Natural Gas Pipelines: Two projects directly affect 80 municipalities
(from Maine Townsman, September 1996)
By Geoff Herman, MMA Paralegal

One proposal for the construction of a natural gas pipeline in Western Maine has been filed with the Federal Energy Regulatory Commission, and another proposal for a gas pipeline to run along the coast and into eastern Maine is to be filed with FERC on August 30. Industry representatives familiar with the federal regulatory review and approval process estimate that federal approval of the two projects could be granted in 1998, and the two pipelines could be in place and operating by 1998 or 1999.

PNGT PROJECT

The first of the two pipeline projects to file its intentions with FERC is the Portland Natural Gas Transmission System (PNGTS); a project sponsored by six energy, natural gas and investment companies. PNGTS proposes to run a 20" pipeline approximately 4 feet under ground a full 250 miles from northeastern Vermont through the northern tier of New Hampshire, entering Maine in Gilead. Approximately 95% of PNGTS system in Maine is mapped out to run along existing pipeline and electrical utility transmission corridors. From Maine the pipeline will run through the southeast corner of New Hampshire and on to Haverill, Massachusetts, where it will connect with an existing natural gas pipeline grid. As proposed, the PNGTS pipeline will permanently replace a crude oil pipeline, temporarily leased from Granite State to carry natural gas, which connects Portland with Montreal.

In addition to the trunk line, the PNGTS proposal includes a lateral line splitting off from the trunk in western Maine to serve the paper mills in Rumford and Jay.

Initially, the PNGTS pipeline will be designed to carry 175 million cubic feet of natural gas per day, which is nearly six times the amount of gas carried in the existing, leased pipeline. The new pipeline is designed to be able to increase its capacity to 300 million cubic feet per day.

Maine Municipalities and Townships Along Route of the Portland Natural Gas Transmission System Project (not including laterals) Gilead, Bethel, Albany, Waterford, Harrison, Otisfield, Casco, Raymond, Windham, Westbrook, Falmouth, Gorham, Scarborough, Biddeford, Saco, Arundel, Kennebunk, Wells, North Berwick, South Berwick, and Eliot.

MARITIMES PROJECT

The other natural gas pipeline proposal, soon to be filed with FERC is the Maritimes and Northeast Pipeline. The Maritimes proposal is being reviewed by FERC as a two-phase project. Phase I is a 64 mile pipeline running from Dracut, Massachusetts to Wells. This phase of the project has recently received preliminary certification from FERC and will possibly receive final FERC approval by April, 1997. Construction of Phase I of the Maritimes project could be completed in 1997, within four months of final FERC approval.

In its proposal stage, Phase II of the Maritimes project will involve the installation of 243 miles of 24" pipeline through 47 municipalities and 6 unorganized townships from Wells to Baileyville. The pipeline will then continue 300 more miles through New Brunswick and Nova Scotia, where it will connect with an ocean floor pipeline from Sable Island, which will be tapped into an estimated 3 trillion cubic feet of natural gas located in six offshore gas fields. As mapped out in its proposal stage, two thirds of the pipeline in Maine will be installed within a Central Maine Power Company transmission corridor. The proposed pipeline will diverge from the CMP corridor in Lisbon and rejoin it in Whitefield. The pipeline will split off again from the CMP right-of-way in Orrington, and from there cut its own path to Baileyville and into the Maritimes.

Lateral pipeline spurs are proposed in at least three locations throughout the Maine route to reach paper companies and other high energy use facilities in Baileyville, along a Bucksport to Millinocket axis, and to a CMP facility in Yarmouth.

The Maritimes pipeline is designed to carry 400 million cubic feet of natural gas per day.

Maine Municipalities and Townships Along Route of Maritimes and Northeast Project (not including laterals) Baileyville, Princeton, Indian Township, Plantation 21, Township 27, Township 37, Township 36, Township 30, Township 29, Township 28, Aurora, Osborn, Mariaville, Otis, Clifton, Holden, Dedham, Bucksport, Orrington, Winterport, Frankfort, Monroe, Swanville, Waldo, Morrill, Searsmont, Appleton, Liberty, Washington, Somerville, Windsor, Whitefield, Pittston, Gardiner, Richmond, Bowdoinham, Bowdoin, Sabattus, Lisbon, Lewiston, Durham, Pownal, North Yarmouth, Cumberland, Falmouth, Westbrook, Windham, Gorham, Scarborough, Saco, Biddeford, Kennebunk, Arundel, Wells.

