Policy Recommendations to Improve State Review of Proposed Pipelines
Background
Multiple infrastructure proposals for new non-renewable energy sources, including oil and natural gas pipelines and transmission lines, have been permitted and constructed in recent years or are pending throughout New Jersey. Pending project proposals include the PennEast, Northeast Supply Enhancement, South Jersey Gas and Southern Reliability Link gas pipelines, and the Pilgrim Oil pipeline. These massive linear developments pose serious risks to natural resources as well as the health and safety of communities in their path. Such projects would also increase the state’s reliance on fossil fuels that contribute to climate change.
The PennEast pipeline alone threatens over 4,300 acres of taxpayer-supported open space, and more than 40 Category 1 streams. The Southern Reliability Link and South Jersey Gas pipelines threaten the Pinelands National Reserve’s delicate ecosystem and the integrity of the Pinelands Act, which was designed to protect the area’s unique ecology. The Northeast Supply Enhancement Project threatens air quality, streams and the Raritan Bay. Pilgrim Oil could jeopardize the Highlands region, source of drinking water for over half the state’s population.
The projects listed above are sponsored by New Jersey regulated utilities or their affiliates, and will be paid for directly by ratepayers even though they do not serve any demonstrated public need and are driven by outdated economic incentives. This would compound economic harm with environmental harm if New Jersey allows them to proceed.
In addition to the current crop of unnecessary projects, under the current regulatory system, future projects could be proposed that do not represent the most cost-effective and least environmentally damaging alternative. It is widely recognized that the current regulatory framework and utility business model are ill-suited for the transition to clean energy solutions, as they provide no incentive for utilities to promote energy efficiency, distributed generation, or demand response that reduces peak loads. Under the current model, utilities incur expenses for such efforts that are simply passed through to consumers with no return for the utility. Utilities only earn returns on utility infrastructure – such as transmission lines, substations or pipelines – creating a perverse incentive to only propose projects that typically incur environmental damage. More cost-effective solutions are simply not proposed. The key to keeping utility rates low in the coming decades will be creating a new regulatory approach that avoids large capital investments when more cost-effective solutions are available.
The current regulatory process for reviewing major energy infrastructure projects such as these is inadequate to fully protect natural resources and the public interest. Interstate gas pipelines, such as PennEast, are under the jurisdiction of the Federal Regulatory Energy Commission (FERC), an agency with a track record of rubber-stamping pipeline projects. Intrastate gas pipelines are reviewed by the NJ Board of Public Utilities (BPU), which has been decidedly in favor of approving pipelines regardless of any genuine need, given the current Energy Master Plan’s strong bias toward natural gas. Contrary to their mandate, neither FERC nor the BPU in recent years have fully examined the public need for such projects, or evaluated whether better alternatives exist. With a strong Clean Energy Master Plan, the BPU would have clear guidance and targets to rely on in evaluating whether future energy infrastructure projects are needed.
Interstate oil pipelines are not regulated by FERC or BPU, but are subject to land use regulatory permitting by the NJ Department of Environmental Protection (NJDEP). Interstate and intrastate gas pipelines are also subject to NJDEP permitting. As such, NJDEP is the most important regulatory backstop to ensure that major energy infrastructure projects are thoroughly vetted to protect sensitive natural resources and the public interest.
NJDEP has significant authority to review such projects, including provisions under the Clean Water Act (CWA) that are not preempted by federal laws such as the Natural Gas Act. Under Section 401 of the CWA, states have the ability to deny certification of a project which “may discharge into the navigable waters” of the state. Federal courts recently reaffirmed this authority when the U.S. Court of Appeals for the Second Circuit upheld the New York Department of Environmental Conservation’s denial of a water quality certificate under section 401. NY had denied the necessary permits for the Constitution Pipeline, a FERC certificated project.
Additionally, New Jersey, with its long history of wetlands protection, is one of only two states that has assumed Section 404 Clean Water Act authority. As a result, New Jersey has even greater authority than New York in reviewing pipelines. NJDEP, the BPU and the Highlands Council, as well as the Pinelands, Delaware River Basin and Delaware and Raritan Canal Commissions all have important roles to play if given the proper leadership and direction to develop, implement and enforce their plans and regulations.
