Key Points

  • The Third Circuit held that the arbitrary-and-capricious standard of 5 U.S.C. § 706 governs review of state agency action in petitions brought under 15 U.S.C. § 717r(d)(1).
  • The court declined to borrow the Pennsylvania appellate standard of review, which both the petitioners and Pennsylvania had urged, and reconciled its earlier decisions in Riverkeeper I and Township of Bordentown.
  • The court held that the Pennsylvania Department of Environmental Protection acted reasonably in issuing Transco's Chapter 102 erosion and sediment control permit and Chapter 105 water obstruction and encroachment permits without requiring in-stream sampling data.
  • The court rejected the petitioners' claim under Pennsylvania's Environmental Rights Amendment, reasoning that compliance with the state's environmental regulations almost always satisfies an agency's duty as trustee to act reasonably.
  • The court denied the petition for review of the Pennsylvania Environmental Hearing Board's order.

A federal appeals court on Wednesday rejected an environmental coalition's challenge to Pennsylvania water permits for a Transcontinental Gas Pipe Line Co. pipeline expansion. The court also held that federal courts must review such state permitting decisions under the federal arbitrary-and-capricious standard, not the standard Pennsylvania's own appellate courts apply.

Judge Matey, writing for a Third Circuit panel that included Judges Porter and Ambro, denied a petition brought by the Delaware Riverkeeper Network, the Delaware Riverkeeper, Maya K. van Rossum and Citizens for Pennsylvania's Future. The groups had argued that the Pennsylvania Department of Environmental Protection issued the permits without the water-quality review that state rules require. "But the Commonwealth acted reasonably, so we will deny their petition," Judge Matey wrote.

The ruling settles which standard governs petitions brought under 15 U.S.C. § 717r(d)(1). "So we clear the air and confirm that § 706 supplies the standard to review state action in petitions brought under 15 U.S.C. § 717r(d)(1)," Judge Matey wrote. Section 706 of the Administrative Procedure Act asks whether agency action was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."

The environmental groups and Pennsylvania both had urged the court to borrow the Pennsylvania appellate standard. Under that standard, a court affirms the state's Environmental Hearing Board unless the board committed legal error or a necessary finding of fact lacks substantial evidence. Transco, which the court allowed to intervene in support of the state, argued for the federal test.

Judge Matey wrote that "Prior panel decisions provide only a hazy answer." A 2016 decision in an earlier Delaware Riverkeeper case applied the arbitrary-and-capricious standard to the department's Clean Water Act permitting. A 2018 decision, Township of Bordentown v. FERC, instead looked to state law to set "the prism of our review." The panel read Bordentown's references to state-law deference as describing the independent judgment courts exercise over the meaning of statutes and regulations under the Supreme Court's 2024 decision in Loper Bright Enterprises v. Raimondo.

Under the federal standard, an agency acts arbitrarily when it fails to "examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made," the panel wrote, quoting its own precedent.

The Administrative Procedure Act does not govern state agencies, the court acknowledged. But "this same background principle of judicial review applies to state agencies, even though the APA does not," Judge Matey wrote. The panel limited its holding to cases where "no legislative directive or choice of law rule tasks us with adopting another standard or borrowing the state's standard." Pure questions of law still receive de novo review.

The dispute began in 2021, when Transco sought to expand natural gas transmission through Pennsylvania, New Jersey and Maryland by building two new pipeline segments in Pennsylvania. The Federal Energy Regulatory Commission issued a conditional certificate that required Transco to obtain a water quality certification under Section 401 of the Clean Water Act, a state finding that any discharge into navigable waters will comply with federal and state law.

The department conditioned its certification on state permits for erosion and sediment control and for water obstructions and encroachments in each of two affected counties. It issued those permits about a year later, after public hearings and comment. The groups appealed to the hearing board, and Transco finished construction while that appeal was pending. Gas began flowing through the pipeline in 2024.

After a five-day hearing with 11 witnesses, including seven experts, the board dismissed the appeal. It found no evidence "that there has been any actual environmental harm or degradation as a result of Transco's Project."

Before the Third Circuit, the groups argued that the department should have demanded in-stream water testing before and after construction. They argued that the department issued the erosion and sediment control permit without requiring a separate demonstration under Pennsylvania's antidegradation rules. Those rules require an applicant seeking that permit for watersheds classified as "Exceptional Value" or "High Quality" to show, if no nondischarge alternative is available, that the discharge will "maintain and protect the existing quality of receiving surface waters." The panel found that the regulations leave such data requests to the department's discretion.

"So PADEP considered water quality information, just not the kind that Riverkeepers wanted," Judge Matey wrote, noting that the department had reviewed stream depth, flow type, vegetation and other site conditions. The board had rejected the groups' expert's call for more baseline data as "excessive, a search for knowledge for knowledge's sake alone, without adding any practical value."

The court also upheld the water obstruction and encroachment permits. The board found that the only permanent change was a shift in vegetation from mowing a narrow strip above the pipeline about every three years. Transco offset that mowing with offsite wetland replacements at a ratio above the one-to-one minimum. The groups' wetland expert "did not even state an opinion on whether the Project would have an adverse effect," the panel wrote.

The panel likewise rejected a claim under Pennsylvania's Environmental Rights Amendment, a state constitutional provision that makes state agencies trustees with a duty to "conserve and maintain" public natural resources, including "pure water." "We see no daylight between Riverkeepers' regulatory and constitutional arguments, and so they resolve the same way," Judge Matey wrote. Judge Matey described the constitutional claims as arguments that "merely repackage their prior arguments under a constitutional veil."

The court declined to read the amendment as imposing more detailed requirements on pipeline projects than the state's environmental regulations. Compliance with those regulations, the panel wrote, "almost always meets a trustee's duty to act reasonably." The groups had identified "no special circumstances, only the ordinary balancing of preservation and progress," the court wrote.

Devon E. Guyer of the Delaware Riverkeeper Network represented the petitioners. Michael Braymer represented the Pennsylvania Department of Environmental Protection.

The case was submitted to the panel on June 5. The denial leaves in place the hearing board's dismissal of the groups' appeal and the permits for the project, through which gas has flowed since 2024.