September 2018 Industry Digest

Two Federal Agencies Change Direction On Compensatory Mitigation

WASHINGTON–Two federal agencies have announced changes in their approaches toward requiring public land users to mitigate the effects of their activities.

On July 24, the Bureau of Land Management issued an instruction memorandum directing its field offices to no longer require off-site compensatory mitigation under the Federal Land Policy and Management Act. Then on July 30, the U.S. Fish & Wildlife Service published a Federal Register notice withdrawing its net conservation gain requirement under the Endangered Species Act.

Both actions walk back mitigation policies established in accordance with President Barack Obama’s November 2015 “Memorandum on Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment,” which directed agencies to set net-benefit, or at a minimum, no-net-loss goals for natural resource development.

BLM’s IM states, “Except where the law specifically requires, the BLM must not require compensatory mitigation from public land users,” adding that under limited circumstances, the agency “will consider voluntary proposals for compensatory mitigation.”

The IM points out that FLPMA does not explicitly mandate or authorize BLM to require compensatory mitigation as a condition for authorizing use of public lands. However, the IM notes, a December 2016 solicitor’s opinion concluded BLM was “authorized to impose mandatory compensatory mitigation to achieve a ‘net conservation gain.’”

While BLM is obligated to ensure activities it permits do not result in unnecessary or undue degradation (UUD), “Compensatory mitigation cannot prevent what would otherwise constitute UUD,” the IM continues.

“If a proposed use of the public lands would result in UUD, then the BLM cannot authorize that use, even if compensatory mitigation is proposed,” the IM states, but adds, “Preventing unnecessary or undue degradation does not mean preventing all adverse impact on the land. A certain level of impairment may be necessary and due under a multiple-use mandate.”

USFWS’s Federal Register notice concludes the agency “does not have authority to require a net conservation gain under the ESA, and the policy is inconsistent with current executive branch policy.”

Like BLM’s IM, USFWS’s notice references President Donald Trump’s March 2017 Executive Order 13783, which not only rescinds Obama’s memorandum on mitigation, but also directs federal agencies to review regulations, orders, policies, etc., that potentially burden the development or utilization of domestic energy resources.

As justification for withdrawing its net-conservation-gain policy, USFWS cites the U.S. Supreme Court’s 2013 ruling in Koontz v. St. Johns River Water Management District, which holds “a unit of government may not condition the approval of a land-use permit on the owner’s relinquishment of a portion of his property unless there is a ‘nexus’ and ‘rough proportionality’ between the government’s demand and the effects of the proposed land use.”

The Federal Register notice further states, “Because by definition, compensatory mitigation does not directly avoid or minimize the anticipated harm, its application is particularly ripe for abuse. These concerns are particularly acute when coupled with a net conservation gain goal.”

New DOI Memo Directs Agencies To Streamline NEPA’s Review Process

WASHINGTON–The Department of the Interior lays out its revised process for reviewing environmental assessments in an Aug. 6 memorandum. The document is the second bureaucratic response to President Trump’s Executive Order 13807, “Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects.”

NEPA was intended to promote rational decision making in regard to environmental policy, and not as a backdoor policing agent against bona fide projects, the DOI memorandum states. “The arduous permitting process has, according to the Trump administration, resulted in a weakened American economy, depressed our competitiveness in the world market, led to lost jobs and decreased wages, and increased the overall costs of goods and services to American families,” DOI says, explaining the rationale for the president’s executive order.

In August 2017, Interior Secretary Ryan Zinke issued DOI’s first response to the presidential directive that federal agencies streamline the National Environment Policy Act’s review process. His order changes the NEPA environmental review process when an Interior agency or bureau is the lead authority in several ways, including:

  • Limiting the size of environmental impact statements to no more than 150 pages, or 300 pages for unusually complex projects;
  • Setting a target completion date of one year from using a notice of intent to prepare the EIS;
  • Requiring timelines that exceed that target range to get approval from DOI; and
  • Limiting EAs to 10-15 pages.

