Contributed By Jones Walker LLP
The energy industry in the United States finds itself at a unique crossroads: substantial new investments are being made in critical infrastructure (pipelines, LNG facilities, petrochemical plants), new drilling and production technologies have caused the United States to become a net producer of hydrocarbons, and the recovery of crude oil prices is spurring new drilling and job creation. At the same time, challenges to new projects – both physical challenges and legal challenges – appear to be at an all-time high. Protests, vandalism and lawsuits have become the norm, and they raise issues for lawyers across numerous practice areas, including financing, government permits, property rights and environmental compliance. The following reviews some select examples of the types of challenges that are occurring in the energy industry across the country.
Increase in Disruptive Protests Across the Country
The protests against the Keystone XL pipeline, which would link the Alberta, Canada oil sands to the United States, garnered national and international media attention over much of the past decade. Recently, protests of major energy projects have increased in size and frequency throughout the United States and Canada. The protests seek to disrupt projects across the upstream, midstream and downstream areas of the energy sector.
In Virginia, for example, protestors occupied covered platforms suspended in trees for a month, blocking workers from cutting down trees in connection with the construction of a natural gas pipeline. In May 2018, a federal judge held the protestors in contempt of an order issued in January 2018 that allowed the project to move forward.
Meanwhile, in Louisiana, opponents of a crude oil pipeline have set up a “protest camp” in southern Louisiana and taken numerous protest actions. In April 2018, they blocked one of the pipeline’s supplier's facilities, in order to disrupt construction. In March 2018, workers found equipment being used to build the pipeline vandalised, with hydraulic hoses and electrical lines cut, windows broken, and messages spray-painted on heavy equipment. In May 2018, protestors were arrested and charged with trespassing after blocking bulldozers and other heavy equipment at a work site.
In Washington State, in December 2017, protestors opposed to the construction of a liquefied natural gas plant in Tacoma, Washington chained themselves to a construction crane, perched on top of tripods to block the front gates to the project, and blocked access to a road to the construction site. Multiple protestors were arrested. Protestors also erected a tent city on the state capitol grounds in Olympia, Washington, and blocked access to the company’s corporate headquarters.
In 2015, the Coast Guard removed and detained protestors who were protesting a drill rig as it departed Seattle, Washington on its way to the Chukchi Sea off the coast of Alaska to explore for oil. The Coast Guard designated a 500-yard safety zone around the rig while it was on the move, and the protestors were removed from their kayaks when they intruded into that zone.
Legal Challenges to Energy Development
Activists have also challenged energy projects and developments through litigation. In Idaho and Montana, for example, wildlife advocates filed lawsuits in April 2018 asking the courts to reverse the federal government’s sale of oil and gas leases on more than 13,000 square miles of land in Montana, Wyoming, Utah and Nevada, arguing that the lands contain crucial habitats for an imperilled bird, the greater sage grouse (Western Watersheds Project, et al.v. Zinke, et al., No. 18-cv-00187 (D. Idaho, filed Apr. 30, 2018); Montana Wildlife Federation, et al. v. Zinke, et al., No. 18-cv-00069 (D. Mont., filed Apr. 30, 2018)).
In Alaska, activists filed multiple lawsuits challenging the federal government’s attempt to lift the ban on new offshore oil and gas drilling in the Arctic and Atlantic Oceans and the sale of petroleum leases in Alaska's National Petroleum Reserve (League of Conservation Voters, et al. v. Trump, et al., No. 17-cv-00101 (D. Alaska, filed May 3, 2017); Natural Resources Defense Council, et al. v. Zinke, et al., No. 18-cv-00031 (D. Alaska, filed Feb. 2, 2018); NorthernAlaska Environmental Center, et al. v. U.S. Department of the Interior, et al., No. 18-cv-00030 (D. Alaska, filed Feb. 2, 2018)).
In Louisiana, in response to a legal challenge by opponents of a crude oil pipeline, the United States Court of Appeals, Fifth Circuit, stayed a preliminary injunction that briefly enjoined construction of the pipeline pursuant to a permit issued by the Army Corps of Engineers, holding that, rather than granting the preliminary injunction, the district court should have allowed the case to proceed on the merits and sought additional briefing from the Corps (Atchafalaya Basinkeeper, et al. v. United States Army Corps of Engineers, 715 Fed. App’x 399 (5th Cir. Mar. 15, 2018)). The Fifth Circuit later vacated the preliminary injunction, concluding that the Corps’ decision to issue the permit to Bayou Bridge was not arbitrary and capricious and that the district court’s injunction was an abuse of discretion (Atchafalaya Basinkeeper, et al. v. United States Army Corps of Engineers, No. 18-30527, 2018 U.S. App. LEXIS 18471 (5th Cir. Jul. 6, 2018)).
