After six years, the only thing that Millennium Pipeline sponsors can do is sit and wait. The 442-mile, 700 MMcf/d gas pipeline project from Lake Erie to New York City is supposed to be in service in November 2005, but a little known federal law has left the project in limbo.

The project has been blocked since last year by New York’s Department of State (DOS) under the Coastal Zone Management Act (CZMA) for a number of reasons, some of them procedural, but most significantly for Millennium’s determination late in the regulatory process that it would have to detonate explosives to break up bedrock underneath the Hudson River in the federally protected Haverstraw Bay Significant Coastal Fish and Wildlife Habitat.

The DOS already was against Millennium’s plan to dredge, excavate and back fill about 200,000 cubic yards of sedimentary and mica shist bedrock material during the crossing of Haverstraw Bay. But the disclosure late in the game that it would have to blast through a portion of Haverstraw Bay apparently took DOS by surprise and basically sealed its decision to reject the project.

The DOS and others charge that the blasting plan will cause irreparable damage to a variety of fish species, but most significantly to the short-nosed sturgeon, a particularly ugly but endangered species of fish that has been bottom feeding and spawning in the Hudson since the Jurassic period.

“Until we get some resolution on the appeal that we have before the Department of Commerce, there’s not much we can do,” said Millennium spokesman Brent Archer.

All the legal filings with the Commerce Department, which handles CZMA issues, were completed in April of this year. Since that time, Millennium has been in the process of trying to raise public awareness that there’s a FERC certificated Northeast gas pipeline project that is just sitting there waiting to be built, but that has been effectively blocked by government interference and red tape in the form of the CZMA.

“It is becoming a visible issue in the context of the task force [on natural gas issues] that was formed by House Speaker J. Dennis Hastert (R-IL) earlier this month,” said Archer. “The Commerce Department’s failure [so far] to overturn the state decision has potentially set a very troubling precedent in a time when everybody is concerned about being able to develop supply and infrastructure to get the supply to market,” Archer added. “It is effectively adding another step beyond the FERC certification process.”

Historically, the CZMA has never been a major permitting issue for pipelines, but now two major Northeast pipeline projects are facing essentially the same problem with the CZMA. The Islander East project, which would cross Long Island Sound, is being blocked by the state of Connecticut (see Daily GPI, Sept. 19, 2002). Islander East, sponsored by Duke Energy Gas Transmission (DEGT) and KeySpan Energy, initially would carry more than 260 MMcf/d and ultimately more than 400 MMcf/d from Connecticut under Long Island Sound to connect with KeySpan’s Long Island pipeline.

Opponents of the pipelines have charged that they would do irreparable damage to the environment. Charlie Kane, chairman of the Water Control Commission of the Village of Croton-on-Hudson, explains that Haverstraw Bay “possesses several unique physical and biological characteristics making it one of the most significant fish and wildlife habitats on the Northeast Coast of the United States.

“This special area of the Hudson, characterized by sunlit shallow depths, submerged vegetation and inflows of brackish Atlantic Ocean water overlain by upstream fresh water flows, make this area a perfect estuarine environment for supporting aquatic biodiversity,” Kane said in comments to the Commerce Department’s National Oceanic and Atmospheric Administration (NOAA), which administers the CZMA. “These features also create an essential ‘nutrient trap’ that is directly related to the biological productivity of the bay and its use as a spawning ground and nursery for newly-spawned ‘young of the year’ of many important Hudson River and North Atlantic coastal fish species. No other area of the Hudson’s 315-mile course from the Adirondack wilderness to the Atlantic Ocean possesses these environmentally significant physical characteristics. For these reasons, Haverstraw Bay could be called the ‘ecological engine’ of the Hudson River estuary. It is this very area, however, that will be directly impacted by Millennium’s unprecedented pipeline crossing proposal.”

The DOS proposed up to 12 different routes, all of which the FERC and Millennium had previously reviewed and rejected. “Those were routes that I think most people would have agreed would create significant other environmental impacts,” said Archer. “Our approach in this case was to look to various mitigations on the existing crossing to protect fish habitat and FERC looked at that plan and certificated it.”

