Posted by: Patricia Salkin | July 31, 2020

Fed. Dist. Court in NY Holds Town’s Zoning Laws Conflicted with the Natural Gas Act and Were Preempted

This post was authored by Matthew Loescher, Esq.

In 2015, National Fuel Gas Supply filed an application with the Federal Energy Regulatory Commission (“FERC”) seeking an Order and Certificate of Public Convenience and Necessity for the construction, operation, and maintenance of a new pipeline and compression facilities from McKean County, Pennsylvania, to Niagara County, New York. Included with this pipeline project, was construction of a compressor station in the Town of Pendleton, New York. FERC issued the Certificate conditioned upon Plaintiffs completing authorized construction within two years of date of the Certificate; compliance with applicable FERC regulations; compliance with environmental conditions; and executing contracts. This case arose from Plaintiffs’ Motion for Partial Summary Judgment, in which Plaintiffs contended that the Natural Gas Act, 15 U.S.C. §§ 717, et seq., and FERC regulations preempted Defendant Town of Pendleton’s ordinance restricting Plaintiffs’ proposed gas pipeline project, construction and operation of a compression station in Pendleton. Plaintiffs’ further sought a declaratory judgment or an injunction against enforcement of the Town’s zoning ordinance against their gas pipeline project.

The Town first alleged that the FERC’s Certificate was “not a final decision until the conditions precedent to the Order are satisfied, and until National Fuel so certifies to FERC”.  While the Certificate contained numerous conditions— including the requirement to obtain a water quality certificate and other pre-construction conditions—these conditions could not be reasonably understood to render the certificate provisional. The court found that these conditions were not precedent to the validity of the certificate itself.  Conversely, the enforcement of the Structures, Dredging, and Fill permit would prohibit or delay the federal project, hence the District Court held that the permit requirement was preempted by the FERC Orders “which has ‘exclusive jurisdiction over the transportation and sale of natural gas in interstate commerce for resale.” Accordingly, the court held that the Town’s zoning laws conflicted with the FERC Certificate and Natural Gas Act and were therefore preempted.

Lastly, the court found that the Natural Gas Act did not have an exhaustion predicate before Plaintiffs could sue to enforce its preemptive effect over Town ordinances. Applying common law exhaustion principles, the court held that Plaintiffs exhausted when they obtained the Certificate. The court also noted that there was no appeal from the FERC’s decision. As such, any exhaustion of the FERC’s decision-making process had been met.

Empire Pipeline, Inc. v Town of Pendleton, 2020 WL 3972315 (WDNY 7/14/2020)

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