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FERC Upholds New Jersey-New York Gas Pipeline Expansion

October 22, 2012
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FERC Thursday upheld a May order to approve the New Jersey-New York Expansion Project, a 20-mile expansion of the company's Texas Eastern Transmission (Tetco) and Algonquin Gas Transmission interstate pipeline systems (see NGI, May 28).

The Federal Energy Regulatory Commission (FERC) rejected Jersey City, NJ's request for a stay of the project into the New Jersey-New York region (see NGI, July 16). Jersey City officials argued that FERC greenlighted the construction before soil and groundwater samples were taken from some of the land in the city, and they said a stay was needed to allocate liability in the event previously unknown contamination was found.

The Commission responded that "liability -- as a consequence of contamination or as a result of any other damage attributable to the project -- is a matter appropriately addressed in a court proceeding, as the Commission has no authority to award damages, and is thus unrelated to a stay," the FERC order said [CP11-56]. Moreover, "we have already considered the potential risks of construction-induced contamination and find no likelihood of irreparable injury that would merit a stay to reconsider the matter."

When completed, the expansion would provide an additional 800 MMcf/d of transportation capacity into the New Jersey-New York region, according to Houston-based Spectra Energy Corp., parent of Tetco and Algonquin. 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).

FERC further rejected the claims that the agency's approval of the project conflicted with the U.S. Constitution's guarantee of due process, which calls for a fair hearing before a neutral arbiter (see NGI, July 23).

"None of the parties challenging the Commission's decision on Constitutional grounds, all of which have long been active participants in this proceeding, explain why this claim could not have been made earlier [before FERC approved the project]. As a rule, we reject requests for rehearing that raise a novel issue, unless we find that the issue could not have been previously presented...We therefore will not entertain this new argument on rehearing," the order said.

Jersey City, Sierra Club and others argued that the Commission is incapable of functioning as neutral arbiter because it is a "self-financing agency entirely reliant upon the energy industry for [its full] funding" and, as such, was predisposed to favor the energy industry's requested authorizations.

"We reject the assertions that the manner in which the Commission is funded influences the outcomes of any of our decisions. Permitting a federal or state agency to levy fees and fines on persons subject to its jurisdiction, or to charge for regulatory actions, is neither a novel nor nefarious means of sustaining the work of any agency. At least two-dozen federal agencies derive some or all of their funding, directly or indirectly from such collections," the order said.

"The parties objecting to this means of funding imply the Commission is motivated to approve more projects because it could then derive more revenue. This is not the case. The Commission is not self-funding in the sense of keeping what it collects. Instead, each year Congress appropriates funds for the Commission's operations, with the stipulation that the Commission reimburse the Treasury the same amount by collecting fees and charges from the entities it regulates."

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