The United States Court of Appeals for the D.C. Circuit has rejected environmental legal challenges by the Sierra Club to LNG export and facilities in Maryland, Louisiana and Texas, repeatedly upholding the Federal Energy Regulatory Commission’s decisions to approve construction of LNG facilities (Sierra Club v. FERC, 827 F.3d 36 (D.C. Cir. 2016) (Texas); Sierra Club v. FERC, 827 F.3d 59 (D.C. Cir. 2016) (Louisiana); EarthReports, Inc. v. FERC, 828 F.3d 949 (D.C. Cir. 2016) (Maryland)).
The D.C. Circuit also repeatedly denied petitions seeking review of the Department of Energy’s orders granting applications to export LNG from LNG terminal facilities (Sierra Club v. U.S. Department of Energy, 867 F.3d 189 (D.C. Cir. 2017); Sierra Club v. Department of Energy, 703 Fed. App’x 1 (D.C. Cir. 2017)).
State Legislation Criminalising Misconduct
One government response to the increase in disruptive protests is legislation penalising misconduct. At least eight states – Louisiana, Colorado, Georgia, Wyoming, Minnesota, Ohio, Pennsylvania and Oklahoma – have considered legislation increasing penalties against protesters who target infrastructure such as pipelines.
In 2017, Oklahoma enacted a new trespassing law, Section 1792 of Title 21 of the Oklahoma Statutes, under which individuals face a felony and a minimum USD10,000 fine or one-year imprisonment for entering property intending to damage, vandalise, deface, “impede or inhibit operations” of a “critical infrastructure facility.” They face a USD100,000 fine or ten years of imprisonment for “tamper[ing]” with equipment in a critical infrastructure facility.
In 2018, the Louisiana legislature amended and re-enacted Louisiana Revised Statutes Section 14:61(B)(1) and (C), relating to the crime of unauthorised entry of critical infrastructure, and enacted Section 14:61(B)(3), 61.1, creating the crime of criminal damage to critical infrastructure, defined as the intentional damaging of critical infrastructure. The law expands the definition of critical infrastructure as follows:
“[A]ny and all structures equipment, or other movable property located within or upon chemical manufacturing facilities, refineries, electrical power generating facilities, electrical transmission substations and distribution substations, water intake structures and water treatment facilities, natural gas transmission compressor stations, liquefied natural gas (LNG) terminals and storage facilities, transportation facilities, such as ports, railroad switching yards, pipelines, and trucking terminals, or any site where the construction or improvement of any facility or structure referenced in this Section is occurring.”
The law amends the penalties for unauthorised entry of critical infrastructure to a fine of up to USD1,000, or up to five years' imprisonment, or both. Penalties for causing criminal damage to critical infrastructure, defined as the intentional damaging of critical infrastructure, include a fine of up to USD10,000 or up to 15 years' imprisonment, or both. Penalties increase to a fine of up to USD25,000 or up to 20 years' imprisonment, or both, “[i]f it is foreseeable that human life will be threatened or operations of a critical infrastructure will be disrupted as a result of the conduct.”
Canada Purchasing Pipeline
In May 2018, the Canadian government announced that it will purchase the Trans Mountain pipeline and related infrastructure in order to develop the Trans Mountain expansion, which would connect oil reserves in Alberta to British Columbia. The project prompted large protests, and dozens of people were arrested for violating a court order limiting demonstrations near the pipeline company’s terminal in British Columbia. In March, the pipeline company filed a civil suit against protestors for obstructing access roads and workers. In April, the pipeline company suspended non-essential spending on the project, citing active opposition from the government of British Columbia.
The Canadian government’s purchase of the project has been viewed by some as a bid to ensure that the pipeline gets built despite the protests and the opposition of British Columbia. Canada’s Finance Minister, Bill Morneau, said the government would eventually sell the pipeline, in its expanded form, back to the private sector.
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