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Stalled pipelines, gas service disruptions in New York reach crossroads

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Stalled pipelines, gas service disruptions in New York reach crossroads

The tumultuous state of natural gas-related affairs in New York continues as the conflict between one of the state's biggest gas providers and its governor comes to a head and federal regulators revive a pipeline project in limbo.

New York Gov. Andrew Cuomo in an Aug. 27 letter ordered state regulators to broaden their investigation of National Grid USA's gas moratorium in parts of downstate New York, raising the possibility that the gas utility could be replaced in its service territories. Cuomo directed the New York Department of Public Service to use its authority to force National Grid to provide gas to certain customers denied service amid an ongoing standoff between the state and the utility over the stalled Northeast Supply Enhancement project.

"My administration has received reports that National Grid is refusing service to some customers who initiated new construction projects well before National Grid's announcement of its moratorium, including affordable housing developments," Cuomo said in the letter. "If these reports are accurate, National Grid is delaying, if not denying, services needed to shelter disadvantaged families."

National Grid said in May that it could not hook up new customers for natural gas distribution in Long Island and New York City until the state reconsiders granting a critical water quality permit for the Transcontinental Gas Pipe Line Co. LLC system.

Cuomo's threat to strip National Grid of its right to deliver natural gas in parts of New York represents a proposed exercise of state authority that sector experts say has rarely been used against a major utility in the last century, illustrating how a standoff over pipeline construction in the Empire State has created a level of brinkmanship few expected.

By issuing the directive, Cuomo invoked powers spelled out in a law that allows the New York Public Service Commission to revoke or modify a company's certificate to provide utility services in its franchise territory when the company demonstrates a failure of the utility to continue to provide safe and adequate service, according to the Department of Public Service.

These types of laws were put in place in the early 1900s in response to utilities whose conduct threatened gas service reliability and public safety, according to Richard Berkley, executive director of the Public Utility Law Project, a consumer advocacy group. To his knowledge, the state has not wielded them in the way Cuomo is now threatening to since the era of former President Franklin Roosevelt.

Berkley acknowledged that National Grid is in a tough position. The gas moratorium has put the company on a path to triggering costly litigation and the most severe penalties in the state's toolbox. But if National Grid promises to deliver gas and then runs into supply constraints during a severe winter, it could stumble into serious legal jeopardy.

In contrast, a united Federal Energy Regulatory Commission found that a New York agency had waived its Clean Water Act authority over the Constitution Pipeline Co. LLC when it improperly extended a statutory deadline, removing a permitting obstacle that has held up the 650-MMcf/d natural gas pipeline project for over three years.

"FERC's surprise unanimous decision this evening determining that New York officials waived [their] authority to review and deny Constitution Pipeline a Clean Water Act Section 401 water quality certification greatly improves the chances that the project eventually goes forward, although other hurdles remain," energy policy expert Rob Rains said in an Aug. 28 email. Rains is an analyst at Washington Analysis LLC.

FERC has issued construction authorizations to pipeline companies while appeals go forward. However, Rains noted that before construction can begin on the Constitution pipeline, the U.S. Army Corps of Engineers would have to provide the developer with a Clean Water Act Section 404 erosion and sedimentation permit. The Army Corps has not always moved quickly on permits for other pipeline projects, Rains said.