17-1164-cv Nat’l Fuel Gas Supply Corp. v. N.Y. State Dep’t of Envtl. Conservation

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 5th day of February, two thousand nineteen.

PRESENT: ROSEMARY S. POOLER, RICHARD C. WESLEY, PETER W. HALL, Circuit Judges.

---------------------------------------------------------------------- NATIONAL FUEL GAS SUPPLY CORPORATION, EMPIRE PIPELINE, INC.,

Petitioners,

v. No. 17-1164-cv

NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION, BASIL SEGGOS, COMMISSIONER, NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION, JOHN FERGUSON, CHIEF PERMIT ADMINISTRATOR, NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION,

Respondents.

---------------------------------------------------------------------- FOR PETITIONERS: EAMON PAUL JOYCE, Sidley Austin LLP, New York, New York, James R. Wedeking, Tobias Samuel Loss- Eaton, Daniel J. Hay, on the brief, Sidley Austin LLP, Washington, D.C.

FOR RESPONDENTS: MEREDITH G. LEE-CLARK, Assistant Attorney General of Counsel, Barbara D. Underwood, Solicitor General, Victor Gerard Paladino, Frederick A. Brodie, Assistant Solicitors General, Lisa M. Burianek, Deputy Bureau Chief, on the brief, New York State Office of the Attorney General, Albany, New York.

FOR INTERVENOR: MONEEN NASMITH, Earthjustice, New York, New York.

Petition for review from the New York State Department of Environmental Conservation.

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the decision of the New York State Department of Environmental

Conservation is VACATED AND REMANDED.

Petitioners seek to build and operate a natural gas pipeline in northwestern Pennsylvania

and western New York (“Pipeline”). The Federal Energy Regulatory Commission (“FERC”)

approved the Pipeline by issuing a certificate of public convenience and necessity pursuant to

the Natural Gas Act. See 15 U.S.C. § 717f. Under Section 401 of the Clean Water Act,

, Petitioners were also required to obtain state water quality certifications from

Pennsylvania and New York before beginning construction on the project. The

Pennsylvania Department of Environmental Protection granted Petitioners a state water

quality certification on February 11, 2018. The New York State Department of

Environmental Conservation (“Department”) then denied Petitioners a state water quality

certification on April 7, 2017 (“Denial Letter”). This appeal followed.

Our review pursuant to the Natural Gas Act proceeds in two steps. First, we “review de

2 novo whether the state agency complied with the requirements of the relevant federal law.”

Islander E. Pipeline Co. v. Conn. Dep’t of Envtl. Prot.,

(2d Cir. 2006) (“Islander East

I”). Second, if we determine that the state has complied with federal law, we “analyze[] the

state agency’s factual determinations under the more deferential arbitrary-and-capricious

standard of review usually accorded state administrative bodies’ assessments of state law

principles.”

(internal quotation marks omitted).

Petitioners argue that the Department “applied the wrong legal standard by requiring

certainty rather than a ‘reasonable assurance’ of compliance.” Petitioner Br. at 35 (quoting

(a)(3)); see also

(a)(3) – (4). In other words, because the

Denial Letter states that the Department is required “to certify that a project meets State water

quality standards,” Sp. App. at 3, the Department demanded “absolute certainty” that the

project would comply with State water quality standards, rather than a reasonable assurance

that the project would not violate those standards. Petitioner Br. at 35–37. The

Department agrees that the “reasonable assurance” standard is applicable. It argues that the

Denial Letter applied that standard and that Petitioners “failed to demonstrate that the project

would satisfy New York’s water quality standards for turbidity.” Dep’t Br. at 42–43.

Because the parties in fact agree on the correct standard to be applied and given that we vacate

the Department’s decision and remand for further explanation from the Department, we

assume without deciding for purposes of the instant appeal that the Department complied

“with federal law” and applied the “reasonable assurance” standard. Accordingly, we

proceed to step two in the analysis. Islander East I,

.1

1 Petitioners also assert that the Department impermissibly relied on a “factor[] which Congress 3 “Under the arbitrary-and-capricious standard, judicial review of agency action is necessarily

narrow.” Islander East II, 525 F.3d at 150 (citing State Farm, 463 U.S. at 43). The

Department was required to “examine the relevant data and articulate a satisfactory

explanation for its action including a rational connection between the facts found and the

choice made.” State Farm, 463 U.S. at 43 (internal quotation marks omitted); accord Natural

Res. Def. Council v. U.S. Envtl. Protection Agency,

(2d Cir. 2011). To determine

whether the Department’s action was arbitrary and capricious, we consider whether it: “relied

on factors which Congress has not intended it to consider”; “entirely failed to consider” any

important aspect of the problem before it; or “offered an explanation for its decision that runs

counter to the evidence before the agency, or is so implausible that it could not be ascribed to

a difference in view or the product of agency expertise.” Islander East II, 525 F.3d at 150–51

(quoting State Farm, 463 U.S. at 43).

