June 2019 Industry Digest

GALVESTON, TX.–A judge has ordered federal agencies to reconsider the Waters of the Unites States regulation issued during the Obama administration. The ruling in State of Texas v. U.S. Environmental Protection Agency also orders the continuation of a preliminary injunction blocking its enforcement that was issued on Sept. 18, 2018.

In his ruling, U.S. District Judge George Hanks Jr. states EPA and the U.S. Army Corps of Engineers have failed to allow public comments after altering the definition of waters of the United States in their final version of the regulation. The decision does not vacate the 2015 changes to the Clean Water Act, but instead gives the agencies the opportunity to reconsider their revisions.

Texas, joined by Mississippi and Louisiana, had argued the final WOTUS rule violated the Administrative Procedure Act and the Constitution’s Commerce Clause and 10th Amendment. The final rule violates the APA’s notice and comment requirements, Hanks ruled, but he declined to address the other challenges to the rule, holding that it would be premature to do so. The Trump administration has reported its intent to rewrite the WOTUS rule.

According to court documents, the two federal agencies substantially rewrote the proposed rule after issuing an early draft for public comments and never resubmitted a final draft to the review process. The ruling notes instead of continuing to use ecological and hydrologic criteria to define adjacent waters as originally proposed, the final rule switched to using distance-based criteria.

“This change is significant–it alters the jurisdictional scope of the act,” Hanks ruled. “As a result, the final rule was deprived of the benefit of comment ‘by those most interested and perhaps best informed on the subject of the rule making at hand.’ Indeed, the summary judgment evidence establishes that if interested parties had been notified of this change, the comments and evidence presented to the agencies would have been significantly and substantively different.”

Texas Attorney General Ken Paxton says the ruling is a major victory for the people of Texas’ ability to regulate their own natural resources, including ponds, puddles and streams on private property, and for property owners, whose land would have been subject to unlawful and impractical EPA regulations.

WASHINGTON–The U.S. Fish & Wildlife Service is accepting public comments on its proposal to reclassify the American burying beetle from endangered to threatened under the Endangered Species Act. Comments will be accepted through July 2.

The service says it has determined that threats to the beetle have diminished to the point that it no longer meets the definition of an endangered species under the act, but is likely to become endangered in the foreseeable future. The beetle, listed as endangered in 1989, once was found in 35 states. Its naturally occurring populations now are limited to Oklahoma and on Block Island, off Rhode Island.

The downlisting proposal provides significant regulatory relief to Oklahoma job creators and is a step in the right direction for appropriate conservation of the state’s native species and economic growth for the region, says Chad Warmington, president of the Oklahoma Independent Petroleum Association-Oklahoma Oil & Gas Association.

“The endangered listing of the burying beetle has been under question for nearly 30 years for failing to provide the appropriate, science-based evidence that such decisions demand while placing an unnecessary burden on Oklahoma energy development,” he says. “The oil and gas industry’s implementation of significant conservation and recovery programs is a key reason the beetle has and will continue to flourish.”

Under the proposal, USFWS would prohibit all intentional take of the beetle and specifically tailor that prohibition to the three geographic areas the beetle occupies.

• In the New England and Northern Plains analysis areas, incidental take only is prohibited in suitable habitat when the take is the result of soil disturbance, with USFWS saying it is seeking an exception for incidental take associated with ranching and cattle grazing.
• In the Southern Plains analysis areas, incidental take is not prohibited unless it occurs on defined conservation lands. The agency is proposing an exception for any incidental take that occurs on conservation lands while conducting activities that comply with a USFWS-approved management plan.

Information on submitting comments is available on the federal eRulemaking portal at www.regulations.gov; in the search box, enter FWS-R2-ES-2018-0029.

WASHINGTON–In a move that he says will promote regulatory transparency, U.S. Environmental Protection Agency Administrator Andrew Wheeler has issued a memorandum instructing the agency’s assistant administrators to harmonize how EPA’s rule-making process considers costs and benefits.

“Many EPA statutes contemplate the consideration of benefits and costs as part of regulatory decision making. However, benefits and costs historically have been treated differently, depending on the media office and the underlying authority,” Wheeler states. “This has resulted in various concepts of benefits, costs and other factors that may be considered. This memorandum will initiate an effort to rectify these inconsistencies through statute-specific actions.”

