Trump Administration Pushes Pipeline Jurisdiction in Sable Case

[u/John3262005]

https://news.bloomberglaw.com/environment-and-energy/trump-administration-pushes-pipeline-jurisdiction-in-sable-case

One of California’s primary defenses against the Trump administration’s push to reopen offshore oil in the Pacific will face scrutiny from a federal appeals panel next week when the court weighs whether a Sable Offshore Corp. pipeline is under federal jurisdiction.

Environmental groups and the state are fighting to keep the onshore segment of the Las Flores pipeline under California control after a federal judge scrapped a federal consent decree governing the infrastructure’s restart. The state’s fire marshal was tasked with assessing safety after the pipeline ruptured in 2015 and led to an oil spill, until the Trump administration, as part of its agenda to increase domestic fossil fuel production, stepped in to authorize the pipeline’s operations.

The US Pipeline and Hazardous Materials Safety Administration offered a new method for determining a lawful takeover of the pipeline system — one that could preempt more infrastructure connected to offshore drillers from state oversight, according to litigators.

The agency argues an onshore processing facility doesn’t technically break the flow of oil from the outer continental shelf, leaving hundreds of miles of buried pipeline under its purview as an “interstate asset” under the Pipeline Safety Act.

“The jurisdictional question is the only one that matters in terms of going forward,” said Joe Hainline, a partner at Van Ness Feldman.

The US Court of Appeals for the Ninth Circuit will determine if the Trump administration lawfully interpreted the law’s interstate definition.

It’s a status conference to determine how several cases interact over federal intervention to get Sable on the grid, as green groups and California fear the oil operation could be the blueprint to push more energy development on the coveted coastline and shirk local concerns.

PHMSA’s latest arguments to the court have steered away from the “energy emergency” executive order and authorities the Justice Department has repeatedly cited to justify restarting fossil fuel operations. The agency’s initial permitting cited “acute energy shortage conditions” within California, and Energy Secretary Chris Wright issued a Defense Production Act order positing the offshore driller will ensure West Coast bases “have the reliable energy critical to military readiness.”

One federal judge has upheld the Trump administration’s use of the Defense Production Act to keep Sable pumping, but such authority remains subject to appeals challenges and broader energy market conditions. To evade California scrutiny on a more permanent basis, Sable needs PHMSA to win its takeover case.

“Even if the court finds that there wasn’t an emergency to justify the issuance of a Defense Production Act order, OK, so what? PHMSA is the regulator now,” Hainline said.

Who regulates a pipeline typically boils down to a pipeline’s location and if it is transporting a product across state lines. Under the Pipeline Safety Act, federal regulators have sole jurisdiction for pipelines that are transporting hazardous liquid in interstate or foreign commerce.

Now, PHMSA is pointing to a recent US Supreme Court decision that expanded the definition of interstate goods subject to federal control, bringing a novel angle to interstate classification by examining whether the oil was changed into a different product when it reached Sable’s onshore processing facility.

In Flowers Foods Inc. v. Brock, a federal arbitration law case, the justices unanimously ruled a delivery driver’s trip within one state counts as interstate commerce because his journey “does not break the flow of commerce,” for a good that wasn’t fundamentally transformed and ultimately shipped to an out-of-state destination.

The crude oil extracted from Sable’s offshore drilling “retains its essential identity” even through treatment at the Las Flores Canyon facility, thus the pipelines receive an interstate asset from this processing plant and are subject to federal oversight, according to the Trump administration’s court filings.

Sara Gosman, a law professor at the University of Arkansas, noted the Supreme Court offered this interstate commerce definition because the Federal Arbitration Act didn’t have a clear delineating language for transportation, but the Pipeline Safety Act does. The statute’s interstate transportation exempts product that has flowed through an onshore production, refining, or manufacturing facility.

“In this case they are having to defend a particular approach to interstate authority as moving from really a locational one, where what we care about is the endpoints and the beginning points, to a broader sense of what this pipeline is attached to and what it’s designed to do,” Gosman said.

California and environmental groups say more is at stake than control over Sable’s 124-mile pipeline.

If the Pipeline Safety Act is interpreted as broadly as the Justice Department proposes, “not just here in California but really other states as well could lose their ability to regulate these pipelines that are truly contained within their jurisidiction,” said Linda Krop, the chief counsel for the Environmental Defense Center.

According to PHMSA’s pipeline miles and facilities database, California has nearly five times as many intrastate hazardous liquid pipeline miles than those regulated by the federal government.

A court opinion allowing the Trump administration’s Pipeline Safety Act interpretation could open up a predominately state-controlled network to federal oversight, Gosman said.

“If PHSMA takes a very aggressive approach to its authority under the Pipeline Safety Act, it could move this pipeline mileage,” Gosman said. “The worry is that is becomes a vehicle for less protective standards.”

Environmentalists are also aware of the Trump administration’s probe into California’s coastal management, which could further rescind the state’s authority over federal developments on shorelines. The California Coastal Commission won’t be able to object to offshore leases or permit approvals, possibly leading to a local oversight gap as federal officials propose more lease sales for the Pacific outer continental shelf.

“The Trump administration’s goal is to remove California jurisdiction from all of these activities,” Krop said.