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FERC Rules, DC Appeals Court Says, Advising Millennium to Bypass New York Agency

A federal appeals court on Friday declined a request by Millennium Pipeline Co. LLC to compel regulators in New York State to expedite a critical water quality permit for a natural gas pipeline expansion, suggesting the pipeline could bypass the state agency and go directly to FERC which already has approved the project.

In a unanimous decision, the U.S. Court of Appeals for the District of Columbia Circuit dismissed Millennium's petition to review the permitting process for its proposed Valley Lateral. At issue is an ongoing delay by the New York State Department of Environmental Conservation (DEC) to issue a Section 401 Water Quality Certification for the project.

"Even if the DEC has unlawfully delayed acting on Millennium's application, its inaction would operate as a waiver, enabling Millennium to bypass the DEC and proceed to obtain approval from FERC," wrote Circuit Court Judge Sri Srinivasan. "The DEC's delay, then, causes Millennium no cognizable injury. Millennium therefore lacks standing to proceed with its petition."

But Catherine Stetson, an attorney with Hogan Lovells US LLP who represented Millennium, told NGI that the decision wasn't bad news for the company.

"Although the D.C. Circuit held that it did not have jurisdiction to find that the DEC waived its Section 401 rights, the court made clear that the Federal Energy Regulatory Commission does have that power and should exercise it in circumstances like these," Stetson said Friday. "The D.C. Circuit's decision thus confirms that state agencies like the DEC cannot ignore federal statutory deadlines with impunity, and clarifies the administrative process for pipelines caught up in bureaucratic red tape."

In his ruling, Srinivasan appeared to concur. "So what can Millennium do in the face of the DEC's continued inaction?" he asked. "Millennium can go directly to FERC and present evidence of the DEC's waiver. To be sure, FERC could ultimately decline to find waiver. But in that event, FERC, not the DEC, would be blocking the construction."

In a note to clients Friday, ClearView Energy Partners LLC also said the dismissal shouldn't be viewed as a defeat for Millennium.

"While this decision does not provide any relief to Millennium today, it outlines the likely avenue to resolution," said ClearView Managing Director Christi Tezak. "We do not read today's decision as an affirmation of the DEC's approach on [permitting], nor a jurisdictional win for DEC, per se...

"However, today's ruling explicitly refers to precedent that implies that FERC has the ability to find that DEC has waived its review, even if DEC issues a denial."

FERC approved the Valley Lateral last November. The project calls for construction of a 16-inch diameter natural gas pipeline traversing Orange County, NY. The pipeline would run approximately 7.8 miles from Millennium's existing mainline to the CPV Valley Energy Center, a new natural gas-fueled power plant currently under construction in Wawayanda.

The project [CP16-17] would provide transportation capacity for about 130 MMcf/d to serve the 650 MW gas-fueled facility.

Court records show that the DEC received Millennium's request for the water quality permit in November 2015, but regulators told the company that its application was incomplete. Communication between the two sides continued for another year, with Millennium reportedly complying with the DEC's requests each time.

But the following November the DEC said that while the company had indeed "fully responded" to its requests, the permit application was still under review. Irked by the ongoing delay, Millennium filed its petition with the appeals court last February. The case is Millennium Pipeline Co. LLC v. Basil Seggos et al [No. 16-1415].

Millennium is owned by subsidiaries of Columbia Pipeline Group Inc., National Grid plc and DTE Energy Co.

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