The long-stalled Islander East Pipeline project scored a major victory last Thursday when an appeals court in New York ruled that a Connecticut agency’s denial of a water permit for the Connecticut-to-Long Island 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.

Although the court typically treats state agency denials “deferentially, in this case, it appears that the challenged agency decision was arbitrary and capricious because the CTDEP [Connecticut Department of Environmental Protection] 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 U.S. Court of Appeals for the Second Circuit said in its 80-plus page decision.

The court remanded the case to the Connecticut DEP to “conduct the type of review contemplated by federal law, within 75 days of issuance of this opinion, or if the CTDEP is unwilling or unable to do so, to abdicate its authority to issue a [water quality certificate] in this case,” the appellate judges ruled. “We draw no conclusion as to whether the record evidence obligates the CTDEP to grant Islander East’s application; we require only that the CTDEP conduct the sort of complete and reasoned review required by law.”

Donald Santa Jr., president of the Interstate Natural Gas Association of America, called the decision a victory for good energy policy, saying “it sends an emphatic message to state agencies that they no longer will be able to act with impunity in denying permits that are needed to construct interstate natural gas infrastructure.”

Within hours of the Energy Policy Act of 2005 (EPAct) being enacted into law in August 2005, sponsors of the Islander East Pipeline project took advantage of language in the measure and challenged in federal court the state of Connecticut’s refusal to issue a water quality permit for the Connecticut-to-Long Island natural gas pipeline (see NGI, Aug. 8, 2005).

Islander East petitioned the Second Circuit to force the Connecticut DEP to award a water quality certificate that would pave the way for the construction of the 50-mile, 24-inch diameter gas pipeline. The DEP denied Islander East’s request for a water quality permit in February 2004.

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. EPAct 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 the newly-enacted energy bill.

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 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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