Requiem for an LNG Project

Posted on August 29, 2016 by Rick Glick

Perhaps not many, at least not in Oregon, would mourn the failure of a liquefied natural gas terminal and associated gas pipeline project.  As counsel for over a decade to the Oregon LNG project at the mouth of the Columbia River, I mourn less for the failure of the project than the process.  I am confident that if the standards-based approval process had been allowed to play out, we would have satisfied all federal and state permitting criteria.  But, alas, we never got that opportunity.

The Natural Gas Act, as amended in 2005, confers upon the Federal Energy Regulatory Commission exclusive authority over the siting of LNG export terminals and interstate pipelines.  The NGA, however, preserves authority delegated to the states by the Clean Water Act, Clean Air Act, and Coastal Zone Management Act.  The problem is that Oregon law requires state agencies to first receive affirmation from local governments of compatibility with land use regulations before issuing a state permit. 

Other states have similar laws and have attempted to use them to halt or impede LNG projects, only to have  Courts of Appeals for the D.C., First and Fourth Circuits reject the incorporation of local land use planning into state processes as preempted by the NGA.  But the conflict with state law sets up an unnecessary confrontation, adding expense and delay that can prove fatal to a project under development, as it was here.

The Oregon LNG project, aware of the federal preemption argument, nonetheless filed land use applications at the City of Warrenton for the terminal, and at Clatsop County for the pipeline.  The project filed the applications to demonstrate a desire to comply with all applicable regulations, confident in its ability to do so.  In fact, an independent hearings officer, following an evidentiary hearing, concluded the project met all County criteria.  Following approval by the County Commission, and, while an appeal by opponents was pending, an election occurred.  An anti-LNG slate was elected to the Board of Commissioners, and the newly constituted County Commission promptly reversed course.  And there’s the rub: the criteria had not changed, only the elected officials passing judgment.  Thus, local land use compatibility statements were not to be had, rendering the state permitting process impossible to complete.

This is not a screed against the multitude of state or federal agencies reviewing our various, complex permit applications.  To be sure, the agencies felt the political pressure brought by opponents, which caused them to be cautious and deliberate (perhaps too deliberate) and thus slow moving.  Nor is this to suggest that local governments and sentiment should have no role in siting energy projects that affect their communities.  Of course they should.

The real problem, however, is the total deference given under Oregon law to local land use regulations, even when the local land use decision is so blatantly political, thus creating a legal basis for NIMBY-ism.  In our case, this deference essentially gave veto authority to the Clatsop County Board of Commissioners, which cannot have been the intent of Congress or the state legislature.  Otherwise, how would any infrastructure project of national importance ever be constructed—highways, power plants, transmission lines, fiber optic cables, telephone lines, railroads, bridges, or dams—if locals could block it through a land use resolution?

Biting Less Than They Can Chew

Posted on June 26, 2014 by Kenneth Warren

The National Environmental Policy Act (NEPA) requires federal agencies to evaluate the environmental effects of their proposed actions.  When a proposed action may cause significant environmental impacts, NEPA requires the agency to prepare an environmental impact statement that evaluates alternatives including measures to avoid or mitigate impacts.  The agency may not divide a single project into separate bites and find that each in isolation would not have a significant environmental impact.  Instead, regulations issued by the Council on Environmental Quality require the agency’s environmental review to encompass connected actions and similar actions.

In Delaware Riverkeeper Network v. FERC, Texas Eastern Pipeline Company sought certificates of public convenience from the Federal Energy Regulatory Commission (FERC) authorizing construction and operation of the Northeast Upgrade Project, one of four projects to improve the Eastern Leg of a natural gas pipeline known as the 300 Line.  FERC evaluated the Northeast Upgrade project separately from the others on the ground that each project was designed to provide natural gas to different customers pursuant to different contracts within different time frames.  FERC concluded that the potential environmental impacts were not significant and terminated its evaluation by issuing a finding of no significant impact.  Environmental organizations petitioned for review of the FERC action on the ground that the four pipeline projects were interrelated and cumulatively would, in their view, clear hundreds of forest acres, fragment habitat and adversely impact wetlands and groundwater in significant ways.  

On review, the Court of Appeals for the District of Columbia held that FERC’s segmented environmental review failed to meet NEPA’s requirements.  The Court reasoned that all four projects involved the construction of a single, physically interdependent pipeline, were undertaken in a close time frame and were financially interdependent.  No customer was a customer of a single pipeline segment and no logical justification existed for the choice of where one project ended and the next began.  Accordingly, the Court remanded the case to FERC to review the pipeline project as a whole, including its cumulative impacts.

FERC now faces the daunting task of determining how to implement the Court’s holding in other situations.  To be sure, in many cases FERC will be able to readily ascertain whether projects involving a single pipeline are physically, financially and temporally interdependent.  But in some areas of the country, transmission pipelines are being installed contemporaneously with natural gas wells, gathering lines physically connecting these wells to the transmission pipelines, and supporting roads, impoundments and other infrastructure.  Whether these arguably related projects are sufficiently connected or similar to trigger joint NEPA review may turn on whether they involve different ownership, distinct functions, separate financing and customers and clear physical divisions.  Resolving these questions may be no easy task, and even then does not necessarily determine whether a full environmental impact statement must be prepared.  When performing an environmental assessment of multiple projects together, FERC may still conclude that the environmental effects are insignificant.  With so many steps in the analysis that may be controversial, a new wave of NEPA challenges is likely on the horizon.

One postscript for practitioners before the D.C. Circuit.  In a punchy concurring opinion, Judge Silberman expressed his dismay at the submission of a brief “laden with obscure acronyms.”  For those of us in the environmental bar for whom use of acronyms has become second nature, beware.