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Vol. 18, No. 16 Week of April 21, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

First step for wetlands

Legislature authorizes administration to investigate state permitting primacy

Alan Bailey

Petroleum News

Among a series of bills passed during the closing hours of the Alaska legislative session came an act authorizing the state administration to seek state primacy for wetlands permitting currently carried out by the U.S. Army Corps of Engineers.

The permitting in question, called “404 permitting” after the section of the Clean Water Act that mandates its use, applies to any activity that involves the dredge and fill of materials into the waters of the United States. Although the U.S. Environmental Protection Agency oversees the operation of this permitting program, the Corps of Engineers has been administering the program in Alaska.

The bill, introduced in February by Gov. Sean Parnell and now passed by the Legislature, authorizes the state administration to flesh out what would be involved in implementing 404 permitting primacy in Alaska, and what the cost would be of operating the permitting program — the practicalities and costs of the state taking over the program are as yet unclear.

Contentious program

The 404 permitting program has become very contentious in Alaska, in part because the question of what constitutes the “waters of the United States” has become an ill-defined concept, thus providing scope for federal authorities to claim permitting jurisdiction over broad areas of wetland, as well as over obvious navigable waterways that could potentially support interstate vessel traffic. And, with vast areas of wetlands within Alaska, it has become near impossible to execute any significant project in the state without first obtaining a 404 permit from the Corps of Engineers.

Alaska angst over the operation of the 404 permitting program has come to a head in recent years following lengthy delays in the wetlands permitting for ConocoPhillips’ CD-5 oilfield development program in the northeastern National Petroleum Reserve-Alaska.

The Clean Water Act does allow for the possibility of individual states taking over administration of the 404 permitting program for non-navigable waters, although the Corps of Engineers would always retain administration of tidal waters, navigable waters and adjacent wetlands, according to testimony presented to the Legislature by the Corps of Engineers. And, regardless of who is administering the permits, the Environmental Protection Agency retains overall oversight of the program.

According to testimony presented to the Legislature by the Alaska Department of Environmental Conservation, several states are considering state primacy of the 404 permitting program but only two states — New Jersey and Michigan — have thus far obtained that primacy.

Parnell, in a Jan. 17 letter to Sen. Charlie Huggins, president of the Senate, explained the reasoning behind his proposed bill while expressing frustration at what he sees as unwarranted project delays resulting from the federal permitting process.

“The current federal process has resulted in a large number of projects in Alaska being subject to an expensive and bureaucratic federal permitting system and litigation, delaying and restricting opportunities for Alaskans,” Parnell wrote. “This change will limit federal overreach in Alaska by giving the state authority to make jurisdictional determinations, timely process permits and allow responsible development.”

Evaluate costs and benefits

The bill, as passed on April 14, allows the Alaska Department of Environmental Conservation in coordination with the Alaska Department of Natural Resources to evaluate the potential benefits, costs and consequences to the state of assuming primacy of 404 permitting. The bill also gives DEC the authority to file an application seeking federal approval for the primacy. And the bill allows the two departments to administer and enforce the permitting scheme, and to adopt any regulations necessary for achieving state primacy or operating the permitting program.

However, given the unknown cost of operating a state 404 program, as well as uncertainties regarding some aspects of taking the program over from the federal government, the Legislature will have opportunities to “weigh in” on whether the primacy move should proceed once the agencies have evaluated the overall costs of operating the program, according to written testimony from DEC. And, during a Senate hearing on the bill, DEC Commissioner Larry Hartig told lawmakers that the permitting program could take five years or more to implement.

Fewer EIS’s?

One possible indirect effect of state 404 permitting primacy could be a reduction in the number of environmental impact statements, or EISs, required for industrial projects in Alaska. The preparation of an EIS, done under the terms of the National Environmental Policy Act, or NEPA, and typically taking two or more years to complete, is often triggered by a 404 permit application to the Corps of Engineers. And, with 404 permits often being required in Alaska’s typically soggy lands, EIS preparation has become a rite of passage for any major project in the state.

But, with an environmental review and potential EIS under NEPA only required for an action involving the federal government, such as a federal permit application, might the takeover of the 404 permitting by state authorities eliminate the EIS from the permitting process for many projects?

That question raises a parallel issue of exactly which wetlands would ultimately become the responsibility of the state, and hence how much federal permitting would actually go away.

In written testimony to the Senate, Kara Moriarty, executive director of the Alaska Oil and Gas Association, an Alaska oil industry trade association, commended the administration’s intent to encourage resource development by simplifying the permitting process but also cautioned about possible permitting duplication and continuing federal involvement, given the complexities of transitioning the permitting program.

“And while a majority of the nation’s wetlands are in Alaska, many of these may be non-assumable by the state under the Clean Water Act’s geographic limitations and would remain subject to federal jurisdiction and duplicative Corps permitting,” Moriarty wrote, adding that her association would work with the state administration and other stakeholders to ensure an effective implementation of the permitting primacy.

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The tricky question of what water is whose

To someone enjoying a summer fishing trip to some remote spot in the Alaska wilderness, it may seem obvious that the lake or creek containing those elusive salmon or trout is part of Alaska. But the question of whether federal or state authorities should have jurisdiction over the permitting of activities impacting such quintessentially Alaska water can prove contentious.

Environmental regulation of surface water in the United States is mandated by the federal Clean Water Act, a statute that applies to what are termed “waters of the United States.” But trying to define exactly what is meant by a “water of the United States” is a fuzzy, imprecise affair, giving federal regulators scope for conflict with state officials over limits of federal authority and leading some to accuse the Environmental Protection Agency, the federal agency administering the statute, of using the Clean Water Act as an unwarranted opportunity to meddle in territory far beyond areas of real federal significance.

The question of what are “U.S. waters” impacts the scope of application of federal permitting schemes such as 404 permitting, the permitting required to put dredge and fill material into those U.S. waters.

Navigable waters

Federal jurisdiction clearly applies to waters used by shipping for interstate commerce. And “waters of the United States” generally include all navigable waters. But just where do these navigable waters end, and hence where does federal jurisdiction stop?

In February, during the Seminar Group’s annual Permitting Strategies in Alaska seminar, Ruth Hamilton Heese, senior assistant attorney general in the Alaska Department of Law, commented on the importance to Alaska of this confusing issue. Alaska has thousands of streams, countless remote water bodies and more than 174 million acres of wetlands, she said.

A dispute over federal water jurisdiction reached the U.S. Supreme Court in 2006. But rather than resolving the problem, the justices failed to come to a majority decision on an acceptable definition of U.S. waters, thus continuing the water-borne confusion.

The court came up with two tests for U.S. waters: whether a wetland or non-navigable water body has a continuous surface water connection to a navigable water body and whether there is a “significant nexus” between the wetland and the navigable water, Heese said.

And, although some justices said that jurisdictional questions of this type should be determined through formal agency rulemaking, the EPA and the U.S. Army Corps of Engineers, the agency administering much wetlands permitting, have only proposed guidance rather than rules for how U.S. waters should be recognized. And that guidance, which would be non-binding and would likely greatly expand federal jurisdiction, has not been issued, while the Environmental Protection Agency has prevaricated about making a formal rule, Heese said.

—Alan Bailey