From pipeline permitting to agency rulemaking, federal courts are poised to decide a suite of legal challenges in 2023 that could set the pace of the nation’s transition away from fossil fuels.
The rulings could also tee up a clash between Congress and the courts.
Lawmakers have passed legislation that could clear the way for a massive lease sale in the Gulf of Mexico — if a federal appeals court does not intervene. And a permitting reform bill may find new life under the 118th Congress, clearing the way for the embattled Mountain Valley natural gas pipeline to be constructed without further agency analysis.
“These projects and new leases shouldn’t be happening at all and certainly not without the careful and comprehensive review that is required by law,” said Kristen Monsell, a senior attorney at the Center for Biological Diversity.
She added: “So far, that has been lacking across the board.”
Agencies’ rulemaking process is also under review, as judges weigh whether states have grounds to oppose the metric the federal government uses to justify the cost of climate rules. The pending lawsuit could be what’s delaying the Biden administration from releasing finalized estimates of the social cost of emitting greenhouse gases, said Hana Vizcarra, a senior attorney at Earthjustice.
The federal government’s Interagency Working Group, which is tasked with coming up with the social cost estimates, is well past its projected timeline of releasing new final figures.
However, EPA has announced its own proposed social cost estimates that nearly quadruple the value to $190 per metric ton of carbon emissions (Energywire, Nov. 21).
Now “that EPA has moved forward with its own proposed numbers, that could lessen the potential impact of a negative outcome in that case,” Vizcarra said in an email.
Two Federal Energy Regulatory Commission decisions that could drive clean energy development in dozens of states will also be decided in early 2023. One concerns a long-standing market rule in PJM Interconnection LLC that critics say has impeded clean energy in the mid-Atlantic region, and another pertains to a new energy market proposal in the Southeast.
Meanwhile, a new climate risk disclosure rule the Securities and Exchange Commission is expected to finalize in early 2023 could tee up another high-profile legal fight over the “major questions” doctrine that was at the center of a Supreme Court case decided in June rejecting EPA’s 2015 climate rule for power plants.
“Depending on how strict they are, [the disclosure rules] could be a big test of the concepts laid down in West Virginia v. EPA,” said Christi Tezak, managing director of the firm ClearView Energy Partners LLC.
The disclosure regulation is not a “classic” energy rule or case, said Vizcarra, “but it is one that energy companies and fossil fuel-friendly red states are closely watching and expected to engage with.”
Here is a look at energy cases to watch in 2023.
Social cost of greenhouse gases
A legal brawl led by Louisiana Attorney General Jeff Landry (R) over how the federal government should estimate the costs of climate change will likely be decided in 2023.
A ruling from the 5th U.S. Circuit Court of Appeals in the Biden administration’s favor would mean federal agencies could keep working as planned on rulemaking, including EPA’s methane regulation for the oil and gas industry.
In a December hearing, the 5th Circuit panel appeared skeptical that the Louisiana-led coalition had demonstrated they had legal standing to bring their case. Judges questioned the states’ claims that they had suffered direct harm from the social cost estimates, echoing concerns raised in a separate ruling on the metric from the 8th U.S. Circuit Court of Appeals (Energywire, Dec. 8).
The 5th Circuit had previously blocked an order from a lower bench that temporarily barred the Biden administration from using the metric, which stalled agency rulemaking and analysis. The Supreme Court later rejected the red states’ bid for emergency relief from the injunction.
The lawsuit is playing out even as the Biden administration is moving toward updating its social cost estimates, which are currently about $51 per metric ton for carbon. The Trump administration had dropped the value as low as $1 per metric ton, making it more difficult for agencies to justify the cost of robust climate regulations.
Meanwhile, in the 8th Circuit, Missouri Attorney General Eric Schmitt (R) has asked for a rehearing of his challenge to the social cost estimate. Like the 5th Circuit, the 8th Circuit had found Missouri and the other red-state challengers had not shown they had been harmed by the Biden administration’s use of the social cost of greenhouse gases (Greenwire, Dec. 6).
If the appeals court rejects the rehearing request, Missouri could then petition the Supreme Court to take up the issue.
Lease Sale 257
Through the landmark Inflation Reduction Act, Congress reinstated a massive offshore oil and gas lease sale in the Gulf of Mexico, but legal observers are watching to see whether a federal appeals court throws a wrench in plans for Lease Sale 257’s revival.
