The Atlantic Coast Pipeline project suffered another legal blow as on January 7 the US Court of Appeals for the Fourth Circuit vacated the air permit for the project's Buckingham County, Virginia compressor station.

The three-judge panel vacated the permit faulting the Virginia Air Pollution Control Board's permit approval in light of environmental justice concerns. The court also chastised the Virginia Department of Environmental Quality (DEQ) for approving the use of gas-fired turbines instead of electric and the court claimed the DEQ had no jurisdiction to make that decision.

The court remanded the permit to the state air control board citing both state and federal applications of the Clean Air Act were at issue as well as a "a complex intertwining of local, state, and federal laws and regulations."

This is the same court which vacated key permits from the US Fish and Wildlife Service for Incidental Take and the US Forest Service permit to cross the Appalachian Trail. The appeal of the Latter vacated permit will be heard by the US Supreme Court. The court is scheduled to rule by June, with oral arguments scheduled for February on United States Forest Service, et al., v. Cowpasture River Preservation Association, et al.

Environmental justice issues

However, the air permit has long been the center of a storm of controversy with the Union Hill community being 84% non-white. Nationally prominent environmental activists, such as Al Gore have joined the cause of the Friends of Buckingham and the Chesapeake Bay Foundation to oppose the siting of the compressor station there. NAACP and the Sierra Club also joined the list of amici curiae.

In the case of Friends of Buckingham v. State Air Pollution Control Board no. 19-1152, Chief Judge Roger Gregory, Judge James Wynn and Judge Stephanie Thacker stated in the 47-page opinion that although the compressor station was properly certified by the Buckingham County Board of Supervisors and received its air permit they were not swayed by the pipeline developer's argument that the compressor station was the only site available in Virginia after FERC ruled out an alternative site. Nor were they swayed by the company's argument that it was the only site that allowed the pipeline to connect to the Transco system and was commercially available.

The judges were particularly concerned that the compressor station was permitted despite FERC's determination "that the Compressor Station will increase the area's amount of nitrogen oxide pollution and fine particle (PM2.5) pollution, and emit known carcinogens into the community. FERC likewise recognized that pollutants from compressor stations 'are known to increase the effects of asthma and may increase the risk of lung cancer'."

The judges also cited Virginia statute in agreeing with the petitioners' argument that the state board violated the law by "...failing to assess the Compressor Station's disproportionate health impacts on the predominantly African-American Union Hill community and the suitability of the site."

The judges stated the board "thrice erred in performing its statutory duty" for the following reasons:

• it failed to make any findings regarding the character of the local population at Union Hill, in the face of conflicting evidence;
• it failed to individually consider the potential degree of injury to the local population independent of NAAQS and state emission standards; and
• DEQ's final permit analysis, ostensibly adopted by the Board, relied on evidence in the record that was incomplete or discounted by subsequent evidence.

Turbines at issue

The judges also went into great detail about the EPA's two-part standard for "redefining the source" in the context of the compressor station. As the court writes in a footnote, "EPA takes a 'hard look' at the proposed definition to determine which design elements are inherent to the applicant's purpose and which elements can be changed to reduce pollutant emissions without disrupting the applicant's basic business purpose."

The court stated, "Having considered the entire record, we are not satisfied that the Board provided a sufficient and rational explanation of its failure to consider electric turbines in place of gasfired turbines, and DEQ's responses to the public are likewise insufficient."

Company comment

Atlantic Coast Pipeline issued a statement on the court's decision refuting the charge of environmental injustice: "The Buckingham air permit unanimously approved by the State Air Pollution Control Board is the strictest air permit of any compressor station in the country, with protections far exceeding the U.S. EPA's guidelines for vulnerable populations. As a result, the Buckingham compressor station will have significantly fewer emissions and more air quality monitoring than any other facility of its kind.

"In its opinion today, the Court recognized the stringency of the permit, while requiring the state to provide more analysis and explanation to support its approval."

The release also detailed the next steps for the project developers. "We will immediately begin working with the state to resolve the procedural issues identified by the Court. We are confident the additional analysis required by the Court can be completed in a timely manner."

The company still maintains it can bring the project in on time by its repeatedly revised target in service date. "We expect the project will still deliver significant volumes to customers under our existing timeline, even as we work to resolve this permit."

The company added, "The Atlantic Coast Pipeline is needed now more than ever for our economy and to accelerate our path to a low-carbon future. New infrastructure will solve the chronic shortages of natural gas in Hampton Roads and eastern North Carolina and allow these communities to revitalize their manufacturing economy. It will also provide the reliable natural gas we need to support the rapid expansion of renewables across Virginia and North Carolina."

And as so often before after the announcement of yet another setback, the company reiterated its commitment to the project. "This project is all about growing the economy and moving toward clean energy, and we remain totally committed to its completion."

Work on the project has been halted since the Fourth Circuit Court decision in December 2018 on the US Fish and Wildlife Service permit. The1.5 Bcf/d project, now running upwards of $7.5 billion in costs and its full in service delayed to the first half of 2022, runs 594 miles from Harrison County, West Virginia to Robeson County, North Carolina. Dominion Energy is the lead developer along with joint venture partners Duke Energy, Piedmont Natural Gas and Southern Company Gas.

Reprinted from PointLogic News. For more natural gas news from IHS Markit, visit the PointLogic website.

Annalisa Kraft is a Senior Markets Reporter at IHS Markit.

Posted 28 January 2020.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.