Victory! FERC Overrules NY DEC to Allow Constitution Pipeline

Reversing a decision they made in January 2018 (see Death of the Constitution Pipeline? FERC Refuses to Overrule NY DEC), late Wednesday the Federal Energy Regulatory Commission (FERC) ruled that the New York Dept. of Environmental Conservation (DEC), thoroughly corrupted by Gov. Andrew Cuomo, took too long to deny a federal Clean Water Act “Section 401” water crossing permit for the Williams Constitution Pipeline project. The project is back on!

A Brief History

Cuomo’s DEC took more than two years to evaluate and eventually reject the Constitution Pipeline in 2016–a $683 million, 124-mile pipeline from Susquehanna County, PA to Schoharie County, NY to move Marcellus gas into NY and New England (see NY Gov. Cuomo Refuses to Grant Permits for Constitution Pipeline). Constitution (i.e. Williams) went to federal court to overturn that decision, but ultimately failed in August 2017 (see Court Rejects Constitution Pipe’s Case Against NY DEC; Now What?).

But then, a ray of hope appeared in the galaxy. FERC overruled NY DEC in another pipeline case, National Fuel Gas Company’s Northern Access Pipeline project, so Constitution filed a request with FERC to overrule DEC in their case too (see Constitution Pipeline Asks FERC to Override NY DEC). FERC *wanted* to overrule DEC again. You can read between the lines and detect it in their statements. But ultimately FERC said they could not overrule the DEC because the DEC rejected the permit with four days left ticking on a one-year clock (see Death of the Constitution Pipeline? FERC Refuses to Overrule NY DEC).

Except that was the second one-year clock for Constitution. DEC has done what other states have done by convincing Constitution to withdraw their 401 application and resubmit it, restarting the clock for a second one-year time frame. The shenanigan of restarting the clock at the request of the state violates the spirit and letter of the law according to a decision in an unrelated case issued by the D.C. Circuit Court of Appeals known as Hoopa Valley Tribe v. FERC (dealing with a hydroelectric dam out West).

The D.C. Circuit ruled in the Hoopa Valley case that states (like NY) cannot keep asking project builders (like Williams) to withdraw applications for water crossing permits to “restart the clock” ticking (like they did with Constitution). Such applications must be ruled on in one year, according to federal law. The court found pressuring applicants to withdraw and resubmit applications, thereby restarting the clock for an additional one year, violates the law.

The writing was on the wall after the Hoopa Valley case. The DEC was very nervous and in April of this year threatened FERC they would reign down all sorts of legal hell if FERC decided to overturn the DEC decision against Constitution (see NY DEC Nervous that FERC Will Overturn Constitution Pipe Ruling). Threats by corrupt agencies like the DEC don’t intimidate federal agencies like FERC.

Wednesday’s Decision

Late Wednesday FERC issued a new order that reverses their previous order from January 2018. This new order (full copy below) overrules the DEC and finds, in light of the Hoopa Valley case, that the DEC took too long to reject the Constitution 401 permit and therefore waived their right to reject the permit.

While this is good news, it doesn’t mean construction will begin next week or next month. Constitution has a few straggling loose ends to tie up first. And you can be sure the DEC is going to sue. In a similar case (NFG’s Northern Access Pipeline) where FERC overruled the corrupt DEC, the DEC filed a lawsuit in federal court, a lawsuit that is still pending (see NY DEC Asks Federal Court to Overturn FERC Approval of NY Pipe). You can expect the same with the Constitution project. So, maybe we’re looking at another year before construction begins. At least there’s now a bright light at the end of the tunnel. We’re almost there!

The Federal Energy Regulatory Commission has found that New York waived its water quality authority for Williams’ Constitution Pipeline, giving new life to a natural gas project stalled since April 2016 when state regulators denied a permit.

The 124-mile project is designed to ship up to 650 MMcf/d of northeastern Pennsylvania gas production to interconnections with the Iroquois Gas Transmission and Tennessee Gas Pipeline in upstate New York.

The commission, by a 4-0 vote late Wednesday, reversed its earlier finding — that the New York review could not be waived — in light of a recent DC Circuit Court of Appeals ruling in Hoopa Valley v. FERC. The Hoopa case had involved a hydropower project for which states and PacifiCorp agreed to defer the Clean Water Act’s one-year statutory deadline by annually withdrawing and resubmitting the water permit.

The commission interpreted the ruling to “stand for the general principal” that states waive their CWA Section 401 authority when a project application is withdrawn and resubmitted to avoid the act’s one-year time limit for state decisions, and the state fails to act in that timeframe, the commission said.

