Earlier this week I
was asked
on TWITTER® to comment on
an
article published at Marcellus Drilling News about lawsuits that had been
filed to stop the implementation of the LNG by rail final rule that
was
published by the DOT’s Pipeline and Hazardous Material Administration
(PHMSA) last month. I am taking this time to expand on by TWEETS.
Lawsuits
The article mentioned above briefly describes the lawsuit
filed by fourteen State Attorneys General and Washington, DC to block the rule.
A
less
polarized article on the same subject can be found on TheHill.com.
According to
the
brief filed Tuesday, “State Petitioners seek a determination by this Court
pursuant to the Administrative Procedure Act, 5 U.S.C. § 706, the Hazardous
Materials Transportation Act, 49 U.S.C. § 5101 et seq., and the National
Environmental Policy Act, 42 U.S.C. § 4321 et seq., that the rule is unlawful
and therefore must be vacated.” The actual reasoning and facts supporting that
claim of the ‘unlawful’ nature of the rulemaking will be submitted to the Court
is subsequent documents and proceedings.
The article on TheHill.com, in reference to an unlinked
statement by the AG’s noted that they “plan to argue that the PHMSA failed to
evaluate the rule’s environmental impacts and that the rule does not contain enough
safety requirements.”
Environmental Impact
The environmental impact complaints center around the fact
that PHMSA, in the preamble to the final rule stated that:
“PHMSA has completed its NEPA [National
Environmental Policy Act of 1969] analysis. Based on the environmental
assessment, PHMSA determined that an environmental impact statement is not
required for this rulemaking because it does not constitute an action meeting
the criteria that normally requires the preparation of an environmental impact
statement. As explained in the
final
EA [environmental assessment; .PDF download link added], PHMSA has found
that the selected action will not have a significant impact on the human
environment in accordance with Section 102(2) of NEPA.”
While the EA goes into lengthy details about the safety
related issues for a release of methane during an LNG railcar incident, it only
briefly discusses (pg 35) the long-term environmental hazards associated with
the release of methane, a potent greenhouse gas. PHMSA concludes by stating:
“PHMSA contends that these economic and practical unknowns create compounded
uncertainties that would not be clarified through the preparation of an
environmental impact statement.” This failure to prepare an EIS will certainly
be addressed in the lawsuit.
Safety Issues
As noted above, PHMSA includes a lengthy discussion of LNG
related safety issues in the EA. And the preamble to the final rule provides
discussions about
comments received about the notice of proposed rulemaking with regards to
emergency planning. PHMSA concluded that they have adequately addressed safety
issues related to the rail transportation of liquified natural gas.
The AG’s will certainly argue that adequacy determination,
particularly where it concerns ongoing safety testing be conducted by PHMS and
the Federal Railroad Administration (FRA). I noted in
one
of my posts on the NPRM comments that there were four studies underway when
the NPRM was issued:
• Puncture resistance testing for
DOT 113C120W railcars;
• Pool fire testing for DOT
113C120W railcars;
• FRA testing of an alternative
‘LNG tender’ design; and
• FRA testing of an alternative ISO
tank design;
The first test in the list was discussed in the safety
assessment I described in the EA. The others have not been mentioned and may
not yet be completed. PHMSA would probably maintain that with the improvements
that the final rule mandated for the DOD 113C120W9 rail cars would obviate the
need for waiting for the completion of the other testing.
Political Influence
Neither of the articles mentioned earlier call attention to
the possible political influence exerted by President Trump on PHMSA to adopt
regulations authorizing the rail transportation of LNG.
Paragraph
4(b) of
EO
13868, Promoting Energy Infrastructure and Economic Growth, dated April 10
th,
2019, required DOT to “finalize such [LNG by Rail] rulemaking no later than 13
months after the date of this order.” PHMSA
acknowledged this
requirement in the preamble to the final rule. PHMSA missed the deadline by
slightly more than 2 months.
As the Chief Executive of the United States, it is clearly
within the President’s authority to set priorities for regulatory development
actions of agencies like DOT. This could only be a legal problem if the President
used undue influence to have PHMSA ignore safety information or other
regulatory requirements in adopting this rulemaking. It would be very unlikely
that any court would find that the existence of EO 13868, in and of itself,
constituted undue political influence. This is especially true since DOT went
through a complete publish, comment and review cycle in the development of this
final rule.
Did the EO influence the processing of this rulemaking?
Almost certainly; the turnaround time between the end of the comment period and
the
submission of the final rule to OMB’s Office of Information and Regulatory Review
(OIRA) for approval was extremely short for a rulemaking of this impact (and
that submission was well within the time limit set by the EO). Additionally,
the time for
approval
at OIRA was shorter than normal at less than 60-days. At the very least, DOT
put additional administrative efforts into getting the final rule written,
reviewed and published.
If called upon to defend against a charge of undue political
influence, the Administration can, however, point to the unusual delay between
the OIRA approval of the final rule (June 18th, 2020) and the actual
publication of the final rule (July 24th, 2020) in the Federal
Register over a month later. It would be argued that the Administration
conducted additional reviews of the rulemaking process to ensure that all of
the ‘i's’ were doted and the ‘t’s’ crossed during the shorter than normal time
between the NPRM and the final rule.
Moving Forward
It is not clear at this point what effect this lawsuit will
have on the start of transportation of liquified natural gas by rail. I think
that the best that the plaintiff’s attorneys really hope for is a stay of the
effective date of the regulation pending review in the courts. If that stay can
be put into place through the first quarter of 2021, the whole lawsuit will
probably be moot. I suspect that a Democratic Congress and a President Biden will
overturn the rulemaking by legislative action, much as we saw the Republicans do
in so many instances in the first two years of the Trump Administration.
I suspect that the simple act of initiating the lawsuit has
achieved the objective of the plaintiffs, stopping the large-scale shipment of
LNG by rail. Since there are no DOT 113C120W9 railcars in existence, and no
other railcar is authorized by this rulemaking, LNG shippers will have to place
orders for a large number of railcars and begin construction of LNG liquefaction
facilities. These are both long-lead time, high-expense activities. Few
shippers can be expected to put this much money on the line with the very real
possibility that their shipping authorization will disappear before the facilities
and railcars can be delivered.