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Clean Water Act ruling makes state reviews shorter but not safer for pipelines

Guidance from a federal court on Clean Water Act requirements could force state agencies to be more punctual in their reviews of natural gas pipeline projects, but states that do not want more fossil fuel infrastructure in their territory will still have ways to thwart these projects.

The court's guidance has reset the board for pipeline companies applying to states for Clean Water Act Section 401 water quality certification. States such as New York and New Jersey have used the permit process to deny authorization for pipeline projects that have been approved by the Federal Energy Regulatory Commission.

Elizabeth Witmer, a Saul Ewing Arnstein & Lehr LLP partner who represents the Williams Cos. Inc.-led Constitution Pipeline Co. LLC project, which ran into problems with New York's permitting agency, said the federal court decision "just changed the landscape."

Witmer spoke Oct. 15 at the Energy Bar Association's Mid-Year Energy Forum on a panel of attorneys whose practice had been affected by the case. The attorneys said they were speaking on their own at the event and not representing their clients.

The court decision was one of two major developments in 2019 that gave pipeline developers more certainty in applications for state-administered Section 401 certification. In January, a U.S. Appeals Court for the District of Columbia Circuit decision supported a hard one-year deadline for the state review. In the case, which pitted the Hoopa Valley Tribe against FERC over a hydropower project, the court said the traditional practice, in which states could reset the deadline by asking applicants to withdraw and resubmit their applications, would no longer fly. (U.S. Appeals Court for the D.C. Circuit docket 14-1271)

Based on the D.C. Circuit decision, FERC granted a waiver to Constitution Pipeline that allowed the developer to bypass the Section 401 permitting process of the New York State Department of Environmental Conservation, which had denied certification for the project in April 2016 after years of review.

In the other development, the U.S. Environmental Protection Agency issued a notice of proposed rulemaking in August designed to help pipeline developers negotiate the state-controlled reviews. The rule reinforced a one-year statutory deadline for states to act, eliminated extensions of this deadline through a cycle of application withdrawals and resubmissions, and limited the reviews and any state-required conditions to water quality issues.

SNL Image

U.S. EPA Administrator Andrew Wheeler said a proposed rule on the Clean Water Act was designed to make states stick closely to the language of the statute.
Source: AP Photo

Emily Mallen, a partner with Sidley Austin LLP who has represented National Fuel Gas Co.'s Northern Access project, another pipeline that had a permitting setback in New York, agreed with Witmer on the importance of the D.C. Circuit decision. "As a pipeline lawyer, it is nice to have Hoopa Valley in your tool belt," Mallen said.

Pipeline developers will still have problems in the Section 401 process. States have shown they are ready to deny applications for Section 401 certification on a shorter timeline.

"States are keeping a calendar," Witmer said.

An attorney who focuses on gas pipelines and other energy issues for conservation group Natural Resources Defense Council backed up the observation. In a conversation outside the conference hall, Gillian Giannetti said, "You are not going to see states wait until Day 366 ever again."

In the post-Hoopa world, states will have one year to build a record that supports their water quality certification decisions and avoids an "arbitrary and capricious" finding during any legal appeal, Giannetti said. Environmental advocates can help states by making sure the record is "as robust as possible."

The limits of FERC waivers

Witmer and Van Ness Feldman LLP partner Julia Scarpino Wood, who focuses on hydroelectric and electric power cases, said energy project developers generally want to be on good terms with state agencies. The companies often need a number of permits from their host states, and they do not want to make the relationship antagonistic by immediately seeking a FERC waiver of the state's authority, the attorneys said.

FERC decisions to grant the waivers can be appealed, and state agencies can play hardball on other permits. In a discussion near the end of the presentation, a member of the audience, Millennium Pipeline Co. LLC Vice President and general counsel Georgia Carter, told the panel that her company had run into Clean Water Act issues that it had to work around.

"States have other ways of slowing you down if they don't want the project," Carter said.

The EPA rule

The proposed EPA rule could cause a more significant change than the D.C. Circuit decision because it not only holds to the Clean Water Act deadline but also limits the scope of states' reviews. "I do think this is going to have a big impact," Mallen said.

The rule would narrow the focus of both the review and the conditions that states place on developers to just water quality issues, Mallen said. In their Section 401 reviews, some states have sought to revisit federal reviews under the National Environmental Policy Act by FERC and other federal agencies, considering impacts such as harm to wildlife species and habitat, Mallen said. These states appear to believe that "NEPA is not good enough," Mallen said.