Energy and Environment Monitor

Federal Court in Pennsylvania Declines to Require Accumulation of Emissions from Non-Contiguous Compressor Stations for CAA Permitting

A federal court in Pennsylvania has ruled that a series of gas compressors used to move gas from wells to larger transmission lines need not be considered a single “source” of air pollution.  See Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., No. 4: 11-cv-1360.  If the eight compressors had been considered a single “source,” then they would likely have been subjected to stricter controls and permitting requirements for “major sources.” 

Penn Future, a citizen group, sued Ultra Resources under the Clean Air Act, claiming that Ultra had constructed a “major source” of nitrogen oxide (NO_x) emissions without obtaining a New Source Review permit from state authorities.  Ultra had, instead, obtained 8 individual permits from PADEP. 

PADEP’s air program defines a “stationary source” of air pollution as a “facility” or structure that emits a regulated pollutant.  “Facility” is defined as a source of air pollution “located on one or more contiguous or adjacent properties which is owned or operated by the same person under common control.”  Penn Future argued that the compressors were all controlled by Ultra, and that the test for “adjacency” should be one of functional interrelatedness rather than precise physical proximity.  The Court disagreed, ruling that the plain meaning of “adjacent” required that the compressor stations had to be on physically contiguous tracts in order to be adjacent. 

The Court relied in part on a similar decision of the Sixth Circuit in Summit Petroleum v. EPA, 690 F.3d 733 (6th Cir. 2012).  See “Oil and Gas Win Big in Sixth Circuit on Title V Source Determinations,” Jackson Kelly Energy & Environment Monitor, August 15, 2012.  This was significant because the linear distance between the stations was not great. 

Finally, the Court also ruled that Ultra would prevail even if the test of “adjacency” included a criterion for functional interrelatedness.  The Court noted that the stations were all operated independently to bring gas from different well pad groupings to a transmission line and were not connected to one another.

This article was authored by Robert McLusky, Jackson Kelly PLLC.  For more information on the author, click here.

Court of Appeals Reverses District Court on NEPA Challenge

     Despite the fact that National Environmental Policy Act (“NEPA”) is almost 40 years old, some federal district courts still confuse their role in reviewing challenges to agency actions.  NEPA was enacted in 1969 in order to raise the awareness of federal agencies regarding the environmental impacts of major federal actions, such as issuance of a permit.  Generally, the Act requires agencies to conduct an Environmental Assessment (“EA”) to determine if a proposed federal action will have a significant impact.  If not, the agency issues a Findings of No Significant Impact (“FONSI”) to support the major federal action.  If the agency finds that there will be a significant impact, it is required by NEPA to prepare an Environmental Impact Statements (“EIS”) which is a detailed examination of the environmental impact of the agency’s proposed action.

     Despite the widespread recognition that NEPA is a procedural statute and not designed to yield any particular substantive result, some district courts still view NEPA challenges as inviting a review of the merits of the agency decision.  An example is presented in Sierra Club v. Van Antwerp, _____ F.3d _____, 2008 WL 1991446 (11^th Cir. May 9, 2008).  In that case the Army Corps of Engineers granted a controversial permit for limestone mines located in south Florida’s Lake Belt which comprises 60,000 acres of wetlands.  The decision was issued after the preparation of an EIS (and a Supplemental EIS) which recognized the project’s negative environmental impacts.  The district court essentially concluded that the permits were to be vacated and issued what amounted to an injunction against the mining operations.  Although the Court of Appeals commended the district court for its thoroughness, it noted that the district court remanded the permits to the Corps because of the cumulative effect of the Corps’ errors, rather than procedural flaws in its NEPA review.

     The Court of Appeals cited several passages from the district court opinion indicating that the district court had predetermined the outcome and, in effect, focused on the merits of the Corps’ decision rather than its compliance with the procedural standards of NEPA.  The Court of Appeals concluded “no matter what evidence supported that conclusion, the [district] court would have banned mining because of its own conclusion that mining in the Lake Belt is a bad thing”.  Sierra Club v. Van Antwerp, 2008 WL 1991446 at 7. 

