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April 16, 2020

New Permitting Developments for Linear Infrastructure Projects Under NWP 12 and CWA Section 401

Federal Court Strikes Down NWP 12

Opposition to the Keystone XL project is not new. However, a new ruling from a federal district court in Montana not only created a new obstacle for that project but called into question Nationwide Permit (NWP) 12, a longstanding nationwide permit that allows pipelines, cables, and other utility lines to cross federally protected waters without having to undergo a lengthy review for each crossing.

In his April 15 order, Judge Brian Morris found that the Army Corps of Engineers (USACE) violated the Endangered Species Act (ESA) by failing to initiate consultation under Section 7(a)(2) when it reissued NWP 12 in 2017. In doing so, the court determined the need for the USACE to consult on the issuance of NWP 12 at the programmatic level was not obviated by either General Condition 18 (providing that a NWP does not authorize any activity that is likely to jeopardize the continued existence of a listed species or to destroy or adversely modify its critical habitat) or the need for preconstruction notice requiring ESA consultation if a proposed activity “might” affect any listed species or critical habitat.

Therefore, the court remanded NWP 12 to the USACE “to initiate consultation under ESA Section 7(a)(2) to ensure that the discharge activities authorized under NWP 12 comply with the ESA.” It also vacated NWP 12 until the required consultation is completed and enjoined the USACE from authorizing any dredge or fill activities under NWP 12 pending completion of the consultation process and compliance with all environmental statutes and regulations.

Notably, Keystone’s challengers also argued the USACE issuance of NWP 12 violated the National Environmental Policy Act (NEPA) and the Clean Water Act (CWA). Based on its expectation that the USACE’s ESA Section 7(a)(2) consultation will inform the USACE’s NEPA and CWA analysis, including perhaps the “prepar[ation of] an EIS because NWP 12 represents a major federal action that significantly affects the quality of the human environment,” the court denied those claims without prejudice.

An appeal is also likely, which, at least in the near term, could stay the court’s decision. In the meantime, while the court’s decision is immediately binding in Montana, the impact of the court’s decision nationwide remains to be seen. At the very least, project schedules for ongoing and other planned projects could be at risk. Moreover, regardless of its binding nature outside of Montana, expect project opponents to rely on Judge Morris’ order for similar outcomes elsewhere.

EPA Sends Proposed Clean Water Act Section 401 Regulations to OMB for Interagency Review on April 7

On April 10, 2019, President Trump signed the “Promoting Energy Infrastructure and Economic Growth” executive order that set forth the administration’s policy statements with respect to efficient permitting processes, regulations that reflect best practices, timely action on infrastructure projects, and regulatory certainty in developing new energy infrastructure. The order required the US Environmental Protection Agency (EPA) to review existing regulations and guidance related to water quality certifications under Section 401 of the CWA and to confirm they were consistent with the policies set forth in the executive order. The order established a swift timeline—May 2020—for the EPA to finalize those regulations. The EPA’s April 7 submission of its regulation to the US Office of Management and Budget for final review signals that the regulations will be released soon in accordance with that timeline.

The CWA requires that projects seeking a federal permit or license that may result in a discharge provide the federal agency with certification stating the proposed activity will not harm the water quality of federally regulated waters within the borders of the state where the project will be sited. The most contentious provision of Section 401 has been the requirement that a certifying agency (typically a state) must act on a certification request within a “reasonable period of time, which shall not exceed one year.” For certifying agencies that fail to act within such a timeframe, they are deemed to have waived their certifying authority. As such, issues have arisen regarding when the one-year period commences as well as whether it can be extended by a certifying authority and the applicant.

In accordance with the executive order, on August 9, 2019, the EPA administrator signed a notice of proposed rulemaking and released a pre-publication version of the proposed revisions. The proposed rule, which updated and clarified requirements for water quality certifications consistent with the executive order, was subsequently published in the Federal Register on August 22, 2019. The public comment period ended on October 21, 2019.

Among many key changes, EPA’s proposed rulemaking:

  1. Details what a “reasonable period of time” is, that it is to be determined by the federal agency and the relevant factors to be considered in setting the reasonable period of time
  2. Requires a project sponsor to notify the federal agency in writing of a request for certification, which, in turn, triggers the requirement of the federal agency to notify the certifying agency of the applicable reasonable period of time and the date on which a waiver will be deemed to have occurred
  3. Permits a certifying agency to extend the applicable reasonable period of time in writing
  4. Citing the decision in the Hoopa Valley Tribe matter, establishes one year as the “absolute outer bound” for an agency to act following receipt of a certification request
  5. Makes it clear that a certifying authority is not authorized to request the applicant to withdraw a certification request or to take any other action for the purpose of modifying or restarting the established reasonable period of time
  6. Clarifies the meaning of a failure or refusal to act and when a waiver has occurred
  7. States that the federal agency must provide written notice of a waiver to the certifying authority and project sponsor

Once finalized, it is expected that various states and environmental groups will challenge the EPA’s rulemaking as a usurpation of state authority.

If you have any questions regarding the content of this alert, please contact Yvonne Hennessey, chair of the Environmental and Lobbying & Election Law Compliance Practice Areas and co-team leader of the Oil & Gas, Linear Infrastructure, and Energy Markets Teams, at yhennessey@barclaydamon.com.

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