STATE OF NEW YORK PUBLIC SERVICE COMMISSION At a session of the Public Service Commission held in the City of Albany

on September 21, 2012 COMMISSIONER PRESENT: Garry A. Brown, Chairman CASE 11-T-0401 - Application of Bluestone Gas Corporation of New York, Inc. for a Certificate of Environmental Compatibility and Public Need Pursuant to PSL Article VII for the Construction and Operation of a 20" Natural Gas Gathering System and Dehydration and Compression Facilities, in the Town of Sanford, Broome County, and Request for Approval of Environmental Management and Construction Standards and Practices. CASE 12-G-0214 Petition of Bluestone Gas Corporation of New York for an Order Granting Certificate of Public Convenience and Necessity and Establishing a Lightened Regulatory Regime.

ORDER ADOPTING THE TERMS OF A JOINT PROPOSAL AND GRANTING CERTIFICATE OF ENVIRONMENTAL COMPATIBILITY AND PUBLIC NEED AND CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (Issued and Effective September 21, 2012)

INTRODUCTION This order hereby grants to Bluestone Gas Corporation of New York (Bluestone), as conditioned by the terms and conditions of a Joint Proposal and this order, a Certificate of Environmental Compatibility and Public Need to construct a natural gas gathering facility and a Certificate of Public Convenience and Necessity to allow Bluestone to exercise road use and crossing rights granted to it pursuant to the road use agreement with the Town of Sanford. Bluestones request for

lightened regulation will be addressed separately.

CASES 11-T-0401 and 12-G-0214

The parties have adequately addressed issues identified in opposition to Bluestones application and petition. Furthermore, Bluestones application and petition, as

conditioned by the Joint Proposals terms and conditions, satisfies the required statutory findings. PROCEDURAL BACKGROUND On July 27, 2011, Bluestone filed an application pursuant to Public Service Law (PSL) Article VII, 121-a(3) (the Article VII application), seeking a Certificate of Environmental Compatibility and Public Need (Certificate). Bluestone proposes

to construct an approximately 9.5 mile natural gas gathering facility located entirely within the Town of Sanford, New York (Facility). 1 In its Article VII application, Bluestone states

that its Facility will aggregate and dehydrate natural gas produced from wells currently under development in Susquehanna County, Pennsylvania and deliver that natural gas to the interstate Millennium Pipeline located in Broome County, New York. On May 23, 2011, prior to the filing of Bluestones Article VII application, the Commission instituted a separate proceeding, an investigation regarding the premature clearing of portions of Bluestones proposed right-of-way (ROW) for this Facility. 2 More specifically, Department of Public Service staff

began investigating significant tree clearing that had occurred, apparently in preparation for the construction of Bluestones

As discussed below, the project has been modified so that the Facility is approximately 9.2 miles. Case 11-G-0221, Proceeding on Motion of the Commission to Investigate the Acts and Practices Involving the Staking and Clearing of the Site of a Major Utility Transmission Facility in the Town of Sanford, Broome County Before the Obtaining of a Certificate of Environmental Compatibility and Public Need, Order Instituting Proceeding (issued May 23, 2011). 2

CASES 11-T-0401 and 12-G-0214

utility gas transmission facility without Bluestones having obtained the required Certificate. Regarding Bluestones Article VII application, on August 10, 2011, the Secretary issued a deficiency letter requesting additional information to aid the Commission review of the Facility and directing Bluestone to serve notice of its Article VII application by regular mail upon all owners of property, as shown on the latest real property tax assessment records for the affected municipalities, within 150 feet of the edge of the proposed Facilitys ROW. On August 18, 2011, the Commission issued an Order Requiring Hearing extending the 60-day timeframe for rendering a decision under PSL 121-a(7). 3 As noted in that Order, the

Commissions primary purpose in requiring a hearing was to determine whether certain staking and tree clearing activities that occurred would affect the determinations that the Commission must make in this Article VII proceeding. 4 Bluestone responded to the deficiency letter on September 6, 2011. On September 21, 2011 the Secretary issued a

letter to Bluestone stating that its application was in compliance with PSL 121-a(3) and the Commissions application filing regulations. However, the case was held in abeyance

while the investigation case regarding tree clearing proceeded. The Commission resolved the investigation case by an order dated April 19, 2012, adopting the terms of an Offer of Settlement from Bluestone. The order requires Bluestone to

provide $400,000 for a public benefit fund to benefit the public in the Town of Sanford or Broome County in satisfaction of all issues raised in the investigation.
3

Case 11-T-0401, Bluestone Order Requiring Hearing (issued August 18, 2011) (Order Requiring Hearing). Id. at 2. 3

