Amicus Curiae Brief — Islander East East Pipeline Pipeline Co., LLC v. McCarthy (No. 08-367)

- 08-367

Supreme Court of the Gnited States

ISLANDER EAST PIPELINE COMPANY, L.L.C..,

Petitioner,

v.

GINA MCCARTHY, COMMISSIONER OF THE

STATE OF CONNECTICUT DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

and

STATE OF CONNECTICUT DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

| BRIEF AMICI CURIAE OF THE INTERSTATE

_ NATURAL GAS ASSOCIATION OF AMERICA,

: THE AMERICAN GAS ASSOCIATION,

| THE NATURAL GAS SUPPLY ASSOCIATION,

| THE INDEPENDENT PETROLEUM

ASSOCIATION OF AMERICA, AND

THE NORTHEAST GAS ASSOCIATION |

—_ —_-— —_

—e Te:

KEVIN B. BELFORD

ANDREW SOTO

AMERICAN GAS

ASSOCIATION

400 N. Capitol St., NW

Washington, D.C. 20001

(202) 824-7070

* Counsel of Record

DONALD F.. SANTA

JOAN DRESKIN

TIMM ABENDROTH *

DAN REGAN

INTERSTATE NATURAL GAS

ASSOCIATION OF AMERICA

10 G Street, NE

Suite 700

Washington, DC 20002

(202) 216-5912

Counsel for Amici Curiae

[Additional Counsel Listed On Inside Cover]

WILSON-EPES PRINTING CO.,INC. — (202) 789-0096 - WASHINGTON, D C. 20002

IN THE OFFICE OF THE CLE

RK

R. SKIP HORVATH

PATRICIA JAGTIANI

NATURAL GAS SUPPLY ASSOCIATION

805 15th Street, NW

Suite 510

Washington, D.C. 20005

(202) 326-9300

BARRY RUSSELL

INDEPENDENT PETROLEUM ASSOCIATION

OF AMERICA

1201 15th Street, NW

Suite 300

Washington, D.C. 20005

(202) 857-4722

THOMAS M. KILEY

NORTHEAST GAS ASSOCIATION

75 Second Avenue

Suite 510

Needham, MA 02494

(781) 455-6800

Counsel for Amici Curiae

—_—_. =

ee a

QUESTIONS PRESENTED

In PUD No. 1 of Jefferson County v. Washington

Dep't of Ecology, 511 U. S. 700, 722 (1994), the Court

reserved the question whether a state water quality

certification under section 401 of the Clean Water Act

(CWA), 33 U.S.C. § 1341, can stand if it conflicts with

a licensing decision of the Federal Energy Regulatory

Commission (FERC). The issue in PUD No. 1 was

hypothetical because FERC had not yet acted. This

case presents an actual conflict: FERC licensed

Petitioner’s proposed pipeline under the Natural Gas

Act (NGA), subject to construction restrictions

addressed to impacts on the sea floor and shellfish,

but Respondent Connecticut Department of Environ-

mental Protection (CTDEP) effectively vetoed the

project by denying Petitioner’s application for a clean

water certificate under CWA § 401(a) based on the

same impacts addressed by FERC. A divided panel

of the Second Circuit, exercising jurisdiction under

a 2005 amendment to § 19 of the NGA authorizing

federal courts of appeals to remand state CWA

permitting actions (inter alia) that are “inconsistent

with the Federal law governing such permit and

[that] would prevent the construction” of an inter-

state pipeline, 15 U.S.C. §717r(d)(3), upheld CTDEP’s

decision.

The questions presented are:

1. Whether the court below erred in applying the

“inconsistent with the Federal law” standard under

NGA § 19(d) without addressing the substantive

CWA issue reserved by this Court in PUD No. 1, viz.,

whether a state can veto a FERC-licensed project

through a CWA § 401 determination that conflicts

with the FERC license.

(a)

ii

2. Whether the court below erred in failing to

address the question whether CTDEP’s denial of a

CWA § 401 certificate, based on seafloor and shell

fishing impacts rather than on water quality, is

“inconsistent with Federal law,” within the meaning

of NGA § 19(d) and CWA § 401(a); and

3. Whether a state may withhold water quality

certification under CWA § 401(a) based on impacts

to an industry, or to the seafloor, in the absence of

a showing that a “discharge” from the construction

activity results in an impact on water quality.

TABLE OF CONTENTS

QUESTIONS PRESENTED ........................seeeee

TABLE OF AUTHORITIESG. .................s00-ssssssseees

INTEREST OF AMICI CURIAE ...............00000005

I icaiiatindadisniiianssennesenwaresereversecers

I. The Court Should Grant the Writ to Ad-

dress Important Substantive CWA

Issues Reserved in PUD No. 1 that Are

Presented by the Proper Interpretation

of the “Inconsistent with Federal Law”

Standard in New NGA § 19(q) .................

