Perfect Compromise. Nobody’s Happy.

June 11, 2014 § Leave a comment

Colorado Governor John Hickenlooper’s compromise seems to have fueled the fire in the ongoing debate about fracking regulation, and more broadly about local versus state control. As noted in earlier posts, other groups including homebuilders join the oil and gas industry in its opposition to these measures.

Currently, 11 potential ballot measures are competing for interest-group money and Colorado voters. While some groups are looking to broadly ban fracking and other activities deemed unacceptable at the local government level, most are looking for more specific limitations on drilling.   A central issue in the measures is the distance permitted between drilling rigs and homes.  The state’s current regulations require a 500-foot buffer. Four of the proposals would increase setbacks for drilling rigs by distances from 1,500 feet to a half-mile–proposals that Hickenlooper recognizes would put the state’s economy at risk by eliminating almost 60% of drilling locations. Colorado has enjoyed an earlier economic recovery than many states in the union in large part because of the oil and gas industry.

Hickenlooper’s compromise attempts to find a middle ground but has effectively made no one happy. Although environmental groups argue the compromise proposal does not go far enough, his bill would permit local governments to enact health and safety standards more stringent than state rules, authorize local inspections of oil and gas sites, and authorize negotiation with operators for setbacks greater than 500 feet. While the “compromise” would allow drilling to continue, the measure imposes a level of uncertainty that could be untenable to companies as various measures imposed at the local level would likely trigger costly delays and legal appeals for companies.

DC Court of Appeals Ruling Against FERC: Process, Not Substance

June 8, 2014 § Leave a comment

Much ado being made in the press by environmental groups about a “big win” from the DC Court of Appeals related to a Tennessee Gas pipeline project, but at the end of the day it’s purely about process and not substance. The $500 million project was complete long before the ruling came down, and gas continues to flow through the pipeline to the high demand markets in the Northeast.

So what’s all the chatter about?

On Friday, June 6, 2014, the DC Circuit Court of Appeals found deficiencies in the process that the US Federal Energy Regulatory Commission (FERC) used for its environmental assessment (EA) of Tennessee Gas Pipeline’s Northeast Project. The ruling was based on the FERC considering individual upgrade projects separately rather than assessing the cumulative environmental impact.

The Court found that FERC impermissibly segmented the environmental review in violation of the National Environmental Policy Act (NEPA) and remanded the case back to the FERC for further consideration. Commission attorneys had argued that its 200-page environmental assessment of the 40-mile section of pipeline through New Jersey called the “Northeast Upgrade” project analyzed all of the pipeline’s cumulative impacts.

Make no mistake, the Court did not find that the project, even taken as a whole, had impermissibly impacted the environment. The ruling was purely based on the process used by the FERC, and not on the merits of this pipeline project or any future projects.

Kinder Morgan issued a statement that,”[w]hether the completed expansion projects are considered individually, as FERC did, or cumulatively, we do not expect any change in the ultimate conclusion that there was no significant environmental impact resulting from the projects.”

Background

The FERC completed an environmental assessment in November 2011 t and issued its recommendation of a finding of no significant impact.  In  May 2012, FERC issued a certificate of public convenience and necessity to Tennessee for the Northeast Project, authorizing construction of five pipeline loop segments totaling more than 40 miles of 30-inch-diameter pipe in Pennsylvania and New Jersey. The project also included adding 22,310 horsepower of compression at two existing compressor stations in Pennsylvania.The project was placed into service in November, adding 636,000 Dt/d of capacity to Tennessee’s 300 Line System.The Delaware Riverkeeper Network, New Jersey Highlands Coalition and Sierra Club’s New Jersey chapter petitioned the court to review FERC’s order approving the project.

The Legal Tussle

The Delaware Riverkeeper Network, the New Jersey Highlands Coalition and the New Jersey Sierra Club argued the decision-making process did not take into account other natural-gas expansion projects seeking approval at the same time in New Jersey.

FERC argued that each project was a stand-alone project that would provide gas to different customers during different time frames.

The Court ruled that given the interrelatedness of the projects as well as their temporal overlap, the FERC was obliged to consider the other three Tennessee Gas pipeline projects when it conducted its NEPA review of the Northeast Project. The Court also held that the NEPA review of the Northeast Project violated the segmentation rule, which was upheld by the Supreme Court in 1976, as an agency is prohibited from dividing “connected, cumulative, or similar federal actions into separate projects and thereby [failing] to address the true scope and impact of the activities that should be under consideration.”

What the Ruling Did Not Say

Make no mistake, the Court did not reach a finding that the project, even taken as a whole, had impermissibly impacted the environment. The ruling was purely based on the process used by the FERC, and not on the merits of this pipeline project or any future projects.

Kinder Morgan issued a statement that,”[w]hether the completed expansion projects are considered individually, as FERC did, or cumulatively, we do not expect any change in the ultimate conclusion that there was no significant environmental impact resulting from the projects.”

So Now What?

Business as usual. Make no mistake; gas will continue to flow through the pipeline regardless of this ruling.  FERC will consider the project as a whole, and ultimately, their assessment of environmental impact may not change. Environmental groups are pushing for the imposition of new requirements to mitigate impacts, but that will not happen without a finding requiring such measures.

What will change as a result of this ruling is the NEPA submissions in advance of new projects will be required to include related projects and cumulative impact studies—not a difficult task given the considerable work performed to comply with NEPA before every pipeline project. Ultimately this ruling is about process and not a significant substantive change.

Victory for Oil and Gas–Jindal Signs SB 469 into Law

June 6, 2014 § Leave a comment

Louisiana Governor, Bobby Jindal signed SB 469 into law this morning, June 6, 2014. As previously noted in a previous post, this legislation will end a lawsuit again 97 oil companies for alleged environmental damage.  “This bill will help stop frivolous lawsuits and create a more fair and predictable legal environment, and I am proud to sign it into law,” Jindal stated. “It further improves Louisiana’s legal environment by reducing unnecessary claims that burden businesses so that we can bring even more jobs to our state.” SLFPA-E is expected to challenge the measure in court. Stay posted for further updates.

Colorado Initiative 75: It’s not just about drilling.

May 24, 2014 § 2 Comments

A Colorado Supreme Court ruling gives a green-light for petitions to circulate on Initiative 75. If approved by voters in November, the initiative would enable cities and counties to set their own rules for oil-and-gas drilling, regardless of existing state and federal laws.

Recall that in February, Colorado health and environment officials already approved new rules to limit air pollution from oil and gas drilling in the state, including a plan to detect and reduce methane emissions. 

Initiative 75, as currently written, would reach beyond oil and gas companies and give local governments the right to prohibit many other business.  This could create interesting bedfellows as the political opposition to the controversial measure grows.

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