The Aug. 6 memorandum provides additional direction for implementing Zinke’s directive in regard to EAs, DOI says. It notes the department’s normal practice yields 30-40 page EAs, and points out if they cannot be kept to those limits in complex cases, EAs still should be shorter than 75 pages and be completed within 180 days. If an EA is expected to be controversial, complex or perceived to have a greater-than-average risk of litigation, the memorandum requires agency personnel to submit it to the DOI solicitor, who will determine if an agency must be assigned to the project.

“Nothing contained in this memorandum is intended to or should be construed to limit or affect the authority or legal responsibilities of the department’s bureaus or other federal or state-level governmental entities, nor bind them to perform actions beyond their respective authorities,” the Aug. 6 memo points out.

FERC Overturns NYDEC Pipeline Permit Denial

WILLIAMSVILLE, N.Y.–The Federal Energy Regulatory Commission has once again rebuked the New York State Department of Environmental Conservation’s attempt to block interstate natural gas pipeline infrastructure by dragging its feet on a Clean Water Act Section 401 water quality permit.

National Fuel Gas Co. announces FERC’s Aug. 6 order “removes a major barrier” for the Northern Access Project it is undertaking with Empire Pipeline Inc. The Northern Access Project will expand capacity on its and Empire’s existing systems by 497,000 and 350,000 dekatherms a day, respectively, for delivery points in the northeastern United States and Canada, NFG notes.

FERC’s order points out that the pipelines filed their Section 401 application with the DEC on March 2, 2016. The DEC denied the application on April 7, 2017. FERC ruled the DEC waived its right to review the application by failing to act within a year of receiving it, even though DEC and NFG agreed in a letter dated Jan. 20, 2017, to establish April 8, 2016, as the date on which the application was deemed received by DEC.

FERC states in its order that its interpretation of Section 401 certification requirements “gives effect to the plain meaning of the words ‘after receipt.’ The execution of an agreement between an applicant and a certifying agency does not entail a ‘receipt’ by the agency.”

FERC observes that its Northern Access ruling is consistent with its 2005 order in a case involving Central Vermont Public Service Corp., in which the agency found that “Section 401 contains no provision authorizing either the commission or the parties to extend the statutory deadline.”

This is the second time FERC has overruled the New York DEC. On Sept. 15, 2017, the commission found the DEC has waived its authority to issue a Section 401 permit for Millennium Pipeline’s Valley Lateral Project (AOGR, October 2017, pg. 25). That decision was upheld on an appeal from the DEC by the U.S. Court of Appeals for the 2nd Circuit in March 2018 (AOGR, April 2018, pg. 92).

PHMSA Eyes Revisions Of Class Location Rule Covering Gas Pipelines

WASHINGTON–The Pipeline and Hazardous Materials Safety Administration has issued an advance notice of proposed rule making seeking public comment on whether it should revise its class location requirements for gas pipeline facilities.

According to the ANPRM, published in the July 31 Federal Register, PHMSA is seeking comments on alternatives to pipe replacements caused by population growth near pipelines. Adopted nearly five decades ago, the agency’s class location requirements rely on population density and land use data to determine pipeline safety margins, including maximum allowable operating pressures.

Pipeline operators have suggested that performing integrity management measures on pipelines where class locations have changed because of population increases would be an equally safe but less expensive alternative to the current requirements of reducing pressures, conducting pressure testing or replacing pipelines, PHMSA writes.

The Interstate National Gas Association of America submitted comments to the Department of Transportation on July 24 on a docket regarding regulatory review actions, PHMSA says. The association estimated that gas transmission pipeline operators spend $200 million-$300 million annually replacing pipe solely to satisfy changing class location requirements.

According to the agency, INGAA’s proposed alternative approach focuses on recurring integrity management (IM) assessments that would leverage advanced assessment technologies to determine whether the pipe condition warrants pipe replacement in areas where the class location has changed.