CASES 11-T-0401 and 12-G-0214

Following resolution of the investigation proceeding, the parties in this Article VII proceeding agreed to pursue settlement negotiations with the intent of resolving all outstanding issues. Consequently, on May 4, 2012, Bluestone

filed a Notice of Impending Settlement Negotiations pursuant to 16 NYCRR 3.9, and the parties commenced negotiations. In addition to Bluestone and Department of Public Service trial staff (Staff), five parties have intervened in the Article VII proceeding: the New York State Department of

Environmental Conservation (DEC), the New York State Department of Agriculture & Markets (Ag & Mkts), DMP New York, Inc. and Laser Northeast Gathering Company, LLC (collectively, Laser), the Delaware Highlands Conservancy (DHC), and Ms. Elisabetta Iaboni. 5 On May 10, 2012, Bluestone filed a related petition for an order granting a Certificate of Public Convenience and Necessity (CPCN) under PSL 68 to allow Bluestone to exercise road use and crossing rights pursuant to a road use agreement between Bluestone and the Town of Sanford (68 Petition), a necessary separate approval. In the same petition, Bluestone

requested an order granting lightened regulation. On June 8, 2012, Bluestone proposed to address the road crossing component of its Petition case together with the Article VII proceeding. Therefore, on June 8, 2012, Bluestone

filed a second Notice of Impending Settlement Negotiations pursuant to 16 NYCRR 3.9, for the Article VII case and the related Petition case. On June 26, 2012, Bluestone filed a revised PSL 68 Petition that eliminates the proposal to install compression

DHC and Ms. Iaboni were granted party status by a ruling issued July 11, 2012, and consequently did not participate in negotiations until after that date. 4

CASES 11-T-0401 and 12-G-0214

units or dehydration equipment at the proposed Sanford Station. The parties held several settlement meetings from May through early August 2012. THE JOINT PROPOSAL On August 9, 2012, Bluestone filed a Joint Proposal (dated August 8, 2012), that purports to resolve all issues regarding the Article VII application and the licensing aspect of the 68 Petition (the Joint Proposal). The signatory parties

to the Joint Proposal are Bluestone, Staff, DEC, Ag & Mkts, and DHC (collectively, the Signatory Parties). The Joint Proposal

includes proposed terms and conditions for the Article VII Certificate, the 68 CPCN, and a proposed water quality certification. The Signatory Parties contend that approval of

the Facility, as conditioned by the terms and conditions of the Joint Proposal, satisfies the required statutory findings, minimizes potential adverse environmental impacts, protects water quality and environmental resources, and ensures public safety. Regarding the two remaining parties in this proceeding, Laser participated in the settlement discussions, and Ms. Iaboni participated in the later-stage settlement discussions, but they did not sign the Joint Proposal. Iaboni has filed a statement in opposition to the Joint Proposal. The Joint Proposal provides substantial changes to the Project. For example, Bluestone has withdrawn its request for Ms.

approval of compression and dehydration equipment at the interconnection point with Millennium Pipeline. The

reconfigured facility is approximately 0.03 miles shorter than originally proposed due to elimination of the compression and dehydration equipment. The Facility is an approximately 9.2

mile natural gas gathering line and metering station located

CASES 11-T-0401 and 12-G-0214

entirely in the Town of Sanford, Broome County, New York. Bluestone has agreed to seek future Commission approval in the event compression facilities are needed. With the filing of the Joint Proposal, the Signatory Parties have requested that the Commission waive the hearing requirement in these proceedings. 6 request. No party has opposed this

The Signatory Parties request is hereby granted.

Description of the Project The Facility consists of two components: a) the

Sanford Station, a tie-in site to the existing Millennium Pipeline in the Town of Sanford, Broome County, New York where approximately 0.2 miles of station piping, gas monitoring equipment and an interconnection with Millennium Pipeline will be installed, and b) approximately 9.04 miles of 20 steel pipeline in Broome County, New York from the Sanford Station to a point on the New YorkPennsylvania border where the pipeline will cross into Susquehanna County, Pennsylvania. The maximum allowable operating pressure of the system will be 1440 psig. 7 The overall facility, including infrastructure in New York and Pennsylvania (Overall Facility), will provide an outlet for the production of natural gas from a minimum of 30,000 acres being developed by affiliates of Southwestern Energy in Susquehanna County, Pennsylvania. The Overall Facility will be

capable of delivering natural gas from these wells to two interstate pipelines: the Millennium Pipeline, which will be

interconnected to the Facility in New York, and the Tennessee Gas Pipeline, which will be interconnected to the Overall Facility in Pennsylvania.
6

