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New York issues redo of Northern Access denial, but FERC order may void impact

Highlights

National Fuel FERC action renders denial ineffective

Company eyes 2022-23 timeframe

Army Corps permit still outstanding

Washington — New York has again denied a water quality certification for the Northern Access 2016 gas pipeline project. But the action may be undercut by the fact that the Federal Energy Regulatory Commission in August 2018 already found New York's review of the project waived because the state exceeded a Clean Water Act timeframe in which to act.

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Co-sponsored by National Fuel Gas Supply and Empire Pipeline, the 99-mile, 490 MMcfd pipeline could help boost production in western Pennsylvania and likely drive down net Canadian imports by increasing Northeast exports to eastern Canada by up to 350 MMcf/d, according to S&P Global Platts Analytics. Amid Northern Access delays, National Fuel has advanced several other expansion projects, including the under-construction Empire North expansion and the recently proposed FM100 Project, both also aimed at adding northeastern Pennsylvania takeaway capacity.

National Fuel on Friday said it believed FERC's prior orders finding the New York State Department of Environmental Conservation waived its authority to act take precedence and render the state's new denial "ineffective and void."

COMPANY RESPONSE

"Once [NYSDEC's] deadline to act passed, its subsequent actions (such as this new denial) are of no consequence," said company spokeswoman Karen Merkel in an email.

In a recent earnings call, David Bauer, CEO of parent National Fuel Gas, said that with positive court rulings, National Fuel "is in a position where we could apply for a notice to proceed in the near future," but added, "we're thinking this is really a longer-term project, likely in the 2022, 2023 timeframe."

In light of the new denial, Merkel said National Fuel is considering legal options and continues to work to "finalize the remaining federal authorizations to move this project forward."

The latest denial of the Clean Water Act Section 401 water quality certification by NYSDEC responded to a 2nd US Circuit Court of Appeals ruling that vacated the state agency's prior denial on the ground that its reasoning was unclear.

This time around, in a denial notice Thursday, NYSDEC explained concerns that multiple stream and wetlands crossings within a watershed or basin would harm water quality or affect best uses such as trout and other fishery habitat. It noted that trenchless stream crossings would be used at only of five of 13 priority stream crossings. "As proposed, those crossings will permanently impair aquatic habitat and generate turbidity which will impair the best uses of the waterbodies, thereby violating state water quality standards," the denial said.

CORPS STICKING POINT

Because of the FERC waiver decision, two policy analysts suggested a more important question going forward for the project could be a US Army Corps of Engineers Clean Water Act Section 404 permit that is still outstanding.

"The real issue seems to me to be the fact that here we are, a year after FERC finding waiver, and Northern Access doesn't have its CWA 404 from the Corps," said Christi Tezak, managing director of ClearView Energy Partners.

Gary Kruse of LawIQ suggested the real audience for the New York denial may be the Corps, which would still need to find the waters of the US will not be impacted by the project. It is possible the Corps could include some of the water crossing methods sought by New York, he said. Depending on the outcome, the state could eventually challenge that permit in court, he added.

With New York seemingly opposed to the project, "it's a very difficult situation to be in" for pipeline construction, he added. While New York Governor Andrew Cuomo is in power, the state could try to use enforcement authorities under state environmental laws during construction, in spite of the waiver by FERC, he said, suggesting the company may want to seek a declaratory order to prevent that.

Litigation over FERC's waiver is ongoing. NYSDEC appealed FERC's action in the 2nd Circuit, and the company has sought to shift the venue to the DC Circuit Court of Appeals.

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Jasmin Melvin, newsdesk@spglobal.com