INGAA says the current alternatives to pipe replacement following a class location change don’t reflect the significant developments in IM processes, technologies and regulations during the past 15 years. “More specifically, in-line inspection technologies, such as high-resolution magnetic flux leakage tools, can precisely assess the presence of corrosion and other potential defects, allowing an operator to establish whether a pipeline segment requires remediation or replacement,” the association says.

The agency will accept public comments on the ANPRM through Oct. 1, 2018.

EPA Decides To Defend Obama Ozone Standard

WASHINGTON–The Trump White House announced in early August it plans to defend the Obama administration’s national air quality standards on ozone. Justice Department officials revealed the decision in a federal court that is hearing lawsuits challenging the air quality requirements.

According to court documents, the notification came in front of the U.S. Court of Appeals for the District of Columbia Circuit, which was hearing Murray Energy Corp. v. U.S. Environmental Protection Agency, one of several lawsuits filed by state and industry groups arguing Obama-era changes to the National Ambient Air Quality Standards (NAAQS) lowering ozone levels from 75 parts per billion to 70 ppb will place many areas of the country in nonattainment.

The Bush administration lowered the primary ozone standards to 75 ppb in 2008. Under President Obama, the Environmental Protection Agency announced plans for a 70 ppb standard, arguing the higher level failed to provide adequate public health. Industry groups warned the new standard would impact job growth in 958 counties across the country (AOGR, February 2016, pg. 20).

The Justice Department notice explains EPA’s decision not to reconsider the 2015 standard comes after two high-level White House directives:

  • An April 12 presidential memorandum that directed the agency to evaluate whether it was fully complying with requirements for periodic five-year reviews of federal air quality standards. The memo specifically directed EPA to evaluate compliance with provisions regarding advice from the NAAQS advisory panel, the Clean Air Scientific Advisory Committee.
  • Former EPA Administrator Scott Pruitt issued a memorandum on May 9 that listed principles governing NAAQS reviews. It called for EPA and the advisory committee to study the “relative contribution of natural and anthropogenic activity” to ozone formation when they reviewed the NAAQS.

To fulfill the May 9 memorandum’s direction for EPA to be ready to finalize any revisions to the ozone NAAQS by October 2020, the agency began a review of the standard with two June 26 calls for information in the Federal Register. The agency says it will consider and solicit comments from the committee and the public on topics relating to background ozone that are used to determine if areas are in attainment.

EPA says it will consider how to proceed with the 2015 ozone NAAQS only after it completes its review of background concentrations and ozone levels, saying the review will be “thorough, transparent and consistent with the statutory requirements.”

Democrats Overturn Stance On PAC Money

WASHINGTON–The Democratic National Committee has reversed its position on contributors from the fossil fuel sector, voting 30-2 to support “the workers, unions and forward-looking employers that power the American economy,” and accept donations from fossil fuel unions and political action committees, a reversal of its policy announced in June.

On June 12, the committee had passed a measure submitted by Christine Pelosi, daughter of House Minority Leader Nancy Pelosi, D-Ca., that banned contributions from PACs representing the fossil fuel industry, declaring energy corporations were “drowning our democracy in a tidal wave of dark oily money.”

The Aug. 10 resolution says the DNC welcomes “the longstanding and generous contributions of workers, including those in energy and related industries, who organize and donate to Democratic candidates individually or through their unions’ or employers’ political action committees.” It says including working people and their unions is critical to the Democratic Party’s ability to affect change that improves the lives of workers, their families, and the country’s middle class.

“These workers, their unions and forward-looking employers are powering America’s all-of-the-above energy economy and moving us toward a future fueled by clean and low-emissions energy technology, from renewables to carbon capture and storage to advanced nuclear technology,” the resolution reads.

The DNC resolution concludes by promising the Democrats will work to build a full-employment economy that provides wages high enough for workers to raise a family and helps build sustained and shared economic growth.

