Natural gas pipeline/photo courtesy of Iakiv Pekarskyi/Shutterstock.com

The New Jersey Department of Environmental Protection erred by issuing permits for a gas pipeline project without granting an adjudicatory hearing to opposing parties, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential opinion.

The NJDEP erroneously concluded that state regulations establishing the availability of such hearings are pre-empted by federal law, the appeals court said Wednesday in Township of Bordentown v. Federal Energy Regulatory Commission.

The decision provides a helping hand to the townships of Bordentown and Chesterfield and the Pinelands Preservation Alliance in their battle against expansion of a Transcontinental Gas Pipe Line Co. facility.

It also comes one day after a different Third Circuit panel dismissed an environmental group's challenge to approval granted by the Commonwealth of Pennsylvania to another Transcontinental pipeline project.

Bordentown, Chesterfield and the Pinelands group brought an appeal to the Third Circuit from orders of the Federal Energy Regulatory Commission and the NJDEP. The petitioners contend that FERC violated a federal law governing approval and construction of interstate pipelines by arbitrarily and capriciously approving Transco's proposed project. They also claim the NJDEP violated New Jersey law by improperly issuing permits to Transco and denying the petitioners' request for a hearing, based only on the NJDEP's belief that state regulations establishing availability of such hearings were pre-empted by federal law.

Circuit Judges Michael Chagares, Morton Greenberg and Julio Fuentes ruled that the petitioners' challenges to FERC's orders lack merit. But they agreed that the NJDEP was incorrect in its interpretation of relevant federal law, thus rendering unreasonable its basis for denying the hearing.

The panel didn't address the petitioners' substantive challenges to the permits.

Bordentown sought an adjudicatory hearing on NJDEP's grant of a Freshwater Wetlands Individual Permit and Water Quality Certificate to the project in March 2017. Chesterfield and the Pinelands group later joined the challenge. In April 2017, Bordentown sought an adjudicatory hearing on a “dewatering permit” issued by the NJDEP.

Bordentown asserted that it had standing under state law to challenge the permits as a third party because it had a particularlized property interest affected by the project, given that part of it would be built on land owned by Bordentown and acquired by Transco through eminent domain based on authority granted by FERC.

In August 2017, the NJDEP denied the requests for an adjudicatory hearing, citing the Third Circuit's 2016 decision in Delaware Riverkeeper Network v. Secretary of Pennsylvania Department of Environmental Protection for the reasoning that federal authorities have exclusive jurisdiction over interstate natural gas projects, and that under the Natural Gas Act of 1938, the state administrative hearing process provided for in the New Jersey Freshwater Wetlands Protection Act is not applicable to permits for interstate natural gas projects.

The appeals court found no merit in the petitioner's challenges to FERC's finding that the pipeline project is needed to satisfy public convenience. Chagares, writing for the court, said the petitioners' argument “misapprehends the purpose of the analysis, the focus of which is on the objective existence of a market need, not the precise mechanics of fulfilling that need.”

FERC reasonably relied on the New Jersey Natural Gas Company's binding contract to use all of the project's capacity as evidence of the market need and proof that the project will be self-supporting, the appeals court said.

Petitioners also claimed that FERC erred by approving construction on property subject to regulation under New Jersey's Green Acres Act without first obtaining state approval, but there is no requirement that FERC pass through the procedural limitations that the state places on land acquired under that act, the panel said.

The petitioners fared better on the issue of the denied hearings. They said the state “misunderstood the scope of the Natural Gas Act's assignment of jurisdiction to the federal Court of Appeals.”

“Because this erroneous view was the only articulated reason for its denial of the petitioners' hearing request, we will remand to the NJDEP for reconsideration of the petitioners' request and to give the NJDEP the opportunity to in the first instance address the petitioners' substantive challenges to the provision of the permits,” Chagares wrote.

The Attorney General's Office, which represents the NJDEP in the case, didn't provide comment on the ruling.

John Gillespie of Parker McCay in Mount Laurel, who represents Chesterfield, and Paul Leodori of Medford, who represented the Pinelands Preservation Alliance, declined to comment.

Jennifer Borek of Genova Burns in Newark, who represented Bordentown, did not respond to a request for comment.