U.S. District Court Judge Brian Morris in Great Falls, Mont., vacated the Corps permit and remanded it to the agency, pending completion of a consultation with the U.S. Fish and Wildlife Service over issues related to compliance with the federal Endangered Species Act (ESA). Morris said this process did not occur when the Corps reissued its permit in 2017, although he noted it did occur when the agency issued a previous permit for the project in 2012.

The ruling comes in a case brought by activist group Northern Plains Resource Council against Keystone XL builder TC Energy and the Corps.

Keystone XL will cross more than 1,000 water bodies in Montana, South Dakota and Nebraska, and in all but a handful of cases, open trenching will be used. 

TC Energy said March 31 that work had been set to get underway later in April to build the $8-billion, 1,210-mile pipeline linking Hardisty, Alberta, and Steel City, Neb., after the province provided a $1.1-billion cash infusion.

“The Corps failed to consider relevant expert analysis and failed to articulate a rational connection between the facts it found and the choice it made,” Morris wrote in his ruling. He said the agency's “‘no effect’ determination and resulting decision to forego programmatic consultation proves arbitrary and capricious in violation of [its] obligations under the ESA.”

Morris points out that under current permit conditions, a permittee must alert the Corps if an activity might affect a listed species or critical habitat, effectively turning over that determination to the non-federal permittee, “even though the Corps must make that initial determination.”

The Corps did not immediately respond to a request for comment on how it would proceed, but Liebesman says he expects the U.S. Justice Dept. to act quickly to request a stay of the ruling or request that Morris limit its scope.

Analysts at consultant ClearView Energy say such moves face stiff odds. “We are not convinced that such efforts have good prospects for success given the clear use of the word ‘shall’ in the relevant statutory provision relied on by the court,” says the firm's analysis.

In a note, ClearView says that among others, the Atlantic Coast Pipeline and the Mountain Valley Pipeline, which also intend to seek NWP-12 permits for water body crossings, face similar risks.  Challenges to the two projects now are under U.S. Supreme Court review related to other project issues.

TC Energy, which is building the controversial Keystone pipeline, says it will continue with construction activities that recently got underway at the border crossing into Canada because the ruling doesn’t impact that work. However, TC Energy spokesman Terry Cunha says the ruling does not just impact Keystone.

“The impacts of his ruling are broad-reaching and could have societal implications far beyond our project,” Cunha said in a statement. “The ruling directly impacts various utilities constructing and maintaining infrastructure projects, including natural gas, liquids, television cable, electrical transmission, telephone, internet, among others. This decision hampers their ability to build or maintain infrastructure projects that cross wetlands or waterbodies across the U.S.”

If the ruling stands, it would take months, or longer, to complete the federal agencies' consultation process, Liebesman says. Projects could possibly change their plans and use horizontal direct drilling, but engineering for those projects could be time consuming.

Additionally, Morris says in his ruling that horizontal direct drilling could contaminate water with drilling fluid.