New York State Clears the Way for Permitting
LNG-Refueling Stations
The
New York State Department of Environmental Conservation (DEC) announced on
January 28, 2015 that it has finalized a new regulatory regime to allow the
construction of liquefied natural gas (LNG) refueling stations in all parts of
the State except for New York City. Under the agency’s final Part 570
regulations, the facilities would be allowed to store up to 70,000 gallons of
LNG, which DEC believes is sufficient to incentivize the construction of new
refueling stations.
As
we noted in previous blogs, DEC added the 70,000 gallon limit based upon safety
concerns raised in response to the agency’s initial set of proposed regulations
– which lacked any capacity limitation. DEC anticipates that virtually all of
the refueling stations would be used by long-haul tractor trailers to address
the growing percentage of the nation’s trucking fleet that is converting to
LNG. As the New York Times reported, manufacturers and retail
chains have pressed for transportation of their goods by natural gas vehicles
and companies like U.P.S. and FedEx have started exploring the option. Clean Energy Fuels, which boasts a system of over
500 LNG and CNG refueling stations around the country, would appear to be a
leading candidate for constructing refueling stations in New York.
Based
upon the large volume of comments submitted in opposition
to the new regulations, it would not be surprising if these regulations are
subject to a court challenge. Although many of the comments
in opposition are focused on the connection between LNG refueling
stations and the purported evils associated with natural gas extracted by high
volume hydraulic fracturing (HVHF), it is likely that a court would defer to
the agency’s appraisal of the environmental impacts associated with the new
regulatory regime. Indeed, DEC pushed back in its Regulatory Impact
Statement (RIS) by noting that less than 1 percent of the natural gas used in
the State would be devoted to transportation for the foreseeable future; i.e.,
the regulation would have no impact on HVHF and vice versa. Moreover, the
Governor recently announced that DEC would ban HVHF in New York.
Thus,
any environmental impacts related to HVHF would not occur within the State
anyway, and New York’s environmental review statute, SEQRA, does not require
consideration of out-of-state impacts when promulgating regulations. On a
global perspective, the intent of the regulations is to incentivize long-haul
tractor trailers to convert from diesel – one of the dirtiest transportation
fuels – to clean burning LNG. Thus, the agency appropriately concluded
that the regulations would be beneficial from an air pollution
perspective. Furthermore, any site-specific environmental impacts would
be addressed in the permit proceeding authorized by the regulations.
A
likely area of dispute would be whether DEC appropriately
interpreted the part of the statute specifying that the “intrastate
transportation” of LNG must be along certified routes. ECL §
23-1713(1). The statute requires the New York State Department of
Transportation to establish those intrastate routes pursuant to certain specified
criteria, including “the capability of municipal fire departments” to address
LNG explosions. Id. § 23-1713(2).
It
is this language – added in 1976 – that has prevented the two agencies from
adopting regulations based upon the belief that some municipalities would
object to being included along a certified intrastate transportation route, and
thus would not cooperate in certifying that its fire departments were capable
of addressing LNG explosions. Indeed, this language highlights how
out-of-date the statute is, given the number of far-more dangerous chemicals
that are legally and safely transported over state roads every day.
To
address this requirement, DEC has interpreted the term “intrastate
transportation” narrowly to include only transportation of LNG that is
initiated in the State. In other words, if the transportation is
initiated in another state, it would considered “interstate” (rather than
“intrastate”) transportation, and thus not be covered under ECL §
23-1713(1).
Based
upon this interpretation, Part 570 simply prohibits the intrastate
transportation of LNG. Thus, the route associated with any LNG delivered
by truck to a LNG refueling station located in New York would have to be
initiated out-of-state. DEC explained in the RIS that its interpretation
in this respect “dovetails” with the significant federal involvement in this
area.
For example, DEC notes that the federal Pipeline and Hazardous
Materials Safety Administration (part of USDOT) and the U.S. Coast Guard have
authority over safety standards for LNG storage and transportation in
interstate commerce.
Thus,
without saying explicitly, the agency appears to be concerned that requiring
trucks in “interstate” commerce to use specific in-state routes would either be
preempted by federal law or violate the Commerce Clause under Article I to the
United States Constitution. DEC thus prudently interpreted the statute in
a manner that assures the regulations are constitutional by omitting interstate
transportation from its scope.
The
effective date of DEC’s final Part 570 regulations is February 26, 2015.
DEC’s final rulemaking documents can be found here: http://www.dec.ny.gov/regulations/93069.html
.