Governor Andrew Cuomo banned hydraulic fracturing in December 2014, a few months after New York’s high court held that state regulation of the oil and gas industry did not preempt local governments’ attempts to prohibit activities inconsistent with municipal land use laws, including oil and gas development.2 Cuomo cited a New York Department of Health report that found a high level of uncertainty about the safety of hydraulic fracturing and the potential for significant negative health impacts.3 Pro-gas development groups protested the loss of revenue and jobs. Environmentalists lauded the ban as a key victory for human and environmental health.
October 31, 2015
Community Impacts Beyond Fracking: Midstream Challenges of Natural Gas Development
Beth Kinne
The ban, however, has not prevented the negative impacts of oil and gas development from spilling over into New York communities, or into other states. Drill cuttings are disposed of in New York landfills as construction waste, and waste water treatment plants have processed waste water from Pennsylvania drilling operations. Pipelines, compressor stations, and storage facilities—known in the industry as “midstream” activities—are still being developed across much of the country to move gas from active drilling regions to areas of high demand.
Communities protest the development of gas transportation and storage facilities for a range of reasons: opposition to development that is inconsistent with community character; concern over threats to water and air quality; fear of rail accidents following incidents in Lac-Mégantic, Ontario, and Mount Carbon, West Virginia, where trains carrying oil derailed and caught fire; and broader opposition to fossil fuel development in general given its role in climate change. The combination of high demand for oil and gas transportation and storage infrastructure with vehement protests against it challenges federal and state agencies and local governments to carefully review the impacts of these projects on local communities and the environment.
The proposed expansion of a natural gas storage project and the concurrent development of an LPG (propane and butane) storage project in the Finger Lakes region of New York provide examples of the local conflict resulting from ancillary impacts of large-scale gas development, and the factors weighed by federal and state agencies as well as local governments in permitting these projects.
Storing Gas in Salt on the Shores of a Lake
The Village of Watkins Glen, New York, is well-known for its NASCAR racetrack and the strikingly beautiful two-mile gorge of Watkins Glen State Park. It also lies at the southern tip of Seneca Lake, the largest of the Finger Lakes and a high-quality water source for some 100,000 people. A proposal to expand existing storage of liquid propane gas (LPG) and create new storage of natural gas (methane) in retired solution-mined salt caverns (“galleries”) lying a few miles north in the Town of Reading has spawned years of community debate and resulted in arrests of over 400 peaceful protestors blocking entrance to the site, along with organized opposition from businesses and communities throughout the region. The Finger Lakes Wine Business Coalition and the Gas Free Business Coalition, two regional business organizations representing hundreds of members, filed statements of opposition with the N.Y. Department of Environmental Conservation (NYDEC). Seven county legislatures and 24 western New York municipalities have passed resolutions opposing the LPG storage project.
The controversy involves the use of multiple galleries at the existing U.S. Salt site for storage of LPG and natural gas by a Houston-based company, Crestwood-Midstream Partners, LP (formerly Inergy Midstream, LP), Crestwood Equity Partners, LP, and their wholly-owned subsidiaries, Fingerlakes LPG Storage, LLC and Arlington Storage Company, LLC. Supporters claim that salt gallery storage of hydrocarbons is safe and proven and that the LPG storage will help stabilize prices and ensure supply, particularly in the winter months.
Opponents claim at least one of the caverns at issue is unstable; that the noise from the operation could cause adverse impacts to the community; and that an accident on the rail line used to transport LPG to the site, which includes an 80-year-old trestle above the highly trafficked Watkins Glen gorge, could threaten hundreds of hikers in the park. More generally, they oppose the creation of additional fossil fuel infrastructure in the Finger Lakes region for two reasons: negative impacts on the local agro-tourism economy and, at a broader level, contribution to climate change.