Recommendations
1. Protect the Integrity of the Pinelands Commission and the Highlands Council
Key Policy Measures:
• The Energy Master Plan and regulations of the DEP, Pinelands Commission and Highlands Council, should state that the policy of the state is not to build energy infrastructure across the Pinelands and Highlands Preservation Area, and that such development may be permitted only if the proponent proves, through an evidentiary hearing in which the public can fully participate, that no alternative means or route exists to serve a genuine public need, and that the proposed project is consistent with the Pinelands Comprehensive Management Plan (CMP) or Highlands Regional Management Plan (RMP).
• Strengthen the membership of the Pinelands Commission and Highlands Council to ensure these agencies have the will and capacity to rigorously and consistently implement the Pinelands and Highlands.
The Pinelands and the Highlands are the nation’s foremost regional growth management programs. Each is based on a conservation and growth map with accompanying regulations that clearly and predictably define where new development may and may not be located – all in order to protect large natural and agricultural conservation zones while concentrating development in designated growth zones around existing towns and settlements. The continuing success, indeed the survival, of these extraordinary programs depends on the consistent and rigorous application of the Pinelands CMP and Highlands RMP to new development and redevelopment – and particularly to large-scale development. The regional plans recognize that public service infrastructure presents two risks to the long-term protection of natural and agricultural areas: it induces heightened growth pressure along its length (we have built it, so let’s use it), and its construction and operation can harm water and other natural resources these areas are supposed to protect.
Today’s controversial natural gas and oil pipeline proposals would locate major new infrastructure in designated conservation zones. In doing so, they are challenging the Pinelands and Highlands plans and are undermining the integrity of the agencies – the Pinelands Commission, Highlands Council and NJDEP – charged with implementing these plans. Strengthening the Pinelands and Highlands regional planning entities and regulations designed to control the spread of growth-inducing infrastructure is vital to saving the unique resources that make the Pinelands and Highlands so valuable to the people of New Jersey.
The Pinelands CMP restricts new public service infrastructure, including natural gas pipelines, to designated growth areas, only permitting new infrastructure where needed to serve needs of the Pinelands that cannot be served without crossing through its conservation zones. The specific standards are tailored to each conservation zone or “management area.” But in all cases the goal is to prevent the use of these areas as a transit for infrastructure that can harm resources and increase long-term pressures to development in the conservation zones.
In the Highlands, pipelines in the Preservation Area are not considered exempt from the Highlands Act or RMP unless there is a finding that the activity is consistent with the goals and purposes of the Highlands Act. Similarly, in the Planning Area, after consultation, where the Highlands Council’s role is advisory in nature, the BPU and NJDEP must give great weight and consideration to the protection of fragile, unique and well-documented resources as they make permit decisions. This principle was recently reaffirmed by the Appellate Division in a case brought by the NJ Highlands Coalition against NJDEP.
If future energy infrastructure projects emerge that are based on genuine need, then conflicts with the Pinelands and Highlands programs will occur, and must be resolved through genuine consultation and public input.
2. Better Evaluate Public Need and Alternatives
Key Policy Measures:
• Enact utility reforms (Utility 2.0) so that financial incentives are most attractive for investments in conservation and demand reduction rather than expansion of utility infrastructure.
• The BPU should be vigilant in protecting ratepayers from projects that do not reflect genuine need.
• The BPU should develop a Clean Energy Master Plan, and reject unneeded projects that are inconsistent with this plan.
• NJDEP should enforce its independent authority to consider the need for a project under the Freshwater Wetlands Protection Act.
The BPU plays a critical role in shaping and approving energy infrastructure. As long as regulated utilities have a financial incentive to propose costly projects, regulators play a critical role to ensure that ratepayers only pay for projects that are deemed necessary and in the public interest. The BPU regularly uses this authority to reduce, defer or (rarely) deny a wide range of projects proposed by utilities. BPU should always be vigilant, across administrations, in assessing whether projects are necessary and whether less costly alternatives exist. At times, however, BPU Commissioners have approved projects with dubious merits. Many of the projects named here could have been denied by BPU simply based on lack of need.
