Oil and Gas Pipelines are Clogged, at Least for Now

A recent ruling by a single federal district judge in Montana has sent a shockwave through the oil and gas industry. By vacating the U.S. Army Corps of Engineers’ (USACE’s) Nationwide Permit (NWP) 12 and then issuing a nationwide injunction against its use for constructing oil and gas pipelines, the judge has effectively halted new construction of those pipelines and sparked a renewed discussion about the propriety of issuing such injunctions.

The ruling arises out of litigation related to the Keystone XL pipeline, an 882-mile pipeline running from Canada to Nebraska. The construction has been mired in controversy from its inception, mainly due to the need for a “presidential permit” to construct a transnational pipeline and criticisms of the sufficiency of the environmental impact statement. The plaintiffs claimed that, in reissuing NWP 12 in 2017, the USACE did not engage in “formal programmatic consultation” with other agencies, as required under the Endangered Species Act (ESA). As a result, any approval of the Keystone XL pipeline under NWP 12 was in violation of law and must be set aside.

General permits, such as NWP 12, are issued by the USACE to streamline the permitting process. NWP 12 applies to the “construction, maintenance, repair, and removal of utility lines and associated facilities” and defines “utility line” broadly to include oil and gas pipelines. Versions of NWP 12 have been in effect since 1977. The USACE specifically consulted with the appropriate federal agencies prior to the reissuance of NWP 12 in 2007 and 2012, but did not in 2017 based on its position that the ESA did not require such consultation because issuing the permit itself has no effect on listed species or critical habitat. Additionally, the permit requires a pre-construction notice from the applicant of any activity that “might affect” a listed species or critical habitat, which prompts an activity-specific determination by the USACE.

In April, the federal judge ruled that the plaintiffs had provided “resounding evidence” that the USACE’s reissuance of NWP 12 may affect listed species and their habitats, and the pre-construction notice essentially delegated the USACE’s duties under the ESA to prospective permittees. Surprisingly, as no party had yet asked for such broad relief, the judge also vacated NWP 12 in its entirety and enjoined the USACE from authorizing any further activities under NWP 12. The judge then modified his initial ruling, limiting it to the construction of new oil and gas pipelines, but allowing nonpipeline construction activities such as electrical utility lines. Several major oil and gas pipeline projects were to be permitted under NWP 12.

The USACE appealed the ruling to the 9th U.S. Circuit Court of Appeals and asked for a stay, which was denied. The USACE has requested a stay from the Supreme Court. If granted, the appeal may proceed, and the USACE may continue to authorize activities under NWP 12. If denied, the use of NWP 12 for authorization of oil and gas pipelines will be prohibited until the appeal is resolved.

Federal judges have issued similar nationwide injunctions in other cases, a practice which has been questioned by several Supreme Court justices in the past few years. The sweeping injunction issued in this case is questionable at best and the modification more so, as exempting nonpipeline activities from the injunction is somewhat illogical if both pipeline and nonpipeline activities may impact listed species and critical habitats. Regardless, until there is a ruling on the stay or a decision on the appeal, the authorization of oil and gas pipelines under NWP 12 is on hold.