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 November 2014 and September 2013,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 .