CHAPTER 8 A PRACTICAL GUIDE TO PLANNING AND PERMITTING A PIPELINE

• Jurisdiction: United States

Midstream Oil & Gas from the Upstream Perspective
(Apr 2018)
CHAPTER 8
A PRACTICAL GUIDE TO PLANNING AND PERMITTING A PIPELINE
Maranda S. Compton
Of Counsel
Van Ness Feldman, LLP
Washington, DC
Michael R. Pincus
Partner
Van Ness Feldman, LLP
Washington, DC

[Page 8 - 1]

MARANDA S. COMPTON is Of Counsel with Van Ness Feldman LLP, in Washington, DC. Maranda focuses her practice on all aspects of Native American law and policy. She is experienced in representing both tribal and non-tribal clients in a wide range of federal regulatory, environmental, energy, and natural resources issues, with particular knowledge of the oil and gas industry. For her clients, Maranda provides a deep understanding of the diverse and complex factors involved in disputes, transactions and regulation arising in the tribal context. Applying her intimate knowledge of Indian Country, she helps clients identify winning strategies and find favorable outcomes in commercial transactions involving American Indian tribes; project development on tribal and federal lands; issues of federal, state and tribal regulation; American Indian water rights; and environmental permitting. Specifically, Maranda counsels energy sector companies and tribes in negotiations of mineral and land leases, operating agreements, joint venture agreements, and rights-of-way. She offers natural resource clients a wealth of experience with issues related to tribal jurisdiction, environmental compliance, tribal employment rights and environmental remediation. In the corporate context, Maranda represents tribal and non-tribal businesses and banks in commercial and lending transactions and related areas of federal, state and tribal regulation. When impassible issues arise, Maranda represents tribal and non-tribal clients in litigation in state, federal and tribal courts, as well as alternative dispute resolution. Prior to joining Van Ness Feldman, Maranda worked for a large international law firm in their Denver, Colorado office. Maranda also served as a law clerk to Justice Allison H. Eid of the Supreme Court of Colorado and clerked for the Native American Rights Fund while in law school. Maranda is an enrolled member of the Delaware Tribe of Indians and the Cherokee Nation of Oklahoma. She received her J.D. degree in 2009 from the University of Denver, Sturm College of Law.

MICHAEL R. PINCUS is a Partner with Van Ness Feldman, LLP, in Washington, DC. Michael advises clients on all aspects of the siting and operation of interstate natural gas pipelines and liquefied natural gas (LNG) terminals before the Federal Energy Regulatory Commission (FERC). As an attorney at Van Ness Feldman, and previously at FERC, Michael has in-depth understanding with a wide range of issues under the Natural Gas Act (NGA), including pipeline certificate and abandonment proceedings and LNG terminal and export authorizations. Michael also has experience with natural gas storage facility authorizations, presidential permits, limited jurisdiction certificates, blanket certificates, market-based rate determinations, and rate and tariff issues. Michael counsels clients through every step of FERC's environmental review process for pipeline and LNG projects under the National Environmental Policy Act and with respect to applicable environmental laws, including the Clean Water Act, Clean Air Act, Endangered Species Act, and National Historic Preservation act. Michael also is also practiced in Part I of the Federal Power Act, advising clients on a variety of hydroelectric licensing and compliance matters, including the license applications, transfers, amendments, surrenders, terminations, as well as preliminary permits. From 2007-2012, Michael worked as an attorney-advisor in the Federal Energy Regulatory Commission's Office of the General Counsel, Energy Project Section. He was also named a "Next Generation Lawyer" by the Legal 500 for oil and gas in 2017.

I. INTRODUCTION

Over the course of the past few years, the United States has experienced--and is still currently experiencing--an unprecedented growth in natural gas and oil production and associated infrastructure development. The Department of Energy's Energy Information Administration (EIA), the nation's statistical and analytical agency for tracking the production, flow, and use of energy, estimates total domestic dry natural gas production was approximately 27.0 trillion cubic feet (Tcf) in 2016. This is an increase from 23.4 Tcf in 2005, before the shale gas revolution.¹ The prolific production in the Marcellus and Utica shale regions has led this growth. EIA also reports that in November 2017, monthly U.S. crude oil production grew 1.2 million barrels a day year-over-year and reached the highest level of production in U.S. history, surpassing 10 million barrels a day, a level last reached in 1970.² U.S. crude oil production has increased significantly over the past 10 years, driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing. EIA projects that U.S. crude oil production will continue growing in 2018 and 2019.

