Breaking: Impact of FERC Denying Constitution's Petition

In a decision issued this afternoon, the Federal Energy Regulatory Commission (FERC) held that the New York State Department of Environmental Conservation (NYSDEC) had not waived its right to issue a Clean Water Act, Section 401 Water Quality Certificate (WQC) with regard to the Constitution Pipeline project. Constitution had asked FERC to find a waiver after FERC had found that the NYSDEC had waived its right to issue a WQC with respect to Millennium Pipeline's Valley Lateral Project. For the industry, FERC's decision makes it clear that states will have one year to rule on an application for a WQC, but that the project sponsor can extend that time frame by re-submitting its application. For Constitution, the path forward has narrowed substantially, with two remaining appeals options that have a very low likelihood of success.

As we indicated at the time Constitution requested the waiver, the factual pattern with regard to Constitution and National Fuel's Northern Access Project was not nearly as straightforward as the facts in Millennium's case. FERC's refusal to find a waiver for Constitution does not bode well for National Fuel's request for a waiver in its Northern Access 2016 project. However, the decision did at least come before Constitution must decide whether to appeal the decision by the Second Circuit to uphold the NYSDEC's denial of the WQC to the United States Supreme Court.

At the time Constitution submitted the waiver request, LawIQ explained that for Constitution to obtain a favorable ruling, the FERC would have had to find either:

1. That "voluntary" resubmittals do not restart the one-year clock under the Clean Water Act, or
   
   2. Eight months of inactivity between the final resubmittal of information in July of 2015 and the decision in April 2016 was not "reasonable."

As we expected, FERC declined on both counts.

FERC's Reasoning

With regard to the first possible holding, FERC stated in its decision that while it was concerned that states and project sponsors that engage in repeated withdrawal and re-filing of applications may be acting contrary to the public interest and the spirit of the Clean Water Act, it nonetheless concluded that the practice does not violate the Clean Water Act. Accordingly, by "withdrawing its applications before a year had passed, and by presenting New York DEC with new applications, Constitution gave New York DEC new deadlines."

As to the second possible holding, FERC found that although Congress may have left it to FERC to find that there could be a period of time shorter than one year that was not "reasonable," the Commission has consistently since 1987 determined "that the reasonable period of time for action under section 401 is one year after the date the certifying agency receives a request for certification" and FERC found "no reason to alter that determination."

Takeaways for Project Developers

This reasoning does not bode well for National Fuel's request for a waiver in its case because the NYSDEC denied its permit less than one year after the date on which National Fuel had stipulated that its application would be considered received by the NYSDEC.

By refusing to rule that the reasonable period for a state to act will not be less than one year, FERC has made the rules clear for future applicants. Project sponsors may need to wait the full year, if a state chooses to take that long, and when faced with the expiration of that time period, a resubmission by the sponsor would restart the clock.

While Constitution could appeal this denial to the Court of Appeals for the District of Columbia, FERC's decision seems well founded and would almost certainly withstand any such appeal. Constitution's other path forward would be to file a petition for a writ of certiorari with the Supreme Court to review the Second Circuit's decision upholding the NYSDEC denial of the WQC. The Supreme Court  accepts less than 4% of such cases, and we see no special attributes of this possible action that might cause the Court to accept the case. Constitution will need to make that decision by January 17, 2018, but at least the timing of this decision means that it can make that decision with a full understanding of how FERC views its waiver request.