Court Rejects FERC’s One-Year Sec. 401 Review Standard - Good News for Developers?
In Zombie Projects - Constitution, Northern Access, and PennEast - Are They Dead? , we explained that the Constitution Pipeline had exhausted all litigation avenues, but one, in its effort to overturn New York’s denial of a Section 401, Clean Water Act (CWA) water quality certificate (WQC) for the project. As we also noted, Constitution’s appeal was put on hold while the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) decided a similar case, Hoopa Valley Tribe v. FERC , involving a hydroelectric project. Last Friday, the DC Circuit decided that case, concluding that withdrawal and resubmission of applications for a WQC did not reset the review clock under the one-year statutory timeline fixed in the Clean Water Act.
This ruling has once again breathed some life into Williams’ Constitution and National Fuel’s Northern Access projects, although how that will be manifested depends upon the briefing schedule the DC Circuit sets for the Constitution case. But will the decision have positive implications for pipeline projects that have yet to receive WQCs? That depends.
In short, the impact is: (1) positive for projects that have been waiting more than one year for a WQC, assuming future courts don’t modify the ruling; (2) uncertain for projects that have not yet passed the one-year mark; and (3) negative for the industry if the DC Circuit follows this decision in the appeal by Constitution -- which the DC Circuit has not yet set for briefing -- and finds that the facts present in that case also do not result in an extension of the one-year deadline. Therefore, if you are interested in the industry as a whole, you will want to follow the Constitution appeal, because how the DC Circuit ultimately resolves that case could impact the industry for decades.
Lawyers Make a Simple Question Complex
As explained by the DC Circuit, the CWA provides that a state waives its right to review a project if the state “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request.” Such a simple concept has created disputes, including:
- Can the waiver occur in less than one year?
- When is a request received?
- Can the parties agree to extend the time?
- What happens if the applicant resubmits the request?
To limit disputes such as these, FERC denied Constitution’s request for a waiver and stated that it will not find a waiver before one year has passed, and it will allow the parties to extend the time period by the applicant withdrawing a request and resubmitting a new one. Hoopa was an extreme case of this withdrawal and resubmit game. As part of a 2010 settlement of the licensing proceeding, Pacificorp agreed to a series of interim environmental measures and funding obligations. Under the settlement, PacifiCorp agreed to defer the one-year statutory limit for action on the required WQC by annually withdrawing and resubmitting the WQC requests. In 2012, the Hoopa Tribe challenged this process and asked FERC to declare a waiver and act on the pending relicensing request. FERC refused to find a waiver because of Pacificorp’s annual resubmittal of the request.
The DC Circuit found that the question before it was a simple one -- whether a state waives its authority when, pursuant to an agreement between the state and applicant, an applicant “repeatedly withdraws-and-resubmits its request for water quality certification over a period of time greater than one year.” The court said the state does waive its authority in such situations.
Impact on Constitution and Northern Access Cases
Had the court found there was no waiver in this case, then Constitution’s case would almost certainly have been over. However, while this gives new life to Constitution’s appeal, we expect that New York will attempt to point out distinctions between the fact pattern in Hoopa and its actions on Constitution’s and Northern Access’ WQC request. There is certainly language in the court’s decision that will allow New York to make these arguments.
FERC declined to find a waiver in the Hoopa case because it found that Pacificorp’s annual resubmission was an independent request, subject to a new period of review. The court determined that FERC’s decision was ill founded, at least when PacifiCorp did not submit a wholly new request each year. The court found it need not determine how different a request must be to constitute a “new request” because PacifiCorp merely resubmitted the same request “in the same one-page letter . . . for more than a decade.” With respect to what action a state must take, the court found that the statute does not define “failure to act” or “refusal to act.” The court noted that by “shelving water quality certifications, the states usurp FERC’s control over whether and when a federal license will issue.”
The factual patterns in both Constitution and Northern Access are not nearly as egregious as in the Hoopa case, which New York will surely point out. But if the court holds firm and finds in all cases that a withdrawal and resubmission does not restart the review period, it will almost certainly find a waiver by New York with respect to both of those projects.
Impact On Pending Projects Past One Year
We have looked at the larger pipeline projects that have not yet begun construction to determine whether they are awaiting a WQC, and have found nine other projects that have applied for but have yet to receive a WQC. Six of the nine projects have been waiting more than one year since submitting their initial request for a WQC. These projects will likely still give the applicable state agency additional time, knowing that if the WQC is denied, the projects can make the waiver claim following the denial.
The remaining three projects submitted their requests less than a year ago and will likely be on the bleeding edge for action by the states faced with the new reality of a hard and fast one-year (or shorter) time period, as discussed below.
Impact on the Industry, Including PennEast and Northeast Supply Enhancement
If the court ultimately extends its holding in Hoopa to both Constitution and Northern Access, we expect a much more difficult relationship between the environmental agencies and the applicants than has existed in the past. A good example of this may be the process that Williams’ Transco’s Northeast Supply Enhancement Project has been subjected to in New York State, as well as the treatment PennEast has received in New Jersey.
Transco first submitted a WQC request to the New York State Department of Environmental Conservation (NYSDEC) on June 27, 2017. Rather than asking for an extension of time to review the request or a voluntary resubmission, the NYSDEC, on April 20, 2018, denied Transco’s request without prejudice due to its determination that it lacked sufficient time to complete its review and conduct the necessary public process prior to the one-year waiver deadline. Transco resubmitted its application on May 16, 2018.
In New Jersey, the U.S. Environmental Protection Agency has delegated to the New Jersey Department of Environmental Protection (NJDEP) the authority to operate the state’s freshwater wetlands protection act (FWPA) in place of the Section 404 program typically administered by the United States Army Corps of Engineers. This creates an additional issue for PennEast in that the one-year time limit on a state's review of a WQC under Section 401 does not apply to Section 404 of the CWA.
Despite this circumstance, in June 2017, the NJDEP administratively closed PennEast's FWPA application because it lacked sufficient survey information of the private land that the pipeline will traverse. PennEast resubmitted its application and that application was dismissed without prejudice by the NJDEP in early 2018. In December of 2018, the federal District Court in New Jersey entered an order which will allow PennEast to access the impacted land to complete the required environmental studies, which will allow PennEast to once again resubmit the FWPA application. While NJDEP regulations have timelines, there is no authority vested in FERC to find a waiver for failing to act within one year after an FWPA application is submitted, and the NJDEP seems likely to take every step it can to make sure no valid waiver claim can be raised.
A state’s fear of a waiver claim may lead to the action described above that could repeatedly extend the review period by one year from the date that an environmental agency “acts” on a pending request. In the past, an agency that needed additional information to process a request would typically have sought that information, along with a voluntary extension of the one-year review period. Now, it seems more likely that any request for additional information will instead be accompanied by a denial of the pending request. This will require the applicant to file a “new request” that will restart the one-year period. Agencies will likely view such a process as the best way to avoid a waiver -- but for the applicant, each denial could extend the review period for another year. The industry should watch carefully how the agencies respond to this newest court decision that will be seen as a limitation on state authority.
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