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Third Circuit Opens the Door for Challenges to State Permits Issued Pursuant to Federal Law to Interstate Natural Gas Facilities

Last week, the United States Court of Appeals for the Third Circuit struck down challenges by environmental organizations to the Federal Energy Regulatory Commission’s (FERC) approval of an expansion of the Transcontinental pipeline, a 10,000-mile pipeline that extends from South Texas to New York City and is operated by Transcontinental Gas Pipe Line Company, LLC (“Transco”).  In doing so, however, the Court held that the environmental organizations had properly invoked a provision of the federal Natural Gas Act to challenge water quality-related permits issued by the states of Pennsylvania and New Jersey.  Thus, the decision, Delaware Riverkeeper Network v. Sec’y Pa. Dep’t of Envtl. Prot, No. 15-2122 (3d Cir. August 8, 2016), provides that the Court of Appeals has exclusive jurisdiction over challenges to permits issued to an interstate natural gas facility to certify compliance with State water quality standards promulgated under federal supervision, as well as with federally-established Clean Water Act requirements.  

The challenge to the pipeline expansion, brought by, inter alia, the Delaware Riverkeeper Network (“Riverkeeper”) and New Jersey Conservation Foundation (“Foundation”) specifically concerned the construction of four new pipeline “loops” and the upgrade of turbines at four compressor stations located in Pennsylvania and New Jersey.  “Loops” are sections of pipe connected to the main pipeline system that reduce the loss of gas pressure and increase the flow efficiency of the system.  Compressor stations use gas and electric-powered turbines to increase the pressure and rate of flow of the FERC completed the requisite Environmental Assessment and issued the necessary certificate of approval for the pipeline expansion under the Natural Gas Act of 1938.  Notably, the Natural Gas Act preempts state environmental regulation of interstate natural gas facilities, but allows the states to participate in environmental regulation of these facilities under, inter alia, the Clean Water Act.  This certificate was conditioned on the project’s receipt of “all applicable authorizations under federal law” enumerated in the Environmental Assessment, including authorizations from Pennsylvania and New Jersey.  FERC required Transco to obtain the following authorizations for each loop from the New Jersey Department of Environmental Protection (NJDEP): a Freshwater Wetlands Individual Permit, a Flood Hazard Area Individual Permit, a Water Quality Certification, and a Letter of Interpretation.  From Pennsylvania, Transco was required to obtain a Water Quality Certification and a Water Obstruction and Encroachment Permit.

The Riverkeeper and the Foundation, in petitioning the Court for review, invoked Section 19(d) of the Natural Gas Act which confers original jurisdiction on the Court of Appeals over State agency actions issued “pursuant to Federal law.”  Both PADEP and NJDEP argued that Section 19(d) did not apply because the authorizations provided by the State agencies were not issued pursuant to Federal law.  Specifically, both PADEP and NJDEP argued that the Court did not have jurisdiction over Water Quality Certifications while NJDEP additionally argued that the Court also did not have jurisdiction over the Freshwater Wetlands Individual Permits as well as the Letters of Interpretation and Flood Hazard Area Individual Permits.  Notably, the Letters of Interpretation and Flood Hazard Area Individual Permits are part of the Freshwater Wetlands Individual Permit in that they provide additional conditions for the Freshwater Wetlands Individual Permit.      

The Court disagreed, finding that the Water Quality Certifications issued by PADEP and NJDEP were necessary to certify compliance with Sections 301, 306 and 307 of the Clean Water Act, all of which involve federal standards.  Thus, the court found, “a Water quality Certification is not merely required by federal law: it cannot exist without federal law, and is an integral element in the regulatory scheme established by the Clean Water Act.” 

Similarly, the Court noted that New Jersey’s Water Quality Certification and Freshwater Wetlands Individual Permits were issued pursuant to the State’s Freshwater Wetlands Protection Act, which provides for the state’s administration of Section 404 permits under the Clean Water Act.  Thus, these permits were similarly issued pursuant to federal law.  Likewise, the Court found, the Flood Hazard Area individual Permits and Letters of Interpretation are “part and parcel” of the Freshwater Wetlands Individual Permits and were therefore also subject to the Court’s review. 

While the petitioners lost on the substantive merits of their challenges to these permits, the decision opens the door for challenges in the federal Courts of Appeals to state permits issued pursuant to Federal law to interstate natural gas facilities.