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Indigenous Environmental Network v. United States Department of State

United States District Court, D. Montana, Great Falls Division

November 8, 2018

INDIGENOUS ENVIRONMENTAL NETWORK and NORTH COAST RIVER ALLIANCE, and NORTHERN PLAINS RESOURCE COUNCIL, et al., Plaintiffs,
v.
UNITED STATES DEPARTMENT OF STATE, et al., Defendants and TRANSCANADA KEYSTONE PIPELINE and TRANSCANADA CORPORATION, Defendant-Intervenors.

          ORDER

          BRIAN MORRIS UNITED STATES DISTRICT COURT JUDGE

         Plaintiffs Indigenous Environmental Network and Northern Plains Resource Council (collectively “Plaintiffs”) bring this action against the United States Department of State (“the Department”) and various other governmental agencies and agents in their official capacities. Plaintiffs allege that the Department violated the Administrative Procedure Act (“APA”), the National Environmental Policy Act (“NEPA”), and the Endangered Species Act (“ESA”) when it published its Record of Decision (“ROD”) and National Interest Determination (“NID”) and issued the accompanying Presidential Permit to allow defendant-intervenor TransCanada Keystone Pipeline, LP (“TransCanada”) to construct a cross-border oil pipeline known as Keystone XL (“Keystone”). Plaintiffs have moved for summary judgment. (Docs. 139 & 145.) The Department and TransCanada (collectively “Defendants”) have filed cross motions for summary judgment. (Docs. 170 & 172.)

         BACKGROUND

         The Court detailed the background of this case in its Order regarding the Department's and TransCanada's Motion to Dismiss for Lack of Jurisdiction. (Doc. 99.) The Court will only recite those facts that have arisen since its Partial Order on Summary Judgment Regarding NEPA Compliance. (“Partial Order”) (Doc. 210.)

         The Court directed the Department, in its Partial Order, to supplement the 2014 final supplemental EIS (“2014 SEIS”) to consider the Mainline Alternative route as approved by the Nebraska Public Service Commission. (Doc. 210 at 12.) The Court declined, however, to vacate the Presidential Permit. The Court instead ordered the Department to file a proposed schedule to supplement the 2014 SEIS in a manner allowing appropriate review before TransCanada's planned construction activities. Id.

         The Department published the Notice of Intent to Prepare a SEIS in the Federal Register on September 17, 2018. 83 Fed. Reg. 46, 989 (Sept. 17, 2018). The Department published the Notice of Availability of the Draft SEIS in the Federal Register on September 24, 2018. 83 Fed. Reg. 48, 358 (Sept. 24, 2018). The Court will address each remaining issue in turn.

         LEGAL STANDARD

         A court should grant summary judgment where the movant demonstrates that no genuine dispute exists “as to any material fact” and the movant is “entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment remains appropriate for resolving a challenge to a federal agency's actions when review will be based primarily on the administrative record. Pit River Tribe v. U.S. Forest Serv., 469 F.3d 768, 778 (9th Cir. 2006).

         The APA standard of review governs Plaintiffs' claims. See W. Watersheds Project v. Kraayenbrink, 632 F.3d 472, 481 (9th Cir. 2011); Bennett v. Spear, 520 U.S. 154, 174 (1997). The APA instructs a reviewing court to “hold unlawful and set aside” agency action deemed “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). A rational connection must exist between the facts found and the conclusions made in support of the agency's action. Kraayenbrink, 632 F.3d at 481. The Court reviews the Department's compliance with NEPA and the ESA under the arbitrary and capricious standard pursuant to the APA. See Ctr. for Biological Diversity v. Nat'l Highway Traffic Safety Admin., 538 F.3d 1172, 1194 (9th Cir. 2008).

         DISCUSSION

         I. Did the Department Violate NEPA when it Approved Keystone?

         Plaintiffs first allege that the Department violated NEPA when it approved Keystone. (Doc. 140 at 20.) NEPA serves as the “basic national charter for protection of the environment.” 40 C.F.R. § 1500.1(a). NEPA requires federal agencies to prepare a “detailed statement” for any “major Federal actions significantly affecting the quality of the human environment.” 42 U.S.C. § 4332(2)(C). The agency's detailed statement is known as an environmental impact statement (“EIS”), and must describe the environmental impacts of the proposed action. 42 U.S.C. § 4332(2)(C)(i), (ii).

