On February 5, U.S. District Court Judge Robert D. Mariani of the Middle District of Pennsylvania granted Tennessee Gas Pipeline Co. LLC’s (TGPC) motion for a preliminary injunction in Tennessee Gas Pipeline v. Delaware Riverkeeper Network, 3:13-CV-46 (M.D. Pa.). The court’s order enjoined the Pennsylvania Environmental Hearing Board from considering appeals of multiple permits obtained by TGPC in furtherance of the 44-mile Northeast Upgrade pipeline project, finding that the Natural Gas Act prevents the EHB from hearing appeals of the Pennsylvania Department of Environmental Protection’s permitting decisions when those permits are obtained for a natural gas pipeline project.

As explained below, this decision will have implications for future gas pipeline projects and could invite permit applicants to seek ways to circumvent EHB review in other environmental areas.

On March 31, 2011, TGPC filed an application for a certificate of public convenience and necessity for the Northeast Upgrade project. Under the Natural Gas Act, the Federal Energy Regulatory Commission (FERC) analyzes and determines whether an interstate natural gas pipeline project is in the "public convenience and necessity." FERC also must determine whether each project constitutes "a major federal action affecting the quality of the human environment" under the National Environmental Policy Act.

On November 21, 2011, FERC issued an environmental assessment, which relied on TGPC’s commitment to obtain, and to comply with, all necessary environmental permits. FERC subsequently issued an order granting TGPC’s request for a certificate, which was conditioned upon TGPC’s compliance with environmental mitigation measures set forth in the environmental assessment, and required TGPC to obtain certain environmental permits.

On November 21, 2012, the DEP issued three permits required by the FERC order and the environmental assessment: one erosion and sediment control permit (ESCGP-1) and two water obstruction and encroachment permits, pursuant to 25 Pa. Code Chapters 102 and 105, respectively. FERC issued a notice to proceed to TGPC on December 14, 2012. The Delaware Riverkeeper Network appealed the DEP’s issuance of the three permits to the EHB days later and filed two petitions, one for a temporary supersedeas (akin to a temporary restraining order) and the other for a supersedeas (analogous to a preliminary injunction).

TGPC then filed an action in the federal district court in January, arguing that the Natural Gas Act pre-empted review of the permits by the EHB or any state court. The court, despite finding for TGPC, did not rely on pre-emption principles.

Although the Natural Gas Act generally pre-empts state review of permits issued pursuant to the Natural Gas Act or FERC orders, it explicitly carved out an exception for the Clean Water Act. The two water permits reference Section 401 of the Clean Water Act, while the ESCGP-1 permit does not. Therefore, the ESCGP-1 would presumably be reviewed by the EHB (or be pre-empted) and those permits related to water quality would be subject to federal judicial review.

However, the court explained that because the permits were so interrelated, it would be "judicially cumbersome" to treat them differently for judicial review purposes.

The Natural Gas Act was amended by the Energy Policy Act of 2005, giving the U.S. courts of appeals "original and exclusive jurisdiction over any civil action for the review of an order or action of a federal agency (other than the commission) or state administrative agency acting pursuant to federal law to issue, condition or deny any permit, license, concurrence or approval … required under federal law."

The DEP, which intervened in the case, argued that without review by the EHB, there would be no exhaustion of agency action that would trigger judicial review. The court disagreed, finding that the amendment to the Natural Gas Act allowed for federal judicial review without review of the permits by the EHB. Under the court’s interpretation, federal judicial review provides the sole source of review after the DEP’s initial determination as to whether a permit obtained pursuant to a gas pipeline project should be issued or denied.

What implications does this decision have for future pipeline projects? First, because the agency action that triggers federal judicial review is the DEP’s issuing of the permit, the decision may result in time and resource savings for similar projects. No longer will entities pursuing similar projects have to sacrifice the time and resources addressing appeals by third parties to the EHB. Second, duplicative appeals will also be avoided. The court found that federal judicial review is triggered for all interrelated permits, so a permit applicant will not face an appeal of some permits to the EHB and federal review of other permits. Natural gas projects should benefit from avoiding multiple attacks on these permits. Questions may continue to arise, though, as to how interrelated such permits must be in order to be grouped together for permit review purposes.

Not all projects will benefit from the EHB’s lack of review, though. The court acknowledged the importance EHB review has in the permitting process. And the EHB, in denying the Delaware Riverkeeper Network’s petition for supersedeas, addressed and rejected TGPC’s pre-emption argument, noting that the EHB "protects important constitutional due process right[s] of appellants" and that forgoing EHB review would "ignore longstanding due process safeguards and allow [the DEP] to act in a manner that is beyond review under state law." (See Delaware Riverkeeper Network v. Commonwealth of Pennsylvania and Tennessee Gas Pipeline, EHB Docket No. 2012-196-M, Dkt. No. 41 (Feb. 1, 2013).)

The EHB’s scope of review is generally de novo, giving it the authority to determine whether a DEP decision is a proper exercise of authority. The EHB has the authority to conduct its own fact-finding and substitute its own discretion for that of the DEP. This means that the EHB can modify DEP actions, including modifying permits. Review by the U.S. Court of Appeals for the Third Circuit, or even a federal district court, on the other hand, will lead to remand to the DEP rather than to amendments of permits. In some cases, this could lead to longer, not shorter, delays.

The decision also raises some difficult procedural issues about the administrative record that a federal court would review. The EHB provides permit applicants and third parties the opportunity — often guaranteed by statute — to make a full record. Consequently, proceedings during the DEP’s permit consideration can be less formal. But a reviewing federal court will only review the record made during the DEP process, and so one might say that the DEP process must be more formal if no EHB review is available at the end.

The court’s decision seemingly denies not only third-party appellants, but also permit applicants, access to EHB review and its "longstanding due process safeguards." Under the court’s decision, permit applicants will be prevented from obtaining potentially beneficial permit amendments through the EHB review process.

The opinion also does not address what would happen in the event of a permit denial by the DEP. A permit applicant should still be able to appeal to the EHB and seek reversal of the DEP’s decision. But neither a third party nor the permit applicant would apparently be able to seek an appeal in the event that the DEP grants a permit.

Will this decision lead to other areas where EHB review will be avoided? In light of this decision, don’t be surprised to see attempts to circumvent EHB review of permits in other areas with similar interrelationships between state permitting and federal environmental law. In the meantime, the Third Circuit may be facing a number of permit appeals soon, without the benefit of a prior EHB review, in light of the continued growth of natural gas pipeline projects. •

Caleb J. Holmes is in the environmental practice of Greenberg Traurig’s Philadelphia office. He served as law clerk to Judge Anthony J. Scirica of the U.S. Court of Appeals for the Third Circuit. He administers www.environmentalandenergylawblog.com.