Delaware Trumps New Jersey in LNG Proceeding

Although the 2005 Energy Policy Act expanded FERC’s authority over LNG facilities, yesterday’s Supreme Court decision in New Jersey v. Delaware reminds us that the states, through their powers under federal statutes like the CZMA still hold the final cards.  That’s true even when a state uses its power to block construction of a facility that a neighboring state might want.

So how does the New Jersey v. Delaware case, which resolved a riparian rights dispute between Delaware and New Jersey relate to FERC?  Here’s the backstory.  In November 2006, FERC approved a conditional certificate for the Crown Landing LNG Facility in this Order on Rehearing. The facility would be sited on the Delaware River in New Jersey, but the loading pier would extend 1455 feet into Delaware’s portion of the river. As such, FERC conditioned commencement of construction of the facility on receipt of a CZMA certification from Delaware. Eventually, Delaware denied the CZMA certification finding that the LNG facility constituted an industrial use not compatible with Delaware’s coastal zone plans.

In the meantime, New Jersey disputed that Delaware had authority to approve the LNG facility. New Jersey contended that the terms of a 1905 Compact between the two states conferred upon New Jersey exclusive jurisdiction over all riparian improvements commencing on its shores. To resolve the impasse, New Jersey asked the Supreme Court to exercise its original jurisdiction over disputes between states.
As I summarized here:

In a majority opinion authored by Ginsburg (Stevens concurred, Breyer recused), the Court found that the Compact did not give New Jersey exclusive jurisdiction over all riparian improvements commencing on its shores. As such, Delaware had overlapping authority to regulate those portions of a structure that extended into its waters, so long as it did not impede “ordinary and usual exercises” by riparian owners in the New Jersey. The Court found that an LNG terminal “goes well beyond ordinary or usual.” Thus, the Compact allowed Delaware to block the facility.

On paper, FERC may have exclusive authority to certify LNG facilities. But for all of FERC’s powers, it can’t override a state’s power under a federal statute like CZMA to disapprove an LNG facility — even where its neighbor supports the project. For that reason, states that welcome construction of LNG facilities must find a way to contain development within their borders or risk veto of the project — not by FERC, but by a fellow state.