Nebraska Supreme Court Clears Roadblock for Keystone XL Pipeline Project

On January 9, 2015, the Nebraska Supreme Court upheld former Nebraska Governor Dave Heineman's approval of TransCanada Corp.'s Keystone XL pipeline route, removing a roadblock frequently cited by President Obama as part of his hesitation to sign a bill approving the project. The proposed pipeline—which would move up to 830,000 barrels of oil a day from Canada's oil sands to Gulf Coast refineries—has become a hot political issue over climate change and economic growth.

The Nebraska lawsuit challenging the state's approval, Thompson et al. v. Heineman et al., No. S-14-158, was premised on plaintiffs' contention that a statute allowing the governor to set the route violated the Nebraska Constitution. The suit was filed in March 2013 by three landowners seeking a declaratory judgment that the law violated the equal-protection, due-process, and separation-of-powers provisions of the Nebraska Constitution, along with its prohibition of special legislation. The suit alleged that the bill unconstitutionally delegated to the governor powers over a common carrier that exclusively belonged to the Nebraska Public Service Commission, and unconstitutionally delegated plenary authority over the exercise of eminent domain power that belonged exclusively to the state legislature. The challenged law, L.B. 1161, allows "major oil pipeline" carriers to bypass the regulatory procedures of the state's public service commission and, as an alternative, permits pipeline carriers to obtain approval from the governor to exercise the power of eminent domain for building a pipeline in Nebraska.

The Nebraska Supreme Court actually voted 4 to 3 to uphold a lower court judge's opinion that a law allowing the governor to set the route violated the Nebraska Constitution and that the landowner appellees had standing to raise the issue. However, under the Nebraska Constitution, a five-vote supermajority is required for the court to rule that a law is unconstitutional. Although the majority bloc was in favor of overturning the pipeline-siting route, it lacked the necessary five-vote supermajority. Accordingly, L.B. 1161 remains intact and the former governor's approval of the permit stands.

Although the Nebraska Supreme Court ruling focused on the permitting process and state constitutional issues, President Obama, and other opponents of the pipeline, have repeatedly alleged concerns about the pipeline's impact on climate change. The President has asserted that a pending review process within the State Department should be completed before he makes a final decision. The State Department review, known as a national-interest determination, considers several factors, including the pipeline's impact on energy security, the environment and climate change, geopolitics, and the economy. Notably, in January 2014, the State Department issued a Final Supplemental Environmental Impact Statement report in which it concluded that the construction of the pipeline is unlikely to have significant effects on climate-change-causing greenhouse gas emissions. The State Department previously extended the time to complete its review process based, in part, "on the uncertainty created by the on-going litigation in the Nebraska Supreme Court.…" On February 2, 2015, the EPA submitted comments to the Final SEIS. In its letter, the EPA stated that it was providing comments now, rather than when the Final SEIS was published, because of the possibility that the Nebraska Supreme Court decision could have led to changes to the Final SEIS. In its letter, the EPA disagreed with the State Department's conclusions the construction of the pipeline is unlikely to have significant effects on climate-change-causing greenhouse gas emissions because of the recent large declines in oil prices.

On the same day as the Nebraska Supreme Court ruling, the U.S. House of Representatives passed a bill approving the route and, on Monday January 12, the whole U.S. Senate cleared a procedural hurdle allowing the Senate's version of the Keystone bill, which had cleared the Senate Energy and Natural Resources Committee on the previous Thursday, to be brought to the Senate floor for debate. President Obama has formally threatened to veto the measure.

D.C. Circuit Considers Motions to Govern Future Proceedings in Light of Supreme Court's Decision in Utility Air Regulatory Group v. EPA

As previously reported in the Summer 2014 issue of The Climate Report, on June 23, 2014, the United States Supreme Court held that (i) the Clean Air Act ("CAA") does not compel the EPA to regulate greenhouse gas ("GHG") emissions under either the Prevention of Significant Deterioration ("PSD") or Title V programs and that the EPA's current interpretation was impermissible and beyond the statutory purpose of the PSD and Title V programs; and (ii) the EPA's decision to require Best Available Control Technology ("BACT") for GHGs emitted by sources otherwise subject to PSD requirements is permissible under the CAA, though the Court did not rule on the EPA's current approach to requiring BACT for such sources. See Utility Air Regulatory Group v. EPA, 134 S. Ct. 2427 (2014) ("UARG").

In the aftermath of the Supreme Court's decision, the United States Court of Appeals for the District of Columbia Circuit must now decide how to proceed with underlying consolidated cases that were the subject of or otherwise directly implicated by the UARGdecision. See, e.g., Coalition for Responsible Regulation, Inc. v. EPA, 09-1322 (D.C. Cir.). To that end, the D.C. Circuit directed the parties in Coalition for Responsible Regulation to file motions to govern future proceedings. The motions were filed in October 2014, and responses were filed in November 2014.

