The Nickel Report

Flaring has the attention of RRC, Producers and Stakeholders

Flaring has the attention of the Texas Railroad Commission (RRC), oil and natural gas companies and stakeholders such as royalty owners, investors and environmental groups. Requests for RRC authorization of flaring has been on the increase in the Permian Basin. As a result, a number of interested parties are looking at regulatory changes. Some interested parties voice concern that a valuable resource is being wasted, others state that the definition of natural gas 'waste' is too limited, still others are concerned about methane emissions and some all of the above. Though the interested parties may not always be aligned, there is a general sense that regulatory amendments are needed.

On June 1, the U.S. Environmental Protection Agency (EPA) Administrator, Andrew Wheeler, signed a final rule seeking to increase predictability for applicants by clarifying the regulations that govern the Clean Water Act (CWA) Section 401 water quality certification process.

Over the past few years, certain states have relied on ambiguities in the Clean Water Act (CWA) Section 401 water quality certification process to block the construction of significant energy infrastructure projects (e.g., oil and gas pipelines, coal export facilities, and liquid natural gas [LNG] terminals) determined by federal agencies to be in the public interest of individual states, regions, and the nation as a whole. Consistent with the cooperative federalism structure of the CWA—and the important role of states in protecting water quality within their borders—Section 401 requires applicants for a federal license or permit anticipated to result in discharges to navigable waters to obtain a certification from the relevant state that the discharge will comply with applicable state water quality standards. States can waive this requirement, and if they do not act within “a reasonable period of time (which shall not exceed one year) after receipt” of the request for the certification, waiver is automatic. 33 U.S.C. § 1341(a).

On Wednesday, April 10, President Trump signed an Executive Order (EO), titled Promoting Energy Infrastructure and Economic Growth, that requires the US Environmental Protection Agency (EPA) and other federal agencies to undertake a series of regulatory actions to clarify the Clean Water Act (CWA) § 401 water quality certification (WQC) process. CWA § 401 provides states with the opportunity to evaluate the potential water quality impacts from discharges of proposed projects by certifying whether the discharge will comply with applicable water quality standards. States can waive this requirement, and if they do not act within “a reasonable period of time (which shall not exceed one year) after receipt” of a request for certification, waiver is automatic. 33 U.S.C. § 1341(a). A handful of states have relied on this process to thwart the development of energy infrastructure projects, either by denying certification due to concerns unrelated to water quality (such as opposition to hydraulic fracturing, climate change concerns, etc.) or by ignoring the statutory time period to reach a determination.

The successful completion of major infrastructure construction projects often depends on the amount of time required for federal agencies to process environmental reviews and make authorization decisions. This is particularly true where multiple federal agencies are involved in the process and the decisions or timeliness of one can influence the decisions or timeliness of another. While numerous administrations have attempted to address multi-agency federal permitting processes in an effort to gain efficiencies, the Trump administration has taken significant steps to ensure that federal agencies work together in ways that will reduce the amount of time required to complete all environmental reviews and issue all required authorizations.

On March 12, 2018, the United States Court of Appeals for the Second Circuit affirmed a Federal Energy Regulatory Commission (FERC) order finding that delays by the New York Department of Environmental Conservation (NYDEC) in reviewing Millennium Pipeline Company’s application for water quality certification constituted waiver of NYDEC’s authority under the Clean Water Act (CWA).

Read the full report on PipelineLaw.com.

Federal agencies that authorize or permit large infrastructure projects, like interstate natural gas pipelines, are often subject to the requirements of the National Environmental Policy Act (NEPA), and environmental organizations frequently rely on NEPA to challenge a project. The D.C. Circuit recently struck down a decision by the Federal Energy Regulatory Commission (FERC) to approve the construction and operation of three interstate natural gas pipelines because the Court found defects in FERC’s NEPA analysis. The court’s decision to vacate FERC’s authorization now threatens to shut down the pipelines, including the Sabal Trail pipeline currently supplying natural gas to newly constructed power plants in Florida.

On August 23, the Department of Energy (DOE) released a study entitled “Staff Report to the Secretary on Energy Markets and Reliability.” This is the so-called “DOE grid study” that Secretary of Energy Rick Perry ordered his chief of staff Brian McCormack to produce in an April 14 memorandum, noting that “Over the last few years...grid experts have expressed concerns about the erosion of critical baseload resources.”

These concerns have been simmering for several years. As the US Environmental Protection Agency was developing the rule that became the Mercury and Air Toxics Standard, the Federal Energy Regulatory Commission (FERC)—prompted by then-Senate Energy and Natural Resources Committee Ranking Republican Lisa Murkowski—held a multi-day meeting to evaluate potential electric reliability impacts from anticipated closings of coal-fired power plants prompted by the rule.