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Spectra Defends NJ-NY Pipe Project Against 'Due Process' Claims

Claims that FERC violated constitutional due process when it approved the New Jersey-New York Expansion Project in May are without merit and should be rejected, said project sponsors Texas Eastern Transmission (Tetco) and Algonquin Gas Transmission (see NGI, May 28).

Jersey City, NJ, and the Sierra Club have requested rehearing of the May order, arguing that the statutory and regulatory framework through which the Federal Energy Regulatory Commission adjudicates natural gas pipeline siting decisions is unconstitutional. They contend that the regulatory proceedings violate the due process clause of the Constitution, which prohibits the taking of liberty or property without due process of law.

The rehearing request is in addition to Jersey City's plea to stay the June order approving the start of construction of the 20-mile expansion of the Tetco and Algonquin systems, which are pipeline subsidiaries of Houston-based Spectra Energy Corp. (see NGI, July 16). In NGI's memory, FERC has never stayed a project.

When completed, the expansion would provide an additional 800 MMcf/d of transportation capacity into the New Jersey-New York region, according to Spectra. The project is targeted to be in service in the fourth quarter of 2013.

The $1.2 billion expansion, which would run from New Jersey into Manhattan, has been the target of repeated attacks from top New Jersey officials -- Republican Gov. Chris Christie, Democratic Rep. William Pascrell and Jersey City Mayor Jerramiah T. Healy (see NGI, Jan. 24, 2011) -- but it has received solid support in New York (see NGI, Nov. 7, 2011) .

"Jersey City and Sierra Club assert that because the Commission recovers the cost of administering its natural gas program through annual charges on regulated entities, the Commission is structurally unable to adjudicate claims fairly as due process requires," Tetco and Algonquin noted in their response. But this claim lacks merit because the Commission "has no financial interest in approving or disapproving" an individual pipeline application, they said.

"On a realistic view of the relationship between the Commission's funding mechanism and its decision to approve a pipeline project, Jersey City and Sierra Club have not, and cannot, meet their burden to show the Commission has a disqualifying interest."

Moreover, "Jersey City's and Sierra Club's claims rest on a fundamental misunderstanding about the relationship between the Commission's funding and the process for approving a pipeline project. Each year, Congress appropriates funds to support the Commission's operations. Congress has directed, however, that the government be reimbursed for 'the costs incurred by the Commission' in administering various regulatory programs, including electricity, oil and natural gas," the Spectra Energy pipelines said.

"The Commission must, at each year-end, 'make adjustments in the assessments for [each] fiscal year as may be necessary to eliminate any over-recovery or under-reporting of its total costs, and any over-charging or under-charging of any person [regulated entity]. All [money] received under this authority 'shall be credited to the general fund of the Treasury'...The funds are not even collected by the Commission, but paid directly from the regulated companies to the U.S. Treasury," the two pipelines said.

Tetco and Algonquin further pointed out that the due process claim had not been raised prior to FERC issuing the certificate for the New Jersey-New York expansion. "Parties are not permitted to raise new issues on rehearing. As the Commission has repeatedly explained -- 'raising issues for the first time on rehearing is disruptive to the administrative process,'" and typically denies parties the opportunity to respond.

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