As a result of increasing development of natural gas drilling, pipelines are popping up everywhere.  And with them has come a mound of litigation.  In a February 5, 2013 decision, the United States District Court for the Middle District of Pennsylvania has ruled, as a matter of first impression, that permits issued by a state agency (in this case, the Pennsylvania Department of Environmental Protection (“PADEP”)) under the federal Clean Water Act (the “CWA”) may be challenged only in federal court, and not in a state adjudicatory proceeding.

In the case at issue, Tennessee Gas Pipeline Co., LLC v. Delaware Riverkeeper Network, No. 3:13-CV-46 (M.D.Pa. Feb. 5, 2013), the Federal Energy Regulatory Commission (“FERC”) had issued a Certificate of Public Convenience and Necessity under the Natural Gas Act (“NGA”) to Tennessee Gas Pipeline Company (“TGPC”) to allow it to upgrade its pipelines in Pennsylvania and New Jersey.   A condition of the Certificate was that TGPC obtain requisite state environmental permits, including permits under the certain sections of the CWA, which in Pennsylvania are issued by the PADEP.   PADEP issued three such permits to TGPC, which certain environmental groups, led by the Delaware Riverkeeper Network, appealed to Pennsylvania’s Environmental Hearing Board (the “EHB”).  In response, TGPC filed an action in federal court seeking an injunction preventing the EHB from hearing the matter on the ground that the NGA preempted state review of the permits.  The environmental groups were named as defendants, and subsequently Michael Krancer, Pennsylvania Secretary of Environmental Protection, was granted leave to intervene.

After a fairly in-depth analysis of the applicable statutes and the few relevant cases, the Court granted preliminary relief, while acknowledging that it was “writing on a clean slate.”  First, the Court denied that the matter was one of statutory preemption because while there is preemptive language in the NGA, there is an express exception for the rights of States under, among other federal statutes, the CWA.  15 U.S.C. § 717b(d).   Next, the Court addressed the nature of the permits issued and, rejecting the arguments of the defendants and Secretary Krancer, held that despite being issued by PADEP and pursuant to Pennsylvania law, two of the three permits “carr[ied] the label of [the] CWA certifications” required under FERC’s Certificate and the third was so interrelated that “separate reviews” could lead to conflicting outcomes and would be judicially cumbersome.” 

The Court then turned to Section 19 of the NGA, which provides that the United States Court of Appeal for the circuit where the subject natural gas project is situated “shall have original and exclusive jurisdiction over any civil action for review of an order or action of a . . . State administrative agency acting pursuant to Federal law to issue, condition, or deny any permit, license, concurrence, or approval . . . required under Federal law.”  The first stop was determining whether the EHB is a “State administrative agency,” because if it is, then by implication, the EHB would not be precluded from hearing the appeal (which subsequently would have to be challenged in the federal courts of appeal) and, instead, a party could be required to exhaust its remedies – including challenging the permits in the EHB – before seeking federal review.   However, the Court held that the EHB is an adjudicative, not administrative, body, and that the intent of Section 19 was to limit its application to agencies that issue, condition or deny permits, not entities that review those decisions.  Further, since Section 19 does not refer to “final” action on a permit and in light of the legislative history, there was not only no requirement of exhaustion but, instead, that it was Congress’ intent “to cut out all [state] review after the original agency made its permitting decision.”[1] 

Having reached the conclusion that TGPC was likely to prevail on the merits – that is, that the NGA precluded review of the permits by the EHB – the Court then quickly disposed of the other elements of preliminary relief, finding that TGPC would suffer irreparable harm if it was forced to litigate the validity of its permits before an entity that had no jurisdiction and if its project was delayed by the additional layer of review by the EHB.  FERC and TGPC’s timetable for completion of the project tipped the equitable scales in TGPC’s favor, and finally the Court found that the public interest was served by allowing the project “to move forward in a timely manner.”

There is little doubt, one suspects, that this decision will be appealed.  Additionally, its concepts are almost certainly applicable in other settings, and it is likely to spawn further challenges to the jurisdiction of state adjudicative bodies where state agencies are involved in the administration of federal laws.

[1] The Court also rejected the argument that review by the EHB would allow for a more full record upon review to the circuit courts.

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