Construction Begins on Pipeline to Bring Rocky Mountain Gas to West Coast; Legal Challenges Linger

Ground has been broken on the Ruby Pipeline, a project that will connect a natural gas hub in southwest Wyoming to another on the California-Oregon border. The $3 billion project will carry 1.5 billion cubic feet of gas per day from Rocky Mountain fields to West Coast consumers. Major permitting for the project was completed in four years, in part by negotiating mitigation directly with wildlife conservation groups. The line was also touted as the first "carbon neutral" gas pipeline - with FERC approval for recovery of carbon mitigation costs. But these measures have not prevented legal challenges to the project. Other environmental groups, as well as western communities unhappy with the financial support given to anti-grazing interests, have stepped in. For these and other reasons, Ruby is shaping up to be an interesting and important case study in infrastructure permitting in the arid West.

Background: Project Need and Requisite Approvals

The Ruby Pipeline is proposed to meet long-term natural gas demand in Northern California, Nevada, and the Pacific Northwest.[1] These states import the majority of their natural gas, primarily from the Western Canadian Sedimentary Basin (WCSB) and, to a lesser extent, from the U.S. Rockies. WCSB production has been steadily declining for the last decade at the same time its remaining resources are in increasing demand throughout the rest of North America, resulting in higher prices and lower demand in the West, meaning transmission capacity from Canada currently is adequate. Meanwhile, technological innovations have increased production capacity in the U.S. Rockies at competitive prices, but infrastructure has constrained deliveries to the West.[2] Consequently, the Ruby Pipeline’s developers, a subsidiary of the El Paso Corporation, proposed a direct connection between the Opal Hub in southwest Wyoming and the Malin Interconnect at the Oregon-California border (general map here; high detail here).[3]

The project requires the typical fleet of federal and state approvals. Most importantly, authority to construct and operate facilities to transport natural gas in interstate commerce fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC) pursuant to the Natural Gas Act.[4] Equally importantly, FERC, together with all other cooperating federal, state and local agencies, must investigate the proposed project’s environmental impacts under the National Environmental Policy Act (NEPA).[5] Furthermore, under Section 7 of the Endangered Species Act (ESA), FERC must consult with the U.S. Fish and Wildlife Service (FWS) to determine whether the proposed action is likely to jeopardize the continued existence of listed species or result in the destruction or adverse modification of critical habitat.[6] About 55 percent of the project crosses federal lands. The U.S. Bureau of Land Management (BLM) must issue rights-of-way and temporary use permits for pipeline projects on lands under its jurisdiction.[7] Other important approvals include a U.S. Army Corps of Engineers (Corps) determination that the pipeline’s water crossings meet the requirements of Nationwide Permit 12 (Utility Line Activities), and United States Forest Service (USFS) amendments to the Fremont National Forest Land and Resource Management Plan. Further approvals crop up every step of the way.[8]

Over the past year, the project has received all of the approvals it needs to begin construction. On September 4, 2009, FERC found the Ruby Pipeline to be required by the public convenience and necessity subject to subsequent environmental review.[9] On January 8, 2010, FERC published the Final Environmental Impact Statement (FEIS) for the project, identifying adverse environmental impacts and recommending numerous mitigation measures, but identifying no potential environmental impacts that would warrant stopping the project.[10] On April 15, FERC issued its final order for a certificate of public convenience and necessity.[11] On June 8, FWS submitted a Biological Opinion (BiOp) to FERC concluding that Ruby would have impacts on certain ESA-listed fish species, but that these impacts could be offset by mitigation and monitoring and would not jeopardize species survival. On July 12, BLM issued its Record of Decision (ROD), granting rights-of-way and other necessary permits over federal lands. On July 30, 2010, FERC provided the initial notice to proceed with construction, and work began.

Some of the People Some of the Time…

Carbon Offsetting

Within this remarkably fast-paced sequence of approvals were several interesting environmental incentives designed to reduce environmental opposition to the project. The first is the commitment to offset the pipeline’s carbon impacts: Ruby is claimed to be the country’s “first carbon neutral pipeline.”

These days, transmission projects are challenged or lauded on the basis of the carbon content of the primary fuel delivered. Transmission projects connecting coal-rich regions to the East Coast have faced opposition as “coal pipelines,” while Western transmission is proposed to bring renewable resources across relatively undisturbed, but isolated regions. This is less of an issue for natural gas – with far less CO2 than coal – but it is, nonetheless, a fossil fuel. The Ruby pipeline’s proponents, therefore, do not propose to offset the carbon associated with all of the fuel delivered, but have emphasized that they are willing to purchase offsets for the expected 523,000 metric tons CO2 per year associated with the pipeline’s construction and operation, up to $12.5 million per year, and have secured agreements with shippers willing to have offsets costs included in their rates. FERC, in its initial order, rejected Ruby’s request to incorporate a mechanism to recover costs associated with the carbon mitigation measures.[12] Upon receiving further information on the details of the proposal, FERC changed its position and allowed the company to include them as voluntary costs.[13]

Grouse and Grazing

The greater sage grouse was once found in sagebrush habitat throughout the Western United States. As sagebrush habitat has declined, so has the grouse population. This has led to a concerted effort to list the species under the Endangered Species Act, a regulatory move that opponents argue would create a “spotted owl of the sagebrush sea,” an industry-killing impediment to all activity across broad swaths of Western lands. As of now, the FWS has declined ESA listing. See J. Ferrell, Sage Grouse Not Protected by ESA, But Will Still Play Role in Western Energy Development (March 29, 2010). It is, rather, a “candidate species,” determined to be suitable for listing but set aside administratively in the face of more pressing problems. Development interests hope fervently that this status may be maintained, and must tread carefully in any project that could potentially tip the analysis over the edge toward listing.