     The Court of Appeals made it clear that the district court had violated longstanding principles governing challenges under NEPA including the requirement to give substantial deference to agency decisions.  The Court held that requirement of deference includes not only the decision itself but questions such as what evidence to find credible, whether to issue a FONSI or EIS, how much discussion to include on each topic and how much data is necessary to fully address each issue.  The Court noted that, since NEPA is procedural, it would not violate NEPA if the EIS noted that granting the permits would result in the permanent irreversible destruction of the entire Florida Everglades, but the Corps decided that economic benefits outweighed that negative environmental impact.

     In conclusion, the Court stated “NEPA can never provide grounds for the court to direct a federal agency’s substantive decision”.  Id at 8.

     This article was authored by James R. Snyder, Jackson Kelly PLLC.  For more information on the author see here.

U.S. Supreme Court Upholds Delaware’s Right to Block LNG Facility in New Jersey

     The United States Supreme Court has held that the State of Delaware, acting within its sovereign capacity deny a permit for LNG terminal built on the New Jersey side of the Delaware River but protruding into a portion of the river that constitutes Delaware’s territory.

     In one of its rare decisions arising from its original jurisdiction, the Supreme Court decided on March 31, that a proposed LNG terminal that would be constructed by a subsidiary of British Petroleum could not be constructed without a permit issued by the State of Delaware.  The case involved an unusual and historical conflict between the two states over a portion of the Delaware River within a 12 mile radius of the City of New Castle, Delaware.  For the third time the Supreme Court has adjudicated the sovereign rights of both states in that portion of the Delaware River.  The first case, New Jersey v. Delaware, 205 U.S. 550 (1907), left unsettled the boundary question but withdrew a case filed by Delaware that pertained to fishing rights which was subsequently resolved by a 1905 compact between the two states.  The second action, New Jersey v. Delaware, 291 U.S. 361(1934), finally set the Delaware boundary on the eastern side of the Delaware River at the low water mark of the river on the New Jersey shore.  The 1934 decision did not, however, disturb a provision of a 1905 compact, “to exercise riparian jurisdiction of every kind and nature, and to make grants, leases and conveyances of riparian lands and rights under the laws of the respective state.”  It is this provision of the 1905 compact that came into play in the permitting of BP’s LNG facility.

     BP sought a permit from the State of New Jersey to construct an LNG facility that would include a gasification plant, storage tanks and other structures on shore in New Jersey, and a pier and related structures extending approximately 2,000 ft. from the New Jersey shore.  The actual unloading platform in the Delaware River would comprise 6,000 sq. ft., affect approximately 29 acres of riverbed within Delaware’s territory and require the dredging 1.24 million cubic yards of river bottom.  New Jersey granted the necessary permit to construct the onshore facilities and the off-shore pier.  Delaware, acting pursuant to the Delaware Coastal Zone Act as approved by the U.S. Department of Commerce under its authority granted by the federal Coastal Zone Management Act, denied its permit.  Under the Delaware statute heavy industry uses of any kind as well as offshore gas, liquid and solid bulk product transfer facilities are expressly prohibited. 

     New Jersey claimed the right to grant its permit and to act exclusively without regard to Delaware’s ownership of the riverbed beyond the low water mark of the river.  Its claim was based in part upon the 2003 decision of the U.S. Supreme Court in Virginia v. Maryland, 540 U.S. 56 (2003).  This decision involved the right of a municipal water authority to build a water intake structure in the Potomac River on the Virginia side that extended beyond Virginia boundary at the low water mark into Maryland territory.  Maryland had challenged this construction in the absence of the water company securing a separate permit from a Maryland agency.  The Supreme Court decided that both a 1785 compact between the two states and an 1877 decision of the Court gave Virginia citizens the right to use the Potomac—including the right to wharf out from the Virginia side or to otherwise construct facilities into the Maryland territory—without the requirement of securing permission from Maryland to do so.  In the present case, the Court rejected New Jersey’s claim that the 2003 decision governed.  It found, instead, that the compact and 1877 court decision was unique in its language and not directly applicable to the present controversy between Delaware and New Jersey. 

     The present case is significant apart from its historical curiosity for two reasons.  The first is that it if demonstrates the continued difficulty in securing permits for large scale energy products such as LNG terminals.  This is particularly true in situations in which more than one state may assert a jurisdictional claim over the territory affected by the facility. 

