Second Circuit Sides with FERC – States May Not Agree to Revise the Certification Request Date to Avoid Waiver of its Certification Authority Under Section 401 of the Clean Water Act

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On March 23, 2021, the United States Court of Appeals for the Second Circuit (the “Second Circuit” or the “Court”) agreed with FERC’s determination that the New York State Department of Environmental Conservation (“DEC”) had waived its certification authority under the Clean Water Act (“CWA”) by failing to act within the one-year statutory deadline. Notably, the Second Circuit held that a state agency cannot revise a certification request date by written agreement with the applicant, thereby altering the one-year statutory deadline for state action. Denying the petitions for rehearing by DEC and the Sierra Club, the Court applied the same reasoning it applied in New York State Dept’ of Env’t Conservation v. FERC (“New York I”), 884 F.3d 450, 455-56 (2d Cir. 2018) (see March 20, 2018 edition of the WER) where the Second Circuit determined that DEC could not unilaterally alter the application date based on when it considered an application complete “because that approach would allow a state agency not only to dictate when the review process can begin but also to delay it indefinitely.” There, to avoid such a subjective standard, the Second Circuit established a bright line rule that the beginning of the review is determined by the date “of receipt of such request.”

The FERC decision at issue pertains to a 99-mile long natural gas pipeline which National Fuel Gas Supply Corporation and Empire Pipeline, Inc. (“National Fuel”) planned to construct from western Pennsylvania to upstate New York, known as the Northern Access 2016 Project ( the “Project”), which required that FERC issue a certificate of public convenience and necessity under the Natural Gas Act, and that National Fuel obtain certain state and federal permits. Because construction and operation of the Project could result in discharges to New York waterways, CWA certification under Section 401 was required. Section 401 requires the state to act within one year of a certification request, otherwise the state’s certification authority is deemed waived.

National Fuel submitted its certification request to DEC on March 2, 2016 and supplemented its application twice upon DEC’s request both in August 2016 and October 2016. During the second supplemental request process, it became clear that DEC would not be able to issue a final decision on the certification request by the one-year statutory deadline and on January 20, 2017, the parties entered into an agreement to revise the certification application date from March 2, 2016 to April 8, 2016, effectively extending the one-year deadline an additional 36 days.

On February 3, 2017, FERC conditionally authorized the pipeline subject to National Fuel obtaining the required federal and state authorizations including certification under the CWA. However, on April 2, 2017, DEC denied National Fuel’s request for CWA certification.

On March 3, 2017, National Fuel sought rehearing of the conditional FERC certificate authorization, initially arguing that DEC failed to act within 90-days for certain required federal deadlines and later, in a December 5, 2017 Renewed Motion for Expedited Action, challenging the validity of its written agreement with DEC altering the application date and arguing for the first time that DEC’s certification authority was waived for failure to act within Section 401 CWA statutory deadline. FERC denied the 90-day challenge but agreed that DEC had waived its certification authority by failing to issue a decision within the statutory deadline finding that DEC could not agree to alter the request date because the “legislative background of Section 401… shows with a good deal of clarity that limiting a certifying state’s discretion and eliminating a potential source of regulatory abuse was what the one-year limit in Section 401 was intended to achieve.”

A copy of the opinion is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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