Is FERC acting lawfully or exceeding its administrative authority?

I know I'm a wonk. That's the only way to explain why I find these things so intriguing and downright exciting.

But there are some interesting legal issues to explore on the Broadwater front. (See the article we've published today about FERC's denial of the rehearing requests filed by the NY, Conn., Suffolk County, and four towns, reprinted below.)

The jurisdictional issue is key. Administrative agencies, like FERC, cannot promulgate regulations or policies inconsistent with the enabling legislation that confers regulatory jurisdiction upon the agencies. That's a basic principle of administrative law.

But is that, in fact, what FERC is doing by issuing "conditional" licenses prior to the states' coastal consistence certifications, as the attorney for Riverhead and Southold argues? (The states of Washington and Delaware make this claim, too, in their lawsuits against FERC pending in the DC Circuit Court of Appeals.)

Here's what the statute, Section 307 of the Coastal Zone Management Act [15 USC 1456(c)(3)(A)], says:

No license or permit shall be granted by the Federal agency until the state or its designated agency has concurred with the applicant's certification or until, by the state's failure to act, the concurrence is conclusively presumed, unless the Secretary, on his own initiative or upon appeal by the applicant, finds, after providing a reasonable opportunity for detailed comments from the Federal agency involved and from the state, that the activity is consistent with the objectives of this chapter or is otherwise necessary in the interest of national security.

So, does this prohibition "No license or permit shall be granted by the Federal agency until the state or its designated agency has concurred with the applicant's [consistency] certification..." mean FERC cannot legally issue licenses conditioned on the state's concurrence with the applicant's consistency certification?

That's the question in a nutshell.

There's a similar "condition precedent" in the Clean Water Act (Section 401).

By issuing the conditional licenses in advance of the coastal consistency and clean water act certifications by states, is FERC running amok?

These are interesting legal questions with far-reaching implications. Do you think New York and Connecticut will bring their own federal suits on the same grounds? I bet they will.

From The Suffolk TImes, Sept. 11, 2008:

FERC refuses to reconsider Broadwater permit
Towns will challenge FERC in federal court

By Denise Civiletti
Federal regulators last Thursday refused multiple requests by state, county and town officials to reconsider their March 20 approvals of Broadwater Energy’s floating liquefied natural gas terminal and subsea pipeline in Long Island Sound.

Following New York state’s April 10 coastal consistency ruling, New York and Connecticut, Suffolk County and the towns of Riverhead, Southold, Brookhaven, East Hampton and Huntington asked the Federal Energy Regulatory Commission to conduct a new hearing on Broadwater’s applications for permits to construct and operate an LNG storage and regasification terminal in the middle of the Sound and the 22-mile subsea pipeline it would use to supply an existing natural gas transmission network with 1 billion cubic feet of natural gas daily.

But in a 97-page decision defending the findings of its environmental impact study and its original permit approvals, FERC unequivocally rejected the rehearing requests, setting the stage for a federal court battle between local and state governments on one hand and federal energy regulators on the other. At issue will be FERC’s authority to issue permits prior to coastal consistency certification by the host state as required by federal law, according to the attorney representing Riverhead and Southold.

“It’s a violation of the [federal] Clean Water Act and Coastal Zone Management Act for FERC to license the project prior to hearing from the state regarding CZMA and the Clean Water Act. Those must be decided by the state first,” said Peter Bergen, the attorney representing the towns of Riverhead and Southold.

FERC issued Broadwater’s permits in advance of New York’s issuing its coastal zone consistency certification, and that’s illegal, Mr. Bergen maintains. “It violates the plain language of the statutes,” he said. Mr. Bergen said section 307 of the Coastal Zone Management Act and section 401 of the Clean Water Act, both federal statutes, plainly require the host state to approve the Broadwater plan before FERC may issue its permits.

Instead, FERC has been issuing permits ahead of state coastal consistency and Clean Water Act certifications, according to Mr. Bergen and attorneys for New York and other states involved in litigation with FERC.
“We raised that issue in our rehearing request and FERC just blew us off,” Mr. Bergen said. “That’s one of the issues we’re going to take to court.”

At least two other states, Washington and Delaware, are already challenging FERC’s practice of issuing conditional permits prior to state coastal consistency and Clean Water Act certifications. Their actions are now pending before the U.S. Court of Appeals in Washington, D.C.

The issue, according to a brief filed by Washington state in its lawsuit against FERC, is “whether the Federal Energy Regulatory Commission can, through policy and practice, rewrite the terms of federal statutes...” Washington state says the answer is clearly no.

The federal law was specifically crafted to allow states that are hosts to these projects and must live with their impacts a “protected” period of time to evaluate them, said Joan Marchioro, an attorney in Washington state’s attorney general’s office. FERC’s policy of issuing “conditional” licenses turns the statute on its head, she said, and “once FERC says to an applicant ‘you’re good to go,’ it puts all the pressure on the state.”

The New York Department of State would only say it is reviewing its options at this time, and the attorney representing Suffolk County did not return a phone call seeking comment. But Mr. Bergen said he recommended to Riverhead and Southold that the towns take this challenge to the federal court and he believes the other parties would follow suit.
Broadwater senior vice president John Hritcko said he is pleased with FERC’s decision denying a rehearing.

“The commission went through it issue by issue and they did a good job reviewing each one of the points made in the rehearing requests,” Mr. Hritcko said in a telephone interview from his office in Houston, Tex., headquarters of Shell Oil, joint venture partner in Broadwater Energy with TransCanada Pipelines.

Broadwater, meanwhile, has appealed the N.Y. coastal consistency ruling to the U.S. secretary of commerce, who has the authority to override the state’s consistency ruling. That appeal is pending, with a ruling by the commerce secretary expected in early 2009, according to Ted Beuttler, a staff attorney in the commerce department’s office of general counsel for ocean services.
Copyright 2008 Times/Review Newspapers Corp.