In their motions and responses, the EPA, certain states, and certain environmental groups acknowledge that EPA regulations requiring stationary sources to obtain PSD or Title V permits, if GHGs are the only pollutant that the source emits above applicable major source thresholds, should be vacated under UARG. However, they argue that UARGpermits the EPA to continue requiring BACT for GHG emissions from sources that are already subject to PSD permit requirements based on emissions of other pollutants (referred to as "anyway sources") without the need for new rulemaking. They contend that the BACT requirement is set forth in § 165(a) of the CAA itself, and that requiring new rulemaking would create confusion because it would upend PSD permitting processes already effectively administered.

In contrast, certain other states and industry groups argue in their motions and responses that UARG does not support continued application of BACT for GHG emissions to "anyway sources." These states and industry groups assert that UARG requires vacation of the Tailoring Rule and any portion of the Timing Rule or other challenged rules that the EPA relied upon to support PSD and Title V regulation of GHG emissions. They contend that no PSD regulation of GHGs survives the UARG decision, such that the EPA would have to enact new rules that properly define and justify application of BACT to GHG emissions of "anyway sources." They argue that allowing the EPA to enforce a BACT program on "anyway sources" without new rulemaking would result in an interim program administered on a permit-by-permit basis that would cause disruption and uncertainty for regulated sources.

The D.C. Circuit must now determine the extent to which UARG compels EPA regulations of GHG emissions to be vacated based on these competing arguments.

California Courts Shelve San Diego's Transportation Plan for Failing to Address Climate Change Impacts

On November 24, 2014, the California Court of Appeal held that the San Diego Association of Governments' ("SANDAG") environmental impact report ("EIR") for its 2050 Regional Transportation Plan/Sustainable Communities Strategy failed to comply with the California Environmental Quality Act ("CEQA") by not adequately considering the climate change impacts of the plan. Cleveland National Forest Foundation v. San Diego Association of Governments, Nos. 37-2011-00101593, 37-2011-00101660 (Cal. Ct. App. Nov. 24, 2014). 

The court affirmed the superior court's finding that the EIR violated CEQA because it failed to analyze the inconsistency between the state's policy goals reflected in Executive Order S-3-05 and the plan's greenhouse gas emissions impact. Executive Order S-3-05 sets greenhouse gas emissions reduction targets in California through 2050. California's legislature enacted equivalent emissions targets through 2020 into law with the intention that the progress and reductions extend beyond 2020 and directed the California Air Resource Board ("CARB") to develop regional greenhouse gas emissions targets for automobiles and light trucks for 2020 and 2035. The San Diego plan acknowledged an increase in greenhouse gas emissions but SANDAG argued that it did not need to compare the plan's greenhouse gas impacts with the state climate policy as articulated in Executive Order S-3-05 because (i) there is no statute or regulation translating the Executive Order into reduction targets specific to the region through 2050 and (ii) the plan complied with the CEQA Guidelines located in title 14 of the California Code of Regulations.

The California Court of Appeal disagreed holding that, even though SANDAG may not know the specific reduction targets it needs to meet, SANDAG could have compared its plan with the state policy of continual greenhouse gas emissions reductions. The court of appeal also held that the use of the CEQA Guidelines did not automatically mean compliance with CEQA when failure to consider other evidence frustrates the state's climate policy and renders the EIR misleading. 

Despite the fact that the court's decision that the plan violated CEQA rendered the petitioners' other challenges to the EIR partially moot, the court addressed the other challenges in turn and found that the EIR also violated CEQA for the following reasons: (i) it failed to adequately address mitigation measures for the post-2020 greenhouse gas emissions; (ii) it failed to address any project alternative that would significantly reduce total vehicle miles traveled and instead focused on congestion relief; (iii) it failed to adequately present a baseline of existing air-quality conditions and analyze the health effects of the air-quality impacts and; (iv) it failed to analyze and mitigate the plan's impact on agricultural land. 

Judge Patricia D. Benke filed a dissenting opinion arguing that the superior court's decision should be reversed because SANDAG adequately analyzed the EIR's greenhouse gas impacts in relation to the regional reduction targets promulgated by CARB.

On January 6, 2015, SANDAG filed a petition for review with the California Supreme Court arguing primarily that consistency with Executive Order S-03-05 is not an appropriate standard by which to evaluate the significance of the transportation plan's greenhouse gas impacts. An Executive Order is not binding state policy with which local governments must comply, and it cannot repudiate Guidelines § 15064.4, which was specifically adopted at the direction of the legislature to guide analysis of greenhouse gas impacts.