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FERC denies effort to revive Constitution gas line through NYSDEC water waiver

Washington — The US Federal Energy Regulatory Commission has denied Williams' request thatit revive the Constitution Pipeline project by finding the New York waterquality review waived through delay.

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Constitution had argued that the New York State Department of EnvironmentalConservation gamed the process by pushing it to withdraw voluntarily itsapplication and resubmit it, and the resulting delay in the permitting processwas unreasonable, even if the agency acted within a year of the latestsubmission.

But FERC affirmed its interpretation that a waiver of a Clean Water ActSection 401 water-quality review occurs following one year after an agencyreceives an application, saying a case-by-case approach would createuncertainty and conflict with precedent.

The 121-mile, 650 MMcf/d Constitution Pipeline project has been stalled sinceApril 2016, when New York environmental regulators rejected a water-qualitycertification. The application was first submitted to NYSDEC in August 2013

Project ties to Northeast PA production

Constitution, backed by subsidiaries of Williams, Cabot, WGL Holdings and DukeEnergy's Piedmont Natural Gas, would link production in northeasternPennsylvania to downstream interconnects with Tennessee Gas Pipeline andIroquois Gas Transmission in upstate New York. It would further move volumesnorth for redelivery into high-demand markets in New England and New York Cityby way of the Tennessee and Iroquois systems.

With capacity of 650 MMcf/d, Constitution was one of the first greenfieldproduction-takeaway projects proposed amid the ongoing shale gas productionboom in the Northeast US. The project's market impacts would largely extend toan increase in production in northeastern Pennsylvania, and a likely declinein the quantity of imported gas from eastern Canada, according to PlattsAnalytics.

By connecting Iroquois and Tennessee with roughly 650 MMcf/d of supply fromthe Marcellus Shale, Constitution would effectively negate the need for thosepipelines to source supply from TransCanada on an average basis.

In 2017, Platts Analytics data show an average 375 MMcf/d of gas was sourcedat the Waddington interconnect between Iroquois and TransCanada, but with highseasonal variability. Wintertime imports averaged 725 MMcf/d in November andDecember last year, while the summer period from April through October saw anaverage 121 MMcf/d of imports.

FERC seeks to avoid uncertainties of case-by-case approach

The new decision, approved Thursday by all five FERC commissioners, noted thatsince 1987 FERC has consistently found that the reasonable period to act underSection 401 is one year and that "we see no reason to alter thatdetermination." The approach avoids the difficulty of reconciling divergentlaws and rules, avoids infringing on states authorities and provides themaximum amount of time allowed under the Clean Water Act, the commission said.

"Finally the commission has concluded that the public interest is best servedby avoiding uncertainty associated with open-ended certification deadlines,"the order said.

Williams, in a statement, said it believes FERC erred in its order, and saidit planned to seek rehearing and, if necessary, appeal the decision.

NYSDEC in a statement said it "is gratified" by FERC's refusal to override thestate agency's denial. NYSDEC "will continue to vigorously defend itsauthority to regulate and protect water quality."

In response to the order Thursday, Washington Analysis said it "forecasts asimilar negative result for a parallel effort by National Fuel Gas to rescueits similarly rejected Northern Access pipeline."

Both National Fuel and Northern Access asked FERC to find New York's reviewwaived after the commission granted such a waiver in the case of MillenniumPipeline's Valley Lateral Project on the ground that NYSDEC failed to decideon a permit within one year after an application.

The Constitution and Northern Access cases differed in that the sponsorseither voluntarily resubmitted applications, in the case of Constitution, oragreed to a new schedule, as in Northern Access' case.

Christi Tezak of ClearView Energy Partners said, "FERC has made it expresslyclear in today's decision on Constitution that a formal withdrawal andresubmission starts the clock, period." She said implications were uncertainfor Northern Access because sponsors had not formally withdrawn andresubmitted the application.

"We don't think Constitution's prospects on appeal to the DC Circuit [Court ofAppeals] look good," she added.

The pipeline company had previously lost challenges to NYSDEC's permit denialin federal district court and in the 2nd US Circuit Court of Appeals.

In its pitch to FERC for the waiver, Constitution argued that NYSDECthreatened to deny the application, coercing it to withdraw and resubmit itsapplication, based on matters that exceeded the state's authority. Pointing toits three consecutive application submissions, it asked FERC to find areasonable period of time for review to be less than one year, based on thestate's action.

"We decline to do so because entertaining, on a case-by-case basis, challengesto a certifying agency's processing of a water quality certification wouldcreate uncertainty for both state certifying agencies and applicants, and iscontrary to commission precedent in both hydroelectric and natural gasproceedings," the commission said.

--Maya Weber,

--Edited by Valarie Jackson,