Projects that expand fossil fuel infrastructure pose an additional challenge. Private sector firms can propose projects that would increase the consumption of fossil fuels, and make it more difficult for New Jersey to achieve its Global Warming Response Act targets for reducing emissions by 2050. To reign in unwanted projects, New Jersey should quickly develop a Clean Energy Master Plan to 2030 that sets specific emissions targets by sector. Policies to support the Clean Energy Master Plan would then be needed in three sectors: to reduce the use of natural gas for building heating and cooling (electrification); to reduce the use of diesel and gas for transportation (electrification); and to reduce the use of natural gas for electric generation.
Equally important, reforms are required to create utility incentives that align with the goals of the Clean Energy Master Plan. Utility rate design should motivate utilities to propose projects that conserve energy and reduce peak loads. Often such projects offer important cost-savings for ratepayers as well as lower environmental impacts, and should always be the preferred alternative.
For all energy infrastructure projects that require its approval, including natural gas pipelines, BPU should ensure consistency with Clean Energy Master Plan emissions targets. Specifically, BPU should require the development of alternatives prior to any expansion of fossil fuel infrastructure. Alternatives examined should include renewable energy and/or energy conservation projects that would reduce overall consumption or peak demand. BPU should be directed to reject any projects that are inconsistent with the Clean Energy Master Plan, and where viable alternatives exist to meet any legitimate public energy needs.
As noted above, for all energy infrastructure projects that impact designated conservation areas, such as the Pinelands and Highlands, BPU should support current state policy: designated conservation areas should be avoided at any cost.
The evaluation of public need also arises when NJDEP implements the federal Clean Water Act through state laws. NJDEP is required to assess public need under standards that include weighing the public interest in resource protection, and examining existing system alternatives. New Jersey’s public interest and need standards and assessments are vastly different from FERC’s economic assessments. It is critically important for New Jersey to follow existing laws requiring independent determination of public need for pipeline projects, because this assessment process informs the range of alternatives that New Jersey must look at when evaluating each application.
NJDEP is also required to avoid impacts to wetlands and to presume that non-wetlands alternatives exist. If existing systems can meet the goals of proposed greenfields infrastructure, New Jersey is required, under current law, to deny permits to build such projects in wetlands.
3. Fully Utilize State Authority in Reviewing Proposed Pipelines
Key Policy Measures:
• Direct NJDEP Commissioner and staff to use the state’s full authority under the Clean Water Act (CWA) and state regulations implementing the CWA when reviewing proposed pipelines.
• Reject permits for proposed pipelines that don’t meet the standards under the CWA and state regulations.
• New Jersey should conduct its own strict cumulative impacts analysis of all pipelines under the Clean Water Act before issuing permits.
• New Jersey’s historically strict standards under the Clean Water Act and Freshwater Wetlands Act need to be enforced.
The State’s Role in Protecting Our Natural Resources
New Jersey is obligated to weigh the environmental impacts of individual pipelines including cumulative adverse effects from the enormous uptick in natural gas pipelines proposed to cut across our state, and to prevent the destruction pipelines will have on our remaining natural habitats, waterways and public health. New Jersey, the nation’s most densely populated state, is among one of the first to face “build out” due to its rapid development. Determined to preserve its lands and waterways, New Jersey enacted open space preservation and farmland preservation programs. FERC’s approval process routinely authorizes interstate gas pipelines through the same lands and waterways New Jersey has already protected. New Jersey plays a primary role in determining whether a FERC-certified interstate gas facility should be built. The Natural Gas Act, a federal law governing interstate pipelines, explicitly preserves New Jersey’s power to approve or deny Clean Water Act, Coastal Zone Management Act, and Clean Air Act approvals for these projects. New Jersey’s greatest source of reserved authority stems from the Clean Water Act, under which New Jersey can approve or deny wetlands permits and water quality certification in order to protect its waters. New Jersey is uniquely positioned to exercise this authority to protect remaining state wetlands and waterways in accordance with existing state standards, which are more stringent than federal ones.
New Jersey’s Authority Under the Clean Water Act
New Jersey, like most other states, has the reserved authority to block a harmful project under section 401 of the Clean Water Act. The activities covered by section 401 are quite broad, covering any discharge into the navigable waters of the United States. If the discharge results in dredge or fill material, the EPA also requires a 404 permit. The EPA requires that a CWA section 401 certificate be obtained first in order to acquire a 404 permit. The CWA preserves a state’s rights to protect its water quality through the 401 certification process. Under the 401 certification a state determines whether a project will meet state-specific water quality standards. New Jersey’s reserved powers under section 401, coupled with its assumption of section 404 permitting, has allowed the state to protect its waters through use of state specific methods and expertise. Beyond simply having the authority to do so, New Jersey is obligated to use this power and knowledge to protect its waterways.