A. The Court Below Failed to Address

the Question Left Open in PUD No. 1

Concerning a Conflict Between

FERC Licensing and State CWA

ERE SE aa

1. The Clean Water Act......................

2. The Question Reserved in PUD

ae lathe cc aetcaniiubteinitininnice

3. The Conflict Between FERC and

Ie

GF ee I ivttcissesteieciscccovscvess

5. The Court of Appeals’ Misinter-

pretation of NGA § 19(d)................

B. The Court Below Failed to Address

the Important Question Whether a

State Permissibly May Deny CWA

Certification Based on _ Environ-

mental Impacts Unrelated to a

“Discharge” that Will Have an

Impact on Clean Water .......................

(iii)

~“ ore <

co

12

13

14

iv

TABLE OF CONTENTS—Continued

Page

II. The Decision Below Undermines the

Congressionally Chosen Remedy for

Abuse of Federally Delegated CWA

Certification Authority ..........................0+- 16

Ill. The Decision Below Threatens Invest-

ment in New Pipelines that Are Needed

to Meet the Nation’s Demand for

SI cscnssincwnsiieionaientions saeiamelanisaiens 18

CRIP GID esc ieesicnssssisncdesensenanemanpaieliabiain 20

Vv

TABLE OF AUTHORITIES

CASES Page

PUD No. 1 of Jefferson County ov.

Washington Department of Ecology, 511

I a cmecreine (i), passim

S.D Warren Co. v. Maine Bd., 547 U.S. 370

EEE ER A A ae 10

STATUTES

I ceiai 12

ee 11,12

ee 12

a ndccinasvaciecunscosincssnanes passim

I IID. cccncocccecoccesvencsocsecscose (i), 5, 7

EE 8

EL 8

TE A a 8

i sceemouesonoees 8

I ccstsiocanse 9

ET 9

Administrative Procedure Act, 5 U.S.C.

a casmeonee 17

Clean Water Act, 33 U.S.C. § 1251 et seq.... 8

a spiapuctiuie 8

rad cecintacreninbinbtedeuvesones (i), passim

ET SE ea (i), passim

ES 9,10

Energy Policy Act of 2005, Pub. L. No. 109- ,

58, 119 Stat. 594, 689-90 (2005)............... 5

Federal Power Act, 16 U.S.C. § 791a et seq. 10

Natural Gas Act, 15 U.S.C. §§ 717-717w .... 2

a in cic ctarhtienee 12, passim

LEE ree oe Ee (i), 12

vi

TABLE OF AUTHORITIES—Continued

OTHER AUTHORITIES

Energy Information Administration, Dep't

of Energy, Natural Gas Consumption by

End Use (September 30, 2008), available

at <http://tonto.eia.doe.gov/dnav/ng/ng_

cons_sum_decu_nus_a.htm)>.....................

Energy Information Administration, Dep’t

of Energy, Additions to Capacity on the

U.S. Natural Gas Pipeline Network

(July 2008), available at <http://www.

eia.doe.gov/pub/oil_gas/natural_gas/fea

ture_articles/2008/ngpipelinenet/ngpipe

I aiiidicdandetctaitsdatitninicivetistidasseines

Energy Information Administration, Dep’t

of Energy, Natural Gas Year-In-Review

2007 (March 2008), available at <http://

www.eia.doe.gov/pub/oil_gas/natural_gas/

feature_articles/2008/ngyir2007/ngyir20

Regional Energy Reliability and Security:

DOE Authority to Energize the Cross

Sound Cable: Hearing Before’ the

Subcomm. on Energy and Air Quality

of the H. Comm. on Energy and

Commerce, 108th Cong. (2004).................

Page

19

19

18

IN THE

Supreme Court of the United States

No. 08-367

ISLANDER EAST PIPELINE COMPANY, L.L.C.,

Petitioner,

Vv.

GINA MCCARTHY, COMMISSIONER OF THE

STATE OF CONNECTICUT DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

and

STATE OF CONNECTICUT DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

BRIEF AMICI CURIAE OF THE INTERSTATE

NATURAL GAS ASSOCIATION OF AMERICA, |

THE AMERICAN GAS ASSOCIATION,

THE NATURAL GAS SUPPLY ASSOCIATION,

THE INDEPENDENT PETROLEUM

ASSOCIATION OF AMERICA, AND ,

THE NORTHEAST GAS ASSOCIATION

INTEREST OF AMICI CURIAE '

The Interstate Natural Gas Association of America

(INGAA), the American Gas Association (AGA), the

' No counsel for a party authored this brief in whole or in

part, and no person or entity other than INGAA, AGA, NGSA,

or IPAA made a monetary contribution to the preparation or

submission of this brief.

2

Natural Gas Supply Association (NGSA) and the In-

dependent Petroleum Association of America (IPAA)

submit this brief amici curiae in sunport of the

petition pursuant to the Court’s Rule 37. Petitioner

and Respondent consent to the filing.

