A recent Report to Congress mandated by the most recent amendments to the Pipeline Safety Act was released by the Government Accountability Office (GAO), reviewing federal and state responsibilities and resources for inspection of pipelines that transport product across state lines. Increases in funding have allowed the federal agency charged with regulating pipeline safety, the Pipeline and Hazardous Material Safety Administration (PHMSA or the Agency), to expand its own inspection workforce and reduce its reliance on state agents. The Report to Congress finds that the Agency has not assessed future workforce needs, however, to determine the appropriate level of state participation.
The Congressional Review Act (CRA) has been in the news of late, yet few people know its history, purpose or challenges. Although used only once in its first 20 years, the Act was resurrected at the outset of the Trump Administration. In the first four months of 2017, the new Administration used the CRA to withdraw 14 rules promulgated late in the Obama Administration. There is an effort now to try to use the CRA to nullify even older rules, promulgated over the past 20 years, which could threaten to create more uncertainty for the regulated community.
Opposition to new pipeline construction has grown in recent years, moving from public comment to litigation to physical protest and vandalism. In 2016 alone, several coordinated actions led to trespass and vandalism of pipelines and pipeline facilities in multiple states, some of which were prosecuted as felony criminal acts. The defendants in several of these cases have raised a “necessity defense” to their actions, and two courts have now allowed that defense to proceed.
The Federal Energy Regulatory Commission (FERC) officially announced that it is going to review its policy framework for certification of new interstate natural gas and LNG pipelines in the U.S. and issued a Notice of Inquiry (Notice or NOI). This is the first time in nearly twenty years that FERC will examine its pipeline review and approval policy, last issued in 1999. Kevin McIntyre, the current FERC Chairman, said review of the policy is intended to determine ‘whether, and if so, how’ any changes should be made in the evaluation of new pipeline projects. The NOI establishes a 60-day public comment period, beginning with publication in the Federal Register, thus the deadline for comments is June 25, 2018.
The U.S. DOT and 10 other federal agencies signed a Memorandum of Understanding (MOU) on April 9, 2018, which became effective on April 10, 2018. The MOU is intended to implement Executive Order 13807 (Aug. 15, 2017), which established a “One Federal Decision” policy for infrastructure projects that require authorizations by multiple federal agencies. Under the MOU, a lead federal agency must be designated to be responsible for addressing compliance with the National Environmental Policy Act (NEPA), and the preparation of a single Environmental Impact Statement (EIS). The lead agency will establish a single Permitting Timetable that all federal agencies must follow. The MOU mandates that all federal authorizations must be resolved within 90 days of issuance of the lead agency’s Record of Decision (ROD) on the EIS, with limited exceptions.
There have been problems on large pipeline construction projects in recent years getting all federal agencies to agree on an approach to permitting review and timetables. The MOU addresses that by requiring all agencies to work on a single approach and timeline, and to develop the policies necessary to do so. It also requires all environmental review to be complete no later than two years from issuance of a Notice of Intent (NOI) to prepare an EIS for a new project. Additionally, the MOU specifies three “concurrence points” at which all involved agencies are requested to reach consensus on NEPA project review and approval: (1) Purpose and Need; (2) identification of Alternatives; and (3) selection of the Preferred Alternative.
For new natural gas pipeline construction projects, FERC will continue to be the lead agency preparing an EIS, but any cooperating agencies must now comply with a uniform schedule for review and input. Although not required by the MOU, state, local and tribal agencies will be invited to voluntarily participate in the single permitting timetable process.
The MOU was welcomed by many as a means to achieve permit streamlining, a concept that Congress has attempted to address over the years, as noted in our prior posts regarding both House and Senate efforts [see prior pipelaws posts, August 4, 2017, July 5, 2017]. It also harkens to President Trump’s January 2017 Presidential Memorandum addressing permit streamlining for domestic manufacturing. As a representative of the U.S. Chamber of Commerce said of this new MOU, “It shouldn’t take longer to approve a project than to build it.” Opponents of new infrastructure projects, including pipelines, note that the courts are still deliberating on whether and to what extent large projects need to consider climate change impacts under NEPA. Challenges such as that are not addressed directly by the MOU, but in theory the MOU will foster a consolidated position by all federal agencies involved.