Pennsylvania Court Nixes Portions Of Rules On Unconventional Drilling

HARRISBURG, PA.–A state appeals court has ruled that portions of the Department of Environmental Protection’s permitting requirements for unconventional wells go beyond the agency’s authority, the Pennsylvania Independent Oil and Gas Association reports.

PIOGA explains that, as part of DEP’s Chapter 78a regulations governing surface operations of unconventional wells, operators must identify and consider impacts on a variety of “public resources,” including playgrounds, “common areas of a school’s property” and species known as “other critical communities” during the permit application process. A five-judge Commonwealth Court panel in an Aug. 23 decision in Marcellus Shale Coalition v. Department of Environmental Protection declared those three provisions void and unenforceable, PIOGA indicates.

The agency’s definition of playgrounds was overly broad for including not only public and private playgrounds, sports fields and picnic grounds, but also “virtually any area open to the public for recreational purposes, including commercial enterprises, such as shopping centers, movie theaters, sports stadiums, amusement parks and golf courses,” the court stated. “Even a playground adjoining a McDonald’s eatery would qualify as a ‘public resource’ under the regulation. The sheer diversity of these resources renders the regulation unreasonable.”

The court held that the regulatory definitions of “playground” and “common areas of a school’s property” lacked the same attributes as public resources identified in Act 13 of 2012, PIOGA notes.

The suit also challenged DEP’s inclusion of “species of special concern” within the scope of protected public resources, arguing that the requirement falls outside Act 13. Although the agency has statutory authority to protect rare, endangered, threatened and critical species, the court acknowledged, the term “other critical communities” does not include “species of special concern” and “represents a less imminent or potential conservation threat.”

“By creating obligations tied to species of special concern, which are not at the same level of risk as threatened or endangered species, the regulation upsets the balance between industry and the environment strived for in Act 13,” the court wrote.

Finally, the court rejected provisions allowing municipalities and playground operators to comment on well permits as “public resource agencies” under Act 13. According to the judges, the Pennsylvania Supreme Court’s Robinson II decision nullified the section aimed at municipal input, and the Commonwealth Court determined the definition of playground owners was overly broad.

The court rejected the MSC’s contention that the entire regulation was invalid because the required regulatory analysis form outlining the economic impacts, statement of need and estimated costs of complying with the rules was inadequate, PIOGA observes. Six remaining counts, including challenges to standards for on-site processing, impoundments, site restoration, spill remediation and waste reporting, also are being considered by the Commonwealth Court, with arguments scheduled for October.

Keystone XL Requires Full EIS, Judge Rules

BILLINGS, MT.–A federal judge in Montana has ordered the U.S. State Department to perform a full environmental impact statement on the revised route through Nebraska for the Keystone XL Pipeline, according to published reports.

The reports say U.S. District Judge Brian Morris ruled on Aug. 15 that the State Department was obligated to “analyze new information relevant to the environmental impacts of its decision.”

The Nebraska Public Service Commission last November approved an alternative route for the Keystone XL that the PSC determined would reduce the pipeline’s impacts on endangered species habitat (AOGR, December 2017, pg. 16). Reports indicate the State Department determined in an environmental assessment released in July that the revised route would not harm water supplies or wildlife. That decision was challenged in U.S. District Court for the District of Montana by the Indigenous Environmental Network and other plaintiffs.

TransCanada Corp. filed its initial application in 2008 for a border-crossing permit for the 1,187-mile pipeline intended to carry up to 800,000 barrels a day of crude oil from Hardisty, Alberta, to Steele City, Ne., for eventual shipment to Gulf Coast refineries.

President Barack Obama eventually denied that permit application in November 2015 (AOGR, December 2015, pg. 30), but under President Trump, the State Department reversed that decision and granted Keystone XL a presidential permit in March 2017 (AOGR, April 2017, pg. 28). That permit was based on an EIS performed by the State Department in 2014, and the Indigenous Environmental Network asked Judge Morris to void that permit as well. However, he refused to do so, the reports say.