The Ruby pipeline traverses almost 9,000 acres of sage grouse habitat. Despite extensive mitigation measures incorporated into the final project plan, detailed criticisms from project opponents telegraphed an intention to challenge the FEIS on the grounds of its impact to this and other sagebrush species.[14] This disagreement appeared to be headed toward the usual litigious conclusion when news broke of a novel agreement: the El Paso Corporation agreed to partner with the Western Watersheds Project (WWP) and the Oregon Natural Desert Association (ONDA), both strong proponents of sage grouse habitat protection and likely project challengers, to provide $22 million over ten years to fund conservation of sensitive western habitats.[15] The money would be given to the Sagebrush Habitat Conservation Fund, which would, among other things, “restore sagebrush habitats by purchasing and retiring federal grazing permits offered by willing sellers,” and to the Greater Hart-Sheldon Conservation Fund, promoting restoration activities in the Hart Mountain National Antelope Refuge and the Sheldon National Wildlife Refuge in southern Oregon. In return, WWP and ONDA withdrew their challenges to the project.

If some found encouragement in this detente, ranching interests in counties through which the pipeline passes were less impressed. One of the WWP’s primary missions is the end of public lands grazing, a vital component of western ranching practices,[16] and providing any money toward that goal – even if limited to “willing” sellers – generated immediate opposition from formerly friendly local interests. County governments, citing concerns from ranchers that implementing a program to retire grazing permits would threaten livelihoods, petitioned the company to withdraw from the agreement and filed challenges to the environmental approvals that they had played a part in securing.[17] To end the furor, in mid-August El Paso struck a deal (not yet finalized) with the Public Lands Council (representing western ranchers), whereby El Paso would pay an additional $15 million over 10 years, to fund research and community outreach. The Public Lands Council, while remaining “concerned” regarding the WWP deal, stopped threatening to oppose the project.[18]

All of the People All of the Time…

Despite the not insignificant outlay of funds to move the project forward and defuse environmental opposition, litigation – perhaps inevitably – has come:

• On July 30, 2010, the Center for Biological Diversity filed the first suit.[19] The action, against BLM, FWS, and the Corps, challenges the federal decisionmaking and environmental review process underlying BLM ROD, the FERC FEIS, the FWS BiOp, and several other subsidiary permitting decisions, under NEPA and a number of other environmental laws. The suit focuses primarily on fish impacts at stream crossings.
• On August 18, 2010, the Coalition of Local Governments, including many of the counties through which the line will pass, filed their own petition for review in essence designed to protest the settlement with WWP and ONDA.[20] The counties claim that by providing funds to the WWP, the project had created environmental impacts not considered in the prior review, including removal of water sources, poorer vegetation quality, increased wildfire risk and economic impacts, purportedly associated with the retirement of grazing permits that the funding purportedly supports.
• On September 10, 2010, Defenders of Wildlife, the Sierra Club and Great Basin Resource Watch, filed a challenge focusing on the pipeline’s routing.[21] The groups forward the position that a longer route more closely aligned with existing development corridors would entail fewer environmental impacts.
• Also on September 10, 2010, representatives of the Paiute tribes and Fort Bidwell Indian Community filed petitions.[22] In addition to supporting the allegations of the other petitioners, these add claims specific to federal trust responsibility to tribal interests.

On August 31, 2010, the Court denied the Center for Biological Diversity’s motion for a preliminary injunction pending appeal, which would have halted construction. As construction proceeds, the pending actions are likely to be consolidated. Time will tell what effect, if any, these litigations have on project costs and the ability to have the facility operational by March 2011.

Conclusion

The Ruby pipeline project was announced in December 2007, and construction work began in July 2010, and – if not upset in litigation – is scheduled to be completed in spring 2011. Even with outstanding litigation risks, the project has been remarkably successful to date. It is worth considering what of this success can be attributed to the project being the right proposal at the right time, and to what extent innovative mitigation strategies played a part.

Certainly, efforts at carbon offsetting appear to have been popular and successful. It is by no means certain, however, that this element was necessary to the project’s success, nor that it will be repeated in other proposals with different economic profiles.

Meanwhile, the settlement with WWP and ONDA has generated discussion over the effectiveness – and propriety – of monetary settlement of public interest environmental claims. Given that other groups have stepped in to file suit, were the payments a cost-effective or necessary project decision? Are conservation funds an acceptable exaction if WWP and ONDA truly believed that the federal review of the project’s environmental impacts was flawed? Are WWP and ONDA strong-arming industry with threats of tying up a worthwhile project in court in order to extract funds for their own pet projects, or did the parties make pragmatic decision, typical of many settlements, weighing and valuing the strengths and weaknesses of their positions?

Again, it remains to be seen whether these measures will, for example, factor into the Ninth Circuit’s analysis of challenges to the project’s environmental review. Were the Court to point out Ruby’s innovative mitigation strategies as demonstrating the project’s underlying fundamental environmental benefit, we may be seeing more such things in the years to come.

For additional information, contact Adam Orford or any member of Marten Law’s Permitting and Environmental Review practice group.