REGULATORY REVIEW PROCEDURE; PREEMPTION

The review and approval of any interstate natural gas pipeline proposal is accomplished by FERC pursuant to the Natural Gas Act (15 USC tI717 et seq.) and the regulations adopted under the authority of the NGA (18 CFR, Part 157). The document a natural gas company needs from FERC before constructing an interstate pipeline is called a "certificate of public convenience and necessity". Although the Natural Gas Act doesn't come right out and say that state and local government regulations are preempted to the extent they would impose siting and design requirements on interstate natural gas pipelines, just such a preemption is strongly implied by the comprehensive federal regulatory scheme created by NGA and a companion piece of federal law regarding pipeline safety (49 USC 60101 et seq.).

More directly, a long line of court decisions further supports the generally preemptive nature of the NCA. In one case, New York's Public Service Commission attempted to require a pipeline developer to undergo a state level environmental review on the theory that an exhaustive environmental review was not fully accomplished in the FERC process, and therefore the federal government had not "comprehensively invaded the regulatory field". The decision in that case (National Fuels Gas Supply Corp. v. Public Service Commission of New York, 894 F.2d 571 (1990)) went soundly against New York.

In a case decided in 1989 by the United States Supreme Court (Northwest Cent. Pipeline Corp. v. State Corp. Commission, 103 L.Ed. Ed 509) the decision includes the statement that "Interstate natural gas pipelines operate within the field reserved under the Natural Gas Act for regulation . . . so inevitably states are preempted from directly regulating such pipelines in such way as to affect their cost structures."

Although there are legal issues regarding local permitting and zoning authority over interstate pipelines, as a practical matter FERC takes municipal views into consideration when making its decisions. The following sections describe the FERC review and approval process.

FERC Review Process

FERC's review and approval process begins when a company first files its intention to construct an interstate pipeline with the federal regulatory agency. Prior to such a filing, the pipeline developer has been testing the market, engaging in feasibility studies, establishing financing, and obtaining permission from the landowners in the proposed right-of-way corridor to do some survey work to pin down the initial siting plan.

If specifically requested by the developer in the initial filing, FERC can issue a preliminary determination on the merits of the project with respect to rate setting determinations and the financial and business aspects of the proposed pipeline development. The preliminary certification does not include FERC review or approval of the environmental and siting aspects of the proposal.

After FERC's preliminary certification is issued (or as part of the comprehensive FERC review if a preliminary determination is not requested), the regulatory review focuses on the environmental and siting issues associated with the proposal. In addition to the NGA standards, FERC examines issues and seeks public input as required by the National Environmental Policy Act (NEPA). During this part of the process, which involves the preparation of an environmental impact statement (EIS), the developer begins to seriously interact with the landowners from whom the developer will need easements, as well as the state and local governments, environmental groups, abutters to the pipeline, and other interested parties that may have questions or concerns about the project. During this time the developer must also obtain some specific environmental approvals from regionally located federal agencies (for example, Army Corp. of Engineers' approval for certain wetland and navigable waters intrusions) and state agencies that administer certain programs in partnership with the federal government; namely, certification of water quality under Section 401 of the Clean Water Act, and certain consistency assurances to the extent the pipeline installation is in or affects resources of the coastal zone under Section 307 of the Coastal Zone Management Act (CZMA).

In addition, the pipeline developer may voluntarily undergo state and/or local environmental review during this period in a "good neighbor" effort to demonstrate the applicant's environmental responsibility. In the case of the two proposals in Maine, as is discussed below, both developers are undergoing some voluntary state and local review, although to varying degrees.

After the FERC certificate is issued, the developer proceeds to purchase any negotiated landowner easements and begin construction. Landowners unwilling to negotiate easements for pipeline installation should be aware that the National Gas Act provides interstate pipeline developers with the right to acquire land or easements through eminent domain. By employing many contractors who simultaneously install the pipeline in "spreads", the pipeline can be constructed in a remarkably short period of time given the magnitude of the entire project.

