The long-stalled Islander East Pipeline suffered a major setback last Tuesday when a Connecticut agency denied — for a second time — the proposed Connecticut-to-Long Island pipeline’s request for a water quality permit. Islander East promptly petitioned the U.S. Court of Appeals for the Second Circuit in New York. to review and reject the state’s decision.

After conducting a court-ordered review of its February 2004 rejection of Islander East’s request for a water quality permit, the Connecticut Department of Environmental Protection (DEP) concluded that the proposed pipeline route would damage the water quality, natural resources and prime shellfish beds in Long Island Sound.

“This agency is not opposed to the construction of a natural gas pipeline across Long Island Sound. Islander East just insists on putting it in the wrong place,” said DEP Commissioner Gina McCarthy. “We can clearly strike a better balance than this between obtaining the energy we need and protecting the quality of our environment.”

This second rejection comes nearly three months after the Second Circuit ruled that a Connecticut agency’s initial denial of a water permit for the Islander East Pipeline was both “arbitrary and capricious.” It remanded the case to the state agency to conduct a “complete and reasoned” review that complies with federal law. The court said the agency’s initial decision appeared to be “arbitrary and capricious because the CTDEP failed adequately to explain or support its denial with record evidence; did not acknowledge or explain contradictory record evidence; and neglected to consider important aspects of the problem.”

The DEP’s latest rejection of a water quality permit was expected by Islander East, said Islander East spokesman John Sheridan.

Donald Santa Jr., president of the Interstate Natural Gas Association of America, said it “was unfortunate that the state is persisting in attempting to block the pipeline.” He noted that the Second Circuit now will have to determine whether the DEP “articulated a reasoned basis for rejecting the [water quality] application” a second time.

Although a setback, Santa said he doesn’t believe the latest decision will kill the Islander East project, a 50-mile, 24-inch pipeline that would extend from Connecticut across Long Island Sound to Long Island. “My sense is that the applicants…see it as a viable project,” he told NGI Friday.

Islander East, which is jointly sponsored by Duke Energy and KeySpan, previously challenged the Connecticut 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 Islander East pipeline project and the related Algonquin Gas Transmission facilities were approved by the Federal Energy Regulatory Commission in September 2002, and were scheduled to be completed and in service in September 2004. FERC granted an extension for the project.

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 NGI, May 10, 2004).

The $180 million pipeline project, if built, initially would deliver 285,000 Dth/d of natural gas from New Haven, CT, across Long Island Sound to Suffolk County (Long Island) near Yaphank, NY, with a lateral to be constructed to Calverton, NY. Additionally, Algonquin, a subsidiary of Duke 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.

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