Though compression will not be

As noted below, Ms. Iaboni was provided with an opportunity to request an evidentiary hearing, but declined to do so. A measurement of pressure, above atmospheric pressure, expressed as pound-force per square inch, measured by a gauge. 6

CASES 11-T-0401 and 12-G-0214

required initially at the Sanford Station, Bluestone anticipates that, in the future, it may need compression to meet the needs of growth in regional production. The Sanford Station will be located on a heavily wooded 108.2 acre site in the Town of Sanford, Broome County, New York. The facilities at the Sanford Station site will

provide the monitoring and measurement of the volume and quality of the gas delivered into the Millennium Pipeline and will provide overpressure protection and flow control. 8 Environmental Management & Construction Standards & Practices As part of the Article VII Application, Bluestone submitted a project-specific set of Environmental Management & Construction Standards & Practices (EM&CS&P). However,

Bluestone has withdrawn its request for approval of this project-specific EM&CS&P. Instead, Bluestone has certified that

it will construct, operate and maintain all Facility fuel gas transmission lines in accordance with the Department of Public Services Revised EM&CS&P, 9 except to the extent specific measures and techniques are indicated in the terms and conditions of Joint Proposal, Appendix C.

The Sanford Station will contain the following facilities: pig receiver trap, filter separator, pressurized wastewater tank (for any liquids that might accumulate in the filter separator), meter skid and canopy, regulator skid and building, gas quality building, flare, emergency generator, and interconnecting piping and controls. Case 06-T-1383, Notice of Intent Filed by Fortuna Energy Inc. to Construct a Natural Gas Gathering Pipeline, Approximately 7,225 feet of 4" Steel Coated Pipeline, Located in the Town of Bradford in Steuben County, Order Granting Certificate of Environmental Compatibility and Public Need and Approving Environmental Management and Construction Standards and Practices (issued December 7, 2006).

CASES 11-T-0401 and 12-G-0214

THE PARTIES STATEMENTS IN SUPPORT AND OPPOSITION The Signatory Parties state that the Joint Proposal represents a compromise package of concessions and agreements that address and reasonably resolve all of the principal issues of concern among the Signatory Parties, as well as a number of ancillary issues. The Joint Proposal includes a comprehensive

set of proposed Certificate Conditions, the Signatory Parties assert, that require Bluestone to work in close cooperation with Staff and DEC (as well as Ag & Mkts) on a wide range of issues pertaining to construction and operation of the Facility. These

issues include: stream and wetlands crossings, invasive species control, timber clearing, soil erosion, construction on steep slopes, protection of existing utilities, hydrostatic testing, blasting, ROW restoration, and ongoing operation and maintenance procedures. Staff supports adoption of the comprehensive terms and conditions of the Joint Proposal because it represents a reasonable compromise of the parties diverse interests and is in the public interest. Staff states that the Facility is

needed to provide New York markets with access to a nearby supply source of natural gas, because both the Millennium and Tennessee pipelines serve New York markets. The Facility may

also introduce increased competition in the local natural gas commodity market, Staff asserts, because local production will displace higher cost supply from traditional supply regions located out of state. In conclusion of its support for the

Joint Proposal, Staff states that the Joint Proposals terms and conditions would authorize the construction and operation of the Bluestone Facility subject to specific conditions and safeguards that will protect the natural environment and the people of the State.

CASES 11-T-0401 and 12-G-0214

Ag & Mkts supports the terms and conditions of the Joint Proposal, noting that its terms and conditions regarding routing, construction, and mitigation techniques will result in the protection, to the extent practicable, of the resources impacted. Ag & Mkts concludes that the Facility, as conditioned

by the Joint Proposals terms and conditions, represents the minimum adverse impact on agricultural lands, considering the state of available technology and other pertinent considerations. In supporting the Joint Proposals terms and conditions, DEC states that its concerns regarding invasive species, stormwater management, wetlands impacts, and other potential adverse environmental impacts have been satisfactorily addressed by the Joint Proposals terms and conditions. DEC was

particularly involved in the development of the Stormwater Pollution Prevention Plan, the Stream and Wetlands Crossing Tables, and the Invasive Species Management Plan. Ms. Iaboni filed a statement in opposition to the Joint Proposal. Ms Iaboni opposes the Joint Proposal on four

grounds: (1) Bluestone must provide financial assurances that it has the financial capabilities to construct, own, and operate the Facility; (2) the terms and the conditions of the Joint Proposal misstate the requirements of the Eminent Domain Procedures Law (EDPL), (3) there is a lack of need for Bluestone to use Ms. Iaboni's property, and (4) the Commissions authorization of this Facility will have a negative effect upon the ability of landowners in or adjacent to the ROW to obtain the value of mineral deposits on their property. In addition,

Ms. Iaboni notes that Bluestone, in its initial application, Exhibit G, misstated that Ms. Iaboni was finalizing agreement with Bluestone regarding the proposed ROW on her property. Iaboni argues that although this misstatement was brought to Ms.