Although this is a close case, the Denial Letter here insufficiently explains any rational

connection between facts found and choices made. We reach this conclusion mindful of the

fact that Article III judges lack the expertise upon which we presume agency determinations

rely. Although an expert on riparian disturbance might read the Denial Letter and infer a

connection between the facts in the record and the Department’s ultimate decision to deny

has not intended it to consider,” namely political considerations. Petitioner Br. at 23 (quoting Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut. Auto. Ins. Co.,

(1983)). Unlike in Islander East I, where there was record evidence that the denial was “a matter of ‘strategy’ in opposing the pipeline,”

, Petitioners’ argument that the Department relied on political pressure is not supported by the record. The record here is not so sparse and the denial not so summary as in Islander East I, and a petitioner “must point to more than continued political opposition for us to find agency bad faith.” Islander E. Pipeline Co. v. McCarthy,

(2d Cir. 2008) (“Islander East II”).

4 the permit, we cannot with a sufficient degree of assurance conclude that was the case.

Specifically, there are no record citations in the Denial Letter and there are no citations to

specific projects or studies the Department may have considered.

Moreover, the Denial Letter further reflects that, as a basis for its denial, the Department

relied on considerations outside of Petitioners’ proposal. See Sp. App. at 6–7. 2 These

considerations include the Department’s discussion of permanent culverts, wet crossings, and

intake pits,

which shows either a misunderstanding of the record or possibly that when it

was considering the Pipeline the Department relied on determinations made with respect to

other pipeline projects. It is clear, moreover, that the Denial Letter mistakenly referenced

Petitioners’ proposed use of permanent culverts and wet-crossings. Compare J. App. at 869

(indicating that Petitioners would not use permanent culverts or wet-crossings)3 with Sp. App.

2 Under Islander East II, a state agency may consider “a worst case scenario,” but in that case “[s]ubstantial evidence support[ed]” the agency’s finding that there was scientific or technological uncertainty that warranted its consideration of a worst case scenario.

. Here, by contrast, the agency appears to have considered a separate application in formulating its decision, or possibly used a boilerplate denial but failed to delete portions that did not relate to the instant application. Sp. App. at 8. This deficiency cannot be cured on appeal by the agency making cursory statements about its own past experiences. 3 As relevant, Petitioners’ proposal states:

National Fuel does not plan or propose to cross any flowing or inundated streams with a wet trenched/open cut method. However, even with the best laid plans, unforeseen and unplanned challenges can occur, rendering all other crossing methods impracticable. If this should happen at any location during the course of construction, National Fuel would communicate and coordinate with [the Department] on any alternative proposed crossing method (not previously proposed/approved), and would not commence the crossing unless and until [the Department grants] the appropriate review and authorization/approval. . . . National Fuel plans to install equipment crossing structures that minimize in-stream disturbance and footprint/streambed occupancy, and as such will avoid the use of culverts covered with stone in streams.

J. App. at 869. 5 at 6–7 (describing “construction in the wet” and Petitioners’ alleged proposed use of

“permanent culverts or temporary bridges”). While the Denial Letter does address Pipeline

features proposed by Petitioners in the same sentence, i.e., that the Pipeline will cross 35

streams using temporary bridges that the Department concluded will have a negative effect on

water quality, or that “construction in dewatered conditions will . . . cause significant damage

or destruction to both riparian and in-stream habitat, in turn causing violations of State water

quality standards,” Sp. App. at 7, from the face of the Denial Letter, we must conclude the

Department relied in part on mistakenly identified project features to reach its final

determination.

Finally, although the Department was not required to adopt FERC’s water quality findings,

see Stewart Park & Reserve Coal., Inc. v. Slater,

, 557–58 (2d Cir. 2003), the

Department failed to address evidence in the record that supported those findings. At oral

argument, Petitioners asserted that (1) FERC made explicit findings as to the permanency of

the water quality effects of the proposed project that the Department failed to consider, and

(2) the Department failed to consider evidence in the record that supports FERC’s findings.

Oral Arg. 3:46; see also Sp. App. at 7 (“More broadly, riparian habitat surrounding streams

within the [Pipeline Right of Way] will be permanently impacted by construction activities

involving excavation and burial of the pipeline . . . .”). The Department should have

addressed such evidence in the record in the Denial Letter. See Islander East I,

.

Because the Department did not sufficiently articulate the basis for its conclusions, on

appeal we cannot evaluate the Department’s conclusions and decide whether they are arbitrary

and capricious. We are not permitted to provide “a reasoned basis for the agency’s action

6 that the agency itself has not given.” State Farm,

(internal quotation marks

omitted). We express no opinion as to whether there is substantial evidence in the record to

support the Department’s denial. Accordingly, we do not remand for the record to be

supplemented, but instead for the limited purpose of giving the Department an opportunity

to explain more clearly —should it choose to do so—the basis for its decision.

Petitioners argue that the Department has already used the time allotted to it to consider

Petitioner’s application. Petitioner Br. at 19. “[A] failure-to-act claim is one over which the

District of Columbia Circuit would have ‘exclusive’ jurisdiction.” Constitution Pipeline Co. v.

N.Y. State Dep’t of Envtl. Conservation,

(2d Cir. 2017) (quoting

(r)(d)(2)). Petitioners are free to present any evidence of waiver to FERC in the first

instance. See Millennium Pipeline Co. v. Seggos,

(D.C. Cir. 2017).

Accordingly, we VACATE the decision of the Department and REMAND this case with

instructions for the Department to more clearly articulate its basis for the denial and how that

basis is connected to information in the existing administrative record.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court

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