On March 12, 2018, the United States Court of Appeals for the Second Circuit affirmed a Federal Energy Regulatory Commission (FERC) order finding that delays by the New York Department of Environmental Conservation (NYDEC) in reviewing Millennium Pipeline Company’s application for water quality certification constituted waiver of NYDEC’s authority under the Clean Water Act (CWA). As we detailed in an earlier blog post, FERC found that NYDEC’s delay exceeded the one-year statutory period established by CWA Section 401. The Millennium case is just one of several interstate natural gas pipeline projects that have faced delays associated with the CWA Section 401 permitting process. (See, e.g., Atlantic Bridge Project, Atlantic Sunrise Project, Constitution Pipeline, Northern Access Project, PennEast Pipeline, and Spire STL Pipeline.) The Court’s decision resolves the nearly three-year permitting process for the Millennium Valley Lateral Pipeline and clarifies for other projects (and state agencies reviewing those projects) that the one-year waiver period begins when the state agency receives the initial request for certification.

Pursuant to the Natural Gas Act (NGA), FERC has regulatory jurisdiction over interstate natural gas pipelines, and when construction of a pipeline involves discharges into waters of the US the project is also subject to the requirements of CWA Section 401 and must obtain water quality certification from the appropriate state agency that construction will not violate state water quality standards. 33 U.S.C. § 1341(a)(1). Under the CWA, the state agency waives its certification authority if the agency fails to act on a request within a reasonable period of time, not to exceed one year. Id. Despite the plain language of the statute, states have in the past crafted state-specific standards for what constitutes a “request” for certification sufficient to start the one-year statutory period.

Millennium’s lengthy permitting process, described in detail here , culminated in a FERC order on September 15, 2017, which concluded NYDEC’s 21-month delay constituted waiver of the agency’s authority under CWA Section 401. NYDEC sought review of FERC’s order at the Second Circuit. NYDEC and its allies made the following three arguments:

  • NYDEC should receive Chevron deference for its interpretation as to what constitutes a valid “request” triggering the one-year, statutory waiver period.
  • The review process under Section 401 begins only after the agency deems an application “complete.”
  • FERC does not have jurisdiction over the 8-mile long lateral pipeline because it is located entirely within New York.

In response to whether NYDEC should receive deference, the Court found that “[a] state agency’s interpretation of a federal statute does not receive deference unless the federal agency charged with administering that statute has expressly approved the state’s interpretation.” Since EPA is charged with administering the CWA and was not involved in approving NYDEC’s interpretation, NYDEC did not receive deference. Similarly, however, “given that FERC is not charged in any manner with administering the [CWA],” AES Sparrows Point LNG, LLC v. Wilson, 589 F.3d 721, 730 (4th Cir. 2009); see also Alabama Rivers Alliance v. FERC, 325 F.3d 290, 297 (D.C. Cir. 2003), the Court also found it would not defer to FERC’s interpretation and would review Section 401 de novo.

In response to NYDEC’s argument that the waiver period begins only after NYDEC deems an application “complete,” the Court found that the plain language of the statute establishes a bright-line rule. “[T]he timeline for a state’s action regarding a request for certification ‘shall not exceed one year’ after ‘receipt of such request.’” Without this bright line, the Court suggested states could apply a subjective standard and theoretically request supplemental information indefinitely. Still, the Court recognized that a state has the authority to simply deny the application without prejudice or request that the applicant withdraw and resubmit its application. Because NYDEC failed to act within one-year after receipt of Millennium’s initial request for certification, the Second Circuit held that NYDEC had thus waived its certification authority.

The Court also found that FERC has jurisdiction over the project, even though it is entirely located in one state. Although the NGA provides FERC with authority over the transportation of natural gas in interstate commerce, the Court reasoned that if a pipeline is an integrated part of an interstate system, then FERC has jurisdiction. Since the Millennium pipeline would transport out-of-state gas from the Millennium mainline to the Valley Energy Center it was deemed to be part of an integrated system transporting gas in interstate commerce.

The Second Circuit’s decision makes clear that the initial request for water quality certification triggers the one-year waiver period, whether or not the state agency deems the application complete. While this clear time period for review may lead to more state 401 denials without prejudice where the state agency believes it lacks necessary information or believes it does not have enough time to prepare a reasoned decision, it will also likely encourage state agencies to move more quickly to meet the one-year deadline.