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Tennessee Gas Pipeline Company Goes on the Offensive
February 26, 2013

On February 5, 2013, the United States District Court for the Middle District of Pennsylvania granted Tennessee Gas Pipeline Co. LLC’s (“TGPC”) motion for an emergency preliminary injunction preventing Pennsylvania’s Environmental Hearing Board (“EHB”) from reviewing permits issued by Pennsylvania’s Department of Environmental Protection (“DEP”) to TGPC associated with its Northeast Upgrade Project (“Project”). The permits were issued on November 21, 2012 and were appealed by the Delaware Riverkeeper Network (“DRN”) and others to the EHB on December 19, 2012. TGPC filed its preliminary injunction on January 8, 2013 based on a theory that the Natural Gas Act (“NGA”) preempted EHB from reviewing the permits. The Court granted the injunction – not based on preemption, but on harmonizing two federal statutes (the NGA and the Clean Water Act (“CWA”)) and the structure of the NGA which provides federal judicial review of an order or action of a state administrative action acting pursuant to federal law – even if that action is not “final agency action.”

The procedural history of the proceeding is complicated but relevant to understanding the significance of this decision. In relevant part, TGPC applied to the Federal Energy Regulatory Commission (“FERC”) for a Certificate of Public Convenience and Necessity (“CPCN”) for their Project under the NGA on March 31, 2011. FERC issued an Environmental Assessment (“EA”) under the National Environmental Policy Act of 1969 (“NEPA”) in November 2011 recommending that FERC order a finding of no significant impact but include mitigation measures to protect the environment. FERC issued such an order on May 29, 2012 as well as the CPCN. DRN filed a Request for Rehearing and stay of the May 29 order – which was denied on January 11, 2013. During the proceedings before FERC, TGPC also obtained three permits from DEP on November 21, 2012: two Water Obstruction & Encroachment Permits and one Erosion and Sediment Control General Permit. DRN appealed DEP’s issuance of the permits to the EHB on December 19, 2012 and a petition for temporary supersedeas – prompting TGPC to seek the preliminary injunction in federal district court.

For the Court to grant TGPC’s preliminary injunction, it was necessary for it to find: 1) TGPC had a reasonable probability of success on the merits; 2) TGPC would be irreparably injured by denial of the relief; 3) granting preliminary relief would not result in greater harm to the defendants; and 4) granting preliminary relief would be in the public interest. The majority of the Court’s decision is dedicated to discussing TGPC’s reasonable probability of success on the merits. TGPC argued that the NGA preempts state review of permits issued pursuant to the NGA or FERC orders. The Court disagreed and cited § 717b(d) of the NGA which carves out an exception that nothing in the NGA affects the rights of states to regulate or certify activity under § 401 of the CWA (a certification that the discharge of pollutants will comply with state water quality standards). The posture of the case placed DRN in a difficult position because on the one hand if it argued that the three permits issued by DEP were based exclusively on state law, TGPC would have a legitimate argument that the NGA preempted state and local permits and EHB would have no jurisdiction. On the other hand, if DRN agreed that the DEP permits were authorized under the CWA, state administrative agencies such as the EHB or state courts would not have exclusive jurisdiction to review the permits issued by DEP. Although the Court did not agree with TGPC’s preemption arguments, it was equally unconvinced with DRN’s argument that the permits were based on state law.

The Court did not view the case as a preemption issue but rather an issue that required “harmonizing” the interplay of the NGA and CWA. The Court decided that the three permits were not exclusively based on state law because of the 401 certification aspect of the permits, and as such, § 717r of the NGA provides “no room for EHB to complete review of PADEP’s permitting decisions before an appeal is taken to federal court.” The determination that DEP’s three permits were issued pursuant to the CWA – at least in part – was necessary for the Court to hold that, based on § 717(r), the United States Court of Appeals has “original and exclusive jurisdiction over any civil action for the review of any order or action of a . . .State administrative agency acting pursuant to Federal Law” and wrest jurisdiction from the EHB. 15 U.S.C. § 717r(d)(1) (emphasis added). The Court dedicated considerable discussion as to what constituted state administrative agency action and whether the state agency was acting pursuant to federal law. Additionally, the Court granted the Secretary of DEP’s motion to intervene but was unwilling to accept the Secretary’s argument that TGPC should be required to exhaust all administrative appeal options at the state level, i.e., appeal to the EHB, before going to federal court. The Court held that the clear language of the statute did not require “final” agency action and that it was “impermissible to imply either an additional administrative requirement originating in state law . . . or to recognize an exhaustion requirement by implication.” Ultimately the Court decided that the TGPC had demonstrated a reasonable probability of success on the merits.

Having dedicated 24 pages of the 27-page decision to the procedural history and preemption/probability of success on the merits, the Court concluded that since the EHB does not have jurisdiction to hear the appeals of the three permits, TGPC “would suffer irreparable injury by being subjected to a protracted process before a body lacking in jurisdiction and the costs associated with the de novo nature of the proceedings, both now and each time it receives a CWA certification which DRN is unwarranted.” With regard to the third factor, balancing the equities, the Court held that the immediacy and urgency of FERC’s timetable was more important than the “speculative nature of DRN’s alleged harm.” Finally, the Court also found that “[a]llowing this Project to move forward in a timely manner would also favor the public interest because the Project will add jobs to the local economies, increase revenues for New Jersey and Pennsylvania by hundreds of millions of dollars, and also provide natural gas to residents of New Jersey and Pennsylvania during peak winter months.” The decision is a significant victory and should provide industry some protection from those interested in delaying projects through time-consuming and expensive appeals before the EHB.

Environmental Law James D. Elliott