GO-WV

(By Robert Stonestreet)

What does the West Virginia oil and gas industry have in common with freshwater mussels, how the federal government chooses to define the term “habitat,” and drilling activity on federal lands in the west?  Quite a bit, actually.  As explained below, recent developments on each of these topics intersect with the regulatory programs that govern oil and gas operations in West Virginia.

WVDNR Mussel Guidance

On June 23, 2022, the West Virginia Division of Natural Resources (WVDNR) published final guidance reflecting the agency’s recommendations for other state and federal government agencies to consider when issuing environmental permits authorizing activities that may impact freshwater mussels.  Why does this matter to the West Virginia oil and gas industry?  Because the guidance hopefully resolves a long running effort to address what some viewed as improper efforts by the WVDNR to directly regulate oil and gas operations.

In addition to various permits required by the West Virginia Department of Environmental Protection (WVDEP) and the United States Army Corps of Engineers (Corps) for activities that impact certain streams, operators are required to obtain a “right of entry” permit from the WVDNR before any disturbance may take place in or under certain size streams.  This permit stems from the State of West Virginia’s claim to own the stream bed of certain waterways.  Activities requiring a “right of entry” permit include installation of equipment to withdraw water for use in well completion or other activities.

Several years ago, WVDNR began attempting to impose conditions in “right of entry” permits that would regulate the design of certain stream crossings and impose restrictions on when and how much water could be withdrawn from a stream.  These conditions were intended to minimize impacts on freshwater mussels, including those protected under the Endangered Species Act.  After much discussion and negotiation between the agency and industry representatives concerning the propriety of such conditions, WVDNR agreed to publish either regulations or guidance on how to address freshwater mussels in the permitting process.  Following a comment period on draft guidance published in the summer of 2021, WVNDR published the final guidance on June 23, 2022.  In that document, WVDNR makes a number of recommendations for other agencies, such as WVDEP and the Corps, to consider during the consultation and coordination process associated with applications for environmental permits governing projects that may impact freshwater mussels.  For example, WVDNR encourages the use of construction methods that minimize mussel impacts and recommends selection of project locations that avoid mussel populations.  The guidance also speaks directly to horizontal directional drilling activities used to bore underneath streams rather than trenching through them.  WVDNR also sets forth specific recommendations to restrict water withdrawals under certain stream conditions.

In addition to the guidance on the consultation process, WVDNR also revised its existing protocol to be followed by licensed divers when performing a stream bed survey to ascertain the presence and concentration of freshwater mussels.  The survey protocol is a rather technical document that lays out the agency’s views on how and where mussel surveys should be conducted in large streams, such as the Ohio and Kanawha Rivers, as well as proposed restrictions on instream dredging or construction activities depending on the results of a mussel survey.  Those working in or around streams that serve as habitat for freshwater mussel populations should consult the guidance, which can be downloaded from the WVDNR’s website: https://wvdnr.gov/plants-ani-mals/freshwater-mussels/.

Service Rescinds Definition of “Habitat”

Speaking of habitat, the United States Fish & Wildlife Service (Service) recently vacated the regulatory definition of the term “habitat” under the federal Endangered Species Act.  Why is this relevant to oil and gas operators in West Virginia?  This change could lead to areas in West Virginia being designated as “critical habitat” for a threatened or endangered species even if the species could not survive there, which would likely preclude development activities on or near those areas.

The Endangered Species Act precludes federal agencies from taking actions, including issuance of permits, that may adversely modify areas designated as “critical habitat” for species listed under the Act as “threatened” or “endangered.”  The Act defines the term “critical habitat” to generally mean areas designated as essential to preserve or promote recovery of protected species regardless of whether the species is actually present in the area.  The term “habitat,” however, was not itself defined in the Act or regulations until January, 2021 when a regulation published by the Service in December, 2020 became effective. (85 Fed. Reg. 81411).  That regulation was in response to litigation challenging a “critical habitat” designation by the Service of an area where the relevant species could not survive under current conditions, which went all the way up to the United States Supreme Court.  Weyerhaeuser Co. v. United States Fish and Wildlife Service, 139 S. Ct. 361 (2018).  In making the designation, the Service reasoned that the area was once occupied by the species, and certain modifications could be made in the future that would allow the species to return to the area.  The property owner challenged the designation arguing that an area could serve as “critical habitat” for a species if the area could not support the species as it exists – i.e. serve as “habitat” as that word is commonly understood.  Both the district court and the court of appeals ruled that an area did not have to be “habitat” (as commonly understood) to meet the statutory definition of “critical habitat.”  A unanimous Supreme Court disagreed and remanded the case with instructions to the lower court to make a determination of whether the subject area would qualify as “habitat” for the relevant species.

In response to the Weyerhauser decision, the Service undertook a rulemaking effort to specifically define “habitat” for purposes of making

“critical habitat” designations under the Endangered Species Act.  After a lengthy comment period, the Service ultimately defined “habitat” as follows: “the abiotic and biotic setting that currently or periodically contains the resources and conditions necessary to support one or more life processes of a species.”  Said another way, habitat means the conditions that presently or sometimes will support one facet of a listed species’ life processes (feeding, breeding, etc.).  Under this definition, the Service could likely not designate an area as “critical habitat” unless the relevant species could survive in that area as it presently exists.

