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

Washington (Platts)--11 Jan 2018 541 pm EST/2241 GMT


The US Federal Energy Regulatory Commission has denied Williams' request that it revive the Constitution Pipeline project by finding the New York water quality review waived through delay.

Constitution had argued that the New York State Department of Environmental Conservation gamed the process by pushing it to withdraw voluntarily its application and resubmit it, and the resulting delay in the permitting process was unreasonable, even if the agency acted within a year of the latest submission.

But FERC affirmed its interpretation that a waiver of a Clean Water Act Section 401 water-quality review occurs following one year after an agency receives an application, saying a case-by-case approach would create uncertainty and conflict with precedent.

The 121-mile, 650 MMcf/d Constitution Pipeline project has been stalled since April 2016, when New York environmental regulators rejected a water-quality certification. 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 Duke Energy's Piedmont Natural Gas, would link production in northeastern Pennsylvania to downstream interconnects with Tennessee Gas Pipeline and Iroquois Gas Transmission in upstate New York. It would further move volumes north for redelivery into high-demand markets in New England and New York City by way of the Tennessee and Iroquois systems.

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

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

In 2017, Platts Analytics data show an average 375 MMcf/d of gas was sourced at the Waddington interconnect between Iroquois and TransCanada, but with high seasonal variability. Wintertime imports averaged 725 MMcf/d in November and December last year, while the summer period from April through October saw an average 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 that since 1987 FERC has consistently found that the reasonable period to act under Section 401 is one year and that "we see no reason to alter that determination." The approach avoids the difficulty of reconciling divergent laws and rules, avoids infringing on states authorities and provides the maximum amount of time allowed under the Clean Water Act, the commission said.

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

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

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

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

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

The Constitution and Northern Access cases differed in that the sponsors either voluntarily resubmitted applications, in the case of Constitution, or agreed to a new schedule, as in Northern Access' case.

Christi Tezak of ClearView Energy Partners said, "FERC has made it expressly clear in today's decision on Constitution that a formal withdrawal and resubmission starts the clock, period." She said implications were uncertain for Northern Access because sponsors had not formally withdrawn and resubmitted the application.

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

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

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

"We decline to do so because entertaining, on a case-by-case basis, challenges to a certifying agency's processing of a water quality certification would create uncertainty for both state certifying agencies and applicants, and is contrary to commission precedent in both hydroelectric and natural gas proceedings," the commission said.

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

--Edited by Valarie Jackson, valarie.jackson@spglobal.com




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