CASES 11-T-0401 and 12-G-0214

Bluestones attention, Bluestone continues to leave this misstatement in place in the revised Exhibit G. Earlier in the proceedings, Ms. Iaboni was provided with an opportunity to request an evidentiary hearing, at which she could have presented evidence that the Facility was not needed or not in the public interest. But, through her counsel, Ms. Iaboni declined to request an evidentiary hearing. 10 In their reply statements in support, Bluestone and Staff have responded to Ms. Iabonis opposition to the Facility. Ms. Iabonis opposition and the replies of Bluestone and Staff are discussed further, below. 11 PUBLIC COMMENTS Several public comments have been received in support of and in opposition to Bluestones proposed facility. Those

commenters in support of the Facility (19 commenters) represent a broad range of interests, including local landowner coalitions, government representatives at the state, county and local level, labor groups, and natural gas industry representatives. These commenters cite factors including

employment opportunities during Facility construction and secondary effects including population growth for the community, increasing school enrollment, and increasing the local tax base. Those commenters in opposition to the Facility (23 commenters) include local residents and landowners. These

commenters cite concerns about potential adverse health effects, environmental impacts, compliance with Federal Energy Regulatory

10

See, Cases 11-T-0401 and 12-G-0214, Bluestone Gas Corporation of New York, Inc., Ruling on Schedule (issued August 15, 2012). Laser, the only other party in these proceedings that is not a signatory to the Joint Proposal, did not file any statement. 10

11

CASES 11-T-0401 and 12-G-0214

Commission (FERC) oversight, encroachment upon landowners property rights, and loss of property value. On August 31, 2012, the Delaware Riverkeeper Network (DRN) submitted a filing to the Commission in opposition to the comprehensive Joint Proposal filed in these proceedings. DRN is

not a party to this proceeding, and consequently, the Judge has treated the DRN filing as a public comment in opposition to this proceeding. The DRN comments identify five points of opposition According to the DRN, before the

to the Joint Proposal.

Commission approves the Joint Proposal: (1) Bluestone should be required to seek a formal FERC order exempting Bluestone from FERC jurisdiction; (2) the Commission should impose a certificate condition limiting Bluestones water body crossing construction techniques; (3) Bluestone should consult with the Delaware River Basin Commission (DRBC); (4) no decision on the Joint Proposal should be made before the state makes a final decision on whether to allow high-volume hydraulic fracturing in New York State; and (5) a cumulative environmental impact study should be conducted. On September 4, 2012, the Judge provided the parties with an opportunity to reply to DRNs comments. DHC and

Bluestone were the only parties to submit a reply to DRNs comments. The DRN comments and the replies of DHC and Bluestone

are addressed in the discussion, below. DISCUSSION, FINDINGS, AND CONCLUSION Certification Standards In rendering a decision on an application pursuant to Article VII, the Commission may not grant a certificate for the construction or operation of a major utility transmission facility unless the Commission finds and determines: the basis of the need for the facility; the nature of the probable environmental impact; 11

CASES 11-T-0401 and 12-G-0214

that the location of the line will not impose an undue

hazard to persons or property along the area traversed by the line; that the location of the facility as proposed conforms

to the applicable state and local laws and regulations issued thereunder; 12 and, that the facility will serve the public interest, convenience, and necessity. 13 The concept of environmental compatibility and public need requires that the Commission protect environmental values, and take into account the total cost to society of such facilities when making a decision on whether the Commission should grant an Article VII certificate. 14 In rendering this

decision, the Commission cannot look at any single aspect of an application in a vacuum; rather the Commission must consider the totality of all of the relevant factors. In rendering a decision on an application pursuant to PSL 68 for approval of the exercise of a franchise, the Commission may not grant a CPCN unless the Commission finds and determines:

12

All of which are binding upon the Commission, except that the Commission may refuse to apply any local ordinance, law, resolution or other action or any regulation issued there under or any local standard or requirement which would be otherwise applicable if the Commission finds that, as applied to the proposed facility, such is unreasonably restrictive in view of the existing technology, or of factors of cost or economics, or of the needs of consumers whether located inside or outside of such municipality. PSL 126(1)(f). PSL 121-a(7), making applicable to a major transmission facility which extends less than 10 miles (except as described in PSL 121-a(2)) the findings of PSL 126(1)(a), (b), (e), (f), and (g). See Chapter 272 of the Laws of 1970, 1, Legislative Findings. 12

