In an October 13, 2017 letter, the New York State Department of Environmental Conservation (“DEC”) challenged the Federal Energy Regulatory Commission’s (“FERC”) decision that, by failing to act, DEC had waived its authority to issue a Clean Water Act water quality certification for Millennium Pipeline Company LLC’s (“Millennium”) proposed Valley Lateral Project, a 7.8-mile natural gas pipeline connecting Millennium’s mainline in Orange County to a natural gas-fired power plant under construction in the Town of Wawayanda, New York.  DEC had ultimately denied the certification.

In order to construct the pipeline, Millennium is required to obtain a Certificate of Public Convenience and Necessity from FERC, which in turn requires documentation of all required federal authorizations (or waivers thereof) before construction can proceed.  One of the required authorizations is a Clean Water Action Section 401 water quality certification from the DEC.

Millennium submitted applications to FERC and DEC in November 2015.  However, when DEC received Millennium’s Section 401 certification application on November 23, 2015, it was not complete, and DEC requested additional information on two occasions, in December 2015 and June 2016.  Millennium responded in May and August 2016, respectively, and DEC declared the application complete on August 31, 2016.

FERC issued a provisional Certificate of Public Convenience and Necessity on November 9, 2016, which was contingent upon Millennium’s filing of documentation that it received all federal authorizations, including the Section 401 certification.  On July 21, 2017, Millennium filed with FERC a Request for Notice to Proceed with Construction, in which it alleged that DEC waived the certification requirement by failing to grant or deny the water quality certification within one year “after receipt of such request,” pursuant to the Clean Water Act.  Millennium argued that the one-year period began to run on the date DEC received its submission – November 23, 2015.  In its response, DEC argued that the one-year period did not begin until it received a “complete” application on August 31, 2016, and therefore had not run. [1]

While the waiver question was under consideration by FERC, in a letter dated August 30, 2017, DEC denied Millennium’s water quality certification application.  DEC’s denial was based on a recent D.C. Circuit decision in which the court held that the environmental review for a natural gas pipeline was inadequate because it failed consider or quantify downstream greenhouse gas emissions.[2]  FERC did not perform such an analysis for the Valley Lateral Project, so DEC denied Millennium’s application.

On September 15, 2017, FERC ruled that DEC had waived its Section 401 authority, interpreting the language of Section 401 to mean that the one-year deadline was triggered when DEC received Millennium’s initial (albeit incomplete) application on November 23, 2015.  FERC reasoned that finding otherwise “would frustrate the purpose of the one-year review period specified by the CWA and allow state agencies to indefinitely delay proceedings by determining applications to be incomplete.”

A month later, DEC challenged FERC’s ruling by filing a Request for Rehearing and Stay of FERC’s September 15, 2017 Order, arguing that FERC erred in finding that DEC waived its jurisdiction, and that FERC should refrain from permitting Millennium to begin construction during the pendency of DEC’s challenge.  DEC argued that the one-year period for acting on a Section 401 application begins when the application is complete, because otherwise applicants could deprive DEC of meaningful review by completing an application 364 days after the initial submission of a deficient one.  In response to FERC’s suggestion that states can address this concern by simply denying incomplete applications, DEC explained that doing so would be inefficient because it would preclude DEC and the applicant from working cooperatively to ensure that an application contains all of the necessary information.  DEC also argued that FERC must defer to DEC’s interpretation of the triggering event because DEC is charged with determining whether to issue a Section 401 water quality certification for the Project.

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[1] Prior to this, Millennium petitioned the U.S. Court of Appeals for the D.C. Circuit to compel DEC to act on its application pursuant to Section 19(d)(2) of the Natural Gas Act.  Millennium Pipeline Co. L.L.C. v. Seggos, 860 F.3d 696 (D.C. Cir. 2017).  The court denied Millennium’s petition on standing grounds, reasoning that any unlawful failure by DEC to act within one year would not harm Millennium, because Millennium could just submit evidence of a waiver instead of the certification to obtain FERC’s approval to begin construction.  Id. at 699-700. The court did not reach the merits of the dispute regarding the appropriate trigger date for the one-year statutory deadline.

[2] Sierra Club v. FERC, 867 F.3d 1357, 1372-75 (D.C. Cir. 2017).