On April 9, the United States Court of Appeals for the Sixth Circuit heard arguments in National Wildlife Federation v. Secretary of the Department of Transportation, a pair of consolidated appeals arising from approval of two spill response plans by the Pipeline and Hazardous Materials Safety Administration (PHMSA). Operators of many onshore oil pipelines must submit, and PHMSA must review, plans to prevent or respond to a “worst case discharge” into or on navigable waters or their adjoining shorelines (49 C.F.R. Part 194). This planning process is a product of the Oil Pollution Act’s amendments to the Clean Water Act. In ruling on these appeals, the Sixth Circuit will determine whether PHMSA approval of those plans requires something that the agency historically has not done: consultation under the Endangered Species Act (ESA) or review under the National Environmental Policy Act (NEPA).

Spill Response Plan Background

Since it was amended in 1990 following the Exxon Valdez incident, the Clean Water Act has required operators’ response plans to meet six criteria. 33 U.S.C. § 1321(j)(5)(D). The statute also provides that the reviewing agency “shall … promptly review” each plan submitted, “require amendments to any plan that does not meet” the six criteria, and “approve any plan” that does meet them. Id. § 1321(j)(5)(E)(i)-(iii). Traditionally, PHMSA approached the response plan review effort as an administrative, non-discretionary review process that did not trigger NEPA review or ESA consultation.

The agency, therefore, has not interpreted the statute to require consultation with the United States Fish and Wildlife Service on, or initiate any NEPA review of, any particular plan. Section 7 of the ESA requires a consultation when an agency’s action “may affect listed species or critical habitat,” but only when the agency has “discretionary … involvement or control” over that action. Similarly, PHMSA has not engaged in the even broader analysis of environmental impacts under NEPA when approving these plans. Like the ESA, NEPA applies only to actions in which the agency has some level of control over the outcome. At least some federal courts have interpreted that to mean that an agency’s policy discretion is a precondition to NEPA. Only the Ninth Circuit has considered directly whether approval of response plans confers sufficient discretion to require either process, and that court concluded that the Clean Water Act does not do so.

NWF Challenge to PHMSA Response Plans

Against this background, PHMSA approved two response plans for an oil pipeline passing through Wisconsin and Michigan, where it crossed the Straits of Mackinac. Two years after the first approval, the National Wildlife Federation (NWF) sued PHMSA to require ESA consultation and NEPA review. The United States District Court for the Eastern District of Michigan ultimately agreed with NWF that the Clean Water Act permitted PHMSA enough discretion in approving response plans that the ESA and NEPA came into play.

Explicitly disagreeing with the Ninth Circuit’s opinion, the District Court focused on two aspects of the Clean Water Act which, according to the District Court, required PHMSA to exercise expert judgment and discretion. First, a response plan must ensure means of removing oil “to the maximum extent practicable.” To the District Court, this implied that PHMSA must exercise discretion to determine what “extent” of removal is “practicable” under the limits of available technology. Second, a response plan must be consistent with the mandates of the National Contingency Plan and any applicable Area Contingency Plan, which serve to coordinate agencies’ own responses to spills.

Potential Implications

If it stands, the District Court’s decision might significantly increase the time and resources required to prepare and gain PHMSA approval of a response plan. That would in turn increase the opportunity for third parties to slow down the approval process for a document that is critical to the operation of pipeline facilities. Consultation under the ESA often results in the Fish and Wildlife Service imposing significant conditions on a project or action, and a NEPA analysis can do the same. The full process under either statute also can require, in a good scenario, a few months or, in a thornier situation, several years. PHMSA is not the only agency that might be shouldered with these burdens; the United States Environmental Protection Agency, the United States Coast Guard, and the Department of the Interior’s Bureau of Safety and Environmental Enforcement all play a role in reviewing and approving response plans for pipelines, facilities, or vessels of various types.

Industry trade groups appearing as amici curiae have pointed out these potential consequences. It is also unclear how a decision affirming the District Court’s decision would impact the hundreds of existing spill response plans that have been approved by PHMSA without ESA consultation or NEPA review. Both PHMSA and the pipeline operator, who had intervened in the case, appealed the District Court’s decision.

Sixth Circuit Oral Argument

In a sign of the times, the case was argued over video feed on April 9, and the Sixth Circuit posted an audio file of the argument. The panel, composed of judges Amul Thapar, Joan Larsen, and Gilbert S. Merritt, Jr., continually wrestled with how to articulate what constitutes sufficient “discretion.” As Judge Thapar put it, drawing on verbiage from a recent United States Supreme Court decision, “How do we define the line between judgment and discretion[,]” when only the latter triggers ESA and NEPA? Or, as Judge Larsen asked, is the issue what type of discretion, namely, whether the agency has discretion related to environmental concerns? Judge Merritt also probed the parties on whether other aspects of the Clean Water Act, particularly its broad definition of a “removal” action, gave PHMSA real discretion. Notably, the Assistant Attorney General for the Department of Justice’s Environment and Natural Resources Division personally argued the case, potentially suggesting its importance to the government.

The case is certainly of significance to the pipeline industry, and we will continue to apprise you of developments as they occur.

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Photo of Catherine D. Little Catherine D. Little

Catherine Little has been advising oil and gas pipelines, terminals and LNG facilities on energy and environmental administrative law for over 25 years at all levels of federal, state and local government, with particular emphasis on regulatory compliance, litigation and enforcement defense and…

Catherine Little has been advising oil and gas pipelines, terminals and LNG facilities on energy and environmental administrative law for over 25 years at all levels of federal, state and local government, with particular emphasis on regulatory compliance, litigation and enforcement defense and administrative adjudication under the Pipeline Safety Act, Natural Gas Act, Clean Water Act (including wetlands), Oil Pollution Act and National Environmental Policy Act. Her team has sought appellate review for enforcement matters with favorable results and works closely with industry and regulators alike to obtain favorable results for their clients. Catherine also regularly counsels clients with respect to pipeline construction and design issues, permitting, confidential investigations, spill and release reporting and response.

Photo of Annie M. Cook Annie M. Cook

Annie Cook’s practice focuses on administrative, environmental, and oil and gas transportation laws. Annie counsels clients on regulatory issues, compliance and litigation strategy, construction and siting, and permitting and enforcement defense relating to the Pipeline Safety Act, the Natural Gas Act, the Clean…

Annie Cook’s practice focuses on administrative, environmental, and oil and gas transportation laws. Annie counsels clients on regulatory issues, compliance and litigation strategy, construction and siting, and permitting and enforcement defense relating to the Pipeline Safety Act, the Natural Gas Act, the Clean Water Act, the Oil Pollution Act, National Environment Policy Act, TCSA, and related state and local laws.  Her team also represents clients regarding related transportation security issues and in responding to inquiries and investigations from the Department of Transportation’s Office of Inspector General.. Annie’s clients include owners and operators of oil and natural gas pipeline and related storage, terminal, and LNG facilities as well as other energy industry stakeholders.

Photo of Houston Shaner Houston Shaner

Houston Shaner helps his clients secure cost-effective outcomes, from shaping regulations in the notice-and-comment phase through permitting, daily compliance and internal investigations. And when his clients require litigation, Houston is ready to defend their interests in court or before agencies.