A U.S. District Court for the Middle District of Pennsylvania judge has ruled in a case of first impression that the federal Natural Gas Act forbids the state Environmental Hearing Board from reviewing permits issued by the state Department of Environmental Protection under federal law. Any review of such permits must be requested from a federal appeals court.

In Tennessee Gas Pipeline v. Delaware Riverkeeper Network, U.S. District Judge Robert D. Mariani granted plaintiff Tennessee Gas Pipeline Co.’s amended motion for emergency preliminary injunction, finding that three permits the DEP issued to the company pursuant to the federal Clean Water Act were precluded, under the NGA, from review by the EHB.

Mariani said the case turned on Section 19 of the NGA — Section 717r(d)(1) of the U.S. Code — which states that federal courts have "exclusive jurisdiction over any civil action for the review of an order or action of a … state administrative agency acting pursuant to federal law to issue, condition, or deny any permit, license, concurrence, or approval … required under federal law."

On December 19, 2012, according to Mariani, the DRN sought review by the EHB of three permits — one Erosion and Sediment Control General Permit (ESCGP-1) and two Water Obstruction and Encroachment Permits — issued by the DEP to Tennessee Gas in connection with the company’s Northeast Upgrade Project.

Tennessee Gas had been directed by the Federal Energy Regulatory Commission to obtain those permits from the DEP as a condition of being granted a certificate of public convenience and necessity under the NGA, which gave the company permission to "’construct, install, modify, operate, and maintain certain pipeline and compression facilities to be located in Pennsylvania and New Jersey,’" according to Mariani.

While the DRN and DEP both argued that the permits were issued under state law, Mariani found that the permits still "carry the label of CWA certifications."

Tennessee Gas filed a motion for emergency preliminary injunction against the DRN in federal court, seeking a declaratory judgment that the EHB had no jurisdiction to review those permits, according to Mariani.

Mariani said Section 19′s reference to a "state administrative agency" applies only to the DEP and not the EHB.

"Section 717r(d)(1) speaks of a ‘state administrative agency acting pursuant to federal law,’ and as such, the court interprets the plain language of the statute to mean that any action of a state administrative agency acting pursuant to federal law to issue, condition, or deny any permit required under federal law, refers to the PADEP and PADEP only," Mariani said. "PADEP is the state administrative agency that is charged by the Clean Water Act to issue, condition, or deny water quality certifications, not the EHB. Rather, the EHB’s authority and jurisdiction exist pursuant to state law only."

And while the EHB said in its opinion denying the DRN’s petition for supersedeas that the permits issued by the DEP were not final because the board had not yet made a decision on appeal, Mariani said Section 717r(d)(1) merely requires federal judicial review of "’an order or action’" by a state administrative agency.

"It does not mandate that judicial review wait until a final agency decision has been rendered, as DRN and PADEP contend," Mariani said. "If Congress had intended to require final agency action, it could easily have said so."

According to Mariani, a "fair reading of Section 717r(d)(1) tips the scales in favor of an interpretation that it is in fact PADEP’s initial ‘order or action’ that triggers judicial review."

"While EHB may very well be authorized to issue, condition, or deny a permit under state law, the language of Section 717r(d)(1) suggests its focus is on PADEP’s initial determination as to whether a permit should be issued or denied," Mariani said.

Mariani said the limited legislative history of Section 717r(d)(1) also seems to suggest that Congress intended to eliminate state appellate review of DEP-issued permits in order to avoid protracted appeals processes that could effectively shut down a natural gas project.

"Congress’ intent in passing the NGA was to bypass the exhaustive rounds of administrative, state, and federal appeals and to provide for a mechanism whereby an aggrieved party could appeal directly to a federal circuit court," Mariani said. "This policy is especially forceful in a case such as this when the EHB reviews PADEP’s decisions de novo."

But the DRN and DEP Secretary Michael Krancer, an intervenor in the case, argued that allowing direct appeals to federal appellate courts from DEP permit decisions would result in underdeveloped records, Mariani said.

Krancer argued that the DEP does not have internal hearing examiners, nor does it prepare formal written findings or issue adjudications when it reviews permit applications, according to Mariani.

"Yet, when this court ordered either DRN or PADEP to supplement the record with any documents containing written findings issued by PADEP in connection with the three permits, any correspondence to interested parties pertaining to the permits, and any and all other documents or information related to the permits, both DRN and PADEP submitted hundreds of pages of documents, including PADEP’s ‘environmental reviews’ for all three permits, engineers summary report for one of the water permits, a record of decision for the ESCGP-1 application, and numerous deficiency letters issued to TGPC," Mariani said.

Still, Mariani did admit that counsel for the DEP "made a persuasive point during oral argument" when he said allowing the EHB to create a formal record before an appeal is handed over to the federal courts would actually mitigate the potential delays that could occur if a federal court decided to remand a matter in order to more fully develop the record.

Mariani agreed that because the DEP is not required to develop a record, there is "substantial risk" that situations could arise similar to what occurred in a pair of U.S. Court of Appeals for the Second Circuit cases called Islander East Pipeline v. Connecticut Department of Environmental Protection and Islander East Pipeline v. McCarthy, from 2006 and 2008, respectively.

In those cases, according to Mariani, the Connecticut DEP initially denied a water quality certification in February 2004 and the Second Circuit’s determination that the agency had not acted in an arbitrary and capricious manner did not come until May 2008.

"This hardly seems like an expeditious process when EHB review (which admittedly would take several months, even on an expedited schedule) would greatly reduce the likelihood that a federal appellate court would find the record insufficient," Mariani said. "Nonetheless, this is the framework that Congress has implemented, and the court will not second-guess the wisdom of that framework when Congress has provided explicit mechanisms for supplementing an incomplete consolidated record."

Mariani closed his opinion by noting that the certainty of the harms Tennessee Gas would suffer if the project was delayed outweigh the speculative harms the DRN alleges it would suffer if the project was allowed to proceed.

Mariani also added that allowing the project to move forward in a timely manner is in the public’s best interest because it "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."

Jane P. Davenport, counsel for the Delaware Riverkeeper Network, said the organization was pleased that, while Mariani enjoined the EHB from reviewing certain permits, he preserved the DEP’s permitting authority.

A spokesman for Tennessee Gas said in an emailed statement that Mariani "clearly and correctly recognized the issues and the harm that Tennessee Gas would incur if the FERC-approved Northeast Upgrade Project is delayed, or stopped, as a result of the actions of the DRN, or other organizations, and correctly stated that the Environmental Hearing Board does not have jurisdiction over any civil action for the review of the Pennsylvania Department of Environmental Protection’s permitting of the project."

A spokesperson for the DEP said the agency is currently reviewing the decision.

A spokesperson for the Office of Attorney General, which is representing the EHB, said the office is currently reviewing the decision and will discuss it with the EHB.

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI.

(Copies of the 27-page opinion in Tennessee Gas Pipeline v. Delaware Riverkeeper Network, PICS No. 13-0341, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •