FERC Slaps Down State Overreach on Federal Jurisdictional Pipelines—Now Congress Needs to Act, Too

Michael L. Krancer, Frederick M. Lowther, and Margaret Anne Hill

FERC issued a key and very welcome decision on September 15, 2017, when it held that New York, by its passive aggressive handling of a Clean Water Act (“CWA”) §401 certification, had waived its authority to issue the certification. FERC here slaps down on States treating CWA certifications as political footballs to veto pipeline infrastructure projects without regard to law or facts but on politics and pressure by ideological anti-natural gas interest groups.

The FERC decision here involves the 7.8-mile Millennium Valley Lateral. The Valley Lateral Pipeline is intended to serve the 680 MW gas-fired CPV Valley Energy Center in Wayawanda, Orange County, NY, currently under construction. FERC had granted the Certificate of Public Convenience and Necessity for the line on November 9, 2016, conditioned upon receipt or waiver of State CWA §401 certification.

Millennium had filed its application with the State of New York for Section 401 certification in November 2015. NYSDEC slow walked the application issuing various further demands and moving the goal post further away.  The federal CWA requires a State to grant or deny a CWA certification for a federal jurisdictional project within one year of receipt of the application.

In July 2017, Millennium wisely asked FERC to declare that the State had waived its authority to issue or deny a water quality certification. While Millennium’s request to FERC was pending, NYSDEC, realizing the pickle it was in, issued on August 30, 2017—one day before what even NYSDEC conceded was the one-year deadline—a two-page letter (signed by the General Counsel of NYSDEC), which supposedly denied “conditionally” the Millennium water quality certification.

NYSDEC’s “conditional denial” cited “new law,” namely the recent D.C. Circuit decision Sierra Club v. FERC, 2017 WL 3597014 (D.C. Cir. August 22, 2017) (“Sierra Club”). In that case, the D.C. Circuit remanded a case to FERC holding that FERC was obligated to review potential downstream air quality impacts from gas-fired power plants served by that proposed pipeline.

NYSDEC’s reliance on Sierra Club is obviously irrelevant and indeed in bad faith because a §401 certification is based on water quality matters, not air quality matters. The Sierra Club case has nothing to do with New York’s role under the CWA to review a project for consistency with State water quality standards. It is not NYSDEC’s job, nor within its authority under the CWA or as a State under the Federal system, to evaluate and judge FERC’s NEPA analysis. That is the province of FERC and the U.S. Court of Appeals.

In a well-reasoned, and copiously footnoted decision, FERC agreed that New York had waived its §401 certification rights. As FERC appropriately notes (citing Alcoa Power Generating Inc. v. FERC, 643 F.3d 963, 972 (D.C. Cir. 2011):

“Congress plainly intended to limit the amount of time that a State could delay a federal licensing proceeding without making a decision on the certification request. This is clear from the plain text. Moreover, the Conference Report on Section 401 states that the time limitation was meant to ensure that “sheer inactivity by the State … will not frustrate the Federal application.”

FERC is exactly right to act and it reached the correct conclusion. As we have written about before, the problem of “State veto” frustrating federal jurisdiction pipelines has reached epidemic proportions. The extreme radical Sierra Club, of course, had a temper tantrum over the decision issuing an irrational political, ideological and creedal statement that “FERC’s reversal of Governor Cuomo’s decision is an insult to New Yorkers…”, calling FERC names, and hurling their usual derogatory mendacious epithets at natural gas.

FERC said the New York “conditional denial” was irrelevant “because New York DEC’s rationale for denying certification, are not relevant to the issue of waiver under CWA section 401 [and that]will be addressed by the Commission in a separate order.”

More is needed though since States can avoid waiver by denying §401 certification. FERC even notes that States can avoid the consequence of its decision here by simply denying certifications—as they are wont to do. The States can also play the game of threatening denial if the §401 application is not withdrawn and refiled (presumably restarting the one-year clock)—the game which NYSDEC played in the Constitution Pipeline case.

So Congress needs to step in to correct the improper “State veto” problem. Congress should amend the CWA to harmonize its state review provision with those of the Federal Coastal Zone Management Act (“CZMA”) that have been working very well for a long time. The CWA “arbitrary and capricious” standard of review should be replaced with a “statutory purpose/national interest” standard to be administered by a Federal Cabinet Officer (the Secretary of Commerce in the case of the CZMA). While such an amendment would take a lot of effort to achieve, it would rectify this unwarranted “State veto” problem.

This blog post is based on our more in-depth article published in The Legal Intelligencer on September 18, 2017. To view the full article, please click here or visit www.legalintelligencer.com.


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