Environmental groups are urging the U.S. Court of Appeals for the District of Columbia Circuit to still decide whether a lower bench properly blocked the lease sale from moving forward after the Bureau of Ocean Energy Management accepted bids in November 2021.
The U.S. District Court for the District of Columbia ruled in January that the agency violated the National Environmental Policy Act by failing to account for foreign oil consumption in its analysis of the sale. The court ordered BOEM to complete a new analysis and halted the offshore sale.
Friends of the Earth and other environmental groups argued in a November court filing that Congress’ climate bill did not override BOEM’s obligation to comply with NEPA, and therefore the D.C. Circuit could still issue a ruling to uphold the blocked sale (Energywire, Nov. 30).
The Biden administration, along with Louisiana and the American Petroleum Institute, say that the case should be dismissed because Congress’ legislation required BOEM to proceed with the sale.
In California, the fossil fuel industry is fighting to resume unconventional offshore drilling in a section of the Pacific Ocean known as the “Galápagos of North America” after a federal appeals court upheld a ban on the practice.
The 9th U.S. Circuit Court of Appeals in June ordered BOEM to conduct a new in-depth NEPA review of the impacts of well stimulation treatments, such as fracking, acid fracturing and matrix acidizing (Energywire, June 6)
The fossil fuel industry argued that the use of these practices is important for accessing oil “where conventional drilling treatments would be less successful.”
On Dec. 19, the Supreme Court granted a request from API, Exxon Mobil Corp. and offshore energy company DCOR LLC for a 30-day extension to file a petition, giving them until Jan. 25 to ask the justices to overturn the 9th Circuit ruling.
The Environmental Defense Center and other green groups had warned the 9th Circuit that the risk of oil spills from the well stimulation treatments could harm threatened and endangered species, including the western snowy plover, the California least tern and the southern sea otter.
Public lands leasing
Wyoming will be a battleground in the coming year for key legal fights over how much fossil fuel leasing will continue on public lands.
Oil and gas trade groups are pushing the Biden administration to continue regular lease sales, while environmental groups are calling for an end to new fossil fuel projects that they warn will be detrimental to a rapidly warming climate.
The administration has walked a careful line between defending its discretion to delay or cancel lease sales, even as it has continued to make public lands available for oil and gas development.
One recent lawsuit from the Western Energy Alliance and the Petroleum Association of Wyoming is pushing for the Bureau of Land Management to resume regular lease sales in the Equality State.
A federal judge in Louisiana had overturned the administration’s temporary pause on new oil and gas leasing on public lands, but the trade groups warned that BLM was still not fully complying with the law when it did not offer a third-quarter lease sale in the state. The challengers argued that the agency is obligated under the Mineral Leasing Act to offer lease sales when there is an expressed interest from fossil fuel companies.
The suit follows other litigation from Wyoming Attorney General Bridget Hill (R), who is challenging canceled second- and third-quarter lease sales in Wyoming in 2021 (Energywire, Dec. 7).
Meanwhile, the Powder River Basin Resource Council and the Western Watersheds Project filed an amended complaint in December challenging BLM’s Trump-era approval of 5,000 new oil and gas wells in Wyoming. The Converse County oil and gas project was the “capstone of the prior administration’s push for ‘energy dominance’ in public lands management,” the groups wrote in their complaint to the D.C. District Court (Energywire, Sept. 9).
BLM has continued to approve permits for wells as part of this “unprecedented development,” despite the Biden administration’s commitments to address emissions, the environmental groups said.
Mountain Valley pipeline
The highly contested Mountain Valley natural gas project could see further delays in 2023 as a federal appeals court weighs in on water permits for the nearly completed 304-mile pipeline from West Virginia to Virginia.
At the same time, Congress could revive permitting reform efforts led by West Virginia Sen. Joe Manchin (D) that could reinstate approvals for the pipeline that have already been struck down by federal judges.
The 4th U.S. Circuit Court of Appeals will hear oral arguments Jan. 24 on the Virginia Water Control Board’s certification that Mountain Valley’s water crossings comply with state standards.
The Sierra Club and other environmental challengers are arguing that the board should have considered alternative crossing locations and less damaging methods for constructing the pipeline. The groups are also questioning whether Virginia regulators followed state water quality requirements.