         The EIS must include a “full and fair discussion” of the effects of the proposed action, including those on the “affected region, the affected interests, and the locality.” 40 C.F.R. §§ 1502.1, 1508.27(a). An agency also may be required to perform a supplemental analysis “if significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts” arise during the NEPA review. 40 C.F.R. § 1502.9(c)(1)(ii). The Court must ensure that the agency has taken a “hard look” at the environmental consequences of its decision. Churchill Cnty. v. Norton, 276 F.3d 1060, 1072 (9th Cir. 2001).

         A. Purpose and Need Statement

         Plaintiffs challenge the reasonableness of the Department's purpose and need statement. (Doc. 146 at 22.) Plaintiffs allege that the Department violated NEPA when it focused the purpose and need narrowly on TransCanada's private interests and improperly restricted the scope of the 2014 SEIS. Id.

         NEPA requires agencies to “briefly specify the underlying purpose and need to which the agency is responding in proposing the alternatives including the proposed action.” 40 C.F.R. § 1502.13. Courts afford agencies “considerable discretion to define the purpose and need of a project.” Westlands Water Dist. v. U.S. Dept. of Interior, 376 F.3d 853, 866 (9th Cir. 2004). NEPA permits an agency to consider the needs and goals of the parties involved in the application. 40 C.F.R. § 1508.18(b)(4). The agency may consider the context of the action proposed, as well as the objectives of the private applicant. Alaska Survival v. Surface Transp. Bd., 705 F.3d 1073, 1085 (9th Cir. 2013). A purpose and need statement will fail, however, if it unreasonably narrows the alternatives in a manner that preordains the outcome. Id. at 1085. The Court's duty requires it to review the purpose and need statement for reasonableness. Westlands Water Dist., 376 F.3d at 866.

         The purpose and need statement reasonably defines both TransCanada's and the Department's purposes. For TransCanada, “the primary purpose of [Keystone] is to provide the infrastructure to transport Western Canadian Sedimentary Basin (“WCSB”) crude oil from the Canadian border, to existing pipeline facilities near Steele City, Nebraska, for onward delivery to Cushing, Oklahoma, and the Texas Gulf Coast area.” DOSKXLDMT0005756. Most of the crude oil ultimately would be delivered to refineries in the Gulf Coast area. Id. TransCanada maintains contractual obligations to transport approximately 555, 000 barrels per day (“bpd”) of WCSB crude oil to the Gulf Coast area. Id. Keystone would serve to fulfill TransCanada's need to meet contractual demand, compete with other transportation options, and to provide refiners a reliable supply of light crude oil from the WCSB and the Bakken. Id. at 5757.

         The Department's purpose stems from the President's authority to require permits for transboundary projects. Executive Order 13, 337 delegates to the Secretary of State (“Secretary”) the authority to receive applications for cross-border permits. 69 Fed. Reg. 25, 299 (April 30, 2004). As part of this delegation, the Secretary must determine if issuance of a permit would serve the national interest. Id. at 25, 300.

         The Department's purpose, therefore, stems from Keystone's crossing of the international border between the United States and Canada. This crossing requires a cross-border permit. DOSKXLDMT0005757. The Department must put forth a ROD approving or denying TransCanada's cross-border permit application. Id. The Department needed to consider Keystone's application and whether it would serve the national interest. Id. The Department reached a national interest determination based on its evaluation of the Keystone's potential environmental, cultural, economic, and other impacts. Id.

         No error exists in the Department's purpose and need statement. The Department possesses broad discretion to define the purpose of its actions. The Department may consider private interests as part of its purpose and need. See Alaska Survival, 705 F.3d at 1085. The Department reasonably stated that it sought to determine whether approval of the permit would serve the national interest. DOSKXLDMT0005757. The Department's purpose and need statement further proves reasonable when it considered both TransCanada's private interests and the Department's own requirements for issuing cross-border permits.

         B. Adequacy of Alternatives

         Plaintiffs next allege that the Department violated NEPA by failing to consider a reasonable range of alternatives in approving Keystone. (Doc. 146 at 24-25.) Plaintiffs allege that the Department unreasonably dismissed alternatives that did not satisfy TransCanada's purpose. Plaintiffs further contend that the Department failed to consider feasible, environmentally beneficial alternatives. Id.

