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Islander East Pipe Takes Case to the Supreme Court

In a case that could have far-reaching impact on natural gas pipelines, as well as electric transmission systems, Islander East Pipeline Co. has petitioned the U.S. Supreme Court to review a lower court's decision that let stand the state of Connecticut's denial of a water quality permit for the proposed Connecticut-to-Long Island natural gas pipeline.

The high court, if it should accept the case, is being asked to reconcile the federal government's authority to regulate and oversee interstate energy infrastructure systems with the ability of individual states to block such projects and, in effect, preempt the federal government.

Specifically Islander East, which is jointly sponsored by Spectra Energy and National Grid, is seeking to overturn the U.S. Court of Appeals for the Second Circuit in New York's ruling in May to not review the Connecticut Department of Environmental Protection's (DEP) refusal to issue a permit under the Clean Water Act (CWA) for the project (see NGI, May 12).

The case before the high court would raise "two related and equally important" questions: 1) where did Congress draw the jurisdictional line between the Federal Energy Regulatory Commission's (FERC) comprehensive authority to regulate interstate natural gas pipelines under the Natural Gas Act (NGA) and a state agency's power to prevent construction of a FERC-certificated pipeline under Section 401 of the CWA; and 2) what is the "federal law" governing a state agency's issuance of a 401 permit for an interstate pipeline and when does the agency act "inconsistently" with that law within the meaning of the NGA, said the attorneys for Islander East in their writ of certiorari.

"This court's resolution of these issues will enable the natural gas industry to assess the legal and regulatory risks of committing to develop new capital-intensive infrastructure projects, and affirm the important role natural gas delivered by pipeline will play in alleviating the nation's energy security and global warming concerns," the pipeline's lawyers argued.

"I think it's going to have some broader implications" for the entire energy industry, said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America, which represents interstate gas pipelines. "The federalism debate [in this case] -- federal vs. states rights -- has relevance for all interstate energy infrastructure in the United States." The responsibilities given to the federal government under the NGA are in direct conflict with the federally delegated authority under the CWA, he said, adding that Islander East is asking the high court to sort this out. Individual states now have the ability to halt or delay interstate commerce.

In late 2007 Islander East asked the Second Circuit court to review a decision by the U.S. District Court in Bridgeport, CT, which in late August of that year set aside a 2004 decision by former Commerce Secretary Donald Evans overturning Connecticut's efforts to block the pipeline (see NGI, May 10, 2004, Sept. 3, 2007). Connecticut initially interrupted the Islander East project by claiming that it was inconsistent with the state's Coastal Zone Management Act statute, which gives states the right to block projects that they view as detrimental to their coastal areas.

With the water permit having been denied twice by the Connecticut DEP, the Islander East project has been at the center of a lengthy and labyrinthine legal dispute since it was first approved by FERC in 2002 (see NGI, Sept. 23, 2002). The proposed pipeline and the state of Connecticut have been in the courts since June 2004.

In March 2007 Islander East scored a win when the U.S. District Court of New Haven rejected arguments by Connecticut's attorney general, the state DEP and the Town of Branford, CT, ruling that the proposed pipeline did not require a state permit (see NGI, April 2, 2007). Since the project had already been approved by FERC, the court said the Commission certificate superseded the state permitting requirement. But the victory was short-lived.

Islander East previously challenged the DEP decision in state Superior Court in Hartford, CT, where the case had languished. The Energy Policy Act of 2005 (EPAct), however, gave interstate pipelines the power for the first time to seek recourse in the federal courts when states oppose FERC-approved projects and refuse to issue permits. Islander East was the first energy-related company to file a court challenge based on language contained in EPAct.

The $180 million Islander East project initially would deliver 285,000 Dth/d of gas 45 miles from New Haven, CT, across Long Island Sound to Suffolk County near Yaphank, NY, with a lateral to be constructed to Calverton, NY.

Additionally, Algonquin Gas Transmission, a subsidiary of Spectra Energy, would loop about 13.7 miles of existing pipeline in Connecticut and add a new compressor station in Cheshire, CT. As a result of these upgrades in Connecticut, Algonquin would interconnect with Islander East. Approximately 22 miles of the pipeline would be built on the floor of Long Island Sound.

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