Washington Watch: Trump’s Early Actions Impact on Pipeliners

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Since his inauguration on Jan. 20, President Donald Trump has taken executive actions aimed at streamlining the number of regulations and regulators, expediting regulatory review for infrastructure improvements and, somewhat ironically, resurrecting two oil pipelines that the Obama administration’s regulatory review process had strangled — the Dakota Access Pipeline (DAPL) and Keystone XL pipeline (KXL). To do this, the president used a combination of Executive Orders and Presidential Memoranda.

An Executive Order is a legally binding mandate from the president to the federal agency heads. It instructs the agencies how to interpret or administer the law and is published in the Federal Register, a daily, official journal that publishes changes to government rules and regulations. A Presidential Memorandum is similar to an Executive Order, but is not required to be published in the Federal Register and, as such, is a little more difficult to track.

This month’s column examines a few of these executive actions that will undoubtedly impact the construction, operation and maintenance of oil and
gas pipelines.

Fewer Regulations, Regulators

The nascent Trump administration took several steps to limit the effectiveness of “late night” regulations developed by the prior administration, as well as reduce the number of regulators and regulations. First, on Jan. 20, the Chief of Staff, Reince Priebus issued a memorandum asking each of the heads of executive departments and agencies to 1.) send no regulation to the Office of the Federal Register (OFR), part of the National Archives and Records Administration, until a department or agency head appointed or designated by the president after noon on Jan. 20 reviews and approves the regulation; 2.) withdraw immediately any regulations that have been sent to the OFR, but not yet published in the Federal Register; and 3.) temporarily postpone for 60 days the effective date of regulations that have been published in the Federal Register, but have not yet taken effect. The Priebus memorandum was not groundbreaking. Rahm Emmanuel and Andrew Card published similar memoranda at the start of the Barrack Obama and George W. Bush administrations. But that’s where the similarity with prior administrations ends.

On Jan. 23, Trump issued a memorandum ordering an “across the board” hiring freeze, while the Director of the Office of Management and Budget develops and implements a long-term plan to reduce the size of the Federal Government’s workforce through attrition. A week later, the President issued an Executive Order aimed at “Reducing Regulation and Controlling Regulatory Costs.” The order required that, whenever an agency proposes a new regulation, it must identify two existing regulations to be repealed. Further, for fiscal year 2017, which has been in progress since October 2016, the total incremental cost of all new regulations for each agency must be no greater than zero. In short, the goal is less red tape and lower costs.

A month later, on Feb. 24, the president issued an Executive Order to further reduce the regulatory burden on the American people. The order requires the head of each agency to appoint a Regulatory Reform Task Force, chaired by a Regulatory Reform Officer, to evaluate existing regulations and make recommendations to the agency head regarding their repeal, replacement, or modification. The task force is required to report progress to the agency head with 90 days of the date of the order.

All told, Trump has begun the slow, deliberate process of changing the course of the federal government. According to data from the Office of Personnel Management, in 1966, the federal government under President Lyndon Johnson had 2,726,000 employees and 3,129,000 uniformed military personnel. In contrast, in 2014 (the last year of available data), there were 2,683,000 million federal employees and 1,459,000 uniformed military personnel. However, reports indicate that when he left office, Obama’s federal government was the largest in history. The current White House resident intends to reverse the trend, which will bring both cheers and jeers
from Congress.

Pipeline Projects

On Jan. 24, the president issued three Presidential Memoranda. To set the stage, he required the Secretary of Commerce to develop and submit to the president by July 15, “a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the Unites … use materials and equipment produced in the United States, to the maximum extent permitted by law.”

Dakota Access Pipeline: Trump issued to the Secretary of the Army a Presidential Memorandum “Regarding Construction of the Dakota Access Pipeline.” By way of background, the memorandum explains that DAPL is an “approximately 1,100-mile pipeline is designed to carry approximately 500,000 barrels per day of crude oil from the Bakken and Three Forks oil production areas in North Dakota to oil markets in the United States. At this time, the DAPL is more than 90 percent complete across its entire route. Only a limited portion remains to be constructed.”

In early December 2016, the Army Corps of Engineers was ready to issue the last bit of authorization required to complete construction of the pipeline — an easement so that DAPL could cross under Lake Oahe (a reservoir created in the 1960s by the construction of the Oahe Dam on the Missouri River in South Dakota). An environmental assessment in July 2016 had already established that the pipeline posed no environmental danger. But after a meeting on Dec. 2, 2016, with Sioux tribal leaders, the Obama administration made a political decision to effectively nullify the findings of the environmental assessment. Specifically, on Dec. 4, then Assistant Secretary of the Army, Jo Ellen Darcy, issued a memorandum stating that an Environmental Impact Statement (EIS) was required to explore “alternatives (including alternative sites), mitigation strategies, monitoring needs, and preferences expressed by the affected community or population.” On Jan. 18, two days before President Obama left office, the Federal Register published the Department of Defense’s “Notice of Intent to Prepare an Environmental Impact Statement in Connection with Dakota Access LLC’s Request for an Easement to Cross Lake Oahe, North Dakota,” which established that written comments on the scope of an EIS should be sent no later than Feb. 20. The joint forces of Native Americans and climate activists had stymied DAPL.

