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FERC Offers Interim Guidance for Firms Challenging Pipe, LNG Project Decisions

FERC last week adopted a policy statement that provides interim guidance, pending a future rulemaking, to companies that are challenging federal or state decisions involving interstate natural gas pipelines and liquefied natural gas (LNG) terminals in federal appeals court. The guidance primarily applies to existing cases.

The policy statement came nearly two months after Congress passed the omnibus energy bill, which required the Federal Energy Regulatory Commission to establish procedures governing court challenges of future pipeline and LNG proceedings [PL05-13].

Specifically the energy bill, which amends the Natural Gas Act (NGA), identifies FERC as the lead agency for coordinating all federal authorizations and for conducting the necessary environmental review; requires the FERC consolidated record to be used as the record in court appeals or reviews of pipe and LNG projects under the Coastal Zone Management Act (CZMA) and other federal laws; and gives developers of pipelines and LNG facilities the right to challenge in federal appeals court any state or federal decisions that are blocking the development of their projects.

"The Commission intends to issue in the near future a 'rulemaking' promulgating regulations to implement the procedures required by Section 313" of the newly enacted energy bill, the policy statement said. "In the interim, we are issuing this policy statement to give guidance with respect to the development of the consolidated record, pending completion of the rulemaking, to parties who initiate federal appellate proceedings under the revised provisions of the NGA."

FERC cited the long-stalled Islander East Pipeline as one of the companies that would benefit from the policy statement. Within days of Congress passing the energy bill in early August, sponsors of Islander East Pipeline project took advantage of language in the measure and challenged in federal appeals court the state of Connecticut's refusal to issue a water quality permit for the Connecticut-to-Long Island natural gas pipeline.

Islander East, which is jointly sponsored by Duke Energy and KeySpan, filed a petition in the U.S. Court of Appeals for the Second Circuit in New York to force the Connecticut Department of Environmental Protection (DEP) to award a water quality certificate that would pave the way for the construction of the 50-mile, 24-inch diameter gas pipeline. The court is scheduled to hear arguments in the appeal in December (see Daily GPI, Aug. 15).

The DEP denied Islander East's request for a water quality permit in February 2004. The state has been holding up the construction of the Islander East and related Algonquin Gas Transmission facilities, which were approved by FERC in September 2002, for more than three years.

"We believe that it is reasonable to interpret Section 313 of [the energy bill] as applying immediately to all pending matters. That being the case, Islander East may properly seek review in the court of appeals of Connecticut's decision denying water quality certification for the project." As for other cases like Islander East that were "relatively advanced" when the energy measure was enacted, "we will deal with the issue of the consolidated record on a case-by-case basis," the agency said.

"In the Islander East case, by the time the company filed its present appeal before the Second Circuit, our certificate orders were final, the appeal of those orders in the District of Columbia Circuit had been resolved, and the record of those proceedings, compiled well before the enactment of [the energy bill], did not consist of a consolidated record...While we had no consolidated record to file with the court in this instance, we remain willing to work with the court and the parties to be of assistance in any way we can."

In other cases similar to Islander East, where a company wishes to appeal state or federal agency decisions but where FERC has not gathered a consolidated record, the Commission said there were two options available. "First the appellant and the respondent state or federal agency...could directly file with the court the record (or a record index) of the state proceeding. This option appears to make the most sense...If for some reason that does not appear viable, we could, under the aegis of [the energy bill], file a request with the state or federal agency that it file a certified copy of its record (or a record index) with us, for forwarding to the court. This may be less satisfactory, given that we have no jurisdiction over the agencies," the Commission said.

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