Immediately upon taking power, the Biden administration announced plans to evaluate a number of regulations promulgated during the prior administration, including those implementing the Endangered Species Act.  In October, 2021, the Service proposed to rescind the regulation defining “habitat” and did so on June 24, 2022 (87 Fed. Reg. 37757).  In the rulemaking, the Service readily acknowledged that “we are changing our position on some aspects of the rationale underpinning the definition’s adoption[.]”  The current leadership of the Service determined that the regulatory definition of “habitat” adopted in early 2021 is “inconsistent with the conservation purposes of the Act” because it restricts the Service’s ability to designate certain areas as critical habitat – i.e. those areas where a species could not presently survive.  According to the rulemaking announcement, rescinding the “habitat” definition will allow the Service “to designate unoccupied areas as critical habitat if those areas fit within any reasonable biological understanding of ‘habitat’ as established by the best available scientific data for a particular species, and if such areas are essential for the recovery of the species.”  In other words, the Service should have more discretion in determining what qualifies as “habitat” when making critical habitat designations.  This discretion is exactly what led to the critical habitat designation successfully challenged in the Weyerhauser case.  The bottom line is that the Service has returned to the regulatory framework applied by the Service to designate an area where a protected species could not survive as critical habitat for that species.  Couple this with ongoing efforts to list more and more species for protection under the Endangered Species Act, property owners and project developers should be concerned.

Cumulative impact of federal drilling permits on endangered species

In addition to potential impacts on critical habitat, the Endangered Species Act also requires federal agencies to consult with the Service to determine whether a proposed project may adversely affect listed species.  Two anti-industry organizations have sued the United States Department of Interior and United States Bureau of Land Management challenging over 3,500 drilling permits issued for federal lands in New Mexico and Wyoming on the grounds that the agencies failed to consider the impacts of climate change and therefore impacts on certain endangered species. Center for Biological Diversity v. United States Department of Interior, No. 1:22-cv-01716 (D. D.C. June 15, 2022).  Why should oil and gas industry in West Virginia care about this?  Because the arguments advanced to challenge those permits also apply to environmental permits often needed for oil and gas operations in West Virginia.

The groups who filed the lawsuit allege that the federal agencies failed to consult with the Service prior to issuing the permits concerning the cumulative impacts of all the approvals on climate change and associated effects on “climate-imperiled” species listed for protection under the Endangered Species Act.  According to the complaint, climate change is a primary driver for the decline of approximately 150 species.  The complaint further alleges failure to consider the cumulative effects of the permits violates the National Environmental Policy Act (NEPA) and the Federal Land Policy and Management Act.  The groups ask the court to vacate all the drilling permits and prohibit the agencies from approving any additional drilling permits until they have “fully complied” with the cited statutes.

Those in West Virginia should be concerned with this challenge for several reasons.  First, while there is not much drilling on federal lands in the state, federal Clean Water Act section 404 “dredge and fill” permits are often required to build roads and pipelines associated with oil and gas development in the state.  These permits, issued by the Corps, are subject to the consultation process under the Endangered Species Act.  One of the same groups suing to vacate the federal drilling permits has a case pending since May, 2021 in Montana alleging that the Corps failed to adequately consult with the Service prior to issuing the section 404 nationwide permit used for pipelines (known as NWP 12). Center for Biological Diversity v. Spellmon, No. 4:21-cv-00047 (D. Mont.).  A decision on the merits of that challenge could be issued soon.

Second, imposition of a “cumulative effects” analysis could displace a case-by-case evaluation of each individual project.  Deeming a certain category of projects to be detrimental to climate change, and thus harmful to “climate-imperiled” species, could preclude approval of all permits for individual projects in that category.

Third, the incremental impact of one or more projects, or even a category of projects, on climate change, much less individual species, is difficult if not impossible to ascertain.  Are bureaucrats at the Service qualified to make such decisions?  Should they be making policy judgments about the net effect of a natural gas development project on climate change?

Fourth, the Service recently published a proposed rule to further expand its authority under the Endangered Species Act.  On June 7, 2022, the Service published a proposal to revise its regulations to authorize the agency to create populations of threatened or endangered species in areas where those species have never been known to exist. (87 Fed. Reg. 34625).  Historically, the agency has authority to re-introduce listed species into geographic areas within the species probable historical range, which are known as “experimental populations.”  In other words, if the agency has evidence that a listed species once existed in an area, the Service can release the species to that area in an attempt to re-establish a population.  The Service now seeks to expand the scope of eligible geographic areas to include locations outside of the species’ known historical range.  The Service cites the impact of climate change on species and their habitats as justification for the proposed rule change.  Under the proposed revised regulation, property owners and developers could face significant delays, or even outright cancellation, of projects in areas where the Service has chosen to attempt to establish a population of listed species that never before existed there. Comments on the proposed rule are due by August 8, 2022.

Conclusion

State and federal actions addressing wildlife management, especially under the Endangered Species Act, continue to pose challenges for the oil and gas industry.  Operators would be wise to monitor regulatory and litigation developments, and to engage their consultants and attorneys early in the planning process to address anticipated issues arising under the Act.

Click here, to view the article online in the July issue of Go-WV News.

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