Week Ending May 29, 2020

Ninth Circuit Denies Stay of District Court Ruling on Army Corps NWP 12 Program

This Article Appears as Published in Foster Report No 3301
Ninth Circuit Denies Stay of District Court Ruling on Army Corps NWP 12 Program

The U.S. Court of Appeals for the Ninth Circuit on May 28 denied the request for a stay submitted by the U.S. Army Corps of Engineers on a district court ruling that halted use of the Nationwide Permit 12 (NWP 12) program for new oil and natural gas pipelines.

The brief ruling on the stay request kept the appeal of the ruling on schedule, with initial briefs due in August and reply briefs due in September.

Observers believe the Army Corps and TC Energy, the owner of Keystone XL pipeline, which was the subject of environmental groups’ challenge at the district court, will seek a stay at the U.S. Supreme Court. The federal government and TC Energy likely will seek a stay quickly, given how impactful the district court ruling is for the agency and pipelines, according to at least two analysts.

A stay request might succeed at the Supreme Court, said Christine Tezak, managing director at ClearView Energy Partners. The ability of a single federal district court to suspend a nationwide program may be frowned upon by a majority of the justices at the high court, Tezak said.

The chances for a stay also are aided by the point that the Northern Plains Resource Council and its co-litigants sought an injunction of the NWP 12 program only with regard to Keystone XL, Tezak added.

The environmental groups who challenged the Army Corps permitting program were successful at the U.S. District Court of Montana, which ruled that the Army Corps committed a serious error by failing to consult with the U.S. Fish and Wildlife Service for the NWP 12 program as required by the Endangered Species Act (ESA).

The initial decision from Chief District Judge Brian Morris in the Great Falls division of the federal district court eliminated the use of the NWP 12 program for any project where water crossings are needed, which brought entities out of the woodwork to have the ruling halted or overturned. Besides the Interstate Natural Gas Association of America (INGAA) and other energy groups, the U.S. Chamber of Commerce, a group of state officials and others said the decision would be problematic and needs to be overturned.

Morris then on May 11 scaled back the ruling, while keeping the decision about violating ESA for lack of consultation intact. Morris limited the vacatur of the NWP 12 program so that it only applies to new pipeline construction, and in doing so likely protected the lower court from a stay of the decision by the Ninth Circuit, LawIQ wrote in a note to clients at the time.

The NWP 12 program is used by project developers to avoid seeking individual permits for each waterbody crossing, thus it is often used for lengthy projects such as pipelines and power lines. Shortly after Morris’ initial ruling, the Army Corps suspended the NWP 12 program and indicated it would challenge the ruling, which it did through attorneys at the Department of Justice.

Companies developing new pipelines are now prohibited from using the NWP 12 program, and need to turn to individual permits from the Army Corps for any waterbody crossing to comply with the Clean Water Act. That process will take a long time and be very expensive, causing significant economic and environmental harm, industry groups said in their motions at the Ninth Circuit. Numerous parties argued that the district court was wrong to make such a broad ruling, asserting that Morris went too far.

Along with Tezak, Gary Kruse of LawIQ believes the government and TC Energy will seek a stay from the Supreme Court.

Besides seeking a stay from the high court, a request for an en banc review of the stay ruling at the Ninth Circuit also is possible. The denial of the stay request came from two judges, Barry Silverman and Jacqueline Nguyen. They wrote that “Appellants have not demonstrated a sufficient likelihood of success on the merits and probability of irreparable harm to warrant a stay pending appeal.”

That is troubling for pipeline owners, Kruse said May 29. “That would seem to indicate the two judges who issued the order, at least on first blush, didn’t find the lower court’s decision to be completely off-base,” Kruse said.

A spokesman for INGAA said the group is disappointed by the decision, “which we believe unfairly and arbitrarily targets energy infrastructure projects that move certain types of products. This decision will cost jobs and cause economic harm at a time when the economy is struggling. We are considering our options to resolve this matter.”

Tezak noted that the Ninth Circuit has the heaviest caseload in the country, and even if oral argument is scheduled for some time in the fourth quarter of 2020, it is not clear that a decision would come before the second quarter of 2021.

Besides having pipeline developers seek individual permits, Tezak said the Army Corps could decide to abandon legal appeals and solve the underlying problem of agency consultation to comply with ESA. She declined to predict how long that would take, but assuming the process would take months, it suggests that NWP 12 permits would not be available until the fall, which would delay work on Atlantic Coast Pipeline and Mountain Valley Pipeline, which have been trying to restart construction this summer.

Tezak maintains that the quickest path to having the Army Corps reinstate the NWP 12 program is a stay from the Supreme Court. She pointed to a stay granted in January on a New York District Court ruling, which was approved by a 5-4 margin. That stay came about two weeks after the request was filed, Tezak said.

By Tom Tiernan ttiernan@fosterreport.com

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