The Clean Water Act sets out a multi-step process for regulating water quality that largely includes the states. Each state designates specific beneficial uses for each of its waterways and the water quality standards needed to support those designated uses. The water quality standards may be the baselines set out by the federal government or more stringent ones set by the states. Designated uses throughout New Jersey’s waterways include drinking water supply, fish consumption, shellfish resources, propagation of fish and wildlife, recreation, and agricultural and industrial water supplies. New Jersey is unique because of its long history of industrial usage and widespread legacy contamination. The State’s development history has resulted in significant impacts to water quality that it is addressing through strict state laws. In addition, it is surrounded by water on three sides and bordered by two major cities. Thus, its regulatory water quality standards are more stringent than that of the federal government.
New Jersey’s unique circumstances require the state to uphold its stringent water quality standards and protections. New Jersey should consider the impact of each individual pipeline as well as the cumulative impacts of past, present and future pipelines on its waterways before approving any one pipeline.
The Governor’s Leadership is Essential
On April 7, 2017, New York Governor Andrew Cuomo ensured that New York’s state authority under section 401 of the Clean Water Act was fully exercised to protect water quality, including drinking water, trout streams and air quality in North County and Western New York when the New York Department of Environmental Conservation (NYDEC) blocked the proposed 99 mile Northern Access Pipeline by denying it section 401 Water Quality Certification. This was not the first time Governor Cuomo invoked the state’s authority. On April 22, 2016, Governor Cuomo’s NYDEC denied 401 certification to the Constitution Pipeline. NYDEC found that the Constitution Pipeline would have caused extensive damage to streams and wetlands, stating that the pipeline “[failed] in a meaningful way to address the significant water resource impacts that could occur.” As noted above, the U.S. Court of Appeals recently upheld NYDEC’s denial of the 401 certification for Constitution.
We believe that New Jersey should be safeguarding its waters at least as carefully as New York State if it is to resume its role as an environmental leader. We ask that New Jersey implement the same strict level of scrutiny the Cuomo Administration used in order to protects its citizens and future generations, when reviewing projects that threaten precious state aquatic resources.
New Jersey’s Additional Sources of Authority Under the Coastal Zone Management Act and the Clean Air Act
In addition to its authority under the Clean Water Act, New Jersey also has the authority to deny Coastal Zone Management Act (CZMA) Consistency Certification and Clean Air Act Permits. The CZMA reserves New Jersey’s authority to block a coastal zone project if it fails to meet the state’s consistency standards. Although a pipeline company may appeal the state’s rejection to the Secretary of Commerce, who may override the state’s decision, the Secretary’s ability to do so requires a probing in-depth review. The Secretary of Commerce may only override a state’s inconsistency determination if s/he can prove (1) that the project furthers national interest; (2) the national interest outweighs its adverse effects; and (3) that there is no reasonable alternative that would otherwise be consistent with the act’s enforceable policies. Ultimately, a federal court has the power to overturn the Secretary’s decision and thus reinstate the state’s finding that the project is inconsistent with CZMA standards, if the Department of Commerce fails to provide a sound factual record supporting its decision. The Secretary’s power to override has been narrowly construed by the courts.
Finally, the Clean Air Act gives New Jersey the ability to limit emissions of air pollutants such as nitrogen oxides and methane emitted by pipeline construction and operation. The EPA sets National Ambient Air Quality Standards for certain air pollutants, and the states then submit State Implementation Plans for EPA approval. New Jersey implements the Clean Air Act through its State Implementation Plan.
The Natural Gas Act ensures that New Jersey’s authority under the Clean Water Act, the Coastal Zone Management Act and the Clean Air Act to review interstate natural gas pipelines remains intact, and is not preempted. However, the opportunity for New Jersey to determine that a FERC-certificated pipeline project may not be built due to its environmental consequences would most likely arise under the Clean Water Act. The State has the power and the obligation to deny 401 certification to projects that receive a FERC certificate but cannot be constructed without harming New Jersey’s natural environment. As chief executive, it is the governor’s job to assure that the state protects its waters from environmental impacts associated with natural gas facilities.