According to industry representatives, if the review and approval process goes smoothly, it takes from 12 to 24 months to obtain a FERC "certificate" from the date of the initial filing, depending on the size of the project. With this in mind, the PNGTS proposal was initially filed with FERC in March of 1996, received a preliminary determination in July, anticipates final FERC approval by early 1998, and intends to be transporting gas by November, 1998. The Maritimes Phase I project (Dracut, Massachusetts to Wells) was first filed in February of 1996, also received a preliminary determination in July, and is expected to be granted final approval in April, 1997. The Maritimes Phase II project developer intends to make initial filing in late summer 1996, and expects final FERC approval by mid1998 so that gas can start moving by November, 1999.

LOCAL ROLE IN PROCESS

The federal regulations that outline the FERC application process provide a list of the exhibits the developer must submit to FERC in application for the all important "certificate". The only required submission that mentions any direct developer-municipality contact is entitled "factors considered in locating facilities in scenic, historic, recreational or wildlife areas." This particular exhibit requires the developer to explain any siting of the pipeline in or through a registered national historic place or landmark, or through any park, scenic, wildlife, or recreational areas officially designated by duly constituted federal, state, or local public authorities. When the pipeline installation will have a significant effect on the scenic, historic, wildlife, or recreational value of such areas, the developer is required to provide a reason for the proposed location of the pipeline and a list of the federal, state and local agencies that will be "consulted" by the developer.

There is no mention of complying with or conforming to local environmental standards. For that matter, there is not even mention of complying with any local standards regarding the protection of those scenic, historic, wildlife, or recreational areas that may be locally designated as special places. The only requirement is that there be some level of local "consultation" when the pipeline installation would significantly impact these locally designated special areas.

In short, the preemptive aspects of the National Gas Act should prepare municipal officials for the possibility of the pipeline developer not adhering to every local land use requirement, whether procedural or substantive, that may apply. On the other hand, the developers of both projects currently underway in Maine have expressed a willingness to go beyond the minimum consultation standards that are part of the FERC process.

The developers of the PLOTS pipeline through western Maine, for example, have submitted the project to the DEP for review and approval under the state's Site Location of Development law. In addition, the developers have expressed a good faith intention to follow all local regulations as well. Zoning, shoreland zoning, or site review process has already been initiated in many of the PNGTS "host" communities, including Kennebunk, Windham, Raymond, Casco, Otisfield, Harrison, Bethel, and Gilead. According to Stan Usovicz, a company representative who presents the PNGTS proposal before many of the local planning board or general public hearings (and who is, incidentally, a town councilor from Salem, Massachusetts), the company reserves the right to proceed in a different manner than may be locally required only when it would be unreasonable to require the pipeline to meet a certain standard. "Pipelines are unusual projects," says Usovicz. "To the extent we can conform (to local regulation), we will."

The Maritimes project takes a more regional approach. The Phase II Maritimes pipeline will travel through 47 municipalities in Maine, and instead of necessarily seeking formal local approval in each host town, the project developers intend to begin by formally notifying each affected municipality within the proposed pipeline corridor that the project is underway. An initial, prefiling notification has already gone out to the chief elected official or the municipal clerk of each of the affected towns. This first notice provides some general information about the project, informs the municipal officer that landowners in the community are being contacted about siting and easement issues, and invites the municipality into a dialogue with the developer to address any questions or concerns the municipality might have.

A second formal notification will be sent out to all the affected communities immediately after the developer files the proposal with FERC. At a minimum, the second notification will include an executive summary of the filing, and in some cases the entire filing is provided in the notification.

In addition to these two notifications, the Maritimes project developers are working on setting up regional meetings at various points along the pipeline route so that both the municipal officials and the general public from several towns can be invited to a centrally located meeting place to participate in informational hearings about the project. Maritimes representatives also intend to meet with the conservation commissions in every municipality that has one, and contact will be made with all public works departments to comply with local procedures for road crossings.

One-on-one meetings between the Maritimes developers and the planning boards in each of the nearly 50 municipalities affected are not being planned, however. It is through the notification and public meeting process that the Maritimes developers hope to become informed about and ultimately address the major siting and environmental concerns that may exist on the local level.

The Maritimes project developers are not sure at this time if they will be seeking review and approval at the state level under the Site Location of Development law. According to project developer dim Grasso, the state process merely duplicates the federal review, and the entire environmental record being reviewed by FERC is made available to the state for its information.