Amici are trade associations that represent all

major sectors of the domestic natural gas industry,

from producers at the wellhead (NGSA, IPAA),

through interstate pipelines (INGAA) to retail distri-

bution companies (AGA) that deliver gas to consum-

ers at the burnertip. INGAA represents the inter-

state natural gas pipeline industry in North America,

including virtually all of the interstate pipelines op-

erating in the United States, including Petitioner.

INGAA’s members transport over 95 percent of the

nation’s natural gas through a network of over

200,000 miles of pipelines. INGAA pipelines are

subject to regulation by the Federal Energy Regula-

tory Commission (FERC) under the Natural Gas Act

(NGA), 15 U.S.C. §§ 717-717w.

The AGA represents over 200 natural gas local dis-

tribution utilities located in all 50 states that deliver

natural gas to 64 million customers throughout the

United States. AGA members include: (1) publicly

traded energy utilities, municipally owned energy

utilities, and privately held utility companies and (2)

natural gas distributors, pipelines, marketers and

storage facilities. AGA is an advocate for local natu-

ral gas utility companies and provides a broad range

of programs and services for members including the

filing of amici briefs commenting on issues that could

affect its members and/or their customers.

NGSA represents U.S.-based producers and mar-

keters of natural gas on issues that broadly affect the

natural gas industry. NGSA is the voice of suppliers

3

who find, sell, transport and deliver approximately

30 percent of the United States’ natural gas supply.

Established in 1965, NGSA encourages the use of

natural gas within a balanced national energy policy

and promotes the benefits of competitive markets to

ensure reliable and efficient transportation and de-

livery of natural gas and to increase the supply of

natural gas to U.S. consumers.

IPAA represents the companies that drill 90 per-

cent of the nation’s oil and natural gas wells. These

companies produce 82 percent of American natural

gas and 68 percent of American oil.

The Second Circuit’s decision sustains Respondent

CTDEP’s veto of Petitioner's FERC-approved Islander

East natural gas pipeline project, based on CTDEP’s

exercise of delegated federal authority under section

401(a) of the Clean Water Act (CWA). Congress en-

acted the judicial review provision under which the

court acted, NGA § 19(d), 15 U.S.C. § 717r(d), to curb

federal and state agencies’ ability to abuse federally

delegated powers under the CWA and other statutes

by vetoing pipeline projects that FERC, the lead

agency for reviewing interstate pipeline projects, has

found to be in the national public interest. Amici are

concerned that the court below has rendered NGA

§ 19(d) toothless. In deciding whether CTDEP’s deci-

sion was “inconsistent with the Federal law” under

19d), the court failed to address the question of a

conflict between FERC licensing and state CWA

§ 401 authority reserved in PUD No. 1, and ultimately

upheld an interpretation of the key statutory provi-

sions, viz., NGA § 19(d) and CWA § 401(a), that will

permit states to veto FERC-approved pipeline pro-

jects based on environmental impacts unrelated to

the CWA’s focus on “discharges” that affect water

4

quality. Unless corrected, the Congressionally cho-

sen mechanism for checking state agency abuse of

federally delegated CWA certification powers will be

largely a dead letter.

The issues raised in the petition concerning the

proper interpretation of NGA § 19(d) and CWA

§ 401(a) are important to the natural gas industry

because they have a direct impact on the ability to

construct, as well as economic viability of construct-

ing needed new interstate pipelines on which the Na-

tion’s economic growth and safety depend. In view of

the Second Circuit’s decision, pipeline investors will

be wary of risking the substantial time and money

necessary to secure FERC approval of a proposed

project — which already includes substantial scrutiny

of the environmental impacts — if, at the end of that

federal process, one state can veto the project by de-

nying CWA certification. More importantly, one

state’s veto power can, as it has done in this case, de-

prive another state’s natural gas consumers of a use-

ful and valuable source of competitive natural gas

transportation. The decision below may well em-

bolden states to assert parochial interests at the ex-

pense of the national interest in obtaining adequate

supplies of natural gas.

INGAA’s members, who are in the business of con-

structing new pipelines, have a direct interest insofar

as they must take the added risk of a state veto into

consideration in planning and proposing new pro-

jects. AGA and its members have an interest in en-

suring that adequate new pipeline capacity is built to

meet the health, safety, and economic needs of their

customers. And NGSA and IPAA have a corre-

sponding interest in ensuring that adequate new

5

pipeline capacity is built to get their natural gas to

market.

INTRODUCTION

In PUD No. 1, this Court reserved the question

whether a state water quality certification under

CWA § 401 can stand if it conflicts with a licensing

decision of the FERC. 511 U.S. at 722. The issue

was hypothetical there because FERC had not acted,

and the Court has not had another occasion to ad-

dress the question.

In 2005, Congress enacted legislation that ad-

dresset! the conflict identified in PUD No. 1 in the

context of FERC licensing of interstate pipelines.

