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Constitution Pipeline Suffers Another Blow With Federal Court Ruling

In yet another setback for the Constitution Pipeline a federal court in New York has dismissed its sponsors' lawsuit challenging state permitting requirements.

Constitution submitted a joint application to the New York State Department of Environmental Conservation (NYSDEC) in August 2013 for a section 401 Water Quality Certification and other permits. Three years later, the agency denied the water quality certification and has yet to rule on other permits for the project.

The U.S. District Court for the Northern District of New York ruled last week that the pipeline's sponsors have no standing to sue because they failed to prove how pending state permits would harm the project and only alleged the possibility of future injury if they aren't received.

"NYSDEC has not denied the permits or refused to issue them,” wrote Judge Norman Mordue in his order granting NYSDEC's motion to dismiss the case. “It simply has not yet acted to grant or deny them. The fact that NYSDEC has not yet acted on the permits does not inflict actual injury on Constitution, because the pipeline project cannot go forward without the [water quality certification] that NYSDEC has denied.

“Nor does NYSDEC's inaction on the permits threaten imminent injury to Constitution. To the contrary, a finding of injury to Constitution arising from NYSDEC's inaction would be based on a speculative chain of possibilities that may never occur."

Whether the project could be harmed, Mordue wrote, depends on Constitution's pending appeal before the U.S. Circuit Court of Appeals for the Second Circuit over the agency's water quality certification denial. Backers have petitioned that court to review NYSDEC's decision.

Constitution is owned by subsidiaries of Williams Partners LP, Cabot Oil & Gas Corp., Piedmont Natural Gas Co. Inc. and WGL Holdings Inc. The 124-mile, 30-inch diameter pipeline would transport 650 MMcf/d of Marcellus Shale gas produced in Northeast Pennsylvania to Schoharie, NY, where it would connect with Iroquois Gas Transmission and the Tennessee Gas Pipeline.

Williams spokesman Christopher Stockton said the company is disappointed about last week's ruling, but he added that it does not affect the pending appeal before the second circuit.

"We anticipate a decision on our appeal from the second circuit as early as the second quarter of this year," he said. "We remain firmly committed to obtaining the necessary permits and moving forward with this critical energy infrastructure project."

The pipeline would cross 100 miles of New York state. Constitution Pipeline Co. LLC had argued in the lawsuit that the state's permitting requirements are preempted by the Natural Gas Act and are not required to move forward with the project. It also sought to prevent the NYSDEC from enforcing compliance of permit requirements.

The agency rejected the company's water quality certification in part because it claimed it did not receive necessary or correct information to approve it. Constitution's path to final approval has lasted more than five years. It was proposed in February 2012, began the pre-filing process with FERC two months later and had an original in-service date of March 2015.

The project received its Federal Energy Regulatory Commission certificate in December 2014.  The backers have quarreled since with regulators in New York, which has banned high-volume hydraulic fracturing and faced industry criticism for its handling of Constitution and other pipeline projects.

It's unclear what's next for the project until the lawsuit is resolved or whether it will receive any approvals from the NYSDEC. Agency spokeswoman Erica Ringewald said she couldn't comment because of the pending lawsuit.

Cabot, which has 500 MMcf/d of capacity on the pipeline, said last October it expected the project to be in service in late 2018. Takeaway constraints in Northeast Pennsylvania have hurt the company's realized prices.

While other projects were recently approved to help alleviate the bottleneck, the Northeast has not been hospitable to gas pipeline projects. Activists, landowners and some public officials have worked together to try and stop pipelines, which have faced federal regulatory and state permitting delays, failed to obtain adequate customer commitments or were canceled altogether as Kinder Morgan Inc.'s Northeast Energy Direct was.   

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