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Algonquin settles enforcement charges with FERC over Hudson River drilling

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Algonquin settles enforcement charges with FERC over Hudson River drilling

Algonquin Gas Transmission LLC will pay a $400,000 fine to settle charges that it violated its certificate order approving the Algonquin Incremental Market project when it entered wetlands outside of the project's right of way without prior Federal Energy Regulatory Commission approval.

FERC on Monday approved a settlement agreement between the Enbridge Inc. subsidiary and the commission's enforcement staff that also subjects Algonquin to at least one year of compliance monitoring (IN19-2).

The commission's pursuit of enforcement action against a pipeline is rare. FERC in 2008 imposed a $450,000 civil penalty related to shipper-must-have-title requirements and a failure to obtain a certificate, a FERC spokeswoman noted. Algonquin's civil penalty for certificate violations is the first case since that time, she said.

New area for enforcement

"Using the enforcement office to police violations of certificates is a new development, so it's something that everyone should be paying attention to," David Applebaum, co-head of Akin Gump's energy regulation, markets and enforcement practice and a former FERC Division of Investigations director, said in an interview Tuesday.

FERC's Office of Enforcement is the only unit of the commission that can propose to impose civil penalties, potentially raising the stakes on certificate compliance issues.

Applebaum said that while it was too early to see any trends, "now you can infer that it's at least more likely … that in certain instances the enforcement office may get looped in and may, depending on the facts, choose to treat [an alleged certificate violation] as an enforcement issue."

FERC issued a certificate (CP14-96) to Algonquin in March 2015 to expand its pipeline system from an interconnection at Ramapo, New York, to supply up to 342,000 Dth/d of gas to local gas utilities in Connecticut, Rhode Island and Massachusetts. The project, put into service in November 2016, helped mitigate capacity constraints affecting New England markets.

But during construction, on Aug. 27, 2016, a drill stem was disconnected from the pipe during horizontal directional drilling beneath the Hudson River. The next day, FERC's on-site compliance monitor informed Algonquin personnel that construction to retrieve the drill stem, thought to have been lost near wetlands in an off right-of-way area, could not commence without an approved variance from the commission, according to the settlement. He also alerted his supervisor at FERC to be on the lookout for an emergency variance request over the weekend.

But when the compliance monitor left the site, Algonquin personnel began preparatory work to recover the drill stem via excavation, entering the wetlands with heavy construction equipment. The "personnel claimed they were uncertain as to whether they now had approval to enter the off right-of-way area prior to approval of the to-be-filed variance," the settlement said.

Ultimately, it was determined that the drill stem had not disconnected where workers originally believed it to be and work stopped when it was clear more extensive excavation work would be needed.

'Not a small amount'

Enforcement staff concluded that entering the wetlands without requesting and securing a variance violated three conditions of the project's certificate order, which also "obligated Algonquin to document and minimize impacts on wetlands."

Algonquin neither admits nor denies the violations, but agreed to pay a $400,000 civil penalty to the U.S. Treasury. It also agreed to submit semiannual environmental compliance monitoring reports to enforcement staff for at least a year but no more than two years.

Applebaum said the fine was "not a small amount given the relatively limited focus of the conduct set forth in the settlement," and that "it didn't appear to cause significant or lasting harm."

Maya Weber and Jasmin Melvin are reporters for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.