on the largest train consist carrying oil in a given response zone. The COSRP requirement expands upon oil spill response requirements already established in both the Clean Water Act of 1972 and the Oil Pollution Act of 1990. Since 1996, COSRPs have been applicable to railroads transporting oil greater than 1,000 barrels or 42,000 gallons per package, but because the typical rail tank car has a capacity around 30,000 gallons, no rail carriers currently transport petroleum oil subject to the 42,000 gallon packaging threshold. In addition to expanding the COSRP requirement, the final rule also “modernizes” the COSRP requirements by requiring that plans establish geographic response zones and ensure that personnel and equipment are prepared to respond to an accident. In addition, the Final Rule requires “high hazard flammable trains” (also called HHFTs and defined as more than 20 continuous cars carrying Class 3 Flammable liquids or 35 cars spread throughout any one train) to share COSRPs and related information with State Emergency Response Commissions, Tribal Emergency Response Commissions, or other appropriate State designated entities.
This rule was first proposed in a Notice of Proposed Rulemaking (NPRM) issued on July 29, 2016, proposing both additions and revisions to 49 CFR Part 130. The NPRM was prompted both by the 2015 FAST Act and National Transportation Safety Board (NTSB) Recommendation R-14-005 following the Lac Megantic train derailment in Quebec. Both the proposed and final rules cite to 13 derailment accidents involving trains carrying crude oil, between 2013 and 2016 (the most recent incident occurred on June 2016 in Mosier, Oregon). Following the July 2013 multiple fatality crude oil train derailment and explosion in Lac Megantic, the NTSB and DOT issued Advisories. The NTSB then issued its 2014 recommendation, with DOT issuing an Emergency Order on May 7, 2014, requiring trains carrying more than one million gallons of Bakken crude to notify local emergency planning entities along their route. Then on August 1, 2014, PHMSA issued a NPRM (HM-251) to explicate and define the Emergency Rule, which was finalized in 2015 and added new design, speed restrictions, braking systems and routing requirements to HHFTs. Congress followed in 2015 with oil train response plan mandates in the FAST Act. In addition, in March of 2018 (in the Consolidated Appropriations Act), Congress directed DOT to “issue a final rule to expand the applicability of comprehensive oil spill response plans.”
The final rule in large part tracks the NPRM, but adds some clarifications and increased flexibility to railroads that must submit COSRPs. PHMSA rejected comments suggesting that COSRPs should be required for lower quantities of oil or fewer numbers of cars in trains, citing to a prior conclusion in a related rulemaking that at lower thresholds “relatively few tank cars would be breached on average in the event of an incident.’ The definition of ‘petroleum oil’ does not change from its current definition at 49 CFR Part 130.5, and the burden remains on the offeror of oil for transport to make that determination. Under the current rule, ‘petroleum oil’ includes mixtures of at least 10% (so diluted wastewater would not meet the test, nor would E95 ethanol, although E85 ethanol would meet the test and require a COSRP if sufficient numbers of cars are in a train).
In terms of increased flexibility, the rule allows railroads to submit plans that meet State requirements under certain circumstances and implements a 12 hour response time in all areas (as opposed to a smaller timeframe). Further, CORSP plans will be approved by PHMSA (not the FRA) and response and mitigation requirements align with PHMSA’s pipeline Facility Response Plan requirements under 49 C.F.R. Part 194. A railroad must also certify in its plan that it has conducted training and that the plan includes requirements for equipment testing and exercises, with recordkeeping required for both (Parts 130.135 and 130.140). Railroads must update and resubmit their plans every 5 years (Part 130.145), or within 90 days of implementing any significant changes or new routes. Finally, the new Final Rule also provides for an alternative hazardous liquid classification testing method based on initial boiling point (per industry best practice ASTM D79000).
PHMSA estimates that the new rule will apply to 73 railroad operators at time of issuance, and that it should take roughly 180 hours to prepare an initial plan. Although not noted in the Final Rule, the number of crude by rail incidents has declined significantly since 2016 (the last incident cited in the Final Rule). The reason for that is that the amount of crude shipped by rail has also declined significantly since 2016. When new sources of shale oil were developed a decade ago, pipeline proximity and capacity was limited, thus increasing amounts of crude were shipped by rail. From 2012 to 2013, the amount of crude oil shipped by rail more than doubled, then continued to increase in 2014 and 2015. In 2016, however, the amount of crude shipped by rail began to drop, and it has now fallen below the levels shipped in 2012.
Although the market need for use of transporting oil by rail has declined overall, to the extent an increase arises as a result of the Permian Basin activity and/or additional high profile rail incidents occur in the future, there may be an increased focus on rail shipments.
Earlier this month, the U.S. Department of Transportation (DOT) issued a notice seeking input from the public on existing guidance documents within DOT and its modal operating administrations, including PHMSA. In particular, DOT seeks input on guidance documents that are no longer necessary, are cost-inducing, inconsistent or unclear, not conducive to consistent enforcement, or that need to be updated. The more specific the comments about the documents and the concerns with them, the better, along with suggested alternatives. The comment period remains open until April 8, 2019.
The notice relates back to a prior DOT notice requesting comments on regulatory review in October 2017, where DOT sought public comment on existing rules as well as guidance documents. Both this notice and the prior 2017 notice stem from the Trump Administration’s Executive Orders regarding deregulation (E.O. 13771) and regulatory reform regulatory reform (E.O. 13777). In addition, this most recent notice was issued on the heels of DOT’s posting of a new guidance directive from DOT’s General Counsel outlining a more detailed clearance process for guidance that became effective in December 2018.
Regardless of the basis, the regulated community has a unique opportunity to recommend that particular guidance documents be repealed or revised. A wide array of PHMSA documents constitute guidance potentially subject to the notice, such as Agency Inspection Protocols, Staff Manuals and Instructions, Reporting Form Instructions (such as 7000.1 or 7100.2 incident and annual reports), Advisory Bulletins, Frequently Asked Questions, and even interpretations and policy statements. Other documents such as the Pipeline Civil Penalty Summary are also within the scope of the Notice.
Certain of PHMSA guidance materials are inconsistent, out of date, and unclear, and could benefit from revision at a minimum. Further, PHMSA at times relies on guidance documents which do not have the force of law to inform agency enforcement or corrective actions. Coupled with DOT’s new focus on streamlining agency guidance, we encourage operators to consider submitting comments. To that end, we are particularly well positioned to assist clients in preparing comments to this Notice, given the breadth and depth of our national practice and experience.
In yet another development relating to Clean Water Act (CWA) Section 401 water quality certifications, a recent policy directive from the Department of the Army could impose tighter timeframes for a state to review whether projects comply with state water quality standards. The U.S. Department of the Army has issued a policy directive memorandum requiring the U.S. Army Corps of Engineers (USACE) to adhere to a “default time period” of 60 days for states to act on a request for water quality certification under CWA Section 401 in conjunction with USACE’s issuance of dredge and fill permits under CWA Section 404. The directive also requires USACE to “immediately draft guidance” to establish criteria for USACE District Engineers to identify circumstances that may warrant additional time for states to decide on an application for water quality certification. Continue Reading USACE to Impose 60 Day Period on State Water Quality Certification Review