Energy Litigation, FERC, Natural Gas

FERC Conditional Approval of Natural Gas Pipeline Consistent with Clean Water Act Sequencing Requirements

In the midst of the U.S. energy boom, the expansion and modernization of the nation’s energy infrastructure has been a priority. The ramp up in shale natural gas production has spurred investments in pipeline projects, particularly in the Northeast where infrastructure failed to support the rising levels of gas production. The review and approval process for natural gas pipeline projects, however, can be time-consuming and requires the input of multiple state and federal agencies in addition to the Federal Energy Regulatory Commission (FERC). Indeed, Congress recently took up discussion of draft legislation to facilitate coordination between federal and state agencies and reduce the unnecessary delays that occur when authorizing natural gas pipelines. In practice, FERC often will issue conditional authorizations for companies to move forward with pipeline projects, subject to them obtaining the necessary authorizations from other agencies involved in the process. The validity of a FERC conditional authorization was challenged in Delaware Riverkeeper Network, et al. v. FERC, et al., No. 16-1092 (D.C. May 23, 2017) because it was issued prior to the natural gas pipeline project receiving the required state-issued Clean Water Act (CWA) § 401 water quality certificate. The DC Circuit made it clear in its Delaware Riverkeeper ruling that FERC cannot claim “no harm, no foul” and avoid judicial review of its allegedly premature action just because the project subsequently received the requisite certification; however, FERC can issue conditional authorizations without running afoul the CWA, as long as the FERC conditional authorization does not allow any activity that may result in a discharge into waters that would trigger the CWA requirements.

The Sequence of Events

At the heart of the pipeline authorization dispute in Delaware Riverkeeper is the Transcontinental Gas Pipe Line Company, LLC (Transco) Leidy Southeast Project, which was designed to expand the company’s natural gas pipeline capacity and add new pipeline in Pennsylvania and New Jersey. The project could result in discharges into navigable waters; therefore, Transco was required to obtain a CWA § 401 water quality certification from the state of Pennsylvania, the state in which any such discharge would originate. Transco applied for the Pennsylvania CWA § 401 water quality certificate in June 2014. Before Pennsylvania had completed review of Transco’s application, FERC issued a certificate of public convenience and necessity that conditionally approved the project in December 2014. Among other conditions, the certificate order adopted the project’s environmental assessment conditions and required that “Prior to receiving written authorization from the Director of OEP to commence construction of any project facilities, Transco shall file with the Secretary documentation that it has received all applicable authorizations required under federal law (or evidence of waiver thereof).” In early 2015, FERC issued letter orders authorizing Transco to begin pre-construction activities, including tree-felling activities for the project. The Delaware Riverkeeper Network and the current Delaware Riverkeeper (Delaware Riverkeeper) challenged the conditional certificate order and additional FERC authorizations related to the project. Amid these continuing challenges, Transco received the Pennsylvania CWA § 401 certificate in April 2015 and it was affirmed by the Third Circuit Court of Appeals in 2016. In March 2016, Delaware Riverkeeper challenged FERC’s conditional certificate order in the DC Circuit.

No Harm, No Foul – No Judicial Review?

FERC attempted to avoid judicial review of its certificate order, arguing that since Transco had received the Pennsylvania CWA § 401 certificate there was no ongoing controversy regarding the sequence in which the FERC certificate order was granted and no true remedy to be granted to Delaware Riverkeeper since FERC could immediately reissue the certificate order if it was invalidated. The DC Circuit rejected FERC’s position, finding that “Riverkeeper’s claim is not moot because once the CWA’s sequence has been flouted, the only fix is to start the process over….Therefore, we could grant Riverkeeper vacatur of FERC’s conditional Certificate Order even if its victory might be short lived.”

Which Came First – Not Dispositive if the Conditions are Clear

Although the court sided with Delaware Riverkeeper in granting review of the FERC conditional authorization, it did not invalidate the certificate order as Delaware Riverkeeper had hoped. The relevant question identified by the court was whether FERC’s conditional authorization permitted “activity…which may result in any discharge in navigable waters.” If it did not, then the sequencing requirement of CWA § 401 was not triggered. The court adopted a concurring statement from one of its recent cases to dispose of Delaware Riverkeeper’s challenge:

The plain text of the Clean Water Act does not appear to prohibit the kind of conditional certificate the Commission issued here. On its face, section 401(a)(1) does not prohibit all “license[s] or permit[s]” issued without state certification, only those that allow the licensee or permittee “to conduct any activity . . . which may result in any discharge into the navigable waters.” 33 U.S.C. § 1341(a)(1). Petitioner has pointed to no activities authorized by the conditional certificate itself that may result in such discharge prior to the state approval and the Commission’s issuance of a Notice to Proceed.

The court found that the FERC conditional certificate order in this case “made it clear that FERC would not authorize any construction until Transco had obtained a § 401 certification from Pennsylvania,” and it did not itself authorize any potential discharge activity.

With Delaware Riverkeeper, FERC has a green light to continue its practice of issuing conditional authorizations for natural gas pipeline projects before a state CWA § 401 certificate has been issued. The court did not, however, determine whether FERC’s subsequent letter orders authorizing Transco to begin pre-construction tree-felling and other activities violated CWA § 401, because Delaware Riverkeeper failed to exhaust its administrative appeals on the issue. With the current push for energy infrastructure build-out, we may see more challenges to pipeline projects that probe these additional questions.

Brian Heslin

About Brian Heslin

Brian Heslin represents energy companies in regulatory proceedings at the state and federal level. In addition, he provides advice on busines and strategic planning, upstream natural gas supply and capacity negotiation, compliance and other related services.

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The landscape of the energy industry is rapidly changing, with a focus on the development of clean, domestic energy sources and a secure, reliable energy infrastructure driving significant changes in the interdependency of energy industry segments and an increase in government regulation. Continued growth in the domestic production of oil and natural gas has positioned the U.S. to be an energy exporter in the global market and will have a marked impact on the course of the industry’s development.

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