Minnesota Court Backs County Ban On Mining Sand For Fracturing

WINONA, MN.–A three-judge panel of the Minnesota Court of Appeals ruled Minona County’s ordinance ban on mining sand used in hydraulic fracturing is legal.

Court documents state Minnesota Sands LLC secured leases in 2011 and 2012 with Winona County landowners to mine silica sand from their properties to use as proppant for fracturing operations. The count denied requests for conditional use permits (CUPs) for other sand mining projects, and imposed a moratorium to allow county commissioners to study the issue. After the moratorium expired, another company received a CUP for its silica-sand mining project.

On Nov. 22, 2016, commissioners amended the zoning ordinance to prohibit all industrial mineral mining within Minona County. The revision–which differentiated between construction minerals produced and used for local building projects, and industrial minerals, including high quartz-level stone, silica sand, quartz and graphite and other materials used in industrial applications–allowed mining for construction minerals.

After another company sued the county, alleging the ordinance was arbitrary and violated the state and federal constitutions, Minnesota Sands filed its own lawsuit, using similar legal claims. A district court granted the county’s request to dismiss both lawsuits, and Minnesota Sands appealed that decision.

According to the appeals court, it considered two issues: whether the county may ban all silica-sand mining without infringing on congressional authority under the Commerce Clause of the U.S. Constitution, and whether the ordinance constituted a regulatory taking of Minnesota Sand’s property.

Minnesota Sands claimed the ordinance discriminated against out-of-state interests and was a ban on exporting industrial minerals mined in the county, and thus violated the Commerce Clause. The appeals court decision stated mined silica sand only became fracture sand after it underwent a specific process involving crushing, cleaning and screening. It pointed out the ordinance outlawed all silica-sand mining, not just silica sand to be processed and used in fracturing.

Discussing Minnesota Sands’ second allegation, the court noted that of the company’s six leases, four were conditioned specifically on it obtaining required zoning or governmental approval before the leases’ effective date. Minnesota Sands never applied for a CUP before the county amended the zoning ordinance it adds, and thus it does not have a compensable property interest for which it is owed compensation.

Gas Storage Levels Increase By 232 Bcf

WASHINGTON–Underground natural gas storage in the United States stood at 2.505 trillion cubic feet on Aug. 24, 19.0 percent below the five year average, according to the U.S. Energy Information Administration. That was up 232 billion cubic feet from the 2.273 Tcf in storage on July 20, which was 19.7 percent below the five-year average. The Aug. 24 storage number was 645 Bcf less than a year ago, when gas storage stood at 3.150 Tcf.

According to EIA, gas storage in the East Region was 640 Bcf on Aug. 24, 13.2 percent below the five-year average, but 113 Bcf more than on July 20, when storage stood at 527 Bcf, which was 16.3 percent below the five-year average. East Region gas storage on Aug. 24 was 106 Bcf less than it was a year ago.

Gas storage in the Midwest Region stood at 667 Bcf on Aug. 24, 18.2 percent below the five-year average and 143 Bcf more than the 524 Bcf in storage on July 20, which was 23.6 percent below the five year average. Aug. 24 gas storage in the Midwest Region was 170 Bcf less than a year ago.

In the Mountain Region, EIA says, gas storage was 157 Bcf on Aug. 24, 16.9 percent below the five-year average and 12 Bcf more than the 145 Bcf stored on July 20, which was 16.7 percent below the five year-average. Gas storage in the Mountain Region was 48 Bcf less than a year ago.

Gas storage in the Pacific Region was 241 Bcf on Aug. 24, 25.4 percent below the five-year average and 16 Bcf less than the 257 Bcf stored on July 20, which was 17.4 percent below the five-year average. Pacific Region gas storage on Aug. 24 was down 59 Bcf from a year ago.

In the South-Central Region, gas storage levels on Aug. 24 were 800 Bcf, 22.3 percent below the five-year average and down 20 Bcf from the 820 Bcf in storage on July 20, which was 20.2 percent below the five-year average. The Aug. 24 gas storage level for the South-Central Region was down 262 Bcf from a year ago.