13

14

CASES 11-T-0401 and 12-G-0214

the applicant has filed a duly certified copy of the

charter of its incorporation; the applicant has filed a verified statement of the

president and secretary of the corporation, showing that it has received the required consent of the proper municipal authorities; and that such exercise of the right, privilege, or

franchise is necessary or convenient for the public service. FERC Jurisdiction DRN asserts that Bluestone is required to first obtain a FERC declaratory ruling disclaiming federal jurisdiction before this Commission can consider Bluestones application under Article VII or the related Petition. Bluestone responds

that DRN has cited no law or regulation providing such a requirement. Furthermore, the record in this proceeding shows

that Bluestone discussed the issue of federal jurisdiction with FERC staff, who agreed with Bluestones assessment that the proposed Facility is a gathering line not subject to FERC jurisdiction. 15 This jurisdictional assessment relies, in part,

upon a FERC Order issued March 5, 2010, to Laser Marcellus Gathering Company, LLC, in which FERC concluded that, because the proposed Laser gathering system will perform a gathering function, it is therefore exempt from FERC jurisdiction. 16 FERC

staff agreed with Bluestones assessment that its Facility is analogous to the Laser gathering facility. Based upon these

15

See Case 11-T-0401 Bluestone Response to August 10, 2011 Request for Additional Information from Staff, at Response D (filed September 7, 2011) (providing a summary of Bluestones consultation with FERC staff). This response was incorporated into the record as part of Joint Proposal, Appendix A. Laser Marcellus Gathering Company, LLC, FERC Docket No. CP10-35-000, 130 FERC 16,162; 2010 FERC LEXIS 410 (2010).

16

13

CASES 11-T-0401 and 12-G-0214

facts in the record, Bluestones Facility is exempt from FERC jurisdiction as it will perform a gathering function. The Overall Pennsylvania and New York Facility The Joint Proposals terms and conditions provide that before commencing construction of the Facility, Bluestone must file with the Commission the requisite approvals to construct the Pennsylvania portion of the facility. The Pennsylvania

facility currently consists of a pipeline that will extend south from the New York-Pennsylvania border to a receipt point near New Milford, Pennsylvania. In the future, Bluestone plans to

construct additional gathering infrastructure to connect its interstate facility to the Tennessee Pipeline at an interconnection point in Pennsylvania. Requiring Bluestone to

demonstrate approval to construct both a receipt point and delivery point ensures that the Facility can be placed in service once constructed. * * *

Pursuant to PSL 68 and 121-a(7), referencing 126(1), the following constitutes the Commissions specific findings and determinations with respect to the Article VII certificate and the CPCN. The Basis of the Need for the Facility Bluestone has entered into binding, long-term agreements with Southwestern Energy Service, an affiliate of Southwestern Energy, to provide gathering and dehydration services for its production currently under development in Susquehanna County, Pennsylvania. Southwestern Energy Service has committed to Bluestone a minimum of 875 BCF 17 from approximately 30,000 acres in Susquehanna County. This

17

Billion Cubic Feet; one BCF is approximately equal to one trillion BTUs. (British Thermal Units).

14

CASES 11-T-0401 and 12-G-0214

commitment shows the magnitude of the potential benefit of the Facility to New York markets and other northeastern US markets. The Overall Facility includes an interconnection to the Millennium Pipeline in New York and an interconnection to the Tennessee Pipeline in Pennsylvania. As a result, the Overall

Facility will provide New York markets with access to a nearby supply of gas, because both the Millennium and Tennessee Pipelines serve New York markets. An increase of regional natural gas supply has the potential to mitigate volatility in the price of natural gas, provide a greater level of security of supply than New York has been able to achieve previously, in the event of potential disruptions in other traditional supply regions, as has occurred during hurricane events in the Gulf Coast basins. An increase

of regional natural gas supply also will reduce the need for costly interstate pipeline capacity. Although the Facility will

not directly serve any retail customers, markets that can be accessed via the Millennium Pipeline and pipelines that connect to it include the service territories of National Grid, Orange and Rockland Utilities, Inc., Corning Natural Gas Corporation, Central Hudson Gas and Electric Corporation, and New York State Electric and Gas Corporation, as well as electric generators that purchase gas directly from producers and marketers. All of

these benefits accrue from the development of infrastructure such as the proposed Facility. Due to the high potential for a large amount of economically recoverable reserves from the Susquehanna County region, Bluestone anticipates a significant number of wells connecting to the Overall Facility in the next few years. Access to natural gas supply from the Susquehanna County region via the Facility is likely to immediately introduce increased competition in the New York natural gas commodity market because