Section 313(b) of the Energy Policy Act of 2005

(EPACT? 119 Stat. 594, conferred original jurisdic-

tion on the United States Courts of Appeals to review

(inter alia) such federal or state agency CWA

decisions. If a court of appeals finds that “such order

or action is inconsistent with the Federal law govern-

ing such permit and would prevent construction . . .

of the facility . . . , the Court shall remand the order

to the agency to take appropriate action consistent

with the order of the Court.” 15 U.S.C. § 717r(d\(3).

Congress did not, however, give further guidance on

how the critical phrase “inconsistent with the Federal

law” is to be interpreted.

The court below is the first to address the new

statute. In interpreting the critical phrase “inconsis-

tent with the Federal law governing such permit,”

the court concluded that it need only determine

whether “CTDEP complied with the procedural dic-

tates of the Clean Water Act in applying state water

quality standards to Islander East’s permit applica-

tion[,)” and whether its decisionmaking passed mus-

6

ter under the deferential “arbitrary and capricious”

standard of the Administrative Procedure Act (APA).

Pet. App. 19a. After remanding the CTDEP’s first

denial as “arbitrary and capricious” (Pet. App. 175a),

with a strong suggestion of predisposition and lack of

good faith on the part of the CTDEP (218a-220a), a

divided panel of the Second Circuit found that

CTDEP’s second denial passed muster under the APA

standards.

In its decision, the court never addressed the diffi-

cult issue reserved in PUD No. 1 as to a conflict be-

tween FERC licensing and a state’s veto under CWA

§ 401. As Petitioner points out, this case presents an

actual conflict. Pet. 4. Moreover, the court did not

confront other substantive grounds for the CTDEP’s

decision to deny CWA certification to the project. As

Petitioner argues, CTDEP relied principally on the

impact that certain construction techniques would

have on the seafloor and the shellfishing industry.

But the court never addressed the question whether

CTDEP may withhold water quality certification un-

der CWA § 401(a) based on impacts to an industry, or

to the seafloor, in the absence of a showing that a

“discharge” from the construction activity results in

an impact on water quality. The court erred in failing

to address these substantive CWA issues in deciding

whether CTDEP’s denial was “inconsistent with the

Federal law governing such permit.”

Amici file this brief to emphasize the critical im-

portance of the decision below to the natural gas in-

dustry. Congress designed new NGA § 19(d) to cir-

cumscribe abuse of federally delegated CWA author-

ity by (inter alia) state agencies, and thereby to re-

duce the regulatory risk associated with the process

of obtaining the necessary approvals to construct new

7

pipelines. The decision below undermines that goal

by sanctioning improper grounds fer a state to deny

CWA certification, and by misreading the “inconsis-

tent with the Federal law” provision in NGA § 19(d)(3)

to give the CTDEP more deference than Congress

intended.

It is important that this Court appreciate the grave

consequences of this decision for building new natu-

ral gas pipeline capacity. The States’ delegated per-

mitting authority under the CWA and other Federal

statutes has an impact on virtually every pipeline

construction project since almost all of them involve

navigable waters. The additional risk of a state veto

at the end of the application process will thus add to

the cost of (if not outright prevent in some cases)

investment in interstate pipeline construction.

Because of the important questions concerning con-

flicts between FERC’s NGA jurisdiction over new in-

terstate pipeline construction, and the federal au-

thority delegated to states to certificate such projects

that involve “discharges” into navigable waters, the

Court may also wish to ask the Solicitor General for

the views of the United States.

REASONS FOR GRANTING THE WRIT

I. The Court Should Grant the Writ to Address

Important Substantive CWA Issues Reserved

in PUD No. I that Are Presented by the

Proper Interpretation of the “Inconsistent

with Federal Law” Standard in New NGA

§ 19(d).

In upholding CTDEP’s denial of water quality cer-

tification for the Islander East project pursuant to

CWA § 401(a), 33 U.S.C. § 1341(a), the court below

performed a perfunctory analysis of CTDEP’s compli-

8

ance with the substantive requirements of that

Act. A more searching inquiry would have shown

CTDEP’s decision to be “inconsistent with the

Federal law” governing Connecticut's CWA permit,

within the meaning of new NGA § 19(d).

A. The Court Below Failed to Address the

Question Left Open in PUD No. 1 Con-

cerning a Conflict Between FERC Li-

censing and State CWA Certification.

1. The Clean Water Act

Among other things, the CWA is designed to “re-

store and maintain the chemical, physical, and bio-

logical integrity of the Nation’s waters.” 33 U.S.C.

§ 1251(a). See generally PUD No. 1, supra, 511 US.

at 704-05. The Act seeks to attain “water quality

which provides for the protection and propagation of

fish, shellfish, and wildlife.” 33 U.S.C. § 1251(a)(2).

The CWA establishes distinct roles for the Federal

and State Governments. The Environmental Protec-

tion Agency (EPA) is required, among other things, to

establish effluent limitations on point sources of

discharges into navigable waters. See §§ 1311, 1314.

