Second Circuit Denies Constitution Pipeline's Appeal

Earlier today, the Second Circuit Court of Appeals ruled in favor of the New York State Department of Environmental Conservation (NYSDEC), denying Constitution Pipeline's petition to review the NYSDEC's denial of a water quality certificate (WQC) for the Constitution Pipeline Project. In a ruling that should not surprise those who have been following this appeal through our written analyses and conference calls, the Second Circuit found that, to the extent Constitution was claiming that the NYSDEC had waived its right to rule on its WQC application, that such an argument had to be presented to the Court of Appeals for the District of Columbia (D.C. Circuit) because, under the Clean Water Act, that is the court with exclusive jurisdiction over a waiver claim.

After dismissing Constitution's waiver claim, the court then found that the NYSDEC's denial of the WQC was neither arbitrary nor capricious and should therefore be upheld under the legal standard for reviewing such decisions. In some statements that can only be considered adverse for the industry as a whole, the court even found that a "state's consideration of a possible alternative route that would result in less substantial impact on its waterbodies is plainly within the state's authority." It then found that the record amply showed "that Constitution persistently refused to provide information as to possible alternative routes for its proposed pipeline or site-by-site information as to the feasibility of trenchless crossing methods for streams less than 30 feet wide." Therefore, the court concluded "that the denial of the § 401 certification after Constitution refused to provide relevant information, despite repeated NYSDEC requests, was not arbitrary or capricious."

This appears to leave Constitution with very limited avenues for reversing the NYSDEC denial.  First, it could try to convince the U.S. Supreme Court to take the case on appeal. Second, it could present its waiver claim to the FERC based upon this decision and the Millennium decision. Third, it could reapply for a WQC from the NYSDEC and actually provide the information that it had refused to provide in the original proceeding.

Based on these potential avenues, we fully expect Constitution to pursue the second option (i.e., present its waiver claim to FERC), but we are not optimistic that FERC would find a waiver in this case. And even if FERC were to find that such a waiver would be upheld on appeal when as found by the Second Circuit, the denial of the WQC came less than one-year (359 days) after Constitution's 2015 withdrawal and resubmission of its application.  

Finally, while it may be a bitter pill for Constitution to swallow, the path forward could require it to follow the third alternative and reapply for a WQC from the NYSDEC. Simply put, the next move is clearly Constitution's.