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Energy and Environment Monitor

Court Allows Pipeline Opponents to Challenge Clean Water Act Permits Directly in Circuit Courts of Appeal

August 11, 2016

By: Robert G. McLusky

The Natural Gas Act (“NGA”) of 1938 grants the Federal Energy Regulatory Commission (“FERC”) exclusive authority to regulate sales and transportation of natural gas in interstate commerce. To that end, Section 7 of the NGA empowers FERC to authorize the construction and operation of interstate transportation facilities—i.e., pipelines.  FERC does so by determining whether a project serves the “public convenience and necessity.”  The NGA preempts state environmental regulation of interstate natural gas facilities, except it allows states to participate in environmental regulation of pipelines under the Clean Air Act, the Coastal Zone Management Act, and the Clean Water Act.  15 U.S.C. § 717b(d).

The Clean Water Act intersects pipeline construction most frequently in the issuance of § 404 “fill” permits, § 402 stormwater construction NPDES permits and the issuance of water quality certifications under § 401. The NPDES program for discharges of non-fill pollutants in most states is run by state agencies rather than by EPA, though EPA has an oversight role.  The § 404 fill program is administered primarily by the U.S. Army Corps of Engineers.  States can assume authority over that program as well—however, only a handful ever have, including New Jersey.  Additionally, § 401 of the Clean Water Act requires that states “certify” that any discharge from the construction or operation of facilities requiring a federal license or permit will comply with state water quality standards. 

Challenges to state-issued NPDES permits are typically required to be brought before administrative law judges or boards under applicable state laws. Likewise, most states provide some manner for challenging a state § 401 certification.  Finally, Corps-issued § 404 permits may be challenged administratively by the applicant or under the Administrative Procedure Act in federal district court by third parties.

In 2005, however, the NGA was amended to grant the courts of appeals jurisdiction to review actions undertaken by state administrative agencies to issue, condition or deny permits and licenses “pursuant to federal law.” In the recent case of Delaware Riverkeeper Network v. PADEP, et al., the Third Circuit Court of Appeals ruled that § 401 certifications and § 404 permits issued by state agencies for FERC-regulated gas pipelines may be challenged directly in circuit courts of appeals.  There, groups opposed to a pipeline proposed by Transcontinental Gas Pipeline Corp. challenged state-issued § 401 certifications by Pennsylvania and New Jersey and a § 404 permit issued by New Jersey.  The states argued that while these certificates and permits are “required” by the federal Clean Water Act, they are not issued “pursuant to” the Clean Water Act and, therefore, could not be challenged directly in the Third Circuit.  The Court disagreed and ruled that it had jurisdiction to hear the challenges.

Although the Court upheld the issuance of the permits, it viewed its authority to review the state permits broadly. The Third Circuit adopted an expansive view of its own jurisdiction in the context of New Jersey’s permits.  New Jersey is one of the few states to have authority to issue Clean Water Act § 404 permits.  It does so pursuant to a state program that includes elements not required by the Clean Water Act.  New Jersey argued that challenges to these “state only” portions of its permit program were beyond the Court’s authority, but the Court disagreed, finding these “state only” components to be integral to the federally-required components of the program. 

This article was authored by Robert G. McLusky, Jackson Kelly, PLLC.


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