CWA § 303 requires each State, subject to EPA

approval, to institute comprehensive water quality

standards establishing water quality goals for all

intrastate waters. Jd. at § 1313. A state water

quality standard “shall consist of the designated uses

of the navigable waters involved and the water

quality criteria for such waters based upon such

uses.” Id. at § 1313(c)2A). A 1987 amendment to

§ 303 requires an “antidegradation policy” providing

that state standards be sufficient to maintain exist-

ing beneficial uses of navigable waters, preventing

their further degradation. PUD No. 1, 500 U.S. at

705.

9

Under CWA § 401(a), a party seeking to construct

an interstate pipeline “which may result in any dis-

charge into the navigable waters” must provide

FERC with certification “from the State in which the

discharge originates or will originate” that “any such

discharge” will comply with that state’s water quality

standards, including those adopted under CWA § 303.

33 U.S.C.§ 1341(a). Under 401(d), 33 U.S.C. § 1341(d),

a state may impose conditions on the certification of a

project, including “any effluent limitations and other

limitations . . . necessary to assure that any appli-

cant” will comply with the CWA and state law

requirements.” See generally PUD No. 1, 511 U.S. at

711-713.

2. The Question Reserved in PUD No. 1

In PUD No. 1, the Court recognized a distinction

between an outright denial of a CWA certificate un-

der § 401(a) and the grant of a conditioned certificate

under § 401(d). PUD No. 1 involved a minimum flow

condition imposed on a certificate granted by the

state under § 401(d). While the Court there rejected

the argument that a state can only impose water

quality limitations that are specifically tied to a

“discharge,” the Court’s “discharge” holding was con-

fined to § 401(d), which “expands the State’s author-

ity to impose conditions on the certification of a

project.” 511 U.S at 711. The Court observed that

the text of § 401(d) “refers to the compliance of the

applicant, not the dischargel,]” and therefore allows

“the State to impose ‘other limitations’ on the project”

to assure compliance with the CWA and state law.

Id. In other words:

Section 401(a)(1) identifies the category of activi-

ties subject to certification — namely those with

discharges. And § 401(d) is most reasonably read

10

as authorizing additional conditions and limita-

tions on the activity as a whole once the thresh-

old condition, the existence of a discharge is

satisfied.

Id. at 711-12. Thus, the Court’s decision was based

on the phrase “other limitations” in § 401(d).* The

Court observed, however, that “l[iJf § 401 consisted

solely of subsection (a), which refers to a state certifi-

cation that a ‘discharge’ will comply with certain

provisions of the Act, petitioners’ assessment of the

scope of the State’s certification authority would have

considerable force.” Id. at 711.

In PUD No. 1, the Court reserved the question of

conflict between a FERC licensing action and a state

CWA § 401 certification. The petitioners argued, in-

ter alia, that the Court should limit the state’s au-

thority to impose water quality conditions on a hy-

droelectric facility because FERC has comprehensive

authority to license such facilities under the Federal

Power Act (FPA), 16 U.S.C. § 791a et seq. The Court

found no such conflict in PUD No. 1, noting that

FERC had not yet acted on the license, and that

FERC might in any event agree with the state

agency. 511 U.S. at 722. The Court was “unwilling

to read implied limitations into § 401” because, inter

* In a later case, the Court, quoting from PUD No. 1, 511 U.S.

at 713, stated: “As we have explained before, ‘state water

quality standards adopted pursuant to [CWA] § 303 are among

the ‘other limitations’ with which a State may ensure

compliance through the § 401 certification process.” S.D Warren

Co. v. Maine Bd., 547 U.S. 370, 374 n.1 (2006). Given the

Court’s focus on the distinction between the scope of subsections

401(a) and (d) in PUD No. 1, it seems clear that the reference in

SD Warren was to § 401(d) rather than 401(a).

11

alia, “any conflict with FERC’s authority under the

FPA is hypothetical[.]” Jd. at 723.

3. The Conflict Between FERC and the

CTDEP

Petitioner argues (Pet. 4) that granting the writ in

this case will give this Court an opportunity to ad-

dress the question reserved in PUD No. 1 because the

case presents a clear conflict between a FERC license

and a state’s authority to veto that license under

CWA § 401. Amici agree. Indeed, as Petitioners ex-

plain (Pet. 23-26), before the CTDEP denied CWA

certification, Connecticut litigated in full the envi-

ronmental issues of concern to it before FERC and

lost: FERC concluded that mitigation measures

specified in its Final Environmental Impact State-

ment “would effectively reduce and minimize impacts

on commercial fishing activities to an acceptable

level” (Pet. App. 409a-410a; see also 435a-438a), and

acknowledged long-term impacts of anchor and sea-

bed depressions and took them into consideration

when it determined that “the overall project will have

limited adverse environmental impacts.” (334a-336a).

Connecticut voluntarily dismissed its petition for

review of FERC’s decision by the D.C. Circuit.

