The Fate of the Section 401 One-Year Timeframe
Last Friday, March 3 may end up being a watershed moment concerning the one-year time limit under the Clean Water Act with respect to issuances of Section 401 Water Quality Certificates (WQC) by state agencies. On Friday, the New York State Department of Environmental Conservation's (NYSDEC) failure to take timely action was the subject of oral arguments heard at the Court of Appeals for the D.C. Circuit with respect to Millennium Pipeline's Valley Lateral Project. Also on Friday, the NYSDEC's failure to timely act was the subject of a filing made at the Federal Energy Regulatory Commission (FERC) by National Fuel Gas Company with respect to their Northern Access 2016 Project. While the timing of a decision from the D.C. Circuit is not known, the decision will likely predate any decision by the FERC on National Fuel's petition. A decision from the D.C. Circuit may clarify the path for how developers are to proceed when states fail to act, and may even put states on notice that they must act within one-year after receiving the pipeline's Section 401 application. 

Millennium's Valley Lateral Gets Its Day in Court

As we discussed in Wading into Navigable Waters? - Section 401 Water Quality Permit Impacts , the primary issue brought to the D.C. Circuit by Millennium Pipeline involved NYSDEC's failure to timely act on Millennium's request for a WQC. Under the Clean Water Act, if the state fails or refuses to act on a request for a WQC within a reasonable period of time (which may not exceed one-year) after the state's receipt of such a request, the requirement for the WQC is waived. A state's failure to act within the time limit has rarely been the subject of court proceedings, but it was the subject of an oral argument held on Friday, March 3 at the D.C. Circuit. 

Based on the oral arguments, the case could be significant for one of two very different reasons.  First, the court may decide that it does not have jurisdiction in cases where a state fails to act under the Clean Water Act, but that FERC does have jurisdiction. If it were to to decide the case in this manner, the role of interpreting whether a state has waived its right to issue a WQC would be squarely placed on FERC's shoulders going forward. Alternatively, if the court finds that it can decide cases like this one, it seems likely that it will rule that a state must act within one-year after receiving an appropriately detailed application, or else the state will have waived entirely its right to impose any limitations on the activities of the pipeline. This would be a significant decision because it would force states to act within one-year or face the loss of any input over the activities of the pipelines.

Millennium filed this appeal on December 5, 2016 and asked the court to find that the NYSDEC had violated the time limitations of the Clean Water Act. Millennium requested an expedited resolution of its claim to meet an April 2017 in-service date for its Valley Lateral Project, which is a 7.8-mile pipeline that is vital to the startup of the 650 MW Valley Energy Center, a natural gas combined-cycle electric power generator in upstate New York.

Millennium's argument to the court was relatively straightforward. The Clean Water Act requires the state to act on a request for a WQC within a reasonable period of time (which may not exceed one-year) after the application is received by the state agency. Failure to do so constitutes a waiver for the need for the WQC and the court therefore should either order the NYSDEC to immediately issue the WQC or remand the case to the NYSDEC with a direction to do so within a very short time frame, such as seven days.

The NYSDEC asserted that the court lacked jurisdiction over the case because the determination of whether a waiver has occurred should be brought before FERC. The NYSDEC argued in the alternative that, even if the court determines that it has jurisdiction, it should find that the time limit has not yet been exceeded. Under the NYSDEC's interpretation of the statute, the time period doesn't start running until the agency determines that it has all information necessary to make a determination, and not when the application is first received. According to the NYSDEC, the earliest date this could have occurred in this case was August 31, 2016, so, in its view, it still has until August 30, 2017 to make its determination.

Based on the questions asked at the oral argument, it appears that the court is struggling with whether it has jurisdiction over the case. The court may hold that Millennium should have simply presented evidence of the NYSDEC's failure to act to FERC, along with its request for a Notice to Proceed with construction. For Millennium, such a decision would be problematic because FERC currently does not have a quorum and making such a finding may not be within the Staff's authority in processing a request for a Notice to Proceed. For the industry, however, it would make clear the path for how to proceed when states fail to act within the one-year time period.

If the court finds that is has jurisdiction, then it seems unlikely, based on today's oral argument, that it will find in favor of the NYSDEC's interpretation that the one-year period under the Clean Water Act doesn't start running until the agency finds it has a complete application. However, even a favorable decision for Millennium along these lines is unlikely to come before the Valley Lateral's purported April 2017 in-service date that caused Millennium to request an expedited review of the case. For the industry, however, such a ruling would put all state agencies on notice that they need to act within one-year after they receive a pipeline's application.

National Fuel Gas Pushes FERC to Weigh In

National Fuel took up the NYSDEC's argument that FERC has the authority to determine that a state's failure to act is a waiver, and asked FERC to find that the NYSDEC failed to timely act with respect to the WQC for their project. Considering that National Fuel recently agreed with the NYSDEC to extend the time for the NYSDEC to make a ruling until April 2017, the purpose of this filing could be to push the NYSDEC to make a ruling before FERC rules. And following NYSDEC's controversial denial of Williams' Constitution Pipeline Project's Section 401, they have reason to be concerned.

According to National Fuel's filing, the NYSDEC received their application for a WQC on March 2, 2016. However, on January 3, 2017, National Fuel agreed to revise the date on which the application was deemed received by the NYSDEC to April 8, 2016, thereby extending the one-year period under the Clean Water Act to April 7, 2017. In National Fuel's filing last Friday, National Fuel asked FERC to find that the NYSDEC's failure to act on the WQC by the date called for in the FERC environmental review schedule, October 25, 2016, constitutes a waiver under the Clean Water Act. While the NYSDEC has not yet filed a response to this request, one can be fairly certain, based on their position in the Millennium case, that they will argue that they have at least until April 7, 2017 to make a determination on the WQC permit. 

FERC may not act on National Fuel's request for quite some time. For starters, FERC may want to wait until the D.C. Circuit Court issues its ruling in Millennium to see whether the court holds that FERC has the authority to make the waiver determination. Also, because the FERC currently lacks a quorum, they may determine that Staff cannot make the waiver determination and that such a finding must await a vote by the FERC commissioners once they have a quorum. Because National Fuel cannot begin construction until either the WQC is issued or FERC determines that the NYSDEC has waived its right to issue a WQC, it seems unlikely that construction on the Northern Access Project 2016 will begin anytime in the near future. 

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