         1. Dismissal of Alternatives

         Plaintiffs allege that the Department only analyzed alternatives that satisfied TransCanada's private needs. Id. at 23-24. NEPA requires that an agency “[r]igorously explore and objectively evaluate all reasonable alternatives, and for alternatives which were eliminated from detailed study, briefly discuss the reasons for their having been eliminated.” 40 C.F.R. § 1502.14. An agency's consideration of alternatives is dictated by the “nature and scope of the proposed action.” Nw. Envtl. Def. Ctr. v. Bonneville Power Admin., 117 F.3d 1520, 1538 (9th Cir. 1997). An agency need not analyze alternatives that do not meet the agency's purpose and need. League of Wilderness Defs.-Blue Mountains Biodiversity Project v. U.S. Forest Serv., 689 F.3d 1060, 1071 (9th Cir. 2012). However, “[t]he existence of reasonable but unexamined alternatives renders an EIS inadequate.” Ctr. for Biological Diversity v. U.S. Dept. of Interior, 623 F.3d 633, 643 (9th Cir. 2010) (quoting Friends of Southeast's Future v. Morrison, 153 F.3d 1059, 1065 (9th Cir. 1998)).

         The Department adequately examined proposed alternatives and reasonably excluded those that did not meet the Project's purpose and need. The factors that the Secretary deemed relevant to the national interest included the following: “foreign policy; energy security; environmental, cultural, and economic impacts; and compliance with applicable law and policy.” DOSKXLDMT0002493. The 2014 SEIS articulated and analyzed the proposed Project and the alternatives. The 2014 SEIS also provided a separate section that detailed the alternatives considered, but excluded from further consideration. Id. at 6082. The Department set forth reasonable explanations for why each excluded alternative did not meet the private needs of TransCanada. Further, the Department explained why it excluded the alternatives due to national interest factors including environmental and cultural resources, or increased spill risk. The Department's analysis of both the private interest of TransCanada and the Department's national interest considerations (i.e. environmental and cultural impacts) proves reasonable in its dismissal of alternatives.

         2. Range of Alternatives

         Plaintiffs next argue that the Department failed to analyze a reasonable range of alternatives because it did not consider more environmentally beneficial alternatives. (Doc. 146 at 24.) The alternatives requirement “is the heart of the environmental impact statement.” 40 C.F.R. § 1502.14. An agency must “[r]igorously explore and objectively evaluate all reasonable alternatives, ” including the “alternative of no action.” 40 C.F.R. § 1502.14(c). The range of alternatives “must be bounded by some notion of feasibility.” Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 551-52 (1978). The Court limits its review of the sufficiency of alternatives to whether the agency considered alternatives “necessary to permit a reasoned choice.” Cal. v. Block, 690 F.2d 753, 767 (9th Cir. 1982).

         The Department set forth four alternatives, including a no action alternative. DOSKXLDMT0005946. Each alternative chosen, including the no action alternative, comports with the Project's underlying purpose and need, as they address both the private interests of TransCanada and the Department's national interest. The 2014 SEIS's comparison of the chosen alternatives also provides the Department with a reasoned choice. See Block, 690 F.2d at 767. Accordingly, the range of alternatives analyzed by the Department proves reasonable.

         3. No Action Alternative

         Plaintiffs next allege that the Department failed to establish a true no action alternative. (Doc. 140 at 26.) NEPA requires a “full and fair discussion” of direct, indirect, and cumulative effects of the proposed action. 40 C.F.R. §§ 1502.1, 1502.16(a), (b), (h), 1508.25(c). NEPA also requires that “all reasonable alternatives” to the proposed action, including no action be addressed. 40 C.F.R. § 1502.14(a), (d). Part of the no action alternative includes consideration of the “predictable actions of others.” 46 Fed. Reg. 18, 026, 18, 027 (Mar. 23, 1981).

         The Department's no action alternative articulates four scenarios that would occur in the absence of the pipeline. The Status Quo Baseline scenario represents the first alternative. “Under the Status Quo Baseline, the proposed Project would not be built.” DOSKXLDMT0006050. Accordingly, the 2014 SEIS concludes that the environmental conditions would remain the same under this scenario. Id. The Department also analyzed three intermodal options including a “Rail/Pipeline Scenario, ” “Rail/Tanker Scenario, ” and a “Rail direct to the Gulf Coast Scenario.” Id. at 6061-81. The Department purported to analyze these scenarios as illustrations of the likely potential impacts associated with transport of crude oil in the absence of Keystone. Id. at 61.

