Two weeks before Constitution Pipeline LLC will argue in appellate court that New York State regulators are purposely holding up its proposed Marcellus Shale natural gas pipeline by denying a crucial water permit, the two sides in the case took swipes at each other through the filing of final legal briefs last month.
After more than four years of regulatory delays,Constitution's backers filed an appeal with the U.S. Circuit Court of Appeals for the Second Circuit last May over the New York Department of Environmental Conservation's (DEC) refusal to issue a Section 401 Water Quality Certification under the federal Clean Water Act (CWA). DEC denied the permit despite approval from FERC and a federal court to begin construction (see Shale Daily, May 16; March 20, 2015; Dec. 3, 2014).
In a brief filed on Oct. 17, Constitution argues that DEC waived its right to take action on the water permit because it failed to act within a reasonable time frame, as stipulated by the CWA and the federal authorization deadline established by the Federal Energy Regulatory Commission under the Natural Gas Act (NGA). Constitution also took issue with DEC waiting eight months to deny the permit, despite regulators telling the company it "had all the information it needed to issue the permit" by the summer of 2015.
"Even if the court determines that DEC did not waive its right to act, DEC's denial is arbitrary and capricious and an abuse of discretion on several grounds," Constitution said. The company added that the denial "was not based on any genuine assessment as to whether the interstate project met federally-approved state water quality standards. Rather, the denial constitutes an impermissible veto of FERC's determination under the NGA and exceeds the narrowly prescribed limits of DEC's jurisdiction under Section 401 of the CWA."
Constitution is owned by subsidiaries of Williams Partners LP, Cabot Oil & Gas Corp., Piedmont Natural Gas Co. Inc. and WGL Holdings Inc. The approximately 124-mile, 30-inch diameter pipeline would transport Marcellus gas produced in northeast Pennsylvania to Schoharie County, NY, where it would connect with two existing interstate pipelines: Iroquois Gas Transmission and Tennessee Gas Pipeline. It would provide 650,000 Dth/d of takeaway capacity.
Construction of the pipeline has not been started. Constitution spokesman Chris Stockton told NGI's Shale Dailythe company currently anticipates that the pipeline could be entered into service in the second half of 2018, assuming it prevails in court. The project had an original in-service date of March 2015.
“Right now our focus is on the successful resolution of our pending legal appeal,” Stockton said Tuesday.
In a separate reply brief, also filed on Oct. 17, Constitution accused DEC of undertaking "a desperate effort" to block the pipeline by allegedly mischaracterizing the record and the findings of FERC and the U.S. Army Corps of Engineers.
"DEC persists in arguing that its 'repeated requests' for additional information afforded Constitution repeated opportunities to supplement its application," Constitution said. "DEC, however, cannot point to a single document after August 2015...where it requested additional information regarding the four bases for its denial: stream-crossing methods, depth of pipeline burial under waterbodies, blasting in or near water bodies, or wetland-crossing methods."
Constitution added that DEC was being misleading in its statement that "at least 118 entries" in the record between July 2015 and April 2016 illustrate ongoing communications between the two sides. The company said the communication involved a third-party monitoring program, a requirement under FERC's certificate, and had nothing to do with the denial of the permit.
"DEC does not and cannot cite to any requests or correspondence about the issues raised in the denial, because none exist," Constitution said.
But DEC fired back in final brief filed on Oct. 21, saying it had conducted "a thorough and transparent review of Constitution's application," and that regulators gave the company "numerous opportunities to submit additional information to demonstrate that its proposed pipeline would comply with applicable water quality protection standards and requirements.
"DEC ultimately concluded that the Section 401 certification could not be granted, because Constitution failed to establish that the large-scale project would comply with the state's water quality standards."
DEC also disagreed with Constitution's assertion that it had exceeded its regulatory scope. The denial of the permit "was consistent with [DEC's] broad authority under the CWA and did not infringe on FERC's jurisdiction," the agency said, later adding that the NGA "expressly preserves the states' broad authority [under the CWA]. Accordingly, states may prevent the construction of natural gas projects that would not comply with state water quality standards."
The regulatory agency also said Constitution's argument that its decision to deny the pipeline was politically motivated relies on outside-the-record declarations, which DEC filed a motion to strike on July 18. Court records show the motion was "referred to the panel that will determine the merits of the appeal" the very next day.
"Even if Constitution's declarations were considered, they do not establish that the denial resulted from improper political influence," DEC said. "Constitution has submitted declarations regarding hearsay statements from one DEC employee indicating that he was waiting for [New York Gov. Andrew Cuomo's office] before moving forward. [But] the employee referenced in [an affidavit] was not the 'ultimate agency decision maker' authorized to reach a position and bind the agency."
Oral arguments will be heard at 10 a.m. on Nov. 16. Court records show attorneys for Constitution have been given 10 minutes to make their opening arguments, followed by 10 minutes allocated to DEC Acting Commissioner Basil Seggos. Two environmental groups opposed to the pipeline and listed as intervenors in the case -- Stop the Pipeline and Catskill Mountainkeeper Inc. -- have each been given five minutes to speak as well.
The Constitution Pipeline was first proposed in February 2012, and its backers began the pre-filing process with FERC two months later (see Shale Daily, April 27, 2012; Feb. 22, 2012). A formal application to FERC was filed in June 2013 (see Shale Daily, June 17, 2013) and approved in December 2014.
The appellate case is Constitution Pipeline Co. LLC v. DEC et al[No. 16-1568].