Intervention

The State of Maine has obtained or will obtain "intervenor" status from FERC for both pipeline projects. The advantages of becoming an "intervenor" are twofold. First, all documentation generated in the course of the FERC review and approval process will be sent to or at least made available to all intervenors. Second, intervenors have direct input access to FERC with respect to any issues that apply to the intervenor's interest. Since the legal rights of a municipality to directly regulate the pipeline project within its jurisdiction are minimal, and apply somewhat loosely from a practical or "political" perspective, a municipality that has particular concerns about the pipeline project may want to seek intervenor status.

The deadline for obtaining intervenor status for the PNGTS project has expired. Notice of opportunity to become an intervenor is published in the Federal Register and exists only within the first 30 days or so from the date the developer first files with FERC. According to a staff person in the Certification Branch of FERC, however, a "late filer" application would probably result in FERC granting a municipality intervenor status for the PNGTS pipeline review. FERC understands, apparently, that municipalities are not daily readers of the Federal Register. The only special condition that would apply to a late filer, however, is that the record as developed up to that point in the process would have to be accepted by the late intervenor.

The opportunity to become an intervenor in the Maritimes Phase II project has not yet ripened because Maritimes has yet to file its Phase II project with FERC. Representatives from Maritimes say they welcome municipal intervenors; so by keeping in touch with either Maritimes or FERC, a municipality should be able to determine when to request intervenor status.

According to FERC staffers, a request for intervenor status need not be a complex, legal looking document. A simple letter is sufficient if it references the project by docket number, formally requests intervenor status, and explains the municipality's relationship to the project (as host, for example, or abutter). Any questions regarding intervenor filing should be directed to the Certification Branch at FERC (12022080442).

HOST BENEFITS

The municipalities through which these two pipelines will travel will enjoy the tax revenues provided through the assessment of the pipeline property for its just value. The PNGTS project developers estimate that in the first year the pipeline is in service, the 21 Maine communities hosting the pipeline will share over $1.7 million in new property tax revenues. If the PNGTS estimates are accurate and the underlying tax assumptions could be fairly applied in coastal and eastern Maine, the Maritimes pipeline (which will be using larger diameter pipe than its PNGTS competitor) and its two Maine compressor stations could easily provide over $4 million in annual property taxes among the nearly 50 municipalities through which it passes. Although the pipeline itself will demand little from the municipality in the areas of education or welfare, its presence in the community could cause increased expenditures in the public safety budget related to emergency response preparedness systems.

In addition to the annual tax contribution, the project developers point out two other host community benefits. First, the installation itself will undoubtedly generate some short-term local employment opportunities. Second, local economic development strategies may be enhanced by local access to such large energy sources. Opportunities within the host community or region may become available to feed high-energy use industries or industrial parks from intermediate distribution systems that can tap into the pipeline.

CONCLUSION

Two natural gas pipeline projects are being proposed for construction in Maine: one from westernmost Maine to its southern tip and the other from easternmost Maine to its southern tip. Because they are interstate gas pipelines, local development review and approval procedures are preempted by federal law (the National Gas Act). The legal reality, therefore, is that the project developers could not be required to comply with even the state mandated review and approval procedures, such as the shoreland zoning rules, if they could obtain FERC's "certificate of public convenience and necessity" without doing so.

The practical and political reality, however, is that the project developers want to work closely with the municipalities through which these pipelines will be constructed. The PNGTS project in western Maine intends to undergo every local environmental review process and meet every local standard that it possibly can. The Maritimes project developers cannot guarantee as close a scrutiny to local regulatory compliance, but intend to be responsive to every legitimate local concern about siting, environment, or safety.

Those municipalities that have a reason to watch the review and approval process very closely might consider obtaining intervenor status so that the adequacy of the federal review procedure can be closely monitored and local issues that appear to be missing FERC's attention can be put into the record.

As is the case with most major development proposals, there are tradeoffs. Tax revenues and economic development are weighed against public safety and environmental concerns, real or perceived. The project developers are not unfamiliar with local opposition that can develop around the siting of gas pipelines. Public safety and environmental concerns can become blended into local opposition movements which rarely become quieter when it is discovered that the local review procedures are more courtesy than requirement.

Indeed, the preemption of municipal rules and procedures can result in mixed messages being sent to the local government from its state and federal partners. In this case, the National Gas Act's preemption of the local review and approval process creates a somewhat loose alternative arrangement that is highly dependent on the good faith efforts of the project developers to address all local concerns squarely, and the local government's ability, even in its reduced status as regulator, to ensure that all legitimate local concerns are adequately addressed.