American Energy Alliance President Thomas Pyle lauds the move as a corrective against regulatory excess. “EPA Administrator Wheeler’s directive to write new rules for the consideration of cost-benefit analysis is a welcomed and appreciated move as this analysis lays the foundation for all regulatory proposals,” he affirms. “This effort will make strides towards more accurate appraisal of the real-world implications of regulations and future rule makings. Previous administrations have often gamed these calculations in order to reach whatever conclusion they desired. We hope the Trump administration’s forthcoming rule will help cut down on the worst abuses.”

Wheeler’s memo, released May 13, indicates it is informed by the public comments associated with EPA’s June 2018 advanced notice of proposed rule making, which solicited public input on ways to help the agency’s rule makings improve consistency and transparency regarding costs and benefits. The memo directs EPA assistant administrators to employ a media-specific approach that accounts for the variety of statutory programs. It goes on to instruct the assistant administrators to “develop reforms, including notice-and-comment rule makings, that outline how benefit/cost considerations will be applied in areas that are in need of greater clarity, transparency and consistency. The rule-making efforts should not forestall near-term benefit-cost methodological changes for individual regulatory actions.”

The memo says EPA media offices are to follow a handful of principles:

• Regulatory decisions should consider and seek to balance both benefits and costs.
• Interpretation of statutory terminology should be more consistent. EPA media offices should evaluate benefits and costs in a manner that applies consistent interpretations of key terms and concepts (such as “practical,” “appropriate,” “reasonable” and “feasible”) for specific statutes.
• EPA should be transparent with regard to the weight it assigns to factors in regulatory decisions. Media offices should openly identify which factors were and were not considered in a regulatory analysis and how these factors have been weighed to arrive at a particular regulatory outcome.
• Technical analysis used to inform decisions should adhere to best practices. EPA’s technical analyses should follow sound economic and scientific principles and adhere to existing guidance and best practices for benefit-cost analysis.

WASHINGTON–The U.S. Department of Commerce has issued a notice of proposed rule making to impose countervailing duties on countries that subsidize their exports by undervaluing their currencies relative to the dollar. DOC notes that U.S. law defines a countervailable subsidy as a financial contribution from a government or public entity that is specific and that provides a benefit to a foreign producer or exporter.

“This change puts foreign exporters on notice that the Department of Commerce can countervail currency subsidies that harm U.S. industries,” Commerce Secretary Wilbur Ross announced March 23. “Foreign nations would no longer be able to use currency policies to the disadvantage of American workers and businesses.”

According to published reports, if the proposal becomes law, it may mean higher tariffs for countries listed on the U.S. Treasury Department’s monitoring list, which includes China, Japan, South Korea, India, Germany and Switzerland.

DOC notes that the Enforcement and Compliance unit within the department’s International Trade Administration is responsible for countervailing duty proceedings and determinations. The department currently maintains 481 anti-dumping and countervailing duty orders that aim to provide relief to American companies and industries impacted by unfair trade measures.

ALBUQUERQUE, N.M.–The Bureau of Land Management must consider the cumulative impacts of drilling nearly 4,000 horizontal multistage hydraulically fractured wells in New Mexico’s San Juan Basin, a federal court has ruled.

Diné Citizens Against Ruining Our Environment and three other groups sued the bureau in 2015 over drilling in the Greater Chaco region. According to court documents, the groups alleged BLM violated the National Historic Preservation Act and National Environmental Policy Act when it approved applications for permits to drill in northeastern New Mexico, and failed to account for regionwide cumulative impacts on water resources, air quality and cultural integrity.

The plaintiffs lost in the U.S. District Court for the District of New Mexico in 2018, and appealed to the U.S. Court of Appeals for the 10th Circuit. The appeals court both affirmed and reversed the lower court decision.

When BLM revised its 1988 resource management plan in 2000, it developed a “reasonably foreseeable development scenario (RFDS)” to predict development likely to happen during the next 20 years, court documents say. The RFDS projected 9,970 wells drilled, with 180 targeting the Mancos. In 2003, the bureau released an updated RMP and final environmental impact statement, both based on the RFDS. The documents assumed the Mancos would not be a significant target, based on available technology.

Beginning in 2010, court documents state, BLM began receiving Mancos Shale APDs, with 70 wells completed by 2014. That year, the bureau prepared a new RFDS, which estimated that full Mancos development would result in 3,960 horizontal, fractured wells.