Arlington Storage Company, LLC (“Arlington”) filed applications with the Federal Energy Regulatory Commission (FERC) in February 20134 to permit its proposed methane storage project. A proposed LPG storage project by Arlington’s “sister” entity, Fingerlakes LPG Storage, LLC (“Fingerlakes LPG”) is under the jurisdiction of New York State and the Town of Reading, which retains right of site review. FERC has jurisdiction over LPG under the Interstate Commerce Act, but has no siting authority under the ICA.5 In spite of divergent approval processes, however, both decisions point to a potential expansion of the relevant definition of “community” in the impacts analysis.
The FERC Approval Process and the Area of Impact
The FERC regulates gas storage as part of gas transportation and any storage facility that connects to an interstate pipeline comes under FERC jurisdiction,6 under sections 7(c) and (e) of the Natural Gas Act.7 Arlington’s storage project will connect via Arlington’s 20-mile Seneca Lake pipeline to the interstate Dominion and Millennium pipelines.
FERC’s mission is to “[a]ssist consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cost through appropriate regulatory and market means.”8 Before granting a certificate of public convenience and necessity allowing a project to proceed, FERC must determine that the benefits of the project outweigh the negative impacts. In this case, the benefits of the project include increased storage located between the Marcellus Shale region, which is producing large quantities of gas, and the northeast United States, which has a large demand. FERC accepted Arlington’s evidence of interest from prospective buyers for more than 11 times the gas this project will store as compelling evidence of need.9
FERC rejected Arlington’s initial environmental impact assessment and required additional information concerning, among other things, cumulative environmental impacts of current and proposed projects within a five-mile radius of the site.10 FERC’s final order found that noise concerns and impacts on landowners from construction and operation of the facility would be either temporary or nonproblematic, and that Arlington’s engineers had adequately addressed concerns over faults in or near the salt caverns.11
The State Approval Process and Community Impacts
Unlike the methane storage project, the LPG storage permit is governed by state law, and in New York local communities around Seneca Lake and the extended Finger Lakes region are weighing in. The State Environmental Quality Review Act (SEQRA) has been interpreted by New York courts as entailing a substantive mandate, compelling state agencies to mitigate negative environmental impacts via use of permit restrictions, modifications of proposals, or, in extreme cases, to deny projects altogether.12
Fingerlakes LPG’s 2009 application to the NYDEC requested permission to store a maximum of 2.1 million barrels (88.2 million gallons) of LPG with a future potential of up to 6 million barrels13 of LPG. Associated infrastructure would include compressor stations, two brine ponds located up the hill from the lake, and a propane dryer to remove water contamination from the final product.14 The propane will feed into the nearby TE Products Pipeline Company, LLC (TEPPCO) pipeline, one of the main distribution lines for propane in the eastern United States, allowing supplementation to meet winter demand, which can outstrip summer demand by a ratio of up to 3:1.15
The NYDEC determined that the project impacts were sufficient to merit an Environmental Impact Assessment16 under SEQRA.17 The DEC Region 8 office took the role of lead agency given its jurisdiction over underground gas storage, well drilling, well construction, and well plugging. The Commissioner pointed out, however, that the Town of Reading Planning Board retained jurisdiction over the site plan and special use permits.18
Following the submission of a draft supplemental environmental impact statement (dSEIS),19 the DEC held public hearings and took public comments in fall 201120 and issued draft permit conditions on October 22, 2014. The NYDEC then scheduled a Special Issues Conference (under 6 N.Y. Comp. Codes R. & Regs. 624.4(b)) in February 2014 to gather further information before issuing a permit or holding an adjudication hearing. At the Special Issues Conference attorneys from the Natural Resources Defense Council represented 12 upstate New York municipalities while attorneys from Earthjustice represented Gas Free Seneca, one of the NGOs organizing against the gas storage project. The Seneca Lake Pure Waters Association also participated. On the side supporting the Crestwood-Midstream project were attorneys representing the New York LPG Association, the Propane Gas Association of New England, and the United Steel Workers Union International.21
Key issues debated at the conference included compliance (or lack thereof) with sections of state law that require, among other things, analysis of noise impacts and impacts of a development on community character before a permit can be issued.22 In particular, the opposition challenged the applicant’s impact analysis—which focused on the immediate and neighboring properties—for being too narrow in geographic scope given the fact that the site was on the lakeshore. Attorneys for Fingerlakes Storage asserted that there was little precedent for such a geographically expansive noise impact analysis. Attorney Deborah Goldberg (Earthjustice, representing Gas Free Seneca) asserted that for a development on the shore of a lake, the “community” impacted should include a broader geographic net. In particular, residents and businesses across the lake from the gas storage and associated trucking and rail activity should have been included in the impacts analysis because of the way noise carries across water. The presiding administrative law judge indicated that an expanded geographic scope of analysis in this case would not be illogical and noted that none of the examples the applicant put forth as precedent included developments on the shore of a water body. This also seems consistent with the five-mile radius impacts analysis required by FERC for Arlington’s methane storage project.
