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Washington — The US government needs to reform its environmental regulations or permitting and construction of oil and natural gas pipelines may be unable to keep pace with demand, according to a report published Thursday by the National Petroleum Council.

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Overhaul of the National Environmental Policy Act, which mandates consideration of the environmental impacts of major government agency decisions, is most needed, the report states.

"The number one legal challenge is the NEPA process," said Amy Shank, an asset integrity and pipeline safety director with Williams, and one of the study's co-authors. "If we get Congress to clarify and really get specific about what NEPA should and shouldn't cover ... then I think those court cases either go away or they get much shorter."

Procedures for NEPA reviews vary between government agencies, boosting the potential for conflict, the report states.

The White House's Council on Environmental Quality, which was established by NEPA, had issued guidance on the law numerous times, but only substantially amended its regulations once, according to the report. This has created inconsistency and numerous legal challenges, the report states.

For example, recent the Federal Energy Regulatory Commission has been challenged under NEPA to consider the environmental impact of natural gas production and consumption in approval of a proposed interstate pipeline. Last year, the Trump administration's approval of a Keystone XL pipeline permit was rejected in a Montana district court for inadequately reviewing the climate impacts of the project.

In 2016, 27 decisions in various US Courts of Appeals involving NEPA-based challenges were issued, with the federal agencies fully prevailing in all but six.

A July study by ClearView Energy Partners found that NEPA was the most frequent statutory basis for a legal challenge of oil and gas pipelines, with the most frequent argument being an insufficient analysis of the effect of greenhouse gas from a project, both upstream and downstream.

Litigation "can delay the construction, maintenance, and operation of sited and approved projects, created uncertainty for communities and project developers, and can reduce the resiliency of US energy infrastructure," the study states.

The report recommends Congress define an "appropriate" environmental review process, set the parameters of a greenhouse gas assessment in a NEPA review.

Legal challenges have delayed projects, but so have legal risks.

"The risk of litigation encourages agencies to expand their NEPA reviews as a defensive measure rather than to aid decision-making," the report states.

And permitting by states further complicates projects, with processes and government agency structures differing by state. The report recommending a common agreement between federal and state jurisdictions for potential conflicts in environmental reviews and development of a master structure for state permitting and coordination of infrastructure approvals.

"Overlapping and duplicative regulatory requirements, inconsistencies across multiple federal and state agencies, and unnecessarily lengthy administrative procedures have created a complex and unpredictable permitting process," the report states.

The report, which was approved by the NPC at its meeting Thursday, was requested in 2017 by then-US Energy Secretary Rick Perry. The NPC, originally established in 1946, is an industry organization charged with advising the energy secretary on oil and gas issues.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com