The Diné Citizens lawsuit initially challenged at least 351 APDs, then added more during the appeal process, court documents indicate, alleging NEPA violations for relying on the 2003 EIS and for failing to supplement the EIS, and NHPA violations for not completing cultural consultation requirements. In its April 23, 2018 decision, the district court rejected those charges.

In their appeal, the groups contend BLM has violated NEPA by failing to analyze indirect and cumulative impacts of drilling on cultural sites and environmental resources in the Greater Chaco landscape.

The appellate court complained about the “dramatic insufficiency” of the plaintiffs’ arguments, pointing out the groups challenged 3,960 proposed Mancos Shale wells but provided complete records only on a handful. “We are therefore unable to evaluate the sufficiently of the BLM’s NHPA and NEPA analyses for the vast majority of the challenged actions,” the court says, noting the submission of only one well’s complete NHPA analysis and six NEPA analyses.

The appeals court ordered the lower court to vacate the APDs on those seven wells, and remand all EAs to BLM to conduct a proper NEPA analysis. “We conclude that the 3,960 horizontal Mancos Shale wells predicted in the 2014 RFDS were reasonably foreseeable after the 2014 RFDS was issued. The BLM therefore had to consider the cumulative impacts of all 3,960 wells when it conducted its site-specific EAs,” the appeals court ruled.

PORTLAND, OR.–The Oregon Department of Environmental Quality has denied a key water access permit to the Jordan Cove liquefied natural gas export terminal proposed for the state’s southern coast. If built, the facility would be the only U.S. LNG export terminal on the West Coast.

According to Pembina Pipeline Corp., the Canadian company proposing to build the project on a 500-acre site on Coos Bay, the export facility would have the capacity to export as much as 7.8 million metric tons of liquefied natural gas annually. The associated Pacific Connector pipeline, running 229 miles between the Jordan Cove site and an interstate gas hub in South-Central Oregon, would transport 1 billion cubic feet of natural gas a day through its 36-inch diameter pipeline.

DEQ declined to issue a Section 401 water quality certification, needed for the U.S. Army Corps of Engineers to issue federal permits for the project, the Oregon agency says. According to the agency, the decision was made without prejudice, allowing Pembina to reapply for the certification and submit additional information that could result in a different decision.

“If Jordan Cove resubmits an application along with information addressing DEQ’s concerns, DEQ will work to keep the timing of its review in line with the overall federal schedule for the project, but this will depend on the applicant submitting the requested information in a timely manner,” the agency says.

According to DEQ, it planned to make its certification decision this September, but accelerated the review schedule to ensure it doesn’t unintentionally waive Oregon’s authority to review the proposed project’s water quality impacts.

DEQ denied the certification because there was insufficient information to demonstrate compliance with water quality standards and that the available information indicated some standards were likely to be violated, the department says. It specifically pointed to concerns about expected effects of constructing and operating the pipeline and the risks of releasing drilling materials from the construction of proposed crossings of the Coos Bay estuary.

Pembina was quoted as saying it was delaying its final decision on the project for a year, and was slashing its forecast spending as it awaited federal and state decisions on needed permits.

ALBANY, N.Y.–New York regulators have denied a water quality permit for an underwater natural gas pipeline from New Jersey to New York City, saying the Northeast Supply Enhancement Project failed to meet the state’s water quality standards and would disturb shellfish beds and other bottom-dwelling marine resources.

In its May 15 notice, the N.Y. Department of Environmental Conservation said the pipeline proposed by Williams Cos. subsidiary Transcontinental Gas Pipe Line Co. would cause re-suspension of sediments and other contaminants, including mercury and copper. Earlier in May, Williams said it had received the Federal Energy Regulatory Commission’s certificate of public convenience and necessity authorizing the Northeast Supply Enhancement project, an expansion of the Transco gas pipeline running from Texas to the Northeast Coast that is designed to serve New York markets in time for the 2020-21 winter heating season.

According to the company, the project is designed to provide 400,000 dekatherms a day of additional gas supply to the National Grid, the largest distributor of gas in the northeastern United States. The enhancement project would allow National Grid to move gas from Pennsylvania’s shale gas fields to the New York City area.

National Grid indicates the project is crucial to convert 8,000 customers a year from heating oil to gas in New York City and Long Island. The company says it will not connect any new gas customers in those areas until the pipeline project is approved.