         Plaintiffs correctly note that NEPA obligates agencies to provide only a single no action alternative. See 40 C.F.R. § 1502.14(d). More importantly, however, the Court must consider whether providing more than one alternative proves arbitrary and capricious. Plaintiffs rely on Conservation Nw. v. Rey, 674 F.Supp.2d 1232 (W.D. Wash. 2009), in which parties challenged a forest management plan as part of the protracted litigation involving the spotted owl. The Forest Service analyzed two no action alternatives that represented its attempt to reconcile the latest iteration of the forest management plan with the effects of recent litigation. Id. at 1246-47. The district court determined that having two no-action alternatives in the environmental analysis proved irrational when only one baseline could exist. Id. at 1247. The district court determined that NEPA required the Forest Service “to provide a single, comprehensive no-action alternative that accurately represented the status quo at the time of the 2007 Final Supplement.” Id.

         By contrast, Defendants argue that nothing in NEPA prohibits analysis of multiple no action scenarios. Defendants cite Mont. Wilderness Ass'n v. McAllister 658 F.Supp.2d 1249, 1264 (D. Mont. 2009); aff'd, 666 F.3d 549 (9th Cir. 2011); 460 Fed. App'x 667 (9th Cir. 2011), where parties challenged the Forest Service's revised travel management plan for the Gallatin National Forest. The Forest Service evaluated two alternatives as the “no action alternatives.” McAllister, 658 F.Supp.2d at 1264. Alternative 1 considered “off road motorized vehicle as it was prior to 2001” when an off-highway vehicle ban had been approved. Id. Alternative 2 contemplated “the possibility that use generally will continue on road and trails being used” at the time of the proposed travel plan amendment. Id. The district court determined that each of the “no action alternatives” reasonably reflected the exemptions, discretion, and latitude in the Forest Service's current management policies. Id.

         The Ninth Circuit agreed that having two no-action alternatives emphasized the validity of the Forest Service's alternatives analysis. 460 Fed. App'x at 671. The Ninth Circuit reasoned that the Forest Service had “constructed two no action alternatives” due to uncertainty as to how it ultimately would implement the ban on off-highway travel. Id. (emphasis in original). The Ninth Circuit deemed nothing unreasonable about the Forest Service's formulation of these no-action alternatives under those circumstances. Id. The same reasoning applies to the alternatives articulated by the Department. Uncertainty regarding what would happen in the absence of Keystone supported the discussion of three no action alternatives in the 2014 SEIS.

         C. Keystone's Impact on Tar Sands Production

         1. The Department's “Market Analysis”

         Plaintiffs suggest that the “market analysis” section of the EIS improperly supports a conclusion that the same level of tar sands production would be inevitable regardless of whether the Department approved Keystone. Plaintiffs argue that this unsubstantiated assumption led to an arbitrary conclusion that Keystone would have no impact on the world's climate. (Doc. 140 at 20.) NEPA's “full and fair discussion” requirement directs an agency to look at a Project's “direct” and “indirect” effects. 40 C.F.R. § 1508.8(a)-(b). Indirect effects include those “caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable.” 40 C.F.R. § 1508.8(b).

         Defendants argue, and the Court agrees, that the 2014 SEIS contained a full and fair discussion of the market demand for oil. (Doc. 173 at 31.) The 2014 SEIS set forth 140 pages of modeling why Keystone would not affect significantly the rate of extraction of oil from Canadian oil sands. Id. at 36 (citing DOSKXLDMT0005760-5908). The 2014 SEIS determined that the pipeline would not affect significantly oil extraction in Canada. As a result of this determination, the 2014 SEIS reasoned that the emissions associated with transporting 830, 000 bpd of tar sands crude oil (Keystone's capacity), would occur regardless of the pipeline's existence. To reach this conclusion, the 2014 SEIS analyzed numerous factors, including the price of oil, transportation costs, and supply and demand for oil. DOSKXLDMT0005760.