FERC rejected arguments from New York and environmental groups that differing circumstances in the Constitution case weighed against granting a waiver.

“The record [for Constitution] indicates that the state encouraged Constitution’s withdrawal and resubmission of its application for the purpose of avoiding the waiver period,” FERC concluded.

NEXT STEPS

The start of construction is unlikely to be imminent.

Williams in a statement said Constitution sponsors “are evaluating next steps for advancing the project,” and asserted the project represents much needed infrastructure for a region confronting natural gas supply constraints that have elevated prices for consumers.

According to Williams spokesman Christopher Stockton, the principal outstanding federal permit needed is the CWA 404 permit from the US Army Corps of Engineers. “For construction activities, we need to obtain a surface water withdrawal permit from the Susquehanna River Basin Commission in addition to a permit from Pennsylvania Fish and Boat Commission, and coordinate with state and local governments for permits like driveway and road crossing permits,” he said in an email.

Rob Rains of Washington Analysis said the FERC decision is a “potential game-changer” for the project’s future. But the process of obtaining a Section 404 permit from the Corps could drag on for a year or longer. Appeals from environmental groups are expected but unlikely to halt work absent an injunction, he said.

Gary Kruse of LawIQ suggested Constitution would be likely to file a complaint seeking an injunction preventing enforcement actions against the project by NYSDEC, likely following the pattern for Millennium Pipeline.

The project is a joint venture of Williams, Cabot Oil & Gas, WGL Holdings and Duke Energy’s Piedmont Natural Gas. (1)

What’s next? That issue was tackled in a Gannett article:

Whether DEC plans to challenge the ruling was not immediately clear. The agency did not immediately respond to a request for comment Thursday morning.

Wednesday’s decision comes at a time of uncertainty for New York’s natural gas future.

Several moratoriums on new natural gas hook-ups are in place throughout the state, including Westchester County, Long Island and parts of New York City.

The moratoriums are the result of a natural gas shortage brought on by a demand for new hook ups and a lack of new natural gas pipelines in the state, energy companies like Con Edison and National Grid have said.

New York regulators denied a necessary permit for a the Williams Pipeline earlier this year that would have brought fracked natural gas into New York City from Pennsylvania.

“These interstate pipeline constraints do not affect our existing customers, but limit our ability to serve new customers on the coldest days, when demand for natural gas is at its peak,” Con Edison, whose moratorium on natural gas hook ups impacts most of Westchester, said in a statement back in March.

Further complicating matters is the state’s new climate change law.

Gov. Andrew Cuomo, earlier this year, signed legislation that would set a statewide goal of net-zero emissions in the state by 2050.

The bill has sparked a debate between environmental activists and business groups over the future of energy in the state.

“We have to transition off of all fossil fuels if we’re going to prevent the most devastating impacts of climate change,” said Liz Moran, environmental policy director for the New York Public Interest Research Group.

But the state’s Business Council argues New York’s new law doesn’t require an end of natural gas usage in the state but rather a limit on fossil-fuel emissions, which can be curtailed by new technologies that still allow the use of natural gas.

The debate is unlikely to be resolved anytime soon — a 22-person committee will be appointed to determine how the state will meet its energy goals. (2)

Just a note on this notion that NY has some sort of right to reject the pipeline based on its recently passed new law that will ban all fossil fuels in the next 20-30 years (see New York Residents Must Dump Oil & Gas Furnaces by 2050). If NY wants to royally screw all of its citizens, that’s NY’s business. That does NOT give NY the right to block a pipeline that will deliver gas to other states, specifically states in New England. That’s why there’s federal law (the Interstate Commerce Clause) that prevents one state from economically harming another state. This business of NY’s new fossil fuel ban law being a justification to block the Constitution is a dead end.

Finally, a look at FERC’s decision through a legal lens:

The Federal Energy Regulatory Commission said late Wednesday that New York environmental regulators blew a one-year deadline to act on a Clean Water Act permit for a $683 million pipeline project, an about-face from last year, when it backed the Empire State’s permit denial.

FERC cited the D.C. Circuit’s January decision in Hoopa Valley Tribe v. FERC for its reversal. In 2018, FERC determined that the New York State Department of Environmental Conservation retained its authority to deny a CWA Section 401 water quality permit for a proposed project by Williams Cos. Inc. unit Constitution Pipeline Co. LLC despite the deadline. But FERC now says the NYSDEC waived its authority to deny the permit by waiting too long.

