The High Cost of Singling Out Pipelines in NWP 12 Ruling

Mark Green
Posted June 24, 2020

As the U.S. Supreme Court weighs a request to delay a lower-court decision to exclude “construction of new oil and natural gas pipelines” from a key federal permitting program, it’s clear the district court’s ruling could seriously harm projects that are critical to strengthening U.S. energy infrastructure.

As many as 75 pipelines in various stages of development could be impacted after last month’s ruling by a federal judge in Montana, who said the Nationwide Permit 12 program (NWP 12) can’t be used for constructing new natural gas and oil pipelines – singling them out among other utility projects that remain NWP 12 eligible. One issue with the district court ruling is that it doesn’t define “pipeline” or what may be covered. The 75 pipelines referred to here include pipelines to deliver natural gas, crude oil and natural gas liquids.

The affected capital investment can be measured in the billions of dollars. Publicly available estimates for the capital costs of just 11 of the 75 projects could exceed $32 billion, which could support nearly 480,000 direct, indirect and induced jobs.

Unfortunately, the impacts could go further. While the Montana case is appealed, projects are in limbo. The industry coalition has appealed the district court’s decision, but the process could take more than a year, which could add to a project’s cost.

Entire projects and the jobs that go with their construction could be at risk, as companies assess the impacts of delay and uncertainty.

Prior to the Montana court decision, NWP 12 provided an efficient mechanism for balancing environmental protection with streamlining projects that have limited environmental impacts. In fact, according to the U.S. Army Corps of Engineers’ estimates, only about 10% of all NWP 12 projects have needed additional protections for endangered species, and these already are included in the NWP 12 program.

The bottom line is that with the Montana ruling, 90% of projects that could put Americans back to work and improve energy transportation are being needlessly delayed.

That’s why API and others in the coalition – the American Gas Association, the Association of Oil Pipelines, the Interstate Natural Gas Association of America and the National Rural Electric Cooperative Association – are encouraging the high court to stay the Montana judge’s ruling while the underlying case is appealed. API’s Paul Afonso, senior vice president and chief legal officer:

“This ruling could delay the construction of over 70 pipelines this year alone, disrupting half a million well-paying, middle-class sustaining jobs and costing American businesses … It is completely inappropriate that the district court has singled out natural gas and oil companies to cut out of a long- established regulatory process, when infrastructure and affordable energy are more important than ever to getting people back to work and the economy moving again.”

The industry coalition’s brief, filed with the Supreme Court (the requested stay was made by the U.S. solicitor general), calls the Montana judge’s ruling a “decision by judicial ambush” in that it went beyond what the plaintiffs in the case sought. The coalition says Montana judge effectively took over the role of the Corps of Engineers and unilaterally rewrote NWP 12, without notice and public comment, while providing little guidance on how to apply it. The coalition brief states:

The harms the order will cause are tremendous. Requiring new, yet-to-be constructed oil and gas pipelines to go through individual Clean Water Act (“CWA”) permitting will have wide-reaching and significant economic and environmental harms.

Other key points in the industry coalition’s brief:

• NWP 12 was established in 1977 as Congress recognized the importance of streamlined permitting. Congress was concerned that lengthy reviews of relatively minor activities could undermine environmental protection by diverting the Corps from more significant activities.
• Over the history of the NWP 12 program, industry coalition members have relied on NWP 12 for timely authorization of activities that have minimal environmental effects but are essential to the safe, reliable and affordable delivery of energy to U.S. consumers.
• The Montana ruling left a number of questions, including the definition of routine maintenance, inspection and repairs on existing NWP 12 projects, and whether those could also be delayed – potentially raising costs and risking environmental impact.

Some examples help illustrate potential problems arising from the Montana case. Some coalition members are replacing older cast iron and unprotected steel pipe with modern pipe to improve safety and reliability – work that could be delayed.

Another member currently is voluntarily improving its existing pipelines, including replacing sections to enhance safety and long-term reliability, especially in environmentally sensitive areas. That’s work that should go forward without unnecessary delay.

Still other members planned to rely on NWP 12 to build natural gas supply pipelines of modern, natural gas-fueled electricity generating plants already under construction. One of them would replace a coal-burning plant, significantly reducing greenhouse gas emissions.

Again, it’s clear the Montana ruling is potentially very costly – in dollars and in environmental protection. As the industry coalition filing says:

The loss of streamlined NWP 12 authorization will impair the ability of Coalition members to provide safe and reliable energy, which is essential to our security, public health and safety, economic viability, and way of life.