Against this backdrop, President Trump’s memorandum directs the Secretary of the Army to instruct the Corps to:
1. Review and approve in an expedited manner requests for approvals to construct and operate the DAPL, including easements or rights of way to cross Federal areas;
2. Consider whether to rescind or modify the Dec. 4 memorandum issued by Darcy and whether to withdraw the Notice of Intent to Prepare an EIS;
3. Consider whether prior reviews and determinations, including the environmental assessment issued in July 2016 as satisfying all applicable environmental laws; and
4. Issue the approved easements or rights-of-way.

On Feb. 8, DAPL received the easement from the Corps. The Cheyenne River Sioux Tribe then filed a motion with the federal trial court in Washington, D.C., for a preliminary injunction, arguing that the presence of oil in the pipeline under Lake Oahe will cause irreparable harm to its members’ “religious exercise” (in violation of the Religious Freedom Restoration Act), and therefore construction should be enjoined. On March 7, the judge denied the motion, concluding that “the extraordinary relief requested is not appropriate in light of both the equitable doctrine of laches [i.e., the Tribe waited too long to bring the claim] and the Tribe’s unlikelihood of success ….” On March 18, the D.C. Circuit also refused to grant the injunction.

Eight other pipelines already cross Lake Oahe, one of which, a 42-in. natural gas pipeline built 30 years ago, is located 5 ft below the mud floor of the lake. DAPL will be constructed about 95 to 115 ft below the lake.

With the easement in hand, the owners of DAPL (Energy Transfer Partners) closed on the sale of slightly more than a one-third interest in the pipeline to MarEn Bakken Co. L, an entity jointly owned by Enbridge Energy Partners and Marathon Petroleum Corp. Oil finally began to flow through DAPL on March 27, as the pipeline prepares for commissioning.

Keystone XL: Trump also issued to the Secretaries of State, Army and Interior, a memorandum “Regarding Construction of the Keystone XL Pipeline.” Remember, on Sept. 19, 2008, TransCanada Keystone Pipeline LP filed the first application for a Presidential Permit to construct, operate and maintain pipeline facilities for the importation of crude oil at the international border between the United States and Canada in Phillips County, Montana. The Keystone XL pipeline would transport crude oil through a 36-in. diameter pipeline from Western Canada to a point on the existing Keystone pipeline system near Steele City, Nebraska, which in turn would allow for delivery to refinery markets in the Texas Gulf Coast area. A Final EIS was published on Aug. 26, 2011. In response to concerns with the pipeline’s proposed route in the Sand Hills of Nebraska, on Jan. 18, 2012, TransCanada filed a second application for a Presidential Permit, with the pipeline’s route avoiding the Sand Hills. On Jan. 14, 2014, a Supplemental EIS was issued. On Nov. 6, 2016 (two days before the presidential election), President Obama announced that a Presidential Permit would not be issued for Keystone XL.

President Trump’s memorandum invited TransCanada to promptly re-submit its application to the Department of State for a Presidential permit for the construction and operation of the Keystone XL Pipeline and directed the:
1. Secretary of State to facilitate the expeditious review, including a final decision, within 60 days of TransCanada’s submission of the permit application;
2. Secretary of the Army to instruct the Corp to review and approve expeditiously requests for authorization to utilize to cross the “waters of the United States” by the Keystone XL Pipeline; and
3. Secretary of the Interior, as well as the Directors of the Bureau of Land Management and the United States Fish and Wildlife Service (FWS) to review and expeditiously approve requests for approvals or other relief related to other applicable laws
and regulations.

Two days later, on Jan. 26, TransCanada announced that it had submitted a Presidential Permit application to the U.S. Department of State for approval of the Keystone XL pipeline. On Feb. 16, the company filed an application with the Nebraska Public Service Commission (PSC) seeking approval for the Keystone XL pipeline route through the state. TransCanada reports, “The proposed route was evaluated by the Nebraska Department of Environmental Quality and approved by the Governor of Nebraska in 2013.” The preferred route avoids the Nebraska Sandhills, over 90 percent of the landowners along the proposed pipeline corridor have signed voluntary easements to construct Keystone XL.

On March 9, Secretary of State Rex Tillerson recused himself from any decision on the Keystone XL Presidential Permit. Tillerson was previously the CEO of ExxonMobil, which is heavily invested in the oil production in Western Canada. On March 24, the State Department issued a Presidential Permit, but the project still requires state regulatory approval. Forecasts indicate that the pipeline will support tens of thousands of direct and indirect jobs during construction and contribute approximately $3.4 billion to U.S. gross domestic product.

Bottom Line

While on the campaign trail, Trump promised that, during the first 100 days of his administration, he would take several actions to “Make America Great Again,” including “lift the Obama-Clinton roadblocks and allow vital energy infrastructure projects, like the Keystone Pipeline, to move forward.” He kept that promise. We’ll see how he does with the other campaign pledges. As for the executive actions, perhaps Paul Begala, political consultant and advisor to President Bill Clinton, summed it up best: “Stroke of the pen. Law of the land. Kinda cool.”

Washington Watch is a bimonthly report on the oil and gas pipeline regulatory landscape. Steve Weiler is partner at Stinson Leonard Street LLP in Washington, D.C.

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