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FERC Denies New York Appeal Over Valley Lateral Project; Court Agrees to Hear Arguments

A regulatory turf war between FERC and New York officials regarding the Valley Lateral Project to carry Marcellus Shale natural gas shows no sign of abating, and a federal appeals court in Manhattan agreed to hear arguments about the project next month.

On Wednesday, the Federal Energy Regulatory Commission issued an order denying requests by the New York State Department of Environmental Conservation (DEC) for a stay and a rehearing over construction of the project, which is being built by Millennium Pipeline Co. LLC [CP16-17].

FERC ruled in September that DEC had waived its authority to issue a Section 401 water quality certification (WQC) for the project, which is required under the Clean Water Act (CWA), claiming state officials took too long to make a decision. In October, the Commission gave Millennium permission to begin construction and said the company did not have to consult with the state over the project’s possible impacts to the bog turtle. The DEC then filed petitions for a rehearing and a stay.

"We disagree with the DEC's contention that DEC, as the certifying state agency, is the appropriate agency to interpret 'any ambiguous terms of the CWA,'" FERC said in its order. "In general, courts do not afford deference to state agency interpretations of federal law even where state agencies are delegated substantial roles in cooperative federalist schemes.

"While it is true that states are sometimes given deference by courts in interpreting federal law where a federal agency has approved a state agency's plan or interpretation of federal law, that is not the case here. There is no evidence that the Environmental Protection Agency -- the federal agency charged with primary federal oversight of the CWA -- has approved any of New York's procedural regulations it purports to rely on, much less its interpretation of these regulations as applied to the CWA waiver provision."

In an effort to block construction, New York Attorney General Eric Schneiderman earlier this month filed a request for an emergency stay on behalf of the DEC, which was granted by the U.S. Court of Appeals for the Second Circuit.

Millennium filed an emergency motion on Wednesday asking to dissolve the stay and deny a DEC petition to halt the project, according to records. However, the court also on Wednesday issued a notice agreeing to hear arguments on Dec. 5. On Thursday, an attorney representing Millennium filed supplementary papers stating that the company must complete work near an eagle's nest by Dec. 31, and all tree clearing activities by March 31.

"Millennium has now determined that the latest construction can begin to meet those deadlines is Dec. 7, 2017," wrote attorney Catherine Stetson of Hogan Lovells US LLP. "There accordingly must be no stay in place by no later than Dec. 6, 2017. If Millennium cannot begin construction on Dec. 7, 2017, the harms of Millennium and CPV Valley LLC detailed in Millennium's motion are likely to occur."

Valley Lateral would deliver about 130 MMcf/d to the Competitive Power Ventures (CPV) 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.

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