FERC’s jurisdiction over the licensing of interstate

pipelines under the NGA is directly analogous to its

jurisdiction over hydroelectric licenses under the

FPA. Under the NGA, anyone seeking to build new

interstate natural gas pipeline facilities must secure

“a certificate of public convenience and necessity”

from FERC pursuant to NGA $3 7, 15 USC.

§ 717f{cX 1A). While other federal statutes apply to

various aspects of pipeline construction, Congress

designated FERC “as the lead agency for the pur-

poses of coordinating all applicable Federal authori-

12

zations and for the purposes of complying with the

National Environmental Policy Act of 1969,” 15

U.S.C. § 717n(b). FERC’s NEPA review typically in-

cludes (as it did in this case) a comprehensive analy-

sis of the environmental impacts all along the pro-

posed route of a new pipeline, including the impacts

on Long Island Sound and the commercial shell fish-

ing industry that are at the center of this contro-

versy. See Pet. App. 332a-337; 406a-410a. FERC’s

final certificate approving the project was conditioned

on Islander East following procedures to avoid or

minimize adverse impacts. See Pet. App. 435a-438a.

4. New NGA § 19(d)

Congress enacted new NGA § 19(d) in 2005 to ad-

dress just the sort of conflict that this Court identi-

fied in PUD No. 1. The Congress conferred “original

and exclusive” jurisdiction on the courts of appeals

for the circuits in which the pipeline project is pro-

posed to review state and federal permitting in

§ 19(d)(1). Under § (d\(3):

If the Court finds that such order or action is in-

consistent with the Federal law governing such

permit and would prevent the construction,

expansion, or operation of the facility subject

to section 3 or section 7 [15 U.S.C. § 717b or

§ 717f], the Court shall remand the proceeding to

the agency to take appropriate action consistent

with the order of the Court.

The legislative history indicates that Congress en-

acted NGA § 19(d) “because applicants, like Islander

East, were encountering difficulty proceeding with

natural gas projects that depended on obtaining state

agency permits.” Pet. App. 179a (citing Regional En-

ergy Reliability and Security: DOE Authority to En-

13

ergize the Cross Sound Cable: Hearing Before the

Subcomm. on Energy and Air Quality of the H.

Comm. on Energy and Commerce, 108th Cong. 8

(2004) (Statement of Rep. Barton)). While the legisla-

tive history is sparse, the structure and text of new

§ 19(d) make it clear the legislation was designed to

put a federal check on the delegated state (and fed-

eral) decision making that would “prevent the con-

struction” of natural gas pipelines or unreasonably

delay consideration of a permit.

Congress imposed on the courts of appeals the du-

ties to construe the phrase “inconsistent with Federal

law governing such permit.” The Second Circuit

should have decided the question posed in PUD

No. 1, viz., whether a FERC licensing approval is

trumped by a state CWA § 401 certificate denial. It

failed to do so.

5. The Court of Appeals’ Misinterpreta-

tion of NGA § 19(d)

In this case, it seems clear that “the Federal law

governing such permit” is the CWA as applied in

light of other federal law. The court below, however,

reviewed the CTDEP’s compliance with the CWA per-

functorily. Under the standard articulated by the

court, the court employs de novo review “to determine

whether the [agency] complied with the requirements

of relevant federal law,” and “[i]f no illegality is un-

covered during such a review,” the court examines

the challenged findings and conclusions “under the

more deferential arbitrary-and-capricious standard of

review usually accorded state administrative bodies’

assessments of state law principles.” Pet. App. 18a-

19a (internal quotation marks and citation omitted).

Here the court “easily” concluded (Pet. App. 19a) that

CTDEP complied with the CWA, and then proceeded

14

to apply the APA’s deferential arbitrary and capri-

cious standard to CTDEP’s conclusion that the Is-

lander East project would violate Connecticut’s water

quality standards.

The court’s first step should have been to address

the question reserved in PUD No. 1: whether a state

can trump a FERC-approved project based on a con-

flicting exercise of its authority under CWA § 401.

The court below stumbled, however, at that first step,

which is indispensable to a meaningful application of

the standard of review for state permits specified

in new NGA § 19%(b). This Court should grant the

writ to guide the courts of appeals in addressing the

conflict between FERC’s lead role in certificating new

interstate pipeline projects and the States’ delegated

authority under CWA § 401.

B. The Court Below Failed to Address the

Important Question Whether a State

Permissibly May Deny CWA Certifica-

tion Based on Environmental Impacts

Unrelated to a “Discharge” that Will

Have an Impact on Clean Water.

Petitioner correctly argues that CWA § 401(a),

properly interpreted, does not authorize a state

agency to block interstate pipeline construction on

any basis other than its impact on water or water

quality under § 401(a). Pet. App. 17-23. In addition,

amici wish to emphasize several additional points.

