Constitution Pipeline Has New Life – When Will it Go into Service?
Late last month in a unanimous decision, FERC reversed a prior decision it had made and determined that the New York State Department of Environmental Conservation (NYSDEC) had waived its authority to issue a water quality certificate (WQC) under section 401 of the Clean Water Act (CWA) with respect to the Constitution Pipeline Project. In that same order, FERC denied the NYSDEC’s request for a stay of the start of project construction. However, there are a number of steps likely needed before Constitution could start construction, namely: (1) a Clean Water Act Section 404 permit from the U.S. Army Corps of Engineers (USACE); (2) possibly renewed consultation with the U.S. Fish and Wildlife Service regarding endangered species; (3) the issuance of a notice to proceed from FERC; and (4) most likely, an injunction against the NYSDEC prohibiting it from enforcing any potentially applicable state permits.
Based on these steps, and lessons learned from a similar situation involving Millennium Pipeline’s Valley Lateral project, another project in which FERC found that the NYSDEC had waived its right to deny a WQC, we do not expect the construction to start until Mid 2020. Between now and then, we expect that Constitution will likely take the time to ensure that any required permits are appeal-proof and the injunction is in hand. Assuming that Constitution can wrap up all of those permits by Mid 2020, the earliest in-service date we see at this point would be sometime in mid to late 2021.
A Recap of the Project Timeline is in Order
The amount of time between the issuance of a certificate and the issuance of the first full notice to proceed with construction has typically been less than 3 months. Constitution received its certificate on December 2, 2014 and is still awaiting its notice to proceed with full construction.
During that time, Constitution pursued two different litigation paths to overturn the NYSDEC’s denial of a WQC for the project, as outlined below.
Challenge to NYSDEC Denial of the WQC
Constitution Asks FERC to Find NYSDEC Waived Right to Issue WQC
Good News, Bad News
The good news is that FERC did reverse course and determine that the NYSDEC had waived its right to issue Constitution a WQC. The bad news, as we discussed in Environmentalist Expertise Drives Increased Investor Interest and Changes to Project Strategy , is that, since 2016, the sophistication of the opposition groups and their creative approaches for challenging project permits has grown tremendously. For this reason alone, we fully expect that Constitution will be very diligent in reviewing each of the project permits it needs to ensure that they are issued or reissued as needed in a manner that will make them less susceptible to appeal before the courts. That process will likely take many months as each required permit is reviewed to determine whether it needs to be issued or reissued, or whether it can stand as originally granted.
As each permit, for instance the 404 permit required to be issued by the USACE, is issued, we fully expect the opposition groups, including the NYSDEC, to comb through each such permit to make sure the procedure used to issue it was proper and that the basis for its issuance was fully supported. In fact, in a discussion of FERC’s reversal of course, New York’s governor indicated that the state is reviewing the decision,"but any way that we can challenge it, we will." In addition, the NYSDEC noted that it disagreed with the decision and that it “will continue to vigorously defend [its] authority to protect New York State’s water quality resources.”
Then There is the Problem of Doing Construction in New York
Given those statements by New York, we expect Constitution to seek a court order prohibiting the state from enforcing other environmental permits that Constitution applied for in conjunction with the WQC. Back in 2016, Constitution had done just that by asking the U.S. District Court for the Northern District of New York (Northern District) to find it did not need those other permits. Like Constitution, Millennium Pipeline sought a similar order from the Northern District after FERC found that the NYSDEC had waived its right to issue a WQC for its Valley Lateral project.
In Constitution’s action in 2016, the court found that the suit was premature, because Constitution did not yet have the right to begin construction. The Millennium case judge largely agreed with the reasoning of the Constitution case judge, but noted some key differences in Millennium’s case. First, the NYSDEC had already denied the other state permits, whereas in Constitution’s case they were still pending. Second, FERC had issued a notice to proceed with construction to Millennium. Third, the NYSDEC had appealed to the Second Circuit and requested a stay of the notice to proceed. Fourth, the Second Circuit had temporarily stayed construction while the issue of a permanent stay was briefed and argued, and then denied the NYSDEC’s request for a permanent stay and lifted the preliminary stay.
All of these factors led the Millennium judge to conclude that, unlike in Constitution’s original case, the only thing standing in the way of Millennium starting construction was its well-founded fear that the NYSDEC would try to enforce its denial of the state permits. We believe Constitution will once again seek court protection from the Northern District, but, based on the prior two cases, we don’t see the court issuing such a stay until its failure to do so is the last thing standing in the way of the start of construction. That means to meet the standard in the Millennium decision, the following events would need to have occurred:
- All other federal permits, especially the USACE’s 404 permit, have been issued and all requests for stays of those permits have been denied.
- FERC has issued a notice to proceed with construction and all requests for a stay of that decision have been denied.
For those processes to play out will take some time, but once it occurs, the ability to get an injunction against the NYSDEC can happen very fast, as was seen in the Millennium case. In Millennium, FERC issued its order finding a waiver by the NYSDEC on September 15, 2017 and denied all the motions for rehearing on November 15, 2017. While that was pending, FERC issued Millennium its full notice to proceed with construction on October 27, 2017 and Millennium filed the action with the Northern District that same day. On November 2, 2017, the Second Circuit issued an administrative stay of the notice to proceed, ordered expedited briefing and oral argument, and then lifted that stay on December 7, 2017. On December 13, 2017, the Northern District enjoined the NYSDEC from enforcing the denied state permits.
This shows how quickly these processes can move. Thus, the real delay to construction will likely come from the need for Constitution to make sure all of the required federal permits are in hand and have been granted in a way that is appeal-proof. Assuming that the process to get all of the permits in place takes at least four to six months, that would extend into early 2020. Getting the injunction from the Northern District would take a couple of months. Our platform shows that a project like Constitution typically takes about 16 months to construct following the notice to proceed, which would put the in-service date into at least the middle of 2021 and, more likely, late 2021.
Let us know how we can support you!
Insights Coming Soon
- Comparing Cameron LNG to Golden Pass LNG
- VLCC