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Federal Judge Dismisses Claim of FERC NatGas Bias

A federal judge on Wednesday dismissed a lawsuit filed by the Delaware Riverkeeper Network (DRN) that had alleged FERC is "structurally biased" toward approving natural gas pipeline projects because of the fees it collects from the industry.

U.S. District Judge Tanya S. Chutkan sided with the Federal Energy Regulatory Commission and the PennEast Pipeline Co. LLC in dismissing DRN's suit. Chutkan, in an accompanying memo, wrote that DRN had failed to demonstrate an adequate "liberty or property interest" to make a claim that FERC had violated its due process rights.

But Chutkan also picked apart DRN's claim that FERC is inherently biased in favor of industry because of its funding structure. Chutkan noted that FERC's budget is set by Congress under the federal Budget Act, with the budget funded in part through fees collected from pipelines under its jurisdiction.

"FERC stands to gain no direct benefit from the approval of a particular pipeline project," the judge wrote. "If FERC does not approve any one project, its budget remains the same, with the proportional volumetric charge per gas company being slightly higher. If FERC commissioners also had ownership interests in gas companies, they might individually have a financial stake in granting certificates because it would reduce the proportional charges on their own companies."

Chutkan added that "the connection between the act of approving an individual pipeline and the financial sustainability of the Commission as a whole is simply too remote to create any such bias" since "it is not plausible" that FERC would lose funding anytime soon if it stopped approving pipelines.

"The Budget Act on its face does not create a FERC funding mechanism that creates unconstitutional bias for the basic reason that approval of pipeline projects does not increase FERC’s budget," Chutkan wrote.

The judge's conclusions largely echoed arguments submitted last year by the Interstate Natural Gas Association of America, which wrote in a brief that DRN's claims were "absurdly broad" and "would render many regulatory fees commonly imposed by federal, state and local governments constitutionally suspect and require a broad change to government funding across the nation."

DRN filed its lawsuit last year as part of its efforts to halt the proposed PennEast Pipeline. The pipeline’s backers cheered Chutkan’s decision to throw out the case.

“The Delaware Riverkeeper Network is an organization that stops at nothing to spread misinformation, scare the public and file ridiculous lawsuits, as validated” by the court’s decision, PennEast spokeswoman Pat Kornick said. “This is the latest example of opposition groups wasting time, tax dollars and government resources with baseless claims and ridiculous lawsuits.”

The 1.11 million Dth/d, 120-mile PennEast is awaiting a final environmental impact statement from FERC, currently scheduled for April 7.

The project, planned to transport Marcellus Shale gas from Northeast Pennsylvania east into New Jersey, has continued to face pushback, most recently from U.S. Sens. Cory Booker (D-NJ) and Robert Menendez (D-NJ), who asked FERC this week to investigate concerns from federal agencies over possible arsenic contamination from the pipeline.

Earlier this month, one of the project backers, PSEG Power LLC, divested its minority stake, which Spectra Energy Partners LP quickly agreed to purchase in a deal expected to close in 2Q2017.

Currently, PennEast is a joint venture owned by AGL Resources Inc. unit Red Oak Enterprise Holdings Inc. (20%); New Jersey Resources' NJR Pipeline Co. (20%); South Jersey Industries' SJI Midstream LLC (20%); UGI Energy Services LLC's UGI PennEast LLC (20%); PSEG Power LLC (10%); and Spectra Energy Partners LP (10%). The partnership is managed by UGI Energy Services.

PennEast is hoping to begin construction next year.

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