Protecting Financial/Trade Secret Information Submitted to the Federal Government: FOIA Exemption 4

The Freedom of Information Act, or FOIA, was signed into law by President Lyndon Johnson on July 4, 1966. FOIA gives the public the right to access records from any federal agency or department within the executive branch. Oil and gas, renewable energy, and mining companies frequently are required to provide financial or trade secret information to the Bureau of Land Management (BLM) or other federal agencies. How can a company be sure that business information won’t be widely shared with the public as a result of a FOIA request? While FOIA plays an important role in keeping the government transparent and accountable, Congress has set forth a series of exceptions to FOIA’s disclosure requirement.

Exemption 4 most recently received the limelight. Exemption 4 states, in pertinent part, that FOIA’s mandatory disclosure requirement does not apply to “commercial or financial information” that is “obtained from a person and privileged or confidential.” 5. U.S.C. §552(8)(B)(b)(4). Yet the term “confidential” is not defined anywhere in the Act. This is where things get interesting.

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What's Up With Chevron and Does It Matter?

If you have paid any attention to the U.S. Senate confirmation process for Colorado’s Judge Neil Gorsuch to the U.S. Supreme Court, you’ve heard Chevron come up.  According to Senator Al Franken (D-Minnesota), “For anyone who cares about clean air or clean water or about the safety of our food and medicines, it’s incredibly important . . . [it] simply ensures that judges don’t discard an agency’s expertise without good reason.”  In a 2016 opinion, Judge Gorsuch called Chevron a behemoth and argued that it “permit[s] executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the constitution of the framers’ design.”

Chevron refers to a U.S. Supreme Court decision decided 33 years ago, Chevron U.S.A., Inc. v. Natural Resources Defenses Council, Inc., 467 U.S. 837 (1984) that embodies the judicial doctrine of court “deference” to an agency’s interpretation of ambiguous federal statutes.1   In Chevron, the Supreme Court reasoned that an agency is the subject matter expert and should have the authority to make policy choices – within reason.

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The 10th Circuit Rebuffs Environmental Groups' Challenges to Keystone XL Pipeline Permit and Verification Letters

On May 29, 2015, the U.S. Court of Appeals for the 10th Circuit upheld the entry of judgment for defendant and rejected National Environmental Policy Act (NEPA) and Clean Water Act (CWA) challenges to the validity of Army Corps of Engineers' Nationwide Permit 12 (NWP 12) for the Gulf Coast Pipeline (the southern segment of the Keystone XL Pipeline) and to the verification letters issued by the Corps. Sierra Club, Inc., et al. v. Bostick, No. 14-6099, 2015 WL 3422924. Writing for the Court, Circuit Judge Bacharach (Oklahoma) held that the environmental groups had waived their NEPA claims that the Corps failed to consider the risk of oil spills and the cumulative impacts of pipelines before first issuing NWP 12 because the groups failed to raise those issues below, and (i) the risk of pipeline oil spills is not so "obvious" as to avoid waiver, (ii) the Corps' knowledge of the risk of pipeline oil spills and responsibility deferral to the Pipeline and Hazardous Materials Safety Administration (PHMSA) did not apply to avoid waiver, and (iii) the groups' cumulative-impacts objections did not adequately challenge the rationality of agency action. The Court further rejected arguments that the Corps should have prepared a new NEPA analysis for the entire Gulf Coast Pipeline before issuing Permit verification letters, holding that the issuance of verification letters did not constitute "major federal action" but mere verification that permittees may proceed under a nationwide permit, and "the Corps had no obligation to assess the environmental impacts of the entire Gulf Coast Pipeline." The environmental groups' challenges under § 404(e) of the CWA (dredge-and-fill activities) were also rejected by the Court, stating, the "environmental groups have not shown that the permit authorizes linear projects with more-than-minimal impacts, and the Corps has permissibly interpreted the statute to allow partial deferral of its minimal-impacts analysis."

Notably, NWP 12 was issued after TransCanada decided to divide the Keystone XL Pipeline into two parts after the original comment period had closed for NWP 12. The Court recognized that nationwide permits are inherently broad, encompassing a variety of activities, some of which may or may not be predicted by the permitting agency. Here, the "Corps made an environmental assessment of the predictable uses of Permit 12, but recognized the futility of predicting every conceivable use for every conceivable type of utility line anywhere in the United States. The Corps need not conduct a new NEPA analysis every time someone conceives a new use for a national permit." The Court also concluded that the record showed that the agency engineers had adequately considered cumulative impacts at proposed crossings.

In his concurring opinion, Circuit Judge Baldock (New Mexico) concurred but found "this case to be prudentially moot" due to changed circumstances.

In her concurring opinion, Circuit Judge McHugh (Utah) wrote separately concerning the Corps' problematic, overly broad definition of "pipeline" and its obligations under NEPA, finding that the Corps improperly conflated its obligations under NEPA with its obligations under § 404(e) of the CWA. "The Corps may not limit its NEPA analysis to the consideration of the environmental effects of the discharge of dredged and fill material into jurisdictional waters, as would be appropriate under § 404(e) of the CWA. Rather, for NEPA purposes, the Corps is required to consider the direct, indirect, and cumulative effects reasonably foreseeable as a result of its permitting decision. This includes the environmental effects caused by the operation of the installations authorized by the Corps' permitting decision. And this understanding of the Corps' NEPA responsibilities has been universally adopted." 2015 WL 3422924, at *18 (citations omitted). Judge McHugh nevertheless "would affirm the district court because I conclude that Sierra Club's argument that the Corps improperly deferred portions of its NEPA analysis to the verification stage was not made to the agency during the reissuance process and is therefore waived…. The Corps has been issuing and reissuing NWP 12 for decades, with no party objecting to the deferral practice." 2015 WL 3422924, at *21.

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