While the MOU stands to improve the coordination and timing among federal agencies, it is only aspirational, speaking in terms of “goals” and “milestones” that are ultimately non-binding. It may also place more burdens on project applicants, to ensure that all agencies are, in fact, coordinating and adhering to the timetable, etc., and that any disputes are identified and resolved in a timely manner.
In addition, challenges to permits and approvals at the local and state level will be unaffected by this MOU. New infrastructure projects continue to face opposition by environmental or citizen groups, and increasingly states too have posed challenges to large scale projects. For example, as noted in our prior post of July 5, 2017, projects such as Millennium Pipeline Company that received prior FERC approval have found themselves in the U.S. Courts of Appeals addressing state challenges. The Second Circuit recently issued a favorable decision in the Mellennium appeal , however, holding firm to the plain language in the Clean Water Act that the timeline for a state’s action in response to a request for a water quality certification is one year from receipt of the request.
 The MOU was signed by the heads of the Department of Transportation; the Federal Energy Regulatory Commission; the Environmental Protection Agency; Department of Energy; U.S. Army Corps of Engineers; Department of the Interior; Department of Agriculture; Department of Commerce; Department of Housing and Urban Development; the Advisory Council on Historic Preservation and the Federal Permitting Improvement Steering Council.
Building off of President Trump’s “Made in America” campaign commitment, the Trump Administration issued a tariff on steel imports on March 8, 2018. The proclamation finds that the imposition of duties on steel articles is necessary to ensure that steel imports will not threaten national security and, effective March 23, 2018, steel imports will be subject to a twenty-five (25) percent ad valorem tariff, except for imports from Canada and Mexico. The proclamation also authorizes the Commerce Department to grant exclusions from the tariffs of affected parties (1) if the steel at issue is determined not to be produced in the U.S. in a sufficient and reasonably available amount or of a satisfactory quality; or (2) based upon specific national security considerations. The President directed the Commerce Department to promulgate regulations as necessary to set forth the procedures for an exclusion process.
Prior to the effective date of the tariff, the Department of Commerce issued an interim final rule (IFR) to outline exclusions and the exclusion application process (set forth as a supplement to 15 C.F.R. Part 705). The IFR was issued without notice and comment and became immediately effective when published on March 19, 2018. While the IFR tracks the limited exclusions in the proclamation, much remains unclear with regard to the process and the likelihood of success for industry applicants. An exclusion will only be granted on a case by case basis where an article is not produced in the U.S. in a “sufficient and reasonably available amount,” is not produced in the U.S. in a “satisfactory quality,” or for a “specific national security consideration.” The IFR does not clarify the meaning of these terms or provide the industry with illustrative examples. The form for filing an exclusion request requires information such as the average annual consumption of the product at issue for the past two years, time involved in delivery, manufacture, and shipment of the product from a foreign suppliers, specifics about the physical properties of the product, and detailed U.S. product availability information (including attempts to qualify a US steel manufacturer or procure the steel from a US manufacturer).
The rule also establishes limits on who can request an exclusion and the scope of any exclusion. Exclusions are limited to individuals or organizations using steel articles in business activities (e.g., construction, manufacturing, or supplying steel to users). Approvals of exclusions will be specific to the individual or entity who submitted the request, unless Commerce approves a broader application of the exclusion to apply to other importers. Objections may be filed by any individual or organization, but Commerce will only consider information directly related to the submitted exclusion request.
The IFR states that “follow-on” requesters to exclusions that are approved will be taken into consideration, but signals that approval will depend on the strength of a requester’s application which may potentially set the stage for inconsistent results. Exclusion requests, objections and comments on the IFR will be public and located in the federal register docket. The rule establishes a 30 day period for individuals or organizations to file objections (from posting of the exclusion request) and a 90 day period for the Department to review and adjudicate any objections to an exclusion request. Responses approving exclusion requests will be effective within 5 days and will generally be approved for one year. Commerce estimates that it will receive tariff exclusion requests from 4,500 applicants. To date, no requests have been posted to the federal docket associated with steel import exclusions.