The hearing will be the latest legal challenge to the pipeline in the 4th Circuit.
The court has also yet to rule on whether the West Virginia Department of Environmental Protection did enough to protect waterways from sedimentation when it approved construction of the pipeline in the state. A three-judge panel appeared poised to reject that approval during oral arguments in October, and a decision is expected in 2023.
Mountain Valley has already faced a series of adverse rulings in 2022 from the 4th Circuit, which axed key federal permits for the project from BLM, the Forest Service, and the Fish and Wildlife Service.
The agencies are working on addressing the court’s concerns, and FWS recently stated that it will continue interagency consultation under the Endangered Species Act until Feb. 10.
The resulting delays and cost overruns have prompted speculation that the Mountain Valley pipeline could be canceled. The project’s plight inspired an unsuccessful effort led by Manchin to pass a bill that would restore the rejected approvals and shift how courts handle federal permit cases.
Permitting reform was ultimately not included as an amendment to the National Defense Authorization Act but could be introduced again in the next Congress.
Pennsylvania Sen. Pat Toomey (R) has also introduced legislation aimed at streamlining permitting by limiting requirements under NEPA and other key statutes.
Utility wholesale markets
A handful of court cases concerning the practices of electric utilities could affect everything from who builds high-voltage transmission lines to the pace of clean energy deployment in the eastern United States.
Perhaps the most high-profile case pertains to a former grid rule in PJM setting an artificial price floor for state-subsidized energy generators — like wind, solar and nuclear power plants — in the wholesale power market. A regional transmission organization, PJM oversees the grid in much of the mid-Atlantic and parts of the Midwest.
In 2021, a proposal from PJM removing the price floor — which critics saw as an unnecessary impediment to renewable energy — went into effect following a split vote among FERC commissioners. But energy generators in PJM are asking the 3rd U.S. Circuit Court of Appeals to overturn the FERC decision so that the price rule stays in place.
Separately, the D.C. Circuit is considering a challenge to a new, utility-run energy trading platform in the South called the Southeast Energy Exchange Market. Renewable energy trade groups say that the market platform would lock out independent energy generators and that it lacks independent oversight.
Outside of the Beltway, the Iowa Supreme Court will rule in 2023 on a challenge to a state law giving utilities first dibs to build high-voltage transmission lines. Although it’s specific to the Hawkeye State, the outcome of the case could affect major transmission projects proposed by the Midwest grid operator — known as the Midcontinent Independent System Operator — to integrate more clean energy into the regional grid, said Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program.
“The broader implication is for these long-term transmission projects,” Peskoe said.
The biggest Supreme Court energy ruling of 2022 — West Virginia v. EPA — is expected to affect litigation involving the oil industry, power sector and climate change in 2023 and beyond.
A pair of proposed rules from the Securities and Exchange Commission requiring some companies to disclose emissions data and their climate targets could be among the first issues to test the boundaries of the version of the “major questions” doctrine the justices used to overturn the Clean Power Plan in West Virginia (Climatewire, July 7).
The SEC is expected to finalize the disclosure rule in the first quarter of 2023, and Vizcarra said she expects immediate challenges.
West Virginia Attorney General Patrick Morrisey (R) cited the disclosure rule as a top target the same day the Supreme Court decided West Virginia, which curbed EPA’s authority to regulate carbon emissions from power plants.
Justices in the majority said the Obama-era Clean Power Plan violated the major questions doctrine, which says Congress must clearly authorize federal agencies to regulate matters of “vast economic and political significance.”
The SEC proposal, Morrisey said, likely falls “into the major questions category where the Biden administration is trying to transform all these agencies … into environmental regulators.”
Morrisey and 20 other Republican attorneys general are also targeting an SEC proposal that would require firms to prove that investments that purport to be green or socially aware live up to those claims (Climatewire, May 26).
In formal comments filed with the agency, the 21 state attorneys said in August that the SEC was trying to transform itself from the federal overseer of securities “into the regulator of broader social ills.”
“The SEC is tackling a major question, but Congress has not given it the clear go-ahead to do so,” the attorneys general wrote to the agency. “Nothing in the relevant statutes constitutes a clear statement of authority for the Commission.”
Reporters Miranda Willson and Lesley Clark contributed.