Islander East Pipeline Co., LLC v. McCarthy

• Decision Date: 02 May 2008
• Docket Number: Docket No. 06-5764-ag.
• Citation: 525 F.3d 141
• Parties: ISLANDER EAST PIPELINE COMPANY, LLC, Petitioner, v. Gina McCARTHY, Commissioner of Connecticut Department of Environmental Protection, and State of Connecticut Department of Environmental Protection, Respondents.
• Court: U.S. Court of Appeals — Second Circuit

525 F.3d 141

ISLANDER EAST PIPELINE COMPANY, LLC, Petitioner, v. Gina McCARTHY, Commissioner of Connecticut Department of Environmental Protection, and State of Connecticut Department of Environmental Protection, Respondents.

Docket No. 06-5764-ag.

United States Court of Appeals, Second Circuit.

Argued: April 10, 2007.

Decided: May 2, 2008.

Frederick M. Lowther (Beth L. Webb, Janet M. Robins, on the brief), Dickstein Shapiro LLP, Washington, D.C.; Anthony M. Fitzgerald, Carmody & Torrance, LLP, New Haven, CT; Thomas L. Stanton, Associate General Counsel, Spectra Energy Islander East Pipeline Company, LLC, as Operator for Islander East Pipeline Company, LLC, Waltham, MA, for Petitioner.

Kimberly P. Massicotte, Assistant Attorney General (Richard M. Blumenthal, Attorney General for the State of Connecticut; John M. Looney, David H. Wrinn, Scott N. Koschwitz, George W. O'Connell, Assistant Attorneys General, on the brief), Office of the Attorney General, Hartford, CT, for Respondents.

Before: KEARSE and RAGGI, Circuit Judges, and RESTANI, Judge.¹

Judge RESTANI dissents in a separate opinion.

REENA RAGGI, Circuit Judge:

This case arises from the ongoing efforts of Islander East Pipeline Co., LLC ("Islander East") to secure a water quality certification from the Connecticut Department of Environmental Protection ("CTDEP") for a plan to build a natural gas pipeline from Connecticut to New York across Long Island Sound. Such certification is a prerequisite to Islander East securing final federal approval for its pipeline project under the Natural Gas Act of 1938 ("NGA"), Pub.L. No. 75-688, 52 Stat. 831 (codified as amended at 15 U.S.C. §§ 717-717w). Pursuant to NGA § 19(d), 15 U.S.C. § 717r(d), Islander East petitions this court for review of the CTDEP's December 19, 2006 denial of certification, which Islander East challenges as arbitrary and capricious, see CTDEP, Water Quality Certification Application No. 200300937-SJ, Islander East Pipeline Co., LLC (Dec. 19, 2006) ("2006 Denial"). The argument is familiar to us. In a published opinion filed October 5, 2006, a majority of this panel vacated the CTDEP's initial February 5, 2004 denial of certification to Islander East as arbitrary and capricious and remanded for further agency review of the pipeline application. See Islander East Pipeline Co. v. Conn. Dep't of Envtl. Prot. ("Islander East I"), 482 F.3d 79 (2d Cir.2006).

The CTDEP has now completed that review and persists in denying certification. Whatever reservations might legitimately be voiced as to this latest decision, see infra at 164-70 (Restani, J., dissenting in part), judicial review of the CTDEP's denial is limited to the grounds set forth in the Administrative Procedure Act ("APA"), specifically 5 U.S.C. § 706(2)(A), which provides that we are to "hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Because the CTDEP supports its second denial with reasoned explanations tied to record evidence, this court can no longer dismiss its conclusions as unlawful under the APA. Accordingly, we deny Islander East's petition for review.

I. Background

A. The Regulatory Scheme

Although we assume readers' familiarity with our prior opinion in Islander East I, 482 F.3d 79, our discussion of the relevant facts as well as our assessment of the merits of Islander East's petition are facilitated by a preliminary review of the relevant regulatory scheme.

1. The Natural Gas Act

The Natural Gas Act of 1938 comprehensively regulates the transportation and sale of natural gas in interstate commerce. See id. at 84. Pursuant to NGA § 7, any party seeking to construct, extend, acquire, or operate a facility for the transportation or sale of natural gas in interstate commerce must secure "a certificate of public convenience and necessity" from the Federal Energy Regulatory Commission ("FERC"). See 15 U.S.C. § 717f(c)(1)(A).² Further, the FERC must ensure that the proposed project complies with all requirements of federal law, including, but not limited to, those established by the Clean Water Act, 33 U.S.C. §§ 1251-1387, and the Coastal Zone Management Act, 16 U.S.C. §§ 1451-65. See Islander East I, 482 F.3d at 84 (citing Islander East Pipeline Co., 102 F.E.R.C. ¶ 61054, p. 61130 (2003)).

