"Environmental - Energy Development Projects Face Growing Opposition," Crowell & Moring's Litigation Forecast 2016

January 2016

Contributor: Kyle Parker. Also published in Westlaw Journal's Environmental Report.

Environmental non-governmental organizations (ENGOs) are using every tool at their disposal to delay and block new energy development projects, says Kyle Parker, a partner in Crowell & Moring’s Environment & Natural Resources Group who heads the firm’s Anchorage office.

“From intense permitting and litigation challenges to aggressive lobbying and social media campaigns, ENGOs are forcing companies to defend their initiatives every step of the way. And they are teaming up to share information, resources, and tactics,” says Parker.

An example of the intensifying pressure that energy companies are facing was seen in Royal Dutch Shell Plc’s battle with environmental groups over oil and gas exploration drilling activities off the northwest coast of Alaska. In a near decade-long fight to block its exploration program, Shell had to overcome repeated ENGO regulatory and legal challenges under the Clean Air Act, Oil Pollution Act of 1990, Marine Mammal Protection Act, and the National Environment Policy Act, among others. Opposition was led by an alliance of nine national and Alaska-based environmental groups that included EarthJustice, the Sierra Club, and the Wilderness Society.

On three separate occasions, Shell overcame aggressive ENGO challenges initiated in multiple legal forums and secured required permits for its drilling programs only to have the project stymied by other challenges, such as President Obama’s extension of the Gulf of Mexico drilling moratorium, which was imposed following the BP spill, to the Arctic (2010); unavailability of required equipment (2012); and, most recently—after safely completing its first Chukchi well since the early 1990s—falling oil prices.

The regulatory and legal issues Shell faced in pursuing the Chukchi Sea project underscore the significant risks associated with exploration activities undertaken by oil and gas companies—something the public often discounts. The company’s experience also illustrates the tough challenges 2016 may hold for other energy companies seeking to move forward with pipelines, storage facilities, and other critical infrastructure throughout the United States.

Publicity resulting from challenges to high-profile energy projects—amplified by the reach and immediacy of social media—is proving to be an increasingly effective springboard for ENGO fundraising, Parker adds. “Their ability to coordinate and raise money has put ENGOs in a position where they have the resources to go after many more projects, even ones that may have longstanding environmental safety records.”

At the same time, the recent boom in domestic oil and gas production has enhanced the nation’s ability to meet its domestic energy demands, as well as created the opportunity to transform the U.S. into a leading exporter of finished petroleum products, natural gas liquids, and even crude oil. “The demand for new infrastructure is growing rapidly, but in community after community, these initiatives face fierce opposition,” Parker says. “And the battles aren’t limited to oil and coal. Now groups are fighting to stop gas pipelines and power transmission lines, as well as wind farms and solar arrays.”

Heading into 2016, the energy industry should anticipate increased ENGO opposition to infrastructure development on multiple statutory and regulatory fronts, he notes, including:

  • Permitting and litigation challenges to the construction of new natural gas pipelines and other infrastructure, including gas storage projects, proposed liquefied natural gas export terminals, and new gas-fired electric generation capacity.
  • Actions seeking to compel federal agencies to account for alleged damage from oil and gas development, as well as putting sensitive lands off limits to development.
  • Efforts to expand chemical disclosure rules and enforcement. In Wyoming, ENGOs are using court challenges to compel the state’s oil and gas permitting agency to disclose the chemicals that are injected underground during fracking.
  • Challenges to the development of gas storage facilities and lobbying efforts at the state level seeking to block the construction of such facilities based on potential environmental harm and adverse community impacts.
  • Actions to leverage expanding wildlife protections to prevent or minimize development. As the scope of the Endangered Species Act broadens, ENGOs are likely to push for additional restrictions on energy development.
  • Efforts to expand Clean Water Act jurisdiction. ENGOs may exploit ambiguities in the new definition of “waters of the United States” issued by the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers to bring citizen suits alleging Clean Water Act violations for discharges to areas that newly qualify as “waters of the United States.”

“The common goal is to make it as complicated as possible to move forward with energy development,” says Parker. “A delay is often a victory in the eyes of these groups.”

Clean Power Plan: An Epic Battle Ahead

A battle over the legality of the EPA’s newly issued Clean Power Plan will be fought in the U.S. Court of Appeals for the D.C. Circuit during 2016 and, quite likely, eventually in the U.S. Supreme Court.

Since being published in the Federal Register last October, the plan has emerged as one of the most heavily litigated environmental regulations. As of early December, 28 judicial challenges had been filed in the D.C. Circuit seeking to block the plan. The challenges are led by four groups: utilities and rural electric cooperatives*; coal companies and the National Mining Association; the U.S. Chamber of Commerce and the National Association of Manufacturers; and a coalition of 24 states.

In addition, nine motions have been filed asking the D.C. Circuit to grant a stay to block the standards until litigation is resolved. A ruling on these motions is likely to occur in early January.

Following that ruling, a briefing on the merits of the case is expected to follow in the spring, with the D.C. Circuit making a decision on merits by the end of 2016. Should the case reach the Supreme Court—and many expect it will—the high court may not issue a ruling until 2017 or even 2018.

Critics of the Clean Power Plan call the move an illegal power grab. They argue that the existing Clean Air Act does not authorize a national mandate on greenhouse gases and that the president is overstepping his regulatory authority to impose sweeping changes without new legislation from Congress.

Critics also argue that the Clean Air Act already regulates power plants and prohibits the agency from writing a second rule that would cover a source that’s already regulated. Another argument is the “fence line” dilemma: opponents question EPA’s selection of three carbon-reducing measures to set state targets, because two of the measures—use of natural gas and zero-carbon energy—fall outside the fence line of a power plant and, therefore, beyond the scope of the EPA’s Clean Air Act authority.

The Obama administration described its new plan as “fair and flexible” because it allows states to decide how best to reduce greenhouse gases. In court, the EPA will argue the act’s language is ambiguous and that, because the agency has not regulated greenhouse gases previously, the new standards are lawful.

“Whether you are for or against it, it’s legally risky,” says Parker. “It’s a novel application of a rarely used provision of the act. It comes on the heels of a line of Supreme Court decisions that expressed skepticism about the scope of EPA’s regulatory authority under the Clean Air Act.”

* Crowell & Moring represents the National Rural Electric Cooperative Association in its legal battle against the rule.

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Kyle W. Parker
Partner – Anchorage
Phone: +1 907.227.9564