At the time of writing, the NYDEC has not yet issued a decision. The Town of Reading has stayed further consideration of the site plan until receipt of the NYDEC’s decision. Signaling opposition, every county bordering Seneca Lake with the exception of Schuyler County (where the Town of Reading sits) has passed a resolution opposing the development, as has the City of Watkins Glen, which is the Schuyler County seat. Every week more citizens are arrested for blocking the gates of Crestwood Midstream facility at the former U.S. Salt property.
Defining the “Community” in Community Impacts Analysis
Environmental Impact Assessments in both the FERC and NYDEC processes include an assessment of impacts on the community. But defining community is difficult and context-sensitive. The utility of the New York State Environmental Quality Review Act’s mandate to consider “community character” has been critiqued because of inconsistent application, largely stemming from a lack of clear statutory definition of what constitutes “community character” worthy of protection in land use decisions .23 The renewed strength of New York’s Home Rule Law after the high court rulings supporting local bans on hydraulic fracturing may indeed have strengthened the ability of opponents to challenge projects creating negative impacts on community character. These cases upheld the municipalities’ local ability to control community character under New York’s Home Rule doctrine.
The extended consideration of the LPG storage proposal—and the willingness of the NYDEC to hold a Special Issues Conference—provided opportunities for community members from around the entirety of Seneca Lake, as well as the greater Finger Lakes region, to assert concerns about local and global impacts of the proposal. If the Reading, New York, LPG project is any indicator, the NYDEC may be willing to entertain logical arguments for definitions of community that are more expansive than those seen previously. In this instance, the business coalitions, the agricultural industry, and the municipalities who depend on Seneca Lake as a supply of drinking water are all potentially impacted communities of the storage project, connected to and dependent on the lake and its environs for health and economic stability, even though they are not physically adjacent to the proposed development. Given the rapid increase in midstream infrastructure to support oil and gas development in this country, the role of community character—at least in New York—may be of significant consequence for protection of natural resources and local and regional economies.
Endnotes
1. The author would like to thank Vera Neinast for her assistance with this article.
2. Wallach v. Town of Dryden, 16 N.E.3d 1188 (2014).
3. Howard A. Zucker & Sally Dreslin, A Public Health Review of High Volume Hydraulic Fracturing for Shale Gas Development, New York State Department of Health. Dec. 17, 2014, available at http://www.health.ny.gov/press/reports/docs/high_volume_hydraulic_fracturing.pdf.
4. FERC, Order Issuing Certificate and Confirming Market-based Rates, Arlington Gas Storage, LLC, No. CP13-83-000 (May 15, 2014), available at https://www.ferc.gov/whats-new/comm-meet/2014/051514/C-1.pdf. The NYDEC asked to have cooperating agency status in April 2013. Id. at n.15.
