Emerging Risk Factors for Mountain Valley and Atlantic Coast Projects

The State of Virginia Department of Environmental Quality (VADEQ) seems to be feeling its way through the dark with regard to its regulatory oversight of Dominion's Atlantic Coast Pipeline (ACP) and EQT's Mountain Valley Pipeline (MVP). The VADEQ's lack of a clear regulatory approval process for the Water Quality Certificate (WQC) could add an element of risk to the timelines for both projects. Over the past several months, the VADEQ has been struggling to define its review process, which could lengthen the timeline for required state-level approvals and lead to follow-on litigation by environmental opposition groups that seek to challenge the VADEQ's ad-hoc process. Some clarity on this issue may come during August public meetings that the VADEQ has scheduled for both projects, but is more likely by late September when it finalizes the the WQC conditions.

Dissecting the Permitting Particulars

There are generally two primary state-level approvals needed for pipeline projects: a Clean Water Act Section 401 WQC and a Clean Water Act Section 402 stormwater permit. Some relevant facts related to both projects:

• The Final Environmental Impact Statement (FEIS) for the MVP project issued by FERC on June 23 stated that MVP submitted its Section 401 and Section 402 applications to the VADEQ in February 2016. 
• The ACP is expected to receive its FEIS later this month, just before the kick-off of the VADEQ public hearings. The Draft Environmental Impact Statement for the ACP project issued by FERC on December 30, 2016 stated that ACP had submitted its Section 401 application to the VADEQ in September 2015 and anticipated filing its Section 402 application in January of 2017.  
  

A Section 401 WQC is usually triggered  by a Section 404 permit from the United States Army Corps of Engineers (USACE). The USACE has issued a number of nationwide permits that allow certain activities with expedited review, and one such permit that is usually applicable to a pipeline project is the "Nationwide Permit 12." Many states have issued general WQCs that allow activities that are approved under USACE nationwide permits. The VADEQ has done this for most of the USACE nationwide permits, including Nationwide Permit 12, and the VADEQ renewed its approval of such activities in April of this year. The VADEQ's decision to issue a general WQC for activities authorized under the USACE's Nationwide Permit 12 is currently subject to an appeal filed by environmental groups in the Richmond City Circuit Court.
But in April of 2017, the VADEQ announced that it intended to require individual permits for each of the projects under section 401. This announcement appeared to be a reaction to pressure from environmental groups. Pundits believe the announcement was also designed to aid the Democratic primary campaign for Governor of the current Lieutenant Governor, Ralph Northam, who had called for a comprehensive environmental review of the projects. Many stakeholders, including environmental groups, assumed that this announcement meant that the VADEQ did not intend to rely on its recently issued general WQC for activities under Nationwide Permit 12, but would require the more onerous project specific WQC, which is similar to what New York State required for projects that it ultimately rejected or failed to rule on.
The VADEQ then disappointed the environmental groups when it clarified in May that it intended to rely on the recently issued general WQC for Nationwide Permit 12 activities within streams and wetlands. Nonetheless, the VADEQ left the door partially open when it explained that it had developed a process for a comprehensive review of the "material elements of the project and proposed plans that pertain to potential water quality impacts from upland activities." In conjunction with this new process, the VADEQ issued data requests for both projects in May, and both applicants filed initial responses by June 1 and supplemented those responses in late June.

Potential Impact for Both Projects

As a result of this process, the VADEQ issued draft conditions for the WQCs for both projects and announced that it will hold a public comment period, including five public hearings in August, to receive comments on the draft WQC conditions designed to protect water quality along the routes of the proposed ACP and MVP pipelines. According to the announcement, two hearings will be held for MVP and three will be held for ACP. The public comment period to submit written comments on both pipelines will run from July 3 through August 22, 2017.
The fact that these hearings are scheduled to occur before the end of the 90-day period following the issuance of the FEIS for both projects could be a positive sign. However, it is not clear how long it will take for the VADEQ to address any issues that are raised during this public comment period. Given the high-level of environmental opposition to both projects, we would expect there to be substantial issues raised in this comment period that will need to be addressed by the VADEQ, which could lead to new hurdles for the projects.
Assuming it takes the VADEQ at least 30 days to finalize the WQC conditions it would be at least late September before VADEQ could issue its final WQC conditions. Assuming that VADEQ does not deny the WQC and the conditions are acceptable to ACP and MVP, we would expect the VADEQ's final permit conditions to be appealed by the environmental opponents to the project, which could delay the start of construction if a stay is granted by the appeals court. What could make the appeals problematic for the projects is the fact that the VADEQ is attempting to apply a novel permitting process, with no prior precedent.
If the VADEQ finds that it could not issue a WQC for either project, or if the review process drags on, then it is possible that MVP or ACP would seek a determination by FERC that the VADEQ has waived its right to issue a 401 WQC, a process recently endorsed by the D.C. Circuit in the Millennium case . As we explained in our discussion of the Millennium case, FERC has not undertaken that role in the past, and we would only expect this to be used by MVP or ACP as a last resort.