The surge in gas and oil production has driven the construction of new natural gas and oil pipelines to carry the increased supplies to market. Permitting and siting these pipelines--whether by a single federal entity, as is the case for interstate natural gas pipelines, or by states and other federal agencies as is the case for oil, natural gas liquids, and natural gas gathering, intrastate, and distribution pipelines--presents considerable challenges in some cases.

This paper addresses jurisdictional issues related to the siting of both natural gas and oil pipelines and provides an overview of applicable regulatory schemes. Parts II, III, and IV each review the applicable permitting scheme and the incremental steps involved in each. Part V identifies additional state and federal permitting requirements that could be implicated depending on the pipelines' route. Lastly, Part VI, highlights how challenges most commonly arise in the permitting process by describing case studies to flesh out practical considerations of pipeline construction, permitting, and operations.

II. OVERVIEW OF PERMITTING REQUIREMENTS

A pipeline is permitted based upon its contents and route. The key distinction exists between pipelines that are permitted by the Federal Energy Regulatory Commission (FERC) and

[Page 8 - 2]

those beyond FERC's construction and operational permitting authority. The scope of FERC's permitting authority is defined by federal statute - namely the Natural Gas Act of 1938 (NGA) and the Interstate Commerce Act of 1887 (ICA). Each of these statutes provide FERC with authority over different areas of pipeline construction and operation. Under the NGA, FERC has broad and principal authority to regulate the siting, permitting, and operation of natural gas pipelines - creating an overarching federal regulatory scheme for the permitting process that is guided by "consumer protection." Under the ICA, FERC maintains very limited authority to regulate crude oil pipelines, instead possessing jurisdiction solely over post-construction rate making and limited operations - what results is a potentially less burdensome, but disjointed permitting scheme of state-by-state regulations and intermittent federal oversight (depending on the route).

For the construction of pipelines not regulated by FERC, state regulations apply (which vary by state). Below is a high level summary of the basic permitting landscapes for key types of pipelines:

Pipeline Activity	Permitting Authority
Oil/NGL	Natural Gas
INTRAstate, gathering, and distribution pipeline: construction, service, and termination/abandonment	Non-FERC	Non-FERC
INTERstate pipeline: construction, service, and termination/abandonment	Non-FERC	FERC
Rates/Tariffs	FERC	FERC
Safety	PHMSA/OPS	PHMSA/OPS

In addition to the general permitting structure above, certain types of routes and/or construction activities implicate specific federal permitting authority, regardless of the product being shipped by the pipeline. Those additional permits come from various federal and state agencies as discussed in this paper in Section V.A below.

III. GAS PIPELINES AND THE FERC PERMITTING SCHEME

FERC, an independent regulatory agency within the U.S. Department of Energy, is responsible for (among other things) regulating interstate natural gas pipelines throughout the U.S., pursuant to the Natural Gas Act of 1938 (NGA).³ In enacting the NGA, Congress declared that the business of transporting natural gas for ultimate distribution to the public is "affected with a public interest" and that federal regulation in matters related to the transportation of natural gas in interstate commerce "is necessary in the public interest."⁴ In the NGA, Congress declared that the

[Page 8 - 3]

need for regulation was partially based on reports of the Federal Trade Commission (FTC), an agency that shares responsibility for enforcement of the antitrust laws with the U.S. Department of Justice.⁵ The FTC reports found that interstate pipelines were natural monopolies that required more governmental regulation than is necessary for businesses that are prevented by market forces from taking unfair advantage of their customers.⁶ In response to the FTC reports, Congress enacted the NGA.

A. FERC Certificate of Public Convenience and Necessity

With the NGA, Congress created a "comprehensive scheme of federal regulation of all wholesales of natural gas in interstate commerce."⁷ The NGA establishes federal regulation of (1) transportation (including storage) and sale for resale of natural gas in interstate commerce; (2) construction, extension, acquisition, and operation of natural gas pipelines facilities; (3) "natural-gas companies;" (4) facilities for import and export; and (5) liquefied natural gas terminals (in certain instances)...