5. Correspondence between author and Vera Neinast (on file with author, Sept. 21, 2015).
6. For more information about the natural gas pipeline and storage regulatory process, see Sudeen Kelly & Vera Neinast, Getting Gas to the People, in Beyond the Fracking Wars: A Guide for Lawyers, Public Officials, Planners and Citizens (E.L. Powers & B.E. Kinne eds., 2013).
7. 15 U.S.C .§ 717 et seq.
8. FERC, Strategic Plan FY 2104-2018, at 1 (2014), at http://www.ferc.gov/about/strat-docs/FY-2014-FY-2018-strat-plan.pdf.
9. FERC, Order Issuing Certificate and Confirming Market-based Rates, Arlington Gas Storage, LLC, No. CP13-83-000 (May 15, 2014), at https://www.ferc.gov/whats-new/comm-meet/2014/051514/C-1.pdf.
10. Letter to James F. Bowe, Jr., King & Spalding, LLP, from FERC, re Environmental Data Request, Arlington Gas Storage, LLC, No. CP13-83-000 (May 14, 2013). Appended to letter from Deborah Goldberg, Managing Attorney, Earthjustice to Lisa Schwartz, NYDEC (May 15, 2014), available at http://earthjustice.org/sites/default/files/Seneca_Lake_Cumulative_Impacts_Letter.pdf.
11. See supra note 7.
12. J. H. Caffrey, The Substantive Reach of SEQRA: Aesthetics, Findings and Non-Enforcement of SEQRA’s Substantive Mandate, 65 Alb. L. Rev. 393 (2001).
13. See letter from Kevin Bernstein, Attorney at Bond Schoeneck and King, PLCC, to Don McDonough, Environmental Analyst, NYDEC Division of Environmental Permits (Oct. 23, 2009), available at http://www.dec.ny.gov/docs/legal_protection_pdf/20091023bsktodec.pdf.
14. The Fingerlakes LPG, LLC permit application documents and related decisions and correspondence are archived on the NYDEC website at http://www.dec.ny.gov/permits/71619.html.
15. NYDEC, Arlington Gas Storage, LLC, LPG Storage Facility, Draft Environmental Impact Statement (Aug. 2011), at 15, at http://www.fingerlakeslpgstorage.com/pdfs/1_Final_DSEIS_Text/Finger_Lakes_DSEIS.pdf.
16. NYDEC, Fingerlakes LPG Storage, LLC, Notice of Deadlines for Petition for Party Status and Special Issues Conference (Oct. 22, 2014), at http://www.dec.ny.gov/enb/99319.html.
17. N.Y. Envtl. Conserv. Law § 8-109.
18. NYDEC, Commissioner’s Determination of Lead Agency, Finger Lakes LPG Storage and Distribution Facility, Town of Reading, Schuyler County (Feb 2, 2010), at http://www.dec.ny.gov/docs/legal_protection_pdf/20100202seqrleaddesig.pdf. The relevant local laws are Town Law §§ 274-a (Site Plan Review) and 274-b (Special Permits); Town of Reading Local Law No. 1 (1995).
19. The dSEIS was supplemental to the 1992 Generic Environmental Impact Statement for Oil, Gas, and Solution Mining.
20. Combined Notice of Completed Application, Notice of Acceptance of a Draft Supplemental Environmental Impact Statement and Notice of Public Hearing, dated Aug. 24, 2011, copy attached to correspondence between Kevin Bernstein of Bond Schoeneck and King, LLC and David Bimber, NYDEC (Sept. 28, 2011), at http://www.dec.ny.gov/docs/legal_protection_pdf/20110928bsktodecaff.pdf.
21. NYDEC Special Issues Conference on Crestwood LPG Storage Facility (Feb. 12, 2013), Horseheads, New York.
22. See 6 N.Y. Comp. Codes R. & Regs. part 617 (2015).
23. Katherine Ghilain, Improving Community Character Analysis in the SEQRA Environmental Impact Analysis: A Cultural Landscape Approach to Defining the Elusive “Community Character,” 17 N.Y.U. Envtl. L. J. 1194 (2009).