Second Circuit: FERC’s And State Agency’s Interpretations Of CWA Are Not Entitled To Chevron Deference

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On March 12, the U.S. Court of Appeals for the Second Circuit issued a decision interpreting Clean Water Act (CWA) Section 401 and the Federal Regulatory Energy Commission’s (FERC) permitting authority, which may have settled some lingering legal issues for the construction of pipelines. The case is New York State Department of Environmental conservation, et al., v. FERC.

The Second Circuit considered two issues:

  1. Whether FERC correctly held that NYSDEC waived its right to act on Millennium Pipeline Company’s (Millennium) application; and
  2. Whether FERC appropriate accepted and reviewed the application as subject to its exclusive jurisdiction under the Natural Gas Act.

The Court of Appeals rejected the arguments of the New York State Department of Environmental Conservation (NYSDEC) that its prolonged review of Millennium’s application for a Section 401 certification was consistent with the CWA. NYSDEC argued that its interpretation of the CWA, allowing NYSDEC to require that a completed application be submitted before the one-year deadline was triggered, was entitled to Chevron deference, but the Court of Appeals disagreed with this argument.

The Court of Appeals stated that

“A state agency’s interpretation of a federal statute does not receive deference unless the federal agency charged with administering the statute has expressly approved the state’s interpretation and implementation.”

This was not the case here — the Environmental Protection Agency was not involved — and accordingly, neither FERC’s nor NYSDEC’s interpretations were entitled to deference. The Court of Appeals proceeded to construe Section 401 on a de novo basis, holding that the plain language of Section 401 outlines a bright-line rule. Section 401 provides that the one-year timeline begins when the request for certification is received — it does not specify that this time limit applies to only “complete” applications, as the NYDEC contended.

In addition, the Court of Appeals noted that FERC has jurisdiction over this pipeline project, which will receive out-of-state gas to supply this otherwise in-state pipeline facility, and FERC properly issued a waiver order permitting Millennium to proceed with construction without a state water quality verification.

Additional Source: Ninth Circuit Discusses “Point Sources” Under The CWA