United States: CT Supreme Court Adopts Narrow View Of State Environmental "Actions"

Stephen Humes is a Partner for Holland & Knight's New York office

The Connecticut Supreme Court held recently that when the state decided adopt a Comprehensive Energy Strategy (CES) that mandated the expansion of natural gas pipeline capacity and installation of 900 miles of new natural gas mains to expand service to consumers, environmental review under the state's so-called "baby NEPA" law was not required.

Connecticut is one of 16 states which, along with the District of Columbia, island of Guam, Puerto Rico, and New York City have environmental review statutes modeled after the federal National Environmental Policy Act (NEPA). Often referred to as "baby NEPA" laws, these statutes typically require that an environmental impact evaluation or assessment be conducted whenever a state agency undertakes "actions which may significantly affect the environment" or the state's environmental resources.

At issue in Connecticut Energy Marketers Association v. Department of Energy and Environmental Protection, 324 Conn. 362 (2016), was the statutory interpretation of the phrase "actions which may significantly affect the environment," and whether that phrase applies to conduct undertaken by private parties at the direction of the state or, alternatively, if the phrase is narrowly interpreted to apply only to actions the state itself took with its own budget and its own contractors.

In response to a legislative mandate, the Department of Energy and Environmental Protection (DEEP) conducted a process in 2013 that recommended a significant expansion of the use of natural gas throughout the state. The recommendations were partly based on economics, in response to the lower price of natural gas, and also acknowledged the reduced greenhouse gas emissions of natural gas compared to heating oil.  The DEEP proposal required expanded natural gas pipeline capacity in the state, regulatory changes to enable certain customers to have connections financed by the state's local gas distribution utilities, utility construction of approximately 900 miles of gas mains to provide access to consumers, and incentives for the state's gas utilities to "ramp–up the required construction quickly ...."

Connecticut Energy Marketers Association (CEMA), the plaintiff, a trade association of more than 500 energy marketers who sell gasoline and heating fuel to residential and commercial customers throughout the state, sued DEEP claiming that the natural gas expansion plan would actually increase the amount of natural gas escaping into the atmosphere, thereby exacerbating global warming, and would also have other negative impacts on Connecticut's environmental resources.  CEMA sought a declaratory judgment that the defendants had violated the Connecticut Environmental Policy Act (CEPA) by failing to conduct an assessment of environmental significance or prepare an environmental impact evaluation pursuant to § 22a–1b (c) of the Connecticut General Statutes. The plaintiff also sought an injunction requiring the defendants to perform those acts.  After the Superior Court sided with DEEP and dismissed the complaint, CEMA appealed.

The Connecticut Supreme Court affirmed the dismissal on December 29, 2016, finding that "the most natural reading of the phrase 'proposed to be undertaken by an agency or agencies' is that the proposed or initiated activity that will allegedly have a major impact on the state's environment ultimately must 'be undertaken by an agency or agencies.' "  In the Court's view, activities that are proposed by state actors, but which are ultimately performed by private entities, do not constitute "actions which may significantly affect the environment" for purposes of CEPA.  Since the actions to be undertaken pursuant to the CES are all to be performed by the local gas distribution companies, which are private entities, the state action requirement of the statute is not triggered.

Even though the plaintiff pointed out that "there is '[f]ederal action' within the meaning of [NEPA] not only when an agency proposes to build a facility itself, but also whenever an agency makes a decision which permits action by other parties which will affect the quality of the environment," the Court was not persuaded and read the Connecticut statute more narrowly.  "We conclude, therefore, that the scope of the 'federal actions' that are subject to NEPA is broader than the scope of activities by state actors that are subject to the act.  If the legislature had intended for the term 'actions which may significantly affect the environment' to have the same meaning under the act as the term 'federal actions' has under NEPA, it easily could have expressly provided so in § 22a–1c."

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