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NY Part 4: New York's Stand Against NatGas Throws Fate of Opposed Pipelines Into Doubt

(See Part 1; Part 2; Part 3)

*This is Part 4, the final story in a series examining the effects of New York’s energy policies on Appalachian natural gas producers, consumers and the Northeast. What comes next for New York’s infrastructure projects -- and those facing similar challenges -- that have hit a wall?

If it wasn’t already clear that New York state is taking a stand against the natural gas industry and its supporters, it should be by now.

To hear officials at the New York State Department of Environmental Conservation (DEC) tell it, the federal government has given up “its responsibility on climate change,” leaving New York as a “driving force for protecting our natural resources for future generations.”

New York’s natural gas industry is still reeling from the punch of a high-volume hydraulic fracturing (fracking) ban more than two years after it went into effect. Constitution Pipeline Co. LLC and National Fuel Gas Co.’s (NFG) Northern Access expansion are fighting the DEC in court over the agency’s three-year process to deny the FERC-approved projects key water quality certificates (WQC) for stream or wetlands crossings under Section 401 of the federal Clean Water Act (CWA). DEC also denied Millennium Pipeline Co. LLC a WQC at the end of August for its Valley Lateral Project. So, what’s next?

In the days after the U.S. Court of Appeals for the Second Circuit denied Constitution’s challenge, energy attorneys said pipeline companies should take notice.

Constitution had asked the court to review and vacate DEC’s decision based on the standard that it was “arbitrary and capricious.” NFG has argued the same. But in Constitution’s case, DEC said it denied the project’s WQC application because it was incomplete, mainly over a disagreement about trenchless crossings and staff’s contention that it didn’t have enough information to determine environmental impacts.

The Second Circuit agreed, upholding DEC’s review and deferring on whether the agency failed to issue a decision within the statutory timeframe to the U.S. Court of Appeals for the District of Columbia. Constitution has since filed a petition to rehear the case en banc, or before all of its active judges, arguing that if the three-judge panel's opinion is allowed to stand it could have far-reaching implications for gas infrastructure projects across the country. 

“Constitution demonstrates that a state has the power to determine what information it wants and that determination is dispositive,” wrote attorney Frederick Lowther, of Blank Rome LLP, in a blog post after the decision.

While the DEC denied Northern Access’ WQC because it said the project would harm the environment, ClearView Energy Partners LLC said the Second Circuit’s opinion still doesn’t bode well for the expansion.

ClearView analysts said Constitution could request that the Federal Energy Regulatory Commission find that DEC waived its CWA review by exceeding the statutory timeframe; appeal the Second Circuit decision to the U.S. Supreme Court or even resubmit the application to the DEC.

NFG has already filed at FERC for reconsideration of the certificate order authorizing the project. It argues that DEC permits are preempted by the Natural Gas Act (NGA) and the state waived its requirement for the project to obtain a WQC by failing to issue it in time. That was filed in March, even before DEC reached its decision. NFG has since filed a motion to expedite its rehearing request.

“We do not consider a waiver ruling from FERC as a foregone conclusion, nor are we convinced that a subsequent challenge from DEC would fail,” ClearView analysts said.

Indeed, Richard Drom, who practices before FERC at Washington, DC-based Eckert Seamans Cherin & Mellott, said the Commission is “entirely correct in not butting into these controversies,” given the authority it has under the NGA. Some also fear that such an intervention could upend the careful balance between states and the federal government under the CWA.

Things have changed at FERC, however. Sources said they hope that President Trump’s administration can influence the Commission to intervene in New York and get Constitution and Northern Access going again.Two of Trump’s FERC nominees have been confirmed and two more are soon expected to join the Commission soon, giving it a full five members and a Republican majority.

FERC could assert its jurisdiction over interstate commerce, picking a fight with the courts and pushing the pipelines through before their opponents can act. The Commission’s first public meeting since January is scheduled for next Wednesday (Sept. 20).

With its quorum only recently having been restored, though, a spokeswoman said the Commission has not yet decided on priority cases. FERC’s website lists more than 40 major pipeline projects pending, some filed as long ago as 2013. The new commissioners will have some studying to do to get up to speed on all the major pending gas and electric cases that have been waiting since the agency lost its quorum in February.

One thing is clear: Constitution and Northern Access, along with New York’s fracking ban, have become powerful symbols of anti-fossil fuel sentiment. Whether New York’s regulatory approach is right or wrong is a matter of opinion.

Environmental groups have welcomed the agency’s decisions, but they also want to see more like them. The Natural Resources Defense Council wrote after the Second Circuit issued its Constitution opinion that it hoped the “decision will have effects beyond New York, and other states will be empowered to block future natural gas pipelines planned for construction within their borders.”

WQC application reviews have been weaponized by environmental groups. The Virginia Department of Environmental Quality in July expanded its review of the Atlantic Coast Pipeline and the Mountain Valley Pipeline (MVP) after opponents criticized it for not going far enough in its CWA process.

Facing a petition for review filed in federal court by environmental groups of its decision to issue the Mountain Valley Pipeline a WQC, the West Virginia Department of Environmental Protection last week vacated the certificate and is reevaluating the company’s application.

After the state  threw out the certificate, a Sierra Club spokesman told NGI that environmental groups have no plans to withdraw their petition for review, saying recent court cases “have upheld states’ rights...and we expect that to be true in future cases as well.”

Complicating matters further for infrastructure is a ruling by the DC Circuit that found FERC’s environmental impact statement for the Southeast Market Pipelines Project failed to adequately consider the impact of greenhouse gas emissions. New York cited that opinion when it denied the Valley Lateral Project a WQC.

Attorney Daniel Markind of Weir & Partners LLP wrote in a note that the Second Circuit ruled narrowly insofar as it did not address the “ultimate issue” of whether Constitution would adversely impact New York’s waterways.

There could be a better outcome for the industry if a court ultimately takes up that issue. In any event, both NFG and Constitution have acknowledged that it could be years before the pipelines are given the approvals needed to build. Mired in litigation and with other options on the table to move natural gas out of the Appalachian Basin, there’s also a chance they won’t get built at all. 

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