• Fifth Circuit Court Establishes Guidelines for the Evaluation of Deepwater Port Licenses
  • July 11, 2006 | Author: Merida Lerch de la Pena
  • Law Firm: Jackson Walker L.L.P. - Houston Office
  • The United States Court of Appeals for the Fifth Circuit has upheld the decision of the Secretary of the Department of Transportation to grant a license for Gulf Landing LLC to operate a liquefied natural gas (“LNG”) facility in the Gulf of Mexico, despite the challenge brought by prominent environmental groups and a charter boat association (“Petitioners”).

    In Gulf Restoration Network v. U.S. Dep’t of Transp., No. 05-60321, 2006 U.S. App. LEXIS 14172 (5th Cir. June 8, 2006), the Court dismissed Petitioners’ arguments that (1) the Secretary of the Department of Transportation (“Secretary”) should have included in the environmental review and subsequent Final Environmental Impact Statement (“FEIS”) for the Gulf Landing facility, the cumulative effect that all five pending applications for similar facilities would have on the environment, rather than including only those applications which have proceeded to the draft Environmental Impact Statement (“EIS”) stage and are within reasonable geographic distance to the Gulf Landing facility and (2) that an open loop system, which uses seawater to warm LNG so that it regasifies, violates the Deepwater Act because it is has a greater negative impact on the quality of water and marine life than a closed loop system, which heats LNG by recirculating water that is warmed by gas-fired boilers located at the port.

    The Court found that the Petitioners’ arguments could not withstand the highly deferential standard of review afforded to decisions made by the Secretary which requires that the Secretary’s decision must be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” in order to be overturned.

    Specifically, with respect to the Petitioners’ claim that the Secretary failed to consider the cumulative effect of the then three pending applications which were not assessed within the Gulf Landing FEIS, the Court found that in order to be included as cumulative, the impact must be reasonably foreseeable. The Court affirmed the Secretary’s reasoning that the impact of the three facilities would be too speculative because the applications had not yet moved to the draft EIS level. In addition, the Court found that the Secretary did not act arbitrarily or capriciously in deciding that an application for a separate facility located approximately 210 miles east of the Gulf Landing facility is too geographically distant to be included with respect to cumulative impact.

    Regarding Petitioners’ open loop system argument, the Court found the statutory requirement under the Deepwater Port Act that the facility use “the best available technology to prevent or minimize adverse impact on the environment” does not mean that a closed loop system must always be implemented over an open loop system due to the greater degree of adverse impact the open loop system allegedly poses to the marine environment. Rather, the Court agreed with the Secretary’s view of the statute as intending to minimize “adverse impact to a reasonable degree given all relevant circumstances.” In the Gulf Landing case, the Secretary considered the technology, the reliability, the fuel-usage requirements and the operating costs in an overall “cost-analysis” of the technology. The Court supported this assessment as being consistent with the language and intent of the Deepwater Port Act.

    The Gulf Restoration Network decision is instructive in that (i) it illustrates the high degree of deference afforded to the Secretary in deciding whether to license facilities; (ii) it establishes that the Secretary need not consider applications for which a draft EIS has not been created when calculating cumulative impact; (iii) it creates an approximate distance boundary as to which facilities need not be considered in the cumulative impact assessment; and (iv) it approves the “best available technology” requirement under the Deepwater Port Act as consisting of a cost-analysis assessment of all relevant circumstances which includes the impact on marine life, the technology, the reliability, the fuel-usage requirements and the operating costs.