The proposed Islander East pipeline, designed to carry natural gas 45 miles from Connecticut to Long Island, NY, was dealt a potentially fatal blow when a federal court set aside a U.S. secretary of commerce decision that had overruled Connecticut’s objections to the project.

Connecticut Attorney General Richard Blumenthal and Department of Environmental Protection (DEP) Commissioner Gina McCarthy said Monday that the U.S. District Court in Bridgeport, CT, had set aside the commerce secretary’s decision, calling it “arbitrary and capricious.” Federal Judge Stefan R. Underhill said the commerce secretary “failed to address an important aspect of [Connecticut’s] problem” and “effectively ignored the adverse effects on oysters” when ruling that shellfish damage would be temporary.

Connecticut had said the proposed Islander East pipeline failed to comply with the state’s coastal zone management plan. The court said the secretary failed to adequately explain or support his decision with data or evidence.

Islander East, which is jointly sponsored by Spectra Energy and KeySpan, has not indicated if it will appeal the decision. According to Blumenthal, the ruling spelled out the end of the proposal.

“This powerful and profoundly important decision should effectively kill Islander East,” Blumenthal said. “The outcome confirms our essential point that the commerce secretary disregarded both hard facts and evidence in his illegal decision. For now — and hopefully forever — this decision means that we have conquered an environmental and economic catastrophe…If there is truly a need for natural gas on Long Island, it can come from elsewhere through a pipeline placed elsewhere, avoiding devastating harm to both environmental and consumer interests.”

The $180 million pipeline project, if built, initially would deliver 285,000 Dth/d of gas 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.

The Islander East pipeline proposal has been at the center of a lengthy and labyrinthine legal dispute since it was first approved by the Federal Energy Regulatory Commission (FERC) in September 2002 (see Daily GPI, Sept. 19, 2002). The state of Connecticut initially interrupted the Islander East project by claiming that it was inconsistent with its Coastal Zone Management Act statute, which gives states the right to block projects that they view as detrimental to their coastal areas. But former Commerce Department Secretary Donald Evans in May 2004 overturned the state’s decision (see Daily GPI, May 7, 2004).

In March, Islander East seemed to have won a key victory when the U.S. District Court of New Haven rejected arguments by Connecticut’s attorney general, the state Department of Environmental Protection (DEP) and the Town of Branford, CT, ruling that the proposed natural gas pipeline did not require a state permit (see Daily GPI, March 28). Since the project had already been approved by the Federal Energy Regulatory Commission, the court said the FERC certificate superseded the state permitting requirement.

A required water permit has been denied twice by DEP. Islander East’s appeal of the second denial is pending decision in the U.S. Court of Appeals for the Second Circuit.

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.

Blumenthal’s office has also fought against the proposed Broadwater Energy LLC LNG (liquefied natural gas) project. Broadwater Energy is seeking permission to occupy land and anchor its LNG facility in the middle of Long Island Sound in New York waters, just short of the Connecticut line. The proposed offshore terminal would include a floating storage and regasification unit with an average sendout capacity of 1 Bcf/d and peak sendout of 1.25 Bcf/d. FERC last year issued Broadwater a favorable draft environmental impact statement, concluding that the proposed $700 million facility would not cause major environmental impacts (see Daily GPI, Nov. 20, 2006). In April, Blumenthal called on New York state regulators to reject a permit for the controversial deepwater LNG terminal (see Daily GPI, April 25).

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