According to a Williams spokesman, the state agency raised a minor technical issue with the company’s certification, and it plans to quickly resubmit the application.

President Trump signed two executive orders April 10 on energy infrastructure. Among the EO’s provisions, the U.S. Environmental Protection Agency is directed to review its water quality certifications under Section 401 of the Clean Water Act.

Also in April, Williams announced it was initiating a binding open season for Regional Energy Access, an incremental expansion of the Transco pipeline to provide firm gas transportation capacity to northeastern markets. The pipeline is being designed to provide more than a billion cubic feet a day from Marcellus Shale production areas to Pennsylvania and New Jersey local distribution companies and power generators.

MARINA, CA.–The Bureau of Land Management’s proposed resource management plan amendment and final environmental impact statement for its Central Coast field office in California plans to open 683,000 acres of federal mineral estate to leasing.

The agency action is a reaction to a 2016 court case, with anti-development groups, including Los Padres ForestWatch and the Center for Biological Diversity, suing the California Division of Oil, Gas and Geothermal Resources in the U.S. District Court, Central District of California. The groups allege the final EIS failed to take the “hard look” required by the National Environmental Policy Act at the environmental impacts of the RMP, when, under the RMP, 25% of new wells were expected to be fractured, court documents state. Therefore, the judge ruled, BLM was required to prepare a supplemental EIS that analyzed the environmental consequences of using fracturing technology.

Under the BLM preferred alternative, leasing with controlled surface stipulations would be allowed on that acreage in Fresno, Monterey and San Benito counties. The agency also would open another 42,400 acres to leasing with no surface occupancy, and close to leasing 67,500 acres of federal minerals in designated wilderness areas, wilderness study areas and national monuments, BLM describes.

According to the agency, the planning documents analyze six alternative approaches to oil and gas leasing and development, specifying which BLM-managed public lands or subsurface federal mineral estate would be open to future leasing, and the stipulations that would applied to protect resources.

The proposed RMPA and final EIS fulfill the BLM’s commitment to a court order to prepare a more detailed environmental analysis of oil and gas leasing and the potential impacts of hydraulic fracturing and other enhanced well stimulation techniques, the agency says, adding it will use the final EIS to issue and/or reissue some or all of the 14 leases subject to the court’s decision.

“We are not talking about a national park. We are not talking about a wilderness area. These are lands that the Obama administration affirmed are appropriate to carefully controlled development,” Kathleen Sgamma, president of the Western Energy Alliance, is quoted as saying.

WASHINGTON–Underground natural gas storage in the United States stood at 1.866 trillion cubic feet on May 24, 12.1 percent below the five year average, according to the U.S. Energy Information Administration. That was up 404 billion cubic feet from the 1.462 Tcf in storage on April 26, which was 17.8 percent below the five-year average. The May 24 storage number was 155 Bcf more than a year ago, when gas storage stood at 1.711 Tcf.

According to EIA, gas storage in the East Region was 383 Bcf on May 24, 3.5 percent below the five-year average, but 104 Bcf more than on April 26, when storage stood at 279 Bcf, which was 5.7 percent below the five-year average. East Region gas storage on May 24 was 59 Bcf more than it was a year ago.

Gas storage in the Midwest Region stood at 399 Bcf on May 24, 10.1 percent below the five-year average and 109 Bcf more than the 290 Bcf in storage on April 26, which was 17.4 percent below the five year average. May 24 gas storage in the Midwest Region was 88 Bcf more than a year ago.

In the Mountain Region, EIA says, gas storage was 93 Bcf on May 24, 31.6 percent below the five-year average and 18 Bcf more than the 75 Bcf stored on April 26, which was 37.0 percent below the five year-average. Gas storage in the Mountain Region was 19 Bcf less than a year ago.

Gas storage in the Pacific Region was 198 Bcf on May 24, 22.0 percent below the five-year average and 46 Bcf more than the 152 Bcf stored on April 26, which was 31.8 percent below the five-year average. Pacific Region gas storage on May 24 was down 22 Bcf from a year ago.

In the South-Central Region, gas storage levels on May 24 were 793 Bcf, 11.2 percent below the five-year average and up 127 Bcf from the 666 Bcf in storage on April 26, which was 15.5 percent below the five-year average. The May 24 gas storage level for the South-Central Region was up 49 Bcf from a year ago.