In Hoopa Valley, the D.C. Circuit said the one-year clock for states to act on CWA permit requests doesn’t reset if applications are withdrawn and resubmitted.

FERC said in an order Wednesday that Constitution’s application was withdrawn and resubmitted repeatedly after the company originally filed it in 2013, and that the one-year CWA clock began when Constitution first resubmitted its application in May 2014. NYSDEC ultimately denied the permit application in April 2016.

“The record here indicates that the state encouraged Constitution’s withdrawal and resubmission of its application for the purpose of avoiding the waiver period,” FERC said in its order. “Those actions and New York DEC’s failure to act on the application within one year from the date it was filed result in waiver of the state’s section 401 authority.”

FERC rejected NYSDEC’s argument that the D.C. Circuit’s ruling in Hoopa Valley, which said California and Oregon waived their authority to issue water quality permits for a hydroelectric project, did not apply because unlike in that case, Constitution and NYSDEC had no written agreement allowing the state agency to delay review indefinitely. Nothing in Hoopa Valley suggests that the form of an agreement between a a project applicant and a state agency – written or otherwise – factored into the D.C. Circuit’s decision, FERC said in its order.

“Hoopa Valley held that the parties’ arrangement ‘serve[d] to circumvent [FERC’s] congressionally granted authority over the licensing, conditioning, and developing of a hydropower project,’ which would have permitted ‘the states [to] usurp FERC’s control over whether and when a federal license will issue,’” FERC said in its order. “The same concern applies here.”

FERC, which approved Constitution’s project in 2014, originally rejected the company’s bid to invalidate NYSDEC’s permit denial because the agency had waived its CWA authority in January 2018. The commission held that NYSDEC stayed within the statutory limits imposed by Section 401, saying that the company’s two withdrawals and resubmissions of its application reset the one-year deadline each time and that the agency always made a decision within the proper time frame.

FERC rejected a rehearing bid in June 2018, prompting Constitution to challenge the decision in the D.C. Circuit. But in February, FERC asked the appeals court for, and was granted, a remand of Constitution’s case so it could consider the implications of the Hoopa Valley decision. The commission then ordered a new round of briefing from Constitution, NYSDEC and environmental groups that had sided with the state.

In deciding that NYSDEC had in fact, waived its authority, FERC also rejected a bid to stay its decision until a potential appeal plays out, saying that doing so would not be in the public interest.

“New York DEC does not support its assertions that commission staff and the commission depended on a forthcoming water quality certification to justify the conclusions that project-related environmental impacts would be acceptable and that the project should be authorized,” FERC said in its order.

FERC’s ruling is the latest twist in the long-running battle between Constitution and New York over the company’s planned 121-mile pipeline through New York and Pennsylvania.

In originally denying the CWA permit, NYSDEC said the project failed to meet water quality standards. Constitution has accused Gov. Andrew Cuomo and his staff of ignoring scientific evidence and bending to the will of anti-gas drilling activists, and claimed the agency unreasonably dragged its feet through repeated requests for additional environmental information and resubmitted applications.

In 2017, the Second Circuit upheld NYSDEC’s denial of the permit on its merits, which prompted Constitution to seek a waiver ruling from FERC.

FERC’s decision Thursday also highlights the growing impact of the D.C. Circuit’s ruling in Hoopa Valley. FERC cited the ruling in April when it stood by its decision that NYSDEC waived its authority to deny a CWA permit for a $455 million natural gas pipeline project, saying that the Section 401 deadline can’t be waived by an agreement. New York has appealed that order to the Second Circuit.

Gas developers and industry groups have accused state governments wary of fossil fuel development of using Section 401 to stymie projects that pass through their states and have been approved by FERC, and the U.S. Environmental Protection Agency recently floated a rule intended to limit state Section 401 reviews.

A NYSDEC representative couldn’t be immediately reached for comment Thursday.

Williams spokesman Christopher Stockton said Thursday that “the project sponsors are evaluating the next steps for advancing the project.” (3)

A copy of FERC’s decision is embedded below.

(1) S&P Global Platts (Aug 29, 2019) – FERC puts Constitution Pipeline back on track, finding New York waived water authority

(2) Binghamton (NY) Press & Sun Bulletin (Aug 29, 2019) – Feds clear way for Constitution Pipeline in New York over state’s objection

(3) Law360 (Aug 29, 2019) – Reversing Course, FERC Dumps NY’s Pipeline Permit Denial