The Administration’s January 2017 Executive Memorandum requiring that all new and repaired pipe be made in the U.S. and the issue of steel tariffs have been the subject of much comment by the pipeline industry. Industry operators and trade groups have argued that such requirements will result in construction delays, project cancellations, higher costs and consumer impacts if they are implemented. There are major constraints on the procurement of adequate quantities of line pipe materials and equipment in the U.S., due to the unavailability of U.S. made pipe at necessary technical specifications and in time to meet market demands and/or regulatory requirements. It remains uncertain whether the Commerce Department’s IFR will resolve any of these concerns, if it will be subject to judicial challenge or whether the exclusion process will prove to be workable for industry.
In an attempt to bring clarity following the recent Supreme Court decision—which as noted in our prior post will result in expiration of the nationwide stay of the 2015 revised definition of “waters of the U.S.” that was imposed two years ago by the Sixth Circuit Court of Appeals—EPA and the Army Corps of Engineers (Corps) issued a final rule extending the applicability date of the 2015 revised definition to February 6, 2020. With this final rule, the Agencies seek to ensure that the pre-2015 “waters of the U.S.” definition will remain in place consistently throughout the country while the Agencies consider possible revisions. As expected, the final rule has already been subject to judicial challenge, further ensuring that the scope of “waters of the U.S.” will continue to remain uncertain in the near future as these challenges play out. Continue Reading Final Rule Adds 2020 Applicability Date to “Waters of the U.S.” Rule
On January 22, 2018, the Supreme Court in a unanimous decision threw the long contested issue of what constitutes “waters of the U.S.” back to the lower courts. Somewhat surprisingly, the Supreme Court held that federal district courts have jurisdiction to hear challenges to the rule, reversing a Sixth Circuit decision and suspending that court’s nationwide stay of the rule. In doing so, the Court guaranteed that a revised definition of “waters of the U.S.” will remain undecided for some time to come. Continue Reading Definition of “Waters of the U.S.” Remains Uncertain
In the past few weeks, the Trump Administration’s Department of Interior (DOI) has taken significant steps to roll back several environmental policies and/or rules affecting the energy industry. On December 22, DOI issued a memorandum interpreting the scope of the criminal liability under the Migratory Bird Treaty Act (MBTA) not to extend to incidental takes of migratory birds associated with development, construction or operation of energy and infrastructure projects. The following week, DOI formally rescinded a 2015 final rule issued by the Bureau of Land Management (BLM) for oil and gas operators engaged in hydraulic fracking on Federal and Indian public lands because it “imposes administrative burdens and compliance costs that are not justified.” That same day, DOI’s Bureau of Safety and Environmental Enforcement (BSEE) issued a proposed rule to revise or eliminate regulations on offshore drilling safety equipment, including the production systems safety rule which was prompted by the 2010 Deepwater Horizon spill in the Gulf of Mexico. More recently, DOI has announced a draft proposed plan to reopen nearly all offshore waters to oil and gas drilling. Continue Reading Regulatory Rollbacks Continue for Energy Industry
Last week, PHMSA’s oil and gas pipeline technical advisory committees convened to review and discuss significant pending rulemakings and regulatory reform initiatives, among other topics. At the same time, the White House touted its deregulation efforts, including the purported elimination of 22 regulations in the past year for each new rule passed. For an agency that is facing outstanding statutory mandates to enact certain regulations, with reauthorization looming in 2018, it is expected that PHMSA will promulgate some new rules in the New Year. It is not yet known, however, what the content of those rules will be and whether the expansive gas ‘mega rule’ will be among those finalized in 2018. Given the overall regulatory climate to reduce regulation and burden, a little certainty might be appreciated in the New Year. Continue Reading All I want for Christmas is … regulatory certainty?