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.