15

CASES 11-T-0401 and 12-G-0214

such regional production will displace higher cost supply from more distant traditional supply regions. Other public benefits of the Facility include longterm economic benefits to the Town of Sanford. The Town of

Sanford will collect substantial annual property taxes on the Facility. Bluestone estimates that between 250 and 300

temporary construction-related jobs will be created during the construction phase of Facility, and that once the Facility is operational, several permanent jobs will be created. Additionally, Bluestone states, third-party services required to support the ongoing Facility operations will also provide economic benefits to the area. In its comments, DRN contends that no decision on the Joint Proposal should be made before New York makes a final decision on whether to allow high-volume hydraulic fracturing in New York State. However, this Facility is not premised upon

authority for high-volume hydraulic fracturing in New York. Instead, Bluestone proposes this Facility based upon its contract with Southwestern Energy Production Company, a producer of the wells in Pennsylvania that will connect to the Facility. In sum, the need for this Facility is not dependent upon any additional New York production. 18 As the Commission has

recently stated in another similar proceeding, although currently a moratorium is in effect on use of high-volume hydraulic fracturing in New York State for drilling horizontal wells, no such moratorium exists for the review of pipeline siting applications. 19 Therefore, DRNs contention that the

Commissions decision in these proceedings should await a final

18 19

Joint Proposal, Paragraphs 13 through 15. Case 10-T-0350, Application of DMP New York, Inc. and Laser Northeast Gathering Company, LLC, Order Granting Certificate of Environmental Compatibility and Public Need (issued February 22, 2011) at 59 (Laser Order). 16

CASES 11-T-0401 and 12-G-0214

decision on whether to allow high-volume hydraulic fracturing in New York State must be rejected. The Nature of the Probable Environmental Impacts 1. Land Use Impacts to land use on lands adjacent to the proposed Facility are anticipated to be minimal and temporary in nature. The operation of the Facility will not significantly impact the current agricultural, rural residential, or commercial land use in the area. Land uses along the proposed pipeline corridor

include undeveloped forested land or woodlands, active agriculture, open land, land subject to a conservation easement, pasture land, public road rights-of-way, abandoned agricultural land, and rock pits and rock quarries. The majority of the

route is undeveloped, characterized with mixed forests, deciduous forest, evergreens forest, and scrub or shrub forested vegetation. 20 No public lands lie adjacent to the proposed route. Private recreational land use exists along the proposed pipeline just south of Laurel Lake Road on a large tract of parkland used for the Boy Scouts Tuscarora Scout Reservation operated by the Baden Powell Council. The entire proposed pipeline is within

the agricultural zoning district in the Town of Sanford, with the exception of the Boy Scout camp parcel between milepost (MP) 6.8 and MP 8, 21 which is zoned as special zoning district. Bluestones ROW agreement with the Boy Scouts includes a No Build window from June 15 to August 31. However, the Boy

Scouts have indicated a willingness to consider accommodating Bluestones construction schedule outside this window, subject to certain limitations and conditions.
20 21

See generally, Application 2.5.1. Milepost 0.0 is the northernmost portion of the Facility and MP 9.0 is at the Pennsylvania border.

17

CASES 11-T-0401 and 12-G-0214

The pipeline crosses New York State certified Agricultural Districts in Broome County between MP 0.9 and 2.7, between MP 3.6 and 3.8, and also within portions of the aboveground Facility site. No long-term impacts on farming,

agricultural activities, or the designated Agricultural District are anticipated as a result of this project. permanent impact to agricultural land use. Due to the rural nature of the area, private residences in proximity to the route are scattered and infrequent. Only nine residences are located within 500 feet of There will be no

the proposed ROW. 2. Topography, Geology, and Soils Construction and operation of Facility will not have a significant adverse impact upon topography, geology or soils. 22 The proposed Facility is located within one Major Land Resource Area (MLRA) recognized by the United States Department of Agriculture, Natural Resources Conservation Service (NRCS): the Glaciated Allegheny Plateau and Catskill Mountains. 23 Approximately 2% of the total pipeline route crosses hydric soils. Hydric soils may indicate the presence of Approximately 68% of the

wetlands or agricultural drain tiles.

route crosses soils that are classified as farmland of statewide importance. Farmlands of statewide importance include lands

other than prime farmland, which have a good combination of physical and chemical characteristics for the production of crops.

22 23

See Article VII Application, 2.5.1. MLRAs are geographically associated land resource units, usually encompassing several thousand acres, characterized by a particular pattern of soils, geology, climate, water resources, and land use. This MLRA is designated as MLRA 140 by the NRCS.

