Looking to 2021 After the Election (Part 2)

What’s the issue?

With most of the results in for the 2020 election, we can begin to look forward to what the election may mean for the energy industry in 2021.

Why does it matter?

Changes in the composition of the Supreme Court, changes in control at FERC and the White House, and a possible change in control of the Senate, could put a number of issues critical to the energy industry into flux for 2021 and beyond.

What’s our view?

On Wednesday we looked at what a Democratic-led FERC may mean for pipeline projects and how a Biden administration working with a closely divided Senate, even one under Republican control, could repeal a number of recently enacted regulations of the Trump administration.

Today we look at the threat a Biden administration poses to Keystone XL, DAPL and MVP, and how a new 6-3 conservative majority at the Supreme Court may act as ballast to any changes sought in the executive and legislative branches.

The results of the 2020 election would indicate that we will have a change in the control of FERC and the White House, continued Democratic control of the House and a closely divided Senate, the control of which will likely not be decided until January runoffs in Georgia. However, the confirmation of Justice Amy Coney Barrett to the Supreme Court, just prior to the election, has created a 6-3 conservative majority which could act as a counterweight to any extreme measures taken by an empowered Democratic-led executive branch.

On Wednesday, we began our look at the big picture for the energy industry by considering what a change in control at FERC may mean, and how a closely divided Senate, even one under Republican control, could cooperate with the Biden administration to repeal a number of recently enacted regulations of the Trump administration. In part two, today, we look at how the Biden administration could be a threat to Keystone XL and DAPL, but a potential benefit to MVP, and conclude with how a newly constituted 6-3 conservative majority on the Supreme Court may constrain extreme actions by the new administration.

Biden Administration Will Now Review Aspects of Keystone XL, DAPL and Possibly MVP

As we discussed in Would Electing Biden Doom the U.S. Oil and Gas Industry?, candidate Biden was walking a fine line in trying to appease the left wing of his party while not alienating key swing voters in states like Pennsylvania and among unionized labor, who tend to work in the heavy industries that could be impacted by an overly aggressive environmental agenda. However, his campaign did indicate that he would rescind the Trump administration’s permit authorizing the Keystone XL pipeline. Therefore, we would fully expect that to happen.

As we noted in Litigation Update: Dakota Access and Water Quality Certificate, the Dakota Access Pipeline could also be under threat by a change in administration if it is not successful in convincing the appellate court to reverse the lower court decision requiring the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS). The USACE has indicated it does not anticipate completing that EIS until late in 2021. As we concluded, a Biden-run USACE may take longer to complete the EIS and may actually conclude that the easement should not be granted. Thus, the change in administration increases the risk to the continued operation of that pipeline.

Finally, the Mountain Valley Pipeline (MVP) project has received two key permits from the Trump administration, but still needs a critical one to cross the Jefferson National Forest. That last permit is currently being reviewed by the U.S. Forest Service (USFS) which prepared a Supplemental EIS, which is subject to a comment period that ended on Monday of this week. The USFS may be able to complete its review by January 20, 2021 but the project may be benefited by a delay if the permit is ultimately issued by a Biden-run USFS. That is because, as we have noted before, the key risk for the project is convincing the U.S. Court of Appeals for the Fourth Circuit that the executive branch has conducted an adequate review of the project. Just this week, the panel of that court that has heard appeals concerning the project granted another stay with regard to the project’s verification under Nationwide Permit 12. This decision appears consistent with its past skepticism of the diligence by the Trump administration, but the same permit issued by the Biden administration may be able to get approval from the court.

Supreme Court Review

The confirmation of Justice Amy Coney Barrett to the Supreme Court, just prior to the election, has created a 6-3 conservative majority and may greatly reduce the ability of Chief Justice Roberts to shape the outcome of cases before the court. Roberts has been praised (or criticized, depending on one’s perspective) for being an institutionalist, one who votes strategically, often in ways that moderate the extreme views of his fellow justices, and in ways that seek, in his view, to preserve the legitimacy of the Court. Now, however, if the other five conservative justices, Justices Thomas, Alito, Gorsuch, Kavanaugh and Barrett, vote together, the Chief Justice’s vote will be unnecessary, and his importance on the Court may sink to a low ebb.

In the October 2019 term, the Chief Justice voted with the majority in 96% of the cases decided during the term — often voting with the other four conservatives, but occasionally voting with the four liberal justices — and was in the majority more than any other justice.

What is clear now, though, is that adding a sixth conservative justice has decidedly moved the Court to the right, and the Court may now revisit some issues that Chief Justice Roberts, perhaps wisely, managed to avoid. Many of these are constitutional questions and unlikely to impact the energy industry, such as issues as diverse as individual religious rights, gun control, reproductive rights and affirmative action. But a large portion of the court’s docket each year is filled with statutory and regulatory interpretation questions.

Decisions by the Supreme Court interpreting the language of a statute can be overturned by the legislative and executive branch if they agree that the Supreme Court’s interpretation is incorrect. However, a conservative Supreme Court combined with a deadlocked Congress, should Republicans maintain control of the Senate, could act as a brake on novel interpretations of Congressional intent under previous statutes. In addition, a more conservative court could also revisit past decisions, as well. For instance, in 2007, the Supreme Court found that the “capacious” language of the Clean Air Act essentially required the EPA to regulate greenhouse gases. That statutory interpretation case was decided by a bare 5-4 majority with Justices Stevens, Kennedy, Souter, Ginsburg, and Breyer in the majority and Chief Justice Roberts and Justices Scalia, Thomas, and Alito in dissent. Only one member of that majority remains on the court, but all of the dissenters other than Justice Scalia are still there. A challenge by Republican attorneys general of EPA greenhouse gas regulations or an appeal of a FERC decision requiring mitigation of greenhouse gas impacts could find a much more receptive court today than in 2007. Chief Justice Roberts’s main point in his dissent in that case, was that the decision to regulate greenhouse gases is “the function of Congress and the Chief Executive, not the federal courts.”

There is also one case currently pending at the Supreme Court and two that may be on their way there that could be influenced by the new conservative majority.

The case currently pending is the PennEast Pipeline appeal that we last discussed in After the Forest Fire, the Small Trees Thrive – New Project Opportunities. The Supreme Court has asked the Solicitor General to provide a view on whether the court should hear the appeal of the appellate court decision that prohibited PennEast from condemning state-owned land for its project. The Solicitor General has yet to weigh in and that opinion will now likely be provided by President Biden’s Solicitor General. As we have indicated before, conservative justices may actually agree with the appellate court decision because it protects states’ rights. So, interestingly, the more conservative court may be a problem for PennEast.

The first case that could find its way to the court is the appeal of the district court decision regarding Dakota Access that we last discussed in Litigation Update: Dakota Access and Water Quality Certificate. We expect a decision in that case by the end of the first quarter in 2021 and if DAPL loses, we would certainly expect an appeal to the Supreme Court. As we discussed on Wednesday, the risk of a shutdown of the pipeline has grown with a Biden administration, so DAPL’s best hope is to win its appeal. Therefore, it will undoubtedly appeal any adverse decision to the Supreme Court, and may very well find support for its position among the six conservative justices.

The second case that may be appealed to the Supreme Court is the challenge to the use of Nationwide Permit 12 by Keystone XL. That case may be mooted if President Biden rescinds the presidential permit for the project. But if he does not, we expect the appellate court in that case to rule on the appeal in the second quarter of next year. If Keystone XL were to lose, we fully expect it to appeal to the Supreme Court, where, like DAPL, it may find a more favorable venue with the new six-member majority.