Second Circuit Confirms NYSDEC Waived Water Quality Certification Authority by Delaying Decision on Application

On March 12, the Second Circuit held that the New York State Department of Environmental Conservation (NYSDEC) waived its authority to review Millennium’s request for a water quality certification under Section 401 of the Clean Water Act (CWA) and that the Federal Energy Regulatory Commission (FERC) has jurisdiction over the Millennium Pipeline, an issue raised by intervenors. The Court agreed with FERC that the one-year review period under Section 401 of the Clean Water Act commences at the moment that the NYSDEC receives a request for water quality certification, and not, as the DEC argued, upon the DEC’s determination that an application is “complete.” The Court further cautioned that DEC’s approach could indefinitely delay certification decisions and “blur [the] bright-line rule into a subjective standard.” The Court also rejected NYSDEC’s argument that it was entitled to Chevron deference and reviewed the appeal de novo, since NYSDEC’s interpretation of CWA Section 401 was not, and could not have been, approved by the U.S. Environmental Protection Agency, which is the federal agency charged with administering the CWA.

Updated Alert from December 8, 2017:

On December 7, the Second Circuit rejected the New York State Department of Environmental Conservation’s (DEC) request for a stay of construction of the Millennium Pipeline Co. LLC’s Valley Lateral natural gas pipeline project. The decision ends an emergency stay on construction that the court imposed on November 2 at DEC’s request, after the Federal Energy Regulatory Commission (FERC) had denied DEC’s request for a FERC rehearing. DEC has petitioned the Second Circuit to review FERC’s determination that DEC waived its power to issue or deny a Water Quality Certification for the project. The court directed an expedited review of DEC’s petition, with arguments being scheduled as early as January 24, 2018.

Original Alert from October 20, 2017:

Following FERC’s Declaratory Order that the New York State Department of Environmental Conservation (DEC) failed to timely act on an application for a Water Quality Certification under Section 401 of the Clean Water Act (CWA), DEC has requested a rehearing and stay of FERC’s determination. At issue is whether the one-year timeframe in which DEC must act on a WQC application commences when the application was first received by the DEC or when the DEC deems the application complete.

DEC’s requests arise from its review of the Millennium Pipeline Company (Millennium) Valley Lateral project (Project). In November 2015, Millennium filed an application with FERC pursuant to Section 7c of the Natural Gas Act for a certificate of public convenience and necessity to construct and operate approximately 7.8 miles of new natural gas pipeline. The pipeline would extend Millennium’s mainline pipeline to the CPV Valley Energy Center, in Orange County, New York. FERC granted the application in November 2016, subject to various conditions resulting from an Environmental Assessment proposed by Millennium and issued by FERC.

Millennium first applied to DEC for a WQC on November 23, 2015. DEC found that application was incomplete. After several rounds of revisions, DEC eventually determined that Millennium’s WQC application was complete on August 31, 2016. 

On July 21, 2017 Millennium filed with FERC a Request for Notice to Proceed with Construction of the Project, and with it stated that DEC waived its authority to issue a WQC for failing to act within the one-year statutorily imposed deadline. DEC contested this assertion and argued that the one-year timeframe is not triggered until the DEC determines that the WQC application is complete. The FERC Declaratory Order occurred against a backdrop of (i) a legal challenge filed by Millennium in the D.C. Circuit alleging that the DEC was unlawfully delaying the action on the WQC application (dismissed on jurisdictional grounds), and (ii) advanced ongoing construction on the CPV Valley Energy Center, which made the timing of availability of the Millennium pipeline’s natural gas supply more urgent.

The Millennium Project is not the first time that DEC has faced the question of when its WQC period is open. In June 2011 Entergy Nuclear Operations, Inc. (Entergy) argued that DEC waived its right to certify a WQC application in relation to Entergy’s license renewal for Indian Point Nuclear Generating Units 2 and 3. Following 58 days of hearings addressing the WQC and other permitting issues, DEC ultimately approved a final WQC without the Nuclear Regulatory Commission and Administrative Law Judges determining the timeliness of DEC’s review.

FERC’s decision cites prior case law and FERC’s own regulations under the Federal Power Act. In the case law FERC cited, courts deferred to agency interpretations of their own regulations governing the timing of § 401 certification waiver. See Alcoa Power Generating Inc. v. F.E.R.C., 643 F.3d 963, 974 (D.C. Cir. 2011) (FERC reasonably interpreted its regulations under Federal Power Act, in determining that certification was timely granted despite the state’s inclusion of a bond condition); AES Sparrows Point LNG v. Wilson, 589 F.3d 721, 729 (4th Cir. 2009) (Army Corps of Engineers reasonably applied its own regulations to start one-year waiver period upon the filing of a complete application to the Corps). Here, however, FERC has not issued regulations under the Natural Gas Act governing the waiver period.

Should FERC or a court determine that the one-year timeframe commences upon filing a WQC application, industry may be better able to plan construction activities, and avoid timeframes triggered by DEC’s arguably discretionary determination of completeness. On the other hand, should agencies tasked with reviewing WQC applications face the prospect of losing jurisdiction even where applications are clearly deficient? The outcome may significantly alter how States deal with future WQC applications that they conclude are incomplete by denying those applications instead of issuing incompleteness notices.

Beveridge & Diamond’s Water practice group develops creative, strategically tailored solutions to challenges that arise under the nation’s clean water laws. The firm’s attorneys have represented clients in a range of industries in project planning as well as in litigation and enforcement proceedings on issues arising from the growing convergence of water supply, use, and quality issues. For more information, please contact the authors.