18

CASES 11-T-0401 and 12-G-0214

Topography in the Facility area ranges from rolling hills to steep slopes. Slopes range from 0 to 80%, although

approximately 95% of the proposed route traverses slopes that are 25% or less. 3. Vegetative Communities There are no Old Growth Forest or Sugar Bush areas in the vicinity of the proposed Facility. Additionally, there are

no trees listed in the Registry of Big Trees in New York State in the vicinity of the proposed Facility route. 4. Fish and Wildlife Resources and Invasive Species a. Migratory Birds The Facility route has been evaluated for migratory bird habitat and flyways, and the project area is within the Atlantic Flyway. routes. b. Rare, Threatened and Endangered Species No known habitats of federal or State-listed threatened or endangered plant and animal species have been identified for the Facility. c. Invasive Species Invasive species are non-native species that can cause harm to the environment or to human health. the route, invasive species are prevalent. In some areas along During field However, it is not within one of the major fly

surveys, the following plant invasive species were identified: Black locust (Robinia pseudoacacia), multiflora rose (Rosa multiflora), Japanese knotweed (Fallopia japonica), and reed canary grass (Phalaris arundinacea). Plan. 24 The terms and conditions

of the Joint Proposal include an Invasive Species Management Bluestones compliance with the Invasive Species

Management Plan will minimize the introduction and spread of invasive species within the Facility project area.
24

Joint Proposal, Appendix C, Attachment 5. 19

CASES 11-T-0401 and 12-G-0214

5.

Hydrology Wetlands and Streams a. Waterbodies The proposed Facility route includes a total of 34

waterbody crossings.

A number of the streams and rivers crossed

provide habitat for a range of aquatic species including freshwater mussels, invertebrates, fish, and other freshwater aquatic biota. The Facility was developed to minimize the

environmental impacts associated with stream and river crossings, and the Joint Proposals terms and conditions provide waterbody crossing methods. 25 Use of best management practices

identified in the EM&CS&P will result in only temporary impacts to the waterbodies. Furthermore, the Joint Proposals terms and

conditions provide that once the crossing has taken place, the area will be graded and seeded, if necessary, to restore the stream and its banks to their former condition. As noted in the Joint Proposal, waterbody crossing methods will be in compliance with the Commission-approved EM&CS&P and the Crossing Methods set forth in Proposed Certificate Conditions. 26 Most waterbodies will be crossed via

the open cut method, utilizing either a dry crossing, flume, or dam and pump method. The Joint Proposals terms and conditions

provide that the method chosen will depend on whether each stream is dry or wet at the time of crossing, and on the amount of flow at the time of crossing. 27 Proposed Certificate Condition 1(h1) provides that during open cut crossings the dam and pump method shall be used to prevent sedimentation and interruption of stream flow during construction. 28
25 26 27 28

This certificate condition was developed in

See the EM&CS&P and Joint Proposal, Appendix C, Attachment 4. Joint Proposal, Appendix C, Attachment 4. Joint Proposal at 16-17. Id. at Appendix C, p. 8. 20

CASES 11-T-0401 and 12-G-0214

consultation with Staff and DEC, and it provides limitations on the amount of downstream turbidity from construction activity. DRN contends that the Joint Proposal should not be approved absent a condition that expressly prohibits use of the wet cut waterbody crossing method. The terms and conditions

of the Joint Proposal, including Condition 1(h1), provide that Bluestone will utilize only dry crossing methods, as DRN advocates in its comments. Consequently, DRNs request for a

condition expressly prohibiting the use of wet cut waterbody crossing method is unnecessary because the Joint Proposals terms and conditions already preclude use of wet cut methods. b. Waterbody Classifications It is the policy of New York State to preserve and protect lakes, rivers, streams, and ponds. All waters of the

State are provided a class and standard designation based on existing or expected best usage of each water or waterway segment. 29 The Joint Proposals terms and conditions provide that cold water in-stream construction activity must be completed between May 15 and September 30. Stream crossings will be

conducted pursuant to the United States Army Corps of Engineers (USACE) Nationwide 12 permit 30 and the Water Quality Certification. 31 Stream crossings conducted outside of these

windows will utilize bored crossings to minimize impacts to aquatic resources. The four streams that the Facility (or related access roads) will cross are protected waterbodies. These four streams

29 30

See Title 5 Article 15 of the Environmental Conservation Law. The USACE Nationwide 12 permit is a general permit regulating utility line activities that have minimal environmental effects, issued pursuant to Clean Water Act 404. See Joint Proposal Appendix D. 21

