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FERC Strikes Back, Waives New York Authority Over Millennium's Valley Lateral

FERC is weighing in officially on New York’s stance against natural gas, issuing an order on Friday that found the state waived its authority to issue a decision on Millennium Pipeline Co. LLC’s water quality certification (WQC) for the Valley Lateral Project because it took too long.

The order effectively reversed the New York Department of Environmental Conservation’s (DEC) Aug. 30 denial of the WQC, which came nearly two years after Millennium first filed its application.

The order could set the stage for a showdown between the Federal Energy Regulatory Commission, New York and states that have increasingly been called on by environmentalists to use their regulatory authority to stymie the gas infrastructure buildout that has come with growing unconventional production.

FERC appeared to hold firmly to the letter of the law in its Friday order and didn’t wade into thornier issues that have arisen in recent years as New York has repeatedly denied pipeline projects for varied reasons. Instead, the Commission found that the DEC waived its authority by failing to act on the WQC within the one-year timeframe required by Section 401 of the U.S. Clean Water Act (CWA).

Millennium has argued before FERC and in federal court that the one-year period began on Nov. 23, 2015, when it first applied for the WQC. The DEC has maintained that the period began on Aug. 31, 2016, or the date it received a complete application from Millennium after the agency requested more information.

Citing case law, federal statutes, the Commission’s precedent in both gas and hydropower proceedings, and even a definition of “receipt” from Merriam-Webster, FERC ruled that the one-year period begins “the day the agency receives a certification application, as opposed to when the agency considers the application to be complete.

“Giving effect to the plain text of the statute,” the order continues, “the one-year review period began Nov. 23 2015, the date New York DEC received the application.”

FERC noted that Section 401 provides that if a state permitting agency “fails or refuses to act on a request for certification within a reasonable period of time (which shall not exceed one year) after receipt of such request, the certification requirements of [Section 401] shall be waived with respect to such federal application. The Commission added that its own natural gas certificate regulations provide no further guidance on the matter.

“To the extent there is any ambiguity in the statutory text, we interpret the triggering date for the waiver provision to be the date a certification application is filed with the relevant agency,” the commissioners wrote. “Our interpretation is consistent with Congress’ intent, given that Congress explained that the review period of one year was established to ‘ensure that sheer inactivity by the state...will not frustrate the federal application.’”

The order was hailed by the Natural Gas Supply Association. “Congress gave individual states a clearly defined role in the approval process and gave FERC primary authority for reviewing pipeline projects, so that one state could not unilaterally veto FERC-approved projects and deprive natural gas consumers in other states from access to natural gas,” CEO Dena Wiggins said.

The Valley Lateral Project would deliver about 130 MMcf/d to Competitive Power Ventures 680 MW Valley Energy Center plant under construction in Wawayanda, NY. It calls for constructing a 16-inch diameter pipeline that would run about eight miles to the facility, which already has the necessary permits to begin operations. CPV has said that without the lateral it would burn ultra-low sulfur diesel to generate electricity.

Millennium battled New York in court over what it claimed were unnecessary permitting delays. The U.S. Court of Appeals for the District of Columbia in June declined Millennium’s request to force state regulators to expedite its WQC review, suggesting the pipeline could bypass the agency and go directly to FERC, which certificated the project in November 2016 [CP16-17]. The company asked FERC in July to proceed with construction activities, arguing that the state waived its right to issue the WQC under the CWA.

“This is a positive step forward for what is an important project for New York consumers,” said Millennium spokesperson Michelle Hook on Friday. “That said, we still want to cooperate fully with the DEC on all issues related to water and will hold to our agreement to accommodate their requests on water crossings and wetlands.”

Hook also said the company plans to refile next week for a notice to proceed with construction. DEC spokesperson Erica Ringewald said the agency is reviewing the decision, but added that it would “consider all legal options to protect public health and the environment.”

FERC in August restored its quorum after two of President Trump’s nominees were confirmed and sworn-in. Two others are soon expected to join the Commission, giving it a full five members and a Republican majority.

What Friday’s order means for other projects that have faced similar hurdles in the state is still unclear. New York has staunchly resisted gas projects, denying WQCs for the Constitution Pipeline and National Fuel Gas Co.’s (NFG) Northern Access expansion project following nearly three years of review each. The projects’ backers have argued in court and before FERC that the agency’s denials were “arbitrary and capricious,” far exceeded the scope of the state's authority under the CWA, were politically motivated and eclipsed the statutory timeframe in which a decision should have been made. 

NFG spokesperson Karen Merkel said Friday’s order is “certainly a positive step for the natural gas industry.” But she noted that the company’s Northern Access case is “substantially different.” The company is fighting the DEC in the U.S. Court of Appeals for the Second Circuit and before FERC over the state’s decision earlier this year to deny the WQC because it found the project would negatively impact the environment.

The Second Circuit recently denied Constitution’s challenge, ruling the DEC is entitled to a WQC review under relevant federal laws. That case is also somewhat different. The DEC denied the project’s WQC, finding its application was incomplete. Constitution spokesman Christopher Stockton said sponsors will continue to pursue all options to move forward, adding that they plan to seek a similar waiver determination from FERC soon. 

DEC sent Millennium a two-page denial letter in August, writing that applicable federal law changed during the course of its review, and as a result, FERC failed to conduct a complete environmental review for the project. The agency cited an Aug. 22 opinion by the DC Circuit. The court narrowly agreed with the Sierra Club that FERC’s environmental impact statement for the Southeast Market Pipelines Project failed to adequately consider the impact of greenhouse gas emissions.

FERC, however, did not address the merits of DEC’s denial or how its review for the Southeast Market project could or could not be related to the Valley Lateral.

Don Santa, CEO of the Interstate Natural Gas Association of America, said the Commission’s order further establishes statutory deadlines “by ensuring a reasonable process and timeframe for the review and decision-making associated with permitting interstate natural gas pipelines.”

The Sierra Club derided FERC’s decision, saying it was an insult to New Yorkers and the rights of citizens to protect their communities. States “unquestionably have the authority” to rule whether a pipeline violates clean water laws, said Atlantic Chapter Director Roger Downs. 

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