While the NGA generally preempts local permit and licensing requirements, see id. (citing Islander East Pipeline Co., 102 F.E.R.C. ¶ 61054, p. 61130); National Fuel Gas Supply Corp. v. Pub. Serv. Comm'n, 894 F.2d 571, 576-79 (2d Cir. 1990), the Clean Water and Coastal Zone Management Acts are notable in effecting a federal-state partnership to ensure water quality and coastal management around the country, so that state standards approved by the federal government become the federal standard for that state. See Islander East I, 482 F.3d at 90 n. 9 (explaining that, under Clean Water Act, state water quality standard approved by federal Environmental Protection Agency ("EPA") "becomes `the water quality standard for the applicable waters of that State'" (quoting 33 U.S.C. § 1313(c)(3))). Consistent with this scheme, the two Acts require applicants for federal permits to provide federal licensing agencies such as the FERC with certifications from affected states confirming compliance with local standards. See id. at 84 & nn. 3-4 (citing 16 U.S.C. § 1456(c)(3)(A); 33 U.S.C. § 1341(a)(1)).

Islander East's dispute with the CTDEP regarding its compliance with the state's coastal zone management plan is the subject of a different appeal pending in this court, See State of Connecticut v. United States Dep't of Commerce, Nos. 07-4522-cv(L), 07-4593-cv(CON).³ Accordingly, on this petition, we consider only Islander East's challenge to the CTDEP's denial of the water quality certification that, being mandated by the Clean Water Act, is a prerequisite to the FERC granting final approval to commence construction of the proposed pipeline.

2. The Clean Water Act

The Clean Water Act specifically protects "existing" and "designated" uses of navigable waters. PUD No. 1 of Jefferson Cty. v. Washington Dep't of Ecology, 511 U.S. 700, 704-05, 114 S.Ct. 1900, 128 L.Ed.2d 716 (1994) (citing 33 U.S.C. § 1313(c)(2)(A) & (d)(4)(B); 40 C.F.R. § 131.12). Thus, a state's water quality standards must identify existing and designated uses, such as drinking, recreation, wildlife support, and shellfish cultivation, and must establish "`water quality criteria for such waters based upon such uses.'" Id. at 704, 114 S.Ct. 1900 (quoting 33 U.S.C. § 1313(c)(2)(A)). Further, pursuant to the Clean Water Act's "antidegradation policy," a state's water quality standards must "be sufficient to maintain existing beneficial uses of navigable waters, preventing their further degradation." Id. at 705, 114 S.Ct. 1900 (citing 33 U.S.C. § 1313(d)(4)(B)). The mandate's broad reach is reflected in 40 C.F.R. § 131.12(a)(2), which provides that states "shall assure water quality adequate to protect existing uses fully." Thus, no activity that would "`partially or completely eliminate any existing use'" is permitted, even if it would leave the majority of a given body of water undisturbed. PUD No. 1 of Jefferson Cty. v. Washington Dep't of Ecology, 511 U.S. at 718-19, 114 S.Ct. 1900 (quoting EPA, Questions and Answers on Antidegradation at 3 (Aug. 1985)).⁴

To protect against water quality degradation, states may employ both quantitative and open-ended standards. See id. at 715-17, 114 S.Ct. 1900; see also 40 C.F.R. § 131.11 (providing for states to establish numerical and narrative criteria). Open-ended standards serve to ensure against under-inclusiveness in circumstances where it may be impossible to formulate a generalized quantitative standard applicable to all cases. See PUD No. 1 of Jefferson Cty. v. Washington Dep't of Ecology, 511 U.S. at 716-18, 114 S.Ct. 1900. In applying open-ended standards, however, a state is expected to translate its narrative criteria into "specific limitations for individual projects." Id. at 716, 114 S.Ct. 1900.

3. Connecticut's Water Quality Standards Pursuant to the Clean Water Act

Two narrative water quality standards figure prominently in this case. Connecticut Surface Water Quality Standard No. 1, as amended, states:

It is the State's goal to restore or maintain the chemical, physical, and biological integrity of surface waters. Where attainable, the level of water quality that provides for the protection and propagation of fish, shellfish, and wildlife and recreation in and on the water shall be achieved.

Connecticut Dep't of Envtl. Prot., Water Quality Stds. at 1 (effective Dec. 17, 2002), http://www.ct.gov/dep/lib/dep/water/water_ quality_standardsl/wqs.pdf.

Connecticut Surface Water Quality Standard No. 2 states:

Existing and designated uses such as propagation of fish, shellfish, and wildlife, recreation, public water supply, agriculture, industrial use and navigation, and the water necessary for their protection [are] to be maintained and protected.

Id.

Pursuant to these standards, the CTDEP "Commissioner shall not issue any certificate or permit for any regulated discharge, dredging activity or discharge of fill and dredged materials unless the Commissioner finds that all existing and designated uses as defined in these water quality standards will be protected fully." Id., App. E-1; see also id. at 1 (Surface Water Quality Std. No. 2).

The coastal waters at issue in this petition are denominated by Connecticut as either "SA" or "SB/SA." SA waters are designated for "habitat for marine fish, other aquatic life and wildlife; shellfish harvesting for direct human consumption; recreation; industrial water supply; and navigation." Id. at 15 (Coastal Waters Classifications and Criteria). SB waters are designated for "habitat for marine fish, other aquatic life and wildlife; commercial shellfish...