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Kinder Morgan sees Permian Highway gas project on track after court action

Highlights

Court declined injunction despite seeing compliance gaps

Cites doubts about insulation from species act liability

Washington — A federal district court declined requests to halt work on Kinder Morgan's 2.1 Bcf/d, 430-mile Permian Highway natural gas pipeline project, despite finding evidence related to gaps in Endangered Species Act compliance to be compelling.

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The decision enables work to continue on the highly anticipated project, which will move gas from the Permian Basin to toward the Gulf Coast, with access to the Katy Hub, LNG exports, and South Texas market, likely bolstering Waha Hub prices.

Kinder Morgan, in an emailed statement Monday, welcomed the decision and said it has "implemented measures" to address concerns raised in the case.

EARLY 2021 START EYED

The project is on track to be in service early in first-quarter 2021, according to the company. "We continue to monitor the coronavirus, and are making adjustments as necessary to create social distancing and limited exposure to one another," said spokeswoman Katherine Hill, but the company is "not expecting [the virus] to impact the construction schedule at this time."

Plaintiffs in the case, including the City of Austin and other localities, a water district and landowners, have contended that allowing construction without an incidental take permit under Section 10 of the Endangered Species Act would result in an unlawful taking of species (City of Austin, et al., v. Kinder Morgan Texas Pipeline, et al., 1:20-CV-138). Further, they have argued that Kinder Morgan and the US Fish and Wildlife Service sidestepped requirements for an environmental review under the National Environmental Policy Act.

And in seeking a preliminary injunction, plaintiffs argued that Kinder Morgan failed to follow some of the required mitigation steps under its incidental take permit to protect habitat of the golden-cheeked warbler, such as avoiding clearing vegetation after March 1, safeguarding against oak wilt by treating promptly treating freshly cut stumps, and ensuring continuous construction to minimize nest disturbance.

HIGH BURDEN ON PLAINTIFFS

Judge Robert Pitman of the US District Court of the Western District of Texas, Austin Division, denied the request for preliminary judgment, finding that despite some compelling evidence of a failure to comply with prescribed mitigation, the plaintiffs had not met the threshold for that extraordinary court remedy.

"[T]he burden to show irreparable harm remains with plaintiffs, and the court concludes they have not demonstrated 'a reasonably certain threat of imminent harm to a protected species,' Kinder Morgan's noncompliance with the terms of the biological opinion notwithstanding," Pitman said in a March 19 order.

For instance, he noted that certain clearing activities that had already taken place could not be prevented by an injunction, and he cited Kinder Morgan's agreement to refrain from further clearing in areas until receiving FWS approval.

He cautioned, however, that should the incidental take statement later be invalidated in court, the company would no longer be insulated from civil and criminal liability under the Endangered Species Act for any "takes" incidental to the pipeline project.

And as parties move to the merits phase of the litigation, he said "important questions remain regarding Kinder Morgan's safe harbor from take liability under Section 7 in light of its noncompliance with terms of the incidental take statement."

The court concluded that the threat of the liability is "sufficient to deter any future harm" caused by added clearing.

"Plaintiffs' other alleged harms — including the increased degradation of warbler habitat from the spread of oak wilt and the allegedly deleterious effect on water quality — are too speculative and thus do not warrant injunctive relief," he wrote.

Despite the denial of the injunction, Gary Kruse of LawIQ said the ruling includes some "worrying cautions" for the company, and appears to be asking the plaintiffs to file a motion to void the biological opinion and incidental take statement. If the court were to invalidate those documents, that could also lead to invalidation of the US Army Corps of Engineers' Nationwide Permit 12, he noted. But even if that legal setback were to occur, he suggested this would not necessarily derail the schedule, since the key nesting period extends only to July 31, and the developers would likely have time to make up for such an interruption.