MPSC Must Review Natural Gas Pipeline Licensing Approval to Consider Environmental Impact

 “The conservation and development of the natural resources of the state are hereby declared to be of paramount public concern in the interest of the health, safety and general welfare of the people. The legislature shall provide for the protection of the air, water and other natural resources of the state from pollution, impairment and destruction.”

Article IV, Section 52, State Constitution of Michigan of 1963.

The Michigan Court of Appeals ruled on Jan. 13 that the Michigan Public Service Commission (MPSC) did not comply with its duty under the Michigan Environmental Protection Act (MEPA) to consider the environmental effects of the licensing of a natural gas pipeline and remanded the decision back to the MPSC for full consideration, consistent with MEPA.

However, while those challenging the pipeline may have succeeded at this stage of the litigation, it is very likely that, ultimately, the MPSC will confirm its earlier decision and license the pipeline once it complies with the procedural requirements of MEPA, absent a showing of fraud or an abuse of discretion.

The MPSC considered an application for the construction of natural gas pipelines. As part of its application, the applicant submitted drawings, maps and documents that the MPSC’s rules required in the application, including environmental impact assessments prepared by its consultant. The MPSC reviewed the application and approved the pipelines, which the successful applicant ultimately constructed.

Two individuals sought to intervene in the applications after the fact. The intervenors tried to introduce additional information concerning the potential environmental impact of the pipeline projects. The MPSC denied the intervenors’ applications.

The intervenors appealed to the Michigan Court of Appeals, arguing that MEPA required the MPSC to consider the environmental effects of the proposed projects and that the MPSC did not conduct an independent review of the applicant’s environmental impact statements.The MPSC challenged the appeal on the grounds that the intervenors did not participate in the proceedings before the MPSC.

However, the court ruled that it had jurisdiction because while the intervenors were not “parties in interest” to the matter below, they were “aggrieved parties” and thus met the “standing” requirements. “Standing” is the legal term that identifies when a party has sufficient connection to the harm from the action that is challenged so that the party has a stake to litigate the matter completely.

The court found that whether or not an agency’s enabling statute required an environmental review of actions pending before it, MEPA imposed a duty on agencies to do so. The duty to protect the air, water and natural resources is embedded in the Michigan Constitution. This duty falls to administrative agencies of the state of Michigan under MEPA.

All Michigan administrative agencies must consider three things with respect to complying with MEPA:

  • Would the proposed action impair the environment?
  • If so, is there a reasonable and prudent alternative to the potential environmental impairment?
  • And, finally, is the impairment consistent “with the promotion of public health, safety, and welfare in light of the state’s paramount concern for the protection of natural resources from pollution, impairment or destruction”?

In looking at the MPSC’s actions in the pipeline applications, the court found that while it reviewed the environmental impact statements, the MPSC did not make any determination of the second and third requirements as identified above. Therefore, the MPSC’s review was incomplete, and the court remanded the licensing decision back to the MPSC for it to consider and document its decisions with respect to all the items that MEPA required. The court did not agree with the intervenors that the MPSC was required to conduct its own independent investigation of environmental impacts.

While the intervenors substantially prevailed before the appellate court, their victory may very well be a pyrrhic one. On remand, the MPSC may conduct its review based on the environmental impact statements already provided by the applicant. In order to comply with MEPA and the court’s direction, the commission needs only to conduct the review and issue its decision, indicating how it complied with MEPA and why its decision is the correct one based on the evidence before it.

In any subsequent review, a court will base its decision on whether there was substantial evidence on the record to support the MPSC’s decision. The final decision, if procedurally complete, could be overturned upon a showing of fraud or an abuse of discretion.

The appellate court maintained that even in the absence of a specific duty by a state agency to conduct environmental review, MEPA imposed a duty upon the state agencies to conduct their reviews in a manner consistent with MEPA. The decision in support (or possibly in opposition) to the requested administrative action must be accompanied by evidence that the agency reviewed and considered all the elements outlined in MEPA in issuing a final decision.

Failure to comply with MEPA will not necessarily mean that the agency’s decision is faulty, but only that a court will remand the decision to the agency to state how it has complied with MEPA’s requirements in issuing its decision. The establishment of an administrative record will form the basis of any appeal of that decision on environmental grounds.

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