First, the only grounds on which the majority be-

low upheld CTDEP’s certificate denial were unrelated

to a discharge affecting water quality. In its decision,

the CTDEP emphasized the “exceptionally high

quality water quality and habitat conditions” needed

for the pertinent shellfishing (near the Thimble Is-

15

lands), and ultimately relied principally on impacts

to the seafloor from anchor strikes and sweeps (i.e.,

impressions or “dents” in the seafloor that would be

left by anchors as a pipe-laying barge moves across

the Sound), and the use of “engineered backfill” (i.e.,

non-native material that would replace native mate-

rial dredged to dig the pipeline trench). See Pet. App.

62a-63a. The CTDEP cited two additional reasons

for denying Islander East a water quality certifica-

tion: (a) dredging and plowing would cause sedimen-

tation that could adversely affect shell fish habitat

and (b) releases of drilling fluid would destroy at

least 3.55 acres of shellfish habitat. Jd. at 63a-64a.

Ultimately, the court found that CTDEP’s certifi-

cate denial survived its deferential “arbitrary and ca-

pricious” review because there was sufficient record

evidence based on the anchor impacts and backfill

concerns to support CTDEP’s finding that there

would be a significant loss of shellfish habitat to the

detriment of the industry. See Pet. App. 21a-38a.

Importantly, the court, like the CTDEP, did not iden-

tify any “discharge” in connection with these impacts,

or tie them to “water quality” per se. As to the

dredging and plowing and releases of drilling fluid

that would have an adverse impact on shellfish (Pet.

App. 39a-45a), the court below found that evidentiary

record deficiencies would call for a remand to the

CTDEP if it were not for the anchor and backfill im-

pacts on shellfish habitat that the court found were

supported by the record. See Pet. App. 38a-39a. In

other words, the court below sustained CTDEP’s CWA

permit denial based on the findings that were not

connected to any discharge that affects water quality—

findings that were irrelevant to the state CWA

§ 401(a) certification.

16

Second, the court’s failure to identify a “discharge”

raises another issue that should be examined under

NGA § 19(d). In both of its decisions addressing the

Islander East project, CTDEP denied the certificate

outright under § 401(a). It did not specifically ad-

dress environmental conditions that FERC imposed

on the federal certificate. Nor did it choose to exer-

cise its CWA authority to impose conditions on the

project, and thus invoke its right to impose “other

limitations” as provided in § 401(d). The important

point is that the permissible scope of state action un-

der § 401(d) is broader than under § 401(a) because

401(a) is limited to “discharges,” whereas 401(d) al-

lows grant of a certificate conditioned on “other limi-

tations.” See PUD No. 1, 511 U.S. at 711. The court

of appeals here has sanctioned an interpretation of

CWA § 401(a) that allows state regulation of matters

that are far removed from water quality. The Court

should grant the writ to ensure that CWA § 401(a)

actions are properly tethered to the focus of the Act

on discharges that affect water quality.

II. The Decision Below Undermines the Con-

gressionally Chosen Remedy for Abuse of

Federally Delegated CWA _ Certification

Authority

NGA § 19(d) is the Congressionally chosen remedy

for addressing conflicts between FERC’s central roie

in licensing interstate and pipeline construction un-

der the NGA and NEPA, on the one hand, and state

and federal agencies exercising federally delegated

authority under the CWA and other statutes. See

discussion at 12-13. In addition to the court’s

perfunctory review of CTDEP’s compliance with the

CWA discussed in Part I, amici are concerned that

the court’s deferential application of the arbitrary

17

and capricious standard leaves ample room for abuse

of delegated authority by state agencies.

After reviewing CTDEP’s procedural compliance

with the CWA (finding that it “easily” passed muster,

Pet. App. 19a), the court examined the challenged

CTDEP findings and conclusions “under the more

deferential arbitrary-and-capricious standard of re-

view usually. accorded state administrative bodies’

assessments of state law principles.” Pet. App. 18a-

19a. The court’s application of the APA could not

overcome its misapplication of the CWA. As it now

stands, the CTDEP’s veto of the Islander East project

will prevail on a record where the majority and dis-

sent disagreed on an extremely close question

whether conceded errors below were harmless, i.e.,

whether the CTDEP would again veto the project in a

second remand on a record cleansed of error.”

We do not invite this Court to review factual dis-

putes over the record before the CTDEP. The Court

should grant the writ, however, to consider how the

“inconsistent with Federal law” standard under new

NGA § 19 (d) is to be applied to review of state water

quality certification in pipeline construction cases.

* In addition, it bears emphasis that a major concern of the

court below was the CTDEP's good faith in its consideration of

Islander East’s proposal. In its first remand decision, the court

strongly suggested that the denial was “foreordained,” based on

the brevity of the decision, and failure to adequately explain or

support the denial, failure to acknowledge contrary evidence,

and neglect of important aspects of the problem. See Pet. App.

175a; 220a. The question of CTDEP's “good faith,” vel non, was

still a close one following the second denial. Compare Pet. App.

45a-46a (majority) with id. at 59a-60a (dissent).