     A second reason, and one applicable even a non-coastal state, such as West Virginia, is the importance that a “course of conduct” can have a decision involving riparian rights in interstate waters.  Apart from the specific language of the 1905 compact and the 1934 decision that the Supreme Court found persuasive, it also reviewed the historical conduct of parties in New Jersey seeking permission from Delaware authorities to undertake construction projects in the Delaware River.  Among the course of conduct was a 1980 representation made by the State of New Jersey when it was seeking authority from the Commerce Department for its Coastal Zone Management Program.  It that letter, the New Jersey official impliedly acknowledged the joint authority of both Delaware and New Jersey over the portion of the Delaware River that was the subject of the current case.  The special master who prepared the recommended findings for the Supreme Court in this case also found at least three other instances in which construction projects undertaken in New Jersey had sought approval from Delaware authorities.

     This course of conduct should serve as a reminder to municipalities and individuals in the Eastern Panhandle that withdraw water from the Potomac River.  In light of the decision in Virginia v. Maryland, it is not necessary to seek permission Maryland authorities to make use of the Potomac River.  Any previous authorizations granted by the agencies of Maryland are not binding and should be repudiated.  An ongoing course of conduct by municipalities or persons in this regard could be utilized in a subsequent case by Maryland agencies should a conflict arise over a use of water withdrawals in the Potomac from West Virginia counties.

     This article was authored by Blair M. Gardner, Jackson Kelly PLLC. For more information on the author see here.

IGCC Plant Approved as Clean Coal Technology

     The March 6, 2008 Order of the West Virginia Public Service Commission approving the 629 megawatt IGCC unit of Appalachian Power Company (APCo) offers significant insight into the future of coal as the fuel of choice for electric power generation in West Virginia.  In addition to granting the certificate of convenience and necessity for the IGCC unit, the Commission also granted a special rate recovery for APCo conditioned upon APCo’s commitment to use coal produced in West Virginia for no less than 75% of the plant’s fuel requirements.  Among the more significant findings and conclusions of the Order are the following: 

1.         As compared with other types of generation facilities, APCo’s preference for IGCC base load technology is reasonable because natural gas-fired facilities meet mostly “peak” or “intermediate” needs;  IGCC technology better meets existing environmental requirements than coal-fired plants;  the plant will run more efficiently and at a cost on par with or below that of natural gas-fired facilities;  and when the impacts of the environmental compliance are considered, the overall estimated cost of electricity from an IGCC plant is the least-cost option over the life of a base load plant.  Therefore, the Commission concludes that the IGCC technology has advantages, both environmental and economic, especially under CO₂ control scenarios, making it the logical choice for new base load generation for the project. 

2.         In 1990, the West Virginia Legislature adopted W. Va. Code §24-2-1g, generally referred to as the Clean Coal Statute which grants the Commission the authority to make rate-making allowances for investment in clean coal and clean air technologies following a determination that to do so was in the public interest.  Although there have been references to the Clean Coal Statute and other Commission proceedings, the request to establish incentive rate-making allowances for this project under the Clean Coal Statute is a matter of first impression.   

3.         Because IGCC technology has the proven capability to capture CO₂ and because IGCC technology will result in lower emissions that conventional coal plants, it is appropriate to consider the plant as a clean coal facility within the meaning of W. Va. Code §24-2-1g.  Furthermore, APCo must use West Virginia coal for at least 75% of the plants fuel requirement. 

4.       There are significant public concerns regarding climate change and consideration legislative activity in Congress.  Accordingly, the Commission concludes that federal climate change laws are likely to be forthcoming to require CO₂ emission reductions in the electric generating sector, although the exact timing and extent of those reductions are not known. 

5.       Because modifications to carbon capture technology are being developed that may improve the technology and reduce its price, and because national environmental requirements have not yet been enacted, it is reasonable for APCo to wait to choose how to achieve compliance with forthcoming environmental requirements regarding carbon emissions. 

6.       Because bituminous coal has efficiency and cost advantages, particularly when considering potential CO₂ capture and control possibilities related to IGCC technology, and because the state’s coal and transportation resources are so abundant, it is reasonable for APCo to consider adding generation capacity that is fueled with coal. 

This article was authored by David M. Flannery, Jackson Kelly PLLC. For more information on the author see here.