PennEast Progress Continues to be Bogged Down by the Garden State

Last week marked two years since the PennEast Pipeline project received its Final Environmental Impact Statement, with an initial expected in-service date of November 1, 2017. At that time, a three-year period may have been appropriate for a project of its size, but here we sit, almost five years, and the project is unlikely to start construction anytime soon. Given that the project is primarily demand driven and supported by numerous utilities, the project sponsors, led by UGI, have been able to hold out despite numerous challenges, ranging from the State of New Jersey to now a potentially competitive project with a similar route and capacity.

Today, we examine the issues the project faces and provide a timeline showing when those issues might be resolved, in order to project what a reasonable in-service date might be, given the myriad of issues that the project faces. As discussed below, there is no guarantee the project gets built if the State of New Jersey continues to oppose it.

Top of the Heap - Protest Activity

The project encountered significant opposition from the outset, with over 5,500 individuals filing comments and, as shown below by the yellow line, ranking it at the top in the number of state/local government comments filed when benchmarked against other similar FERC projects. In particular, the project was subject to a concerted effort by landowners in New Jersey to deny the project access to their land for purposes of conducting the studies necessary to complete environmental, endangered species and cultural resources information that must be provided to FERC and other agencies that are required to review and approve the project.

The Garden State 

At the time the Final Environmental Impact Statement was issued in April 2017, field delineations for wetlands had been conducted on only 38% of the project in New Jersey. The remaining 62% had instead been delineated using databases. FERC, therefore, included an environmental condition requiring PennEast to file, before commencing construction, a complete wetland delineation report that meets the requirements of the U.S. Army Corps of Engineers (USACE) and applicable state agencies. Similarly, studies for endangered species, such as the Indiana Bat in New Jersey, had been completed in only 34% of the areas needed, and cultural resource surveys had only been completed on approximately 38% of the project area in New Jersey.

One of the most significant landowners opposing access and easements for the project was the State of New Jersey itself, both on lands it owned and on lands that had been preserved for a special use, such as open land or farmland. Despite this opposition and access problems, FERC did grant the project a certificate on January 19, 2018. However, the certificate order was issued in a vote with only two commissioners, Chairman McIntyre and Commissioner Powelson, both of whom are no longer on the commission, supporting the entire order. Two other commissioners, Chatterjee (now Chairman) and LaFleur concurred and Commissioner Glick dissented. 

The company began condemnation actions almost immediately to gain access so that they could complete the analyses needed to finish the required studies. The process of gaining access typically is very short, less than 30 days, after filing the condemnation action. PennEast wasn’t so lucky. The U.S. District Court in New Jersey took almost a year to grant PennEast the access it needed, issuing an order in December 2018. A number of parties, including the State of New Jersey, appealed that order to the U.S. Court of Appeals for the Third Circuit, which recently issued a stay of construction while it considers the appeals. The good news in the Third Circuit order for PennEast was that the court continued to allow access to the properties to enable PennEast to complete the needed studies. 

Upon completion of the studies, PennEast has estimated it will take approximately 30 to 45 days to complete its application with the various agencies, including the New Jersey Department of Environmental Protection (NJDEP). The NJDEP has informed PennEast that one hundred percent of the surveys must be completed before the agency will consider the company’s application to be complete for the federally required wetlands permit. PennEast must also provide studies to allow a complete review of the threatened or endangered species issues by the U.S. Fish and Wildlife Service and the NJDEP’s Division of Fish and Wildlife. PennEast has noted that there are also time of year restrictions as to when some of these endangered species surveys must be completed. None of them can start before April 15 and some cannot begin before June 1. Also, PennEast must obtain a clearance from the New Jersey State Historic Preservation Office for any archaeological/architectural survey findings. Therefore, we don’t see this process being complete until sometime in August of this year. 

While it waited for access in New Jersey, PennEast completed its work in Pennsylvania, but this has led it to file for a revised route in that state, which was substantial enough that FERC needed to undertake a supplemental Environmental Assessment. The comment period for the Environmental Assessment needed to approve these modifications closed on April 15, but the changes must still be approved by FERC. 

Best Case Scenario for the Project

Based on all of the foregoing, we can see that the path forward remains a long and winding one. The fastest path forward appears to be the following:

However, the project continues to face substantial hurdles along its path, any one of which could slow the best case scenario significantly, if not derail it entirely.

Known Unknowns that May Impact the Best Case

The most significant hurdle is a key approval PennEast needs from the NJDEP. In most states, a project’s crossing of streams and wetlands is reviewed by the USACE, most typically under Nationwide Permit 12, and at most, the state must issue a WQC. Even that level of review has become problematic in states like New York, West Virginia and Virginia. It has become clear through recent litigation over these state-issued WQCs that the states must complete their review within one year after an application is received. However, in New Jersey, the state issues both the wetlands permit and the WQC, and the wetlands permit has no comparable one-year limitation. 

So, in the above timeline, we have assumed that the State of New Jersey still complies with the one-year limit and that it ultimately approves the project. The key activity to watch over the next year, though, is the process before the NJDEP. As the Second Circuit held in a case involving the Constitution pipeline, the state simply must act within one year; it need not approve the WQC, and provided it is not arbitrary and capricious in its denial of the WQC, the courts will uphold the state’s denial. Therefore, if the State of New Jersey truly wants to stop this project, it almost certainly would be able to develop a record sufficient to deny the requested permits or impose conditions that make the project non-viable.

Another problem that only arose recently is that one of the revised routes in Pennsylvania includes a revised crossing for the Appalachian Trail. As those who have been following the issues that Atlantic Coast Pipeline has encountered will know, the Fourth Circuit has issued a decision with respect to that project that at least creates the possibility the federal approval of a trail crossing may not be approved other than by an Act of Congress. This revised crossing of the Appalachian Trail may be met by a similar argument if the approval of the federal government is needed. 

Finally, as we noted in Gas Projects in the Hopper -- Are Open Seasons a Leading Indicator?, Williams recently held an open season for its Regional Energy Access Project, with a similar route and capacity. The project is designed to provide one Bcf/d from receipt points on Transco’s existing line starting in Luzerne County, Pennsylvania, to delivery points in Pennsylvania and New Jersey, including Mercer County, New Jersey and Northampton County, Pennsylvania, and along Transco’s mainline to Station 200, Marcus Hook lateral and Trenton Woodbury lateral. By comparison, PennEast “will originate in Dallas, Luzerne County, in northeastern Pennsylvania, and terminate at Transco’s pipeline interconnection near Pennington, Mercer County, New Jersey” and is also designed to transport one Bcf/day. Provided the Transco open season is a success, one could expect a pre-filing in the next two months. And, as noted in a recent FERC filing, Williams expects this project to be in-service by November 2022.

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