18

III. The Decision Below Threatens Investment

in New Pipelines That Are Needed to Meet

the Nation’s Demand for Natural Gas.

The decision below, unless corrected, will have a

chilling effect on the construction of additional natu-

ral gas pipeline infrastructure across the country

that is necessary to sustain the economy and safety of

residential consumers. As amici demonstrate below,

the pace of new pipeline construction has quickened

in response to the Nation’s energy needs. That con-

struction has rested on the assumption that the

regulatory risk of these investments is constrained by

law within reasonable bounds. The Second Circuit’s

decision has shattered that assumption by conferring

on state environmental agencies sweeping power to

veto pipeline projects. The protection of new NGA

§ 19(d) has been set at naught.

Petitioner's experience illustrates the problem

poignantly: after obtaining New York’s and FERC’s

go ahead, subject to environmental conditions that

addressed shellfishing impacts of concern to Con-

necticut, the CTDEP vetoed the project. Moreover,

the CTDEP’s veto came after extensive litigation be-

fore FERC over the very same substantive environ-

mental issues concerning the impacts of pipeline con-

struction on shellfishing in Long Island Sound. See

Pet. at 23-26 (discussing Connecticut’s participation

in FERC’s NEPA proceeding prior to its own CWA

review). After seven years, Islander East’s substan-

tial costs of pursuing the various federal and state

permits may well be sunk.

Demand for natural gas is increasing, particularly

in the power generation sector. See, e.g., Energy

Information Administration (EIA), Dep’t of Energy,

Natural Gas Year-In-Review 2007, at 1 (March 2008),

19

available at <http:/Awww.eia.doe.gov/pub/oil_gas/nat

ural_gas/feature_articles/2008/ngyir2007/gyir2007.pdf>;

EIA, “Natural Gas Consumption by End Use

(September 30, 2008), available at <http://tonto.eia.

doe.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm)>. The

EIA reports that U.S. natural gas pipeline construc-

tion activity has accelerated substantially in response

to this growing demand, as well as to increasing

production from new and shifting sources of supply

such as shale and liquefied natural gas import

terminals. See EIA, Additions to Capacity on

the U.S. Natural Gas Pipeline Network: 2007 (July

2008), available at <http://www.eia.doe.gov/pub/oil_gas/

natural_gas/Feature_articles/2008/ngpipelinenet/ngpi

pelinenet.pdf>. Capacity additions to the grid totaled

almost 14.9 billion cubic feet of daily deliverabilty for

the 50 projects completed in 2007 — the largest in any

year in EIA’s 10-year database of pipeline con-

struction activity. Jd. at 1. Moreover, substantial

additional capacity additions have been proposed in

the next several years. EIA reports about 200

natural gas pipeline projects proposed for develop-

ment between 2008 and 2010, accounting for over

10,100 miles of potential new natural gas pipeline.

Id. at 14.

With NGA § 19(d) as the sole remedy for a natural

gas project sponsor whose FERC-approved project

has been “vetoed” on parochial and arbitrary

grounds, the Court should consider the impact on fu-

ture investment decisions of letting this decision

stand. Other state and federal agencies may well ex-

ploit the Second Circuit’s lax approach to review un-

der NGA § 19(d). The threat of a veto at the end of

the long and costly process necessary to obtain fed-

eral approval may discourage investment in the con-

struction of critically needed gas transmission facili-

20

ties whenever those facilities involve construction in

the waters of more than one state. Nor is the effect

limited to coastal water construction projects; virtu-

ally every interstate pipeline crosses navigable water

subject to State CWA § 401 certification. In short, un-

der the Second Circuit’s approach, the States’ dele-

gated permitting authority under the CWA and other

federal statutes threatens virtually every pipeline

construction project.

CONCLUSION

The petition for a writ of certiorari should be granted.

KEVIN B. BELFORD

ANDREW SOTO

AMERICAN GAS

ASSOCIATION

400 N. Capitol St., NW

Washington, D.C. 20001

(202) 824-7070

R. SKIP HORVATH

PATRICIA JAGTIANI

NATURAL GAS SUPPLY

ASSOCIATION

805 15th Street, NW

Suite 510

Washington, D.C. 20005

(202) 326-9300

THOMAS M. KILEY

NORTHEAST GAS

ASSOCIATION

75 Second Avenue

Suite 510

Needham, MA 02494

(781) 455-6800

* Counsel! of Record

Respectfully submitted,

DONALD F. SANTA

JOAN DRESKIN

TIMM ABENDROTH *

DAN REGAN

INTERSTATE NATURAL GAS

ASSOCIATION OF AMERICA

10 G Street, NE

Suite 700

Washington, DC 20002

(202) 2iG-5912

BARRY RUSSELL

INDEPENDENT PETROLEUM

ASSOCIATION OF AMERICA

1201 15th Street, NW,

Suite 300

Washington, D.C. 20005

(202) 857-4722

Counsel for Amici Curiae