The regulation comes as the Trump administration and pipeline companies have accused New York and other states of improperly using their Clean Water Act authorities to delay or block infrastructure projects needed to get natural gas to demand centers.
Analysts with Height Securities said June 2 they viewed the rule as "largely symbolic and an effort to demonstrate the Trump administration's commitment to the energy sector and infrastructure development."
BROAD STATE AUTHORITY
The rule's tighter timelines will likely speed up the CWA Section 401 application process, but the efforts to shape the certification criteria states use are "largely tenuous," Height analysts said, noting states have broad authority under the CWA to regulate waterways within their borders, including addressing sedimentation.
Under the 289-page regulation released June 1, state or tribal authorities would have to take action on a certification request within a year of receiving an application. The scope of their action would be limited to ensuring discharges from a point source comply with water-quality requirements.
Height analysts suggested New York's recent rejection of the Northeast Supply Enhancement pipeline project already cited water quality impacts, and fell within the one-year time frame, and thus would likely have complied with EPA's new rule.
CONTROVERSIAL PIECE ABANDONED
ClearView Energy Partners said EPA's final version of the rule backed off the biggest change: a provision allowing a federal permitting agency to determine whether a state's conditions are within the scope of the CWA. The proposal would have let permitting agencies overrule state objections and then allowed the projects to move ahead while state regulators would have had to petition courts to reverse those findings.
The new version lets federal authorities assess whether the state or tribes met procedural requirements rather than judging the substance of the denial, ClearView noted.
Jim Wedeking, counsel at Sidley, called the regulation a "very incremental, step-by-step" approach, that mostly supports prior decisions by the Federal Energy Regulatory Commission and courts on when state reviews are waived due to delay.
The regulation codifies the US Court of Appeals for the District of Columbia Circuit Hoopa Valley decision, related to the timing of CWA reviews, and it may lower the prospects of a circuit court split, he said.
DENIALS MAY CONTINUE
Gary Kruse of Arbo (fka LawIQ) said restricting the reviews to one year and to water-quality issues may not be a huge help for gas pipeline projects and may end up directing states on how to go about killing a project. States may not be as quite as cavalier as they have been in the past, and will have to meet a timeline, and but may, in the end, reject a project in a more defensible way that will be upheld in court, he said. Courts have already been hemming in the states, and even without the rule, courts are unlikely to uphold a denial on a purely on a nonwater quality basis, he said.
Given the length of the regulation, some stakeholders including environmental groups had yet to analyze the details. Legal challenges are expected from a wide range of groups and other parties.
"[W]e're still a long way from knowing what effect the final rule will have on pipeline projects, assuming any portion of it survives the legal challenges," said one environmentalist lawyer.
The final rule takes effect 60 days after publication in the Federal Register.
Industry groups welcoming the rule focused on the added clarity it would provide, or its potential to restore balance they contend was disrupted by states viewing Section 401 as a means to stop fossil fuel infrastructure.
ClearView said key aspects of the rule include clarification of what makes up a request that starts the one-year clock, as well establishing a new pre-filing period meant to encourage earlier notice and coordination. In addition, it noted that added information sought by states and tribes also must be able to be generated within the "reasonable period" of time.
