Nat'l Fuel Gas Supply Corp. v. N.Y. State Dep't of Envtl. Conservation ( 2019 )

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.
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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.
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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, 33
U.S.C. § 1341, 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
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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., 482 F.3d 79, 94 (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.” Id. (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
40 C.F.R. § 121.2(a)(3)); see also 33 U.S.C. § 1341(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, 482 F.3d at 94.1
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Petitioners also assert that the Department impermissibly relied on a “factor[] which Congress
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“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, 658 F.3d 200, 215 (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., 463 U.S. 29, 43 (1983)). Unlike in Islander
East I, where there was record evidence that the denial was “a matter of ‘strategy’ in opposing the
pipeline,” 482 F.3d at 105, 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, 525 F.3d 141, 164 (2d Cir. 2008) (“Islander East
II”).
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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, id., 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. 525 F.3d at 157. 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.
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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.
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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, 352 F.3d 545, 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, 482 F.3d at 88.
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
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that the agency itself has not given.” State Farm, 463 U.S. at 43 (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, 868 F.3d 87, 100 (2d Cir. 2017) (quoting 15 U.S.C.
§ 717(r)(d)(2)). Petitioners are free to present any evidence of waiver to FERC in the first
instance. See Millennium Pipeline Co. v. Seggos, 860 F.3d 696, 700 (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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