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June 29, 2020

NYS Court of Appeals Holds FERC Certificate of Public Convenience Exempts Pipeline Company From Eminent Domain Public Notice, Hearing Requirements Despite Water-Quality Certification Denial

In a 4-2 decision issued on June 25, the NYS Court of Appeals ruled the certificate of public convenience and necessity that National Fuel Gas Supply Corporation obtained from the Federal Energy Regulatory Commission (FERC) to construct its Northern Access 99-mile natural gas pipeline from Pennsylvania to Western New York (Certificate) exempted it from the public notice and hearing provisions of the Eminent Domain Procedure Law under EDPL 206(A) despite the denial of a water-quality certification which was a condition of the Certificate. The case is National Fuel Gas Supply Corporation v. Schueckler.

The landowner had successfully argued before the Appellate Division that the Certificate was ineffective because it was conditioned upon National Fuel complying with various environmental conditions which it failed to do. Specifically, National Fuel had applied for a water-quality certification from the NYS Department of Environmental Conservation (DEC) that the DEC denied.

In reversing the lower court’s decision, the Court of Appeals held the Certificate didn’t condition National Fuel’s eminent domain power on receipt of the water-quality certification. While satisfaction of FERC’s conditions under the Certificate was required to construct and operate the proposed pipeline, the court held the DEC’s denial of the water-quality certification didn’t invalidate the Certificate and the applicability of the EDPL 206(A) exemption.

The court determined National Fuel satisfied the clear statutory language of EDPL 206(A) by going through the federal regulatory process; submitting materials regarding the public benefit, use, and need for the proposed pipeline; and obtaining the Certificate from FERC that considered all of the relevant factors required by the EDPL in terms of the project’s public benefits and environmental impacts. The court noted the DEC’s denial of the water-certification application is still being litigated, but it didn’t need to consider this based on its decision that the denial didn’t invalidate the Certificate.

In short, the Court of Appeals agreed with National Fuel’s argument that the conditions under the Certificate, including with respect to the water-quality certification, didn’t make the Certificate provisional for purposes of eminent domain since they weren’t conditions to the validity of the Certificate itself. The water-quality certification was a condition to commencing construction but not to National Fuel’s right to proceed under eminent domain.

The dissent highlighted the importance of the water-quality certification requirement in light of the pipeline crossing 192 state-regulated streams and that a taking of private property for a project that may never be built is at odds with the EDPL. In light of the majority’s decision, it invited the legislature to consider whether property owners should be protected from such a result.

If you have any questions regarding the content of this alert, please contact Mark McNamara, Real Property Tax & Condemnation Practice Area chair, at mmcnamara@barclaydamon.com or another member of the firm’s Real Property Tax & Condemnation Practice Area.

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