CSG Law Alert: Third Circuit Opinion Sets Precedent That Implicates Projects Involving State-Issued Environmental Permits
On September 5, 2018, the United States Third Circuit Court of Appeals (“Third Circuit”) rendered a decision that could potentially implicate the NJDEP permitting process in future Natural Gas Act and other federal permitting actions.
In Township of Bordentown, et al. v. FERC, No. 17-3207 (3rd Cir. September 5, 2018), the Third Circuit held that the New Jersey Department of Environmental Protection (“NJDEP”) could not deny the Petitioners the ability to request an adjudicatory hearing under the New Jersey Freshwater Wetlands Protection Act (“FWPA”) solely on the basis of preemption of the Federal Natural Gas Act (“NGA”). This opinion means that challengers have at least the right to request an administrative hearing for State-issued environmental permits, even for certain Federally-permitted projects. If a state environmental agency like the NJDEP were to grant such a hearing, this could significantly delay the commencement of a project.
By way of background, Transcontinental Gas Pipe Line Co. (“Transco”) proposed to upgrade its existing interstate natural gas pipeline system – including the construction of a new mater and regulating station, compressor station, and electrical substation along a lateral in Chesterfield, NJ – and conduct certain modifications in Mercer County, NJ (the “Project”). The Project required, and obtained, approvals from the Federal Energy Regulatory Commission (“FERC”) under the NGA. In addition, the Project is to be situated in freshwater wetlands and transition areas requiring the discharge of fill or dredge material into navigable waters, as well as a significant diversion of volumes of water. The discharge of dredge and fill material into navigable waters requires a permit pursuant to Section 404 of the Federal Clean Water Act , 33 U.S.C. 1341(a) (“CWA”). New Jersey has assumed permitting authority for certain navigable waters such as those involving the Project, which is implemented under the FWPA. Transco applied for, and obtained, a Freshwater Wetlands Individual Permit and Water Quality Certification.
Once NJDEP issued the permit, and pursuant to the FWPA, the Petitioners requested an adjudicatory hearing. NJDEP denied the hearing based solely upon the NGA’s requirement that the federal courts have exclusive jurisdiction to review the issuance of permits such that the state administrative hearing process is not applicable.
The Third Circuit concluded otherwise, and ruled that the administrative hearing process provided under state law is not precluded by the court’s exclusive jurisdiction under the NGA. In doing so, the Third Circuit reviewed the NGA and concluded that its jurisdiction is limited to civil actions, and not administrative proceedings. The Third Circuit also reviewed case law from the Supreme Court of the United States and other Federal Circuit Courts of Appeal, and concluded that the hearings at the administrative hearing level were not civil actions as referenced in the NGA, even if administrative proceedings mirror adversarial trials. Thus, the NGA “leaves untouched the state’s internal administrative process, which may continue to operate as it would in the ordinary course under state law.”
Depending on the Federal permitting process involved, applicants must consider the possibility that an administrative hearing may – and can, if granted – be considered as part of the timing of the state permitting process. The Third Circuit’s opinion, of course, is limited to the applicability of an administrative hearing in a state-permitting program delegated under a Federal statute, in this case the delegation of CWA authority to the NJDEP under the FWPA. However, the analysis of whether an administrative hearing is a judicial action can be read beyond its applicability to the FWPA. Each individual permittee applying under State law must always add a permit of time predicted for the hearing, if a hearing is granted, as part of its construction planning process. In addition, permittees may now want to vigorously oppose adjudicatory requests, as they can be used offensively by project challengers to delay a project.
It should be noted that the vast majority of the opinion provides a detailed analysis of FERC’s issuance of certificate of public convenience and necessity, and its subsequent analysis under the Federal National Environmental Protection Act (“NEPA”). The Third Circuit issues important conclusions regarding the applicability of a related intrastate project and its impact on the NEPA analysis. However, the important takeaway from this opinion is the applicability of the state administrative hearing process to state permits issued for Federal projects, and its impact on the timing of a project.