         The WCSB produced 1.8 million bpd of crude oil when the Department issued the 2014 SEIS. The 2014 SEIS estimated that production would increase to at least 5 million bpd by 2030. Id. at 5789. The 2014 SEIS further concluded that increased transportation capacity of oil from Canada by other pipelines and rail transportation would meet demand. Id. at 5803. The 2014 SEIS reasoned that existing pipeline capacity stood at 3.3 million bpd in 2014. The 2014 SEIS also concluded that rail capacity supported 700, 000 bpd, and estimated that rail capacity would increase to 1.1 million bpd by the end of 2014. Id. at 5804. Defendants argue that rail transportation would fill any void in crude oil transportation in the absence of construction of expanded pipeline capacity. (Doc. 173 at 35.)

         The Court must limit its review to determining whether the 2014 SEIS took a “hard look” at the effects of Keystone on oil markets. See Norton, 276 F.3d at 1072. The Department met this “hard look” requirement in its market analysis and its conclusion that Keystone would not impact the rate of tar sands extraction. The Department provided sufficient analysis that went beyond mere assumptions of the rate of oil sands extraction rates in 2014. The Court finds no error in the Department's 2014 analysis of the rate of tar sands extraction and its impact on climate change.

         2. New Information Since 2014

         Plaintiffs argue, however, that significant new information has come forth since 2014 regarding oil markets, rail transportation, and greenhouse gas emissions that requires a supplement of the Project's impacts. (Doc. 140 at 35.) NEPA imposes a continuing duty on federal agencies to supplement new and relevant information. Price Rd. Neighborhood Ass'n v. U.S. Dep't of Transp., 113 F.3d 1505, 1508-09 (9th Cir. 1997). NEPA requires a supplemental EIS if an “agency makes substantial changes in the proposed action that are relevant to environmental concerns; or there are significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts.” 40 C.F.R. § 1502.9(c)(i)-(ii). An agency is not required, however, to “supplement an EIS every time new information comes to light after the EIS is finalized.” Marsh v. Or. Nat. Res. Council, 490 U.S. 360, 373 (1989). A supplement proves necessary “if the new information [presented] is sufficient to show the remaining action will ‘affec[t] the quality of the human environment' in a significant manner or to a significant extent not already considered[.]” Id. at 374 (quoting 42 U.S.C. § 4332(2)(C)).

         a. Change in Oil Markets

         Plaintiffs first argue that the Department failed to consider a decrease in oil prices in the 2014 SEIS. (Doc. 140 at 27.) The 2014 SEIS analyzed the possibility of moderate fluctuations in oil prices and the possibility of a low oil price scenario. The 2014 SEIS failed to address, however, the significant changes in oil prices that have occurred since 2014. This lack of analysis fails to satisfy NEPA's hard look requirement. The 2014 SEIS stated that “pipeline constraints are unlikely to impact production given expected supply-demand scenarios, prices, and supply costs. Over the long term, lower-than-expected oil prices could affect the outlook for oil sand production[.]” DOSKXLDMT0005895. The Department acknowledges that a significant drop in oil prices materially could change the analysis. The 2014 SEIS conditioned much of its analysis, however, on the price of oil remaining high.

         The record demonstrates the need to supplement. The 2014 SEIS stated the price of crude oil would range from $100 per barrel to $140 per barrel over twenty years. Id. at 5864. The 2014 SEIS predicts the price of oil needed to fall within the range of $65-$75 per barrel in order for Keystone to break even. Id. at 5767. The 2014 SEIS concedes that Keystone would be affected by supply costs if the oil prices fell within or below that range. Id.

         The United States Energy Information Administration predicts that the price of oil likely will remain below $100 for decades. Id. at 1849. The record shows further that a dramatic drop in oil prices occurred soon after publication of the 2014 SEIS that lowered the price to nearly $38 per barrel. The Department suggests that the current price of oil stands at roughly $60 per barrel. (Doc. 173 at 49.) This drop constitutes more than a mere fluctuation in oil prices.

         Plaintiffs also present evidence that the Environmental Protection Agency called upon the Department to revisit the EIS's conclusions after the 2015 oil prices dropped. (Doc. 140 at 36 (citing DOSKXLDMT0000973-74).) Oil prices have remained below the “break-even” numbers established in the 2014 SEIS. This new and relevant information bears upon the Department's earlier analysis in the 2014 SEIS. The Court makes no suggestion of whether this information should alter the Department's ...


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