However, according to Kane there are several alternatives that would completely avoid Haverstraw Bay’s Coastal Fish and Wildlife Habitat zone but either were not considered by Millennium or dismissed without a full evaluation. “Most notably, the Palisades/Dobbs Ferry Alternatives No. 1 & 2,” he said. “These alternatives would place the crossing almost 10 nautical miles south of Haverstraw Bay, and would be shorter, less costly, and have far less environmental impacts… At the crossing…the Hudson River narrows to approximately one mile, river flows accelerate, especially on the ebb tide, considerably increasing the flushing rate to New York Harbor of any suspended material due to dredging and or blasting.

“Due to the pre-existing Tennessee Pipeline crossing at this location, benthic communities and submerged vegetation have experienced prior disturbance. Therefore, placing the Millennium Pipeline in this area would comport with the CZMA’s mandate to site new coastal facilities in areas where development already exists.”

The route dispute has become something akin to a holy war with no end in sight. But what’s making matters even worse is what Archer charges is a loophole in the CZMA process that has to be closed. It allows the Commerce Department to toss cases into a bureaucratic quagmire from which they may never escape.

Under the CZMA statute, the Commerce secretary has 90 days to issue a decision on an appeal, such as Millennium’s, after the record is closed. However, NOAA is under no statutory obligation to close the record. As a result, it can extend the appeals process simply by leaving the record open and avoiding starting the clock on the 90-days that the secretary has to render a decision.

Millennium sponsors wonder if they may have to wait until the year 3000 to break ground on their pipeline. “On some of the drilling permits [for other coastal areas], the record has literally been kept open up to 10 years,” said Archer.

“There really is not a practical way for us to ask NOAA how far along they are in their review. We’re just in a position of basically waiting until 1) they indicate that they are ready to close the record; and 2) the secretary is prepared to issue a decision.”

Millennium has been basically in a state of limbo for about three months. Meanwhile, it charges that potential customers, such as New York City-based KeySpan, are looking for other ways to get additional gas supply into their markets.

“There’s a lot of market interest there right now, and that’s why the status that we’re in tends to be a little bit more frustrating,” said Archer. He noted that New York is the premium natural gas market in the entire country. “It’s a price issue and a reliability issue. If the growth in this market continues, it becomes less of a price issue and more of an issue of can we even get enough energy in there to fuel the market on a peak day.

“Common sense would say that if we could have found a better route by now we would have jumped on it. But we’re dealing in a geographic area of the country where there are not a lot of great options. Whether it’s market issues or engineering constraints, we have really winnowed down all the various route options to that one, and our technical experts are willing to stand on that; it’s the only viable option that we see for this project.”

One of the reasons the Hudson crossing that Millennium chose is important is the pipeline’s location once it is across the river. It provides access to an existing Consolidated Edison power corridor that runs north and south through Westchester County. It’s one of the last unencumbered power corridors in an extremely congested part of New York City. If Millennium uses the ConEd corridor, it crosses only about six or seven residential properties in about 28 miles of pipeline route.

Millennium project sponsors also already have spent $40-45 million.

The pipeline project may never be built in its current form, but the existing Columbia system still is in need of an expansion, said Archer. “If you take all the political and regulatory issues that have been put up one after another in front of this project, we still are looking at a pretty established power corridor all the way across the state and an existing [Columbia pipeline] system that serves customers that we have in New York that on its own could stand to be upgraded for capacity reasons. This market is showing consistent growth trends year after year. No one wants to give up on a project where there is such a market potential that is waiting for the regulatory process to be completed.”

Millennium believes the Commerce Department can reject DOS’s decision purely on procedural grounds because Millennium said DOS chose not to be a part of the FERC process. Millennium also believes that it complies with the CZMA. The Department of Energy, FERC and U.S. Rep. Billy Tauzin (R-LA) all have filed comments or letters urging the Commerce Department to overturn the DOS ruling.

Millennium project sponsors are keeping their fingers crossed that high gas prices and political pressure will help force Commerce to overrule the state decision last year.

“If we don’t get some certainty on the regulatory side soon,” said Archer, “it is going to make it very difficult for us to have an 2005 in-service date. We’re always looking at various scenarios but no one is budging from the project as it stands right now.”

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