A federal court in New York dismissed a challenge alleging a failure by the Delaware River Basin Commission (“DRBC” or “Commission”), the U.S. Army Corps of Engineers, and others* to conduct National Environmental Policy Act (“NEPA”) analysis for proposed regulations that would allow fracking in the basin.  This decision was rendered in three combined cases, brought by New York State, The Delaware Riverkeeper Network (and others), and the Damascus Citizens for Sustainability, each alleging similar NEPA violations.

The American Petroleum Institute, Independent Petroleum Association of America, and US Oil & Gas Association sought to intervene, a motion rendered moot by the decision.

While the cases were dismissed, the decision’s basis was that as draft regulations, none of the plaintiffs have yet suffered a cognizable injury.  “While Plaintiffs provide a great deal of support for how their interests may be threatened if natural gas development is allowed in parts of the Basin, as of now it is not allowed, and the mere existence of proposed regulations is not sufficient to allow this court to say Plaintiffs’ interests are at risk.”  As such, the litigation will be reengaged if and when the DRBC finalizes its rules.

The DRBC is an organization created by a congressionally-approved interstate compact among New York, New Jersey, Pennsylvania, Delaware, and the United States to manage water resources within the Delaware River Basin.  In 2010, the Commission enacted a de facto moratorium on fracking within the basin (save for some now completed exploratory wells) by deferring consideration of any applications until it can develop regulations.  Such permits are necessary, as such operations would require water withdrawals with DRBC’s jurisdiction and otherwise have the potential to affect these resources.

Draft fracking regulations issued in December 2010, over New York’s’ objections.  A revised draft was released in November 2011, but final action was deferred when two commissioners indicated opposition.  To date, no final action has been taken and the moratorium remains in place.

Plaintiffs argued that, due to federal participation in the Commission, NEPA applied and that an environmental impact statement (“EIS”) was required to accompany the proposed rules.  An EIS must be prepared to analyze, and consider alternatives to, any “major Federal actions significantly affecting the quality of the human environment.”  The Commission and the federal defendants claimed they have no duty to comply with NEPA for DRBC initiatives.

Typically, NEPA would not apply to actions undertaken by an interstate compact commission.  They are instrumentalities of the compacting states despite the fact that the Constitution requires (most) compacts – those that intrude on powers generally reserved for the federal government – to be approved by Congress.  Such approval renders the compact as federal law, but it does not change the nature of the body created by the states.

The DRBC compact, however, has unique features that make the question of NEPA’s applicability an open question.  For one, and relatively unusually, the United States is a party to the Delaware River Basin Compact.  The Division Chief of the North Atlantic Division of the Army Corps of Engineers is a voting member, on equal footing with a commission of each of the four states.  The primary mission of the Commission is to develop and revise a “comprehensive plan for immediate and long range development and uses of the water resources of the Basin to which federal, state, and local agencies and private parties are bound.”  If the Army Corps representative “concurs” with the plan, the federal government must submit any project having a substantial impact on the river basin’s water resources for approval.

Further, “[w]hen Congress approved the Compact, it included reservations that specified that the DRBC would be considered a federal agency as to certain provisions of federal laws but not for others, such as the Administrative Procedures Act (the ‘APA’).”  The law implementing the compact was silent on the applicability of NEPA.  To make matters more confusing, when the NEPA was enacted, the DRBC (founded in 1961) adopted regulations incorporating NEPA analysis into its decisionmaking processes.  It abandoned that practice in 1980, relying on the federal government to conduct such analysis due to financial concerns.  In 1997, the Commission repealed its NEPA regulation.

Because the court decided the issue on standing grounds, it did not venture an opinion as to whether the DRBC is required to develop an EIS for its fracking regulations.  Rather, while it found that New York and the environmental plaintiffs had an “interest” in the regulations based on potential adverse impacts on New York citizens and the groups’ members, the court found they, as of yet, have suffered no injury.

New York’s interest was based, first on the “maintaining the status quo in the Upper Delaware River,” i.e., that part forming the border between Delaware and New York.  The state asserted the potential for harm to its natural resources and continued recreational uses by its citizens.  It also alleged that ozone, which New York characterized as a being a byproduct of fracking, would have adverse health impacts on its citizens.  In the state’s view, those adverse health impacts would result in increased Medicaid payments.  The non-governmental organizations’ interests were all based on members who owned land and otherwise use the river basin for recreation, uses they claimed to be threatened.

However, in terms of the injury prong of the standing inquiry, the court relied heavily on the fact that the regulations were not final and thus the moratorium on fracking remains in place.  Plaintiffs whose challenge is based on procedural laws like NEPA – which only requires a “hard look” at the impacts of federal actions and its alternatives, not that the least environmentally harmful option be chosen – are afforded a less demanding showing of the immediacy of injury and its redressability by a favorable decision.  In the Supreme Court’s formulation, “procedural rights are special.”

As such, while the failure to undertake the required NEPA analysis may not be the direct cause of the harm (because the action can occur even if an EIS were prepared), courts will grant standing to allow challenges to the failure to abide by NEPA’s requirements.  In this case, however, the court found that no action had yet occurred which could trigger even this relaxed standard.  “The line between proposed regulations and final regulations may be subtle, but the court believes it is real, in both the NEPA cases and in the other probabilistic injury cases.”  In other words, without a final rule that could affect the standing of some of the plaintiffs, the court felt it would simply be issuing an advisory opinion.

The court’s decision simply delays the day of reckoning.  A challenge will be ripe if and when the DRBC issues its final regulations.  As the court noted, when that day arrives, there will be many interesting questions to answer:

The court notes that, should the DRBC adopt regulations that permit natural gas development within the river basin without performing an EIS, then at some point, some court would be required to address multiple difficult issues, including: (1) whether NEPA can be enforced through a cause of action other than the APA; (2) whether the DRBC is a federal agency; (3) and whether, even if not, the presence of a federal officer on the DRBC, and the support and assistance federal agencies give to the DRBC, are sufficient to “federalize” the DRBC's actions.  Should the Division Engineer vote for or concur in these hypothetical DRBC regulations, then a court would be required to consider additional questions, including: (4) whether either a vote for or concurrence in a DRBC regulation is a “major federal action” under NEPA; and (5) whether either a vote or a concurrence is a “final action” under the APA.  Finally, if the course of this litigation is predictive of that future litigation, then a court would also be required to consider: (6) whether the Oil and Gas Industry has a legal interest in a regulatory agency not performing an EIS.

That will certainly be a case worth following.

As a closing note, the court all but invited the plaintiffs in that future case to seek a temporary restraining order:

The courts will be available if and when the DRBC adopts final regulations permitting natural gas development, and are more than capable of preliminarily enjoining any development so that no wastewater is created before the courts have evaluated whether the DRBC and the Federal Defendants are obligated to follow NEPA in this instance.