State EPA Federal Permitting and Preemption by FERC

According to a Forbes article in 2016, the Federal Energy Regulatory Commission (FERC) approved almost 40 major pipeline projects across the country, covering 1,200 miles, over 14 Bcf/d of new capacity (total national consumption is around 75 Bcf/d), and over $10 billion in new investment.  Most of these new pipelines are being built in the eastern third of the U.S.  There are three major pipelines currently being constructed or will soon start construction in Ohio.

With all this new construction, a key issue is the interplay between regulation under the Natural Gas Act (NGA) administered by the FERC and State EPA environmental permitting.  In order to expedite construction and avoid duplication in regulation, the NGA preempts much of the State regulatory oversight.  

On August 18th the Federal Court in the 2nd Circuit issued a significant decision regarding state environmental permitting authority and preemption.  The case relates to the State of New York’s permitting authority under the Clean Water Act (CWA).

In Constitution Pipeline Company v. New York State Department of Environmental Conservation, the New York State Department of Environmental Conservation (NYSDEC) denied a stream/wetland permit requested by Constitution Pipeline to construct a pipeline that crossed through New York.  The dispute involved whether less water quality impacts were feasible by avoiding open cuts through streams and wetlands in favor of horizontal directional drilling which goes underneath these resources.  

During the FERC review, NYSDEC submitted comments requesting more HDDs and Constitution Pipeline submitted comments in response favoring the current plans.  FERC agreed with Constitution Pipeline and issued a certificate for the project pursuant to the NGA.  NYSDEC ended up denying the CWA 401 permit on the grounds more HDDs would result in less state water quality impacts.  Constitution Pipeline challenged the denial of the 401 in federal court arguing the NGA preempted the State since the FERC had already determined as part of its review the more HDDs were not feasible. 

The Court noted that the NGA has specific carve outs from preemption for the Clean Water Act.  The Court held that states retain their authority under the CWA and NYSDEC was within its right to deny the 401 permit.   Constitution Pipeline is looking to appeal arguing this gives the State’s veto authority over FERCs decision to approve pipeline routes.

Major Federal Court Decision Shows Climate Change Still In Play

The D.C. Circuit Court of appeals issued a major rebuke to those who believe climate change is no longer relevant in environmental reviews.  In Sierra Club v. FERC, No. 16-1329 (D.C. Cir. Aug. 22, 2017), the Court agreed with environmental groups, including the Sierra Club, that the Federal Energy Regulatory Commission (FERC) failed to adequately analyze greenhouse gas emissions as part of a $3.5 billion dollar natural gas pipeline project.  The project involves construction of a 500 mile long pipeline through Florida.   

FERC Review Authority

The Natural Gas Act (NGA) provides FERC the authority to review and approve interstate pipeline projects, including the environmental impacts associated with the project.  Section 7 of the NGA requires the pipeline owner to obtain a "certificate of public convenience and necessity" from FERC (i.e. Section 7 Certificate).  One component of the Section 7 review is compliance with the National Environmental Policy Act (NEPA) which includes FERC's preparation of an "Environmental Impact Statement" (EIS).  

The Sierra Club argued that the FERC, in performing it EIS, failed to adequately consider the impacts of emission of greenhouse gases associated with the project.  Specifically, the pipeline would supply natural gas to power plants in Florida which would generate additional greenhouse gas emissions by burning natural gas.  

The Court said NEPA required FERC to consider both direct and potentially indirect impacts from those emissions.  

  • Direct Impacts- quantitative estimate of the downstream greenhouse
    emissions that will result from burning the gas transported by the pipeline or explain in detail why such a estimate cannot be provided;
  • Indirect Impacts- the court did not specify what indirect impacts, which leaves open the question of whether the EIS must analysis whether greenhouse gas emissions will result in more severe storms, agricultural impacts, etc.

Impact of the Decision

First, the decision demonstrates greenhouse gas issues are still alive and well.  FERC must take steps to analyze greenhouse gas emissions as part of its EIS review.  

Second, the decision doesn't mean the Court took a negative view of natural gas pipelines.  In fact, the Court specifically stated there can be both negative and positive impacts in terms of greenhouse gas emissions from these project.  For example, burning natural gas made available via the pipeline may allow higher emitting coal fired power plants to shut down thereby reducing greenhouse gas emissions overall.

Third, perhaps the biggest impact will be seen on challenges to other projects that must get FERC approval.  The requirement to include evaluation of impacts of projects on greenhouse gas emissions could result in other projects being successfully challenged in Court and may also delay some projects in order to allow required analysis to be included as part of the EIS.