31

CASES 11-T-0401 and 12-G-0214

will be crossed by the pipeline and two of the streams also will be crossed by an access road. The Facility route in New York is located within the Delaware River Basin Watershed and the Susquehanna River Basin Watershed. The majority of the Facility is located within the Delaware River Basin Watershed 32 and a small portion of the Facility is in the Susquehanna River basin watershed. 33 Each of

these respective watersheds has a regulatory commission that has been charged with monitoring water withdrawals within the watershed. 34 DRNs contention that Bluestone must obtain approval of the DRBC regarding construction of this pipeline misapprehends the record in these proceedings. By letter dated

April 3, 2012, the DBRC advised Bluestone that the Facility is not reviewable under the DRBCs Rules of Practice and Procedure. The terms and conditions of the Joint Proposal provide that Bluestone will not withdraw or discharge any water from the Delaware River Basin watershed for its Facility. 35 Instead,

Bluestone will obtain the water needed for hydrostatic testing from locations outside of the Delaware River Basin. Consequently, DRNs contentions that Bluestone must obtain approval of the DRBC for this Facility and that Bluestone must submit a water withdrawal application to the DRBC, must be rejected. No adverse impacts to watersheds are anticipated.

32 33

From MP 0.0 to 8.7. From MP 8.7 to 9.0; i.e., 0.3 miles. No water will be withdrawn from or discharged to the Susquehanna River Basin watershed within New York for the Facility. The DRBC and the Susquehanna River Basin Commission. Joint Proposal, Paragraph 42. 22

34 35

CASES 11-T-0401 and 12-G-0214

c. Wetlands Wetlands surveys of the Facility area were performed following review of the U.S. Fish & Wildlife Service, National Wetlands Inventory (NWI) and New York State Freshwater Wetlands Maps. Two NWI wetland complexes are located within the survey No state-regulated wetlands are located area for the Facility. 36

within the survey area for the Facility. The total acreage of wetlands that occur within the Facility footprint is 1.72 acres. be permanently impacted. 37 0.003 acre to 0.17 acre. The USACE, in accordance with Clean Water Act 404, allows compensatory mitigation for unavoidable wetland impacts. Such impacts must be minimized, and finally compensated for, to the extent appropriate and practicable. The 1.25 acres of However, only 1.25 acres will

These wetlands range in size from

wetlands permanently impacted by Facility construction will be mitigated at a 2:1 ratio, a total of 2.5 acres of mitigation at an off-ROW location. Bluestone has prepared a compensatory mitigation plan for the Project. 38 Mitigation monitoring of the compensatory wetlands will occur for a period of three to five years, as required by USACE. 39 d. Springs and Wells One State-listed well has been identified within 500 feet of the proposed construction work areas for the Facility. However, to ensure all springs and wells along the route have been identified, Bluestone contacted individual landowners in
36 37 38 39

At MPs 3.11 and 6.31. See Joint Proposal, Paragraph 44. See Joint Proposal, Appendix A, Exhibit 11. A ROW Restoration Plan that contains provisions for restoring impacted wetlands is included with the Article VII Application as Exhibit FF.

23

CASES 11-T-0401 and 12-G-0214

proximity to the Facility route.

Eleven landowners identified

well locations approximately 500 feet from proposed construction areas. 6. No adverse impacts to springs or wells are anticipated. Aesthetic, Visual and Recreational Resources In Broome County, the topography ranges from rolling hills to steep slopes. No officially designated visual

resources such as scenic areas, roads, vistas and overlooks are present in the Facility project area. During the planning and

pipeline phase of Facility, efforts were made by Bluestone to minimize visual impacts where practicable including expanding distances of the ROW from residences, altering the ROW route to improve the visual aesthetics of road crossings, and the avoidance of forested areas. However, Bluestone identified the Route 17 crossing as having an aesthetic effect as viewed from other portions of the Route 17 roadway. As a result, Bluestone identified two

alternative routes to ascend the hillside south of Route 17. The alternative routes utilize the existing topography and land features to mitigate the visual effect of the ROW as seen from the highway. The terms and conditions of the Joint Proposal The

incorporate the preferred alternative in the proposed ROW.

selected alternative utilizes points of inflection, or changes in the direction of the pipeline route, on each side of Route 17 to minimize the visual impact of the ROW and the sight lines created by the ROW. Construction activities will be short-term, and any long-term changes will be relatively minor. Potential visual

impacts during construction will be temporary due to the fact that activities will be limited to pipeline ROW and access roads. Only nine residences are located within 500 feet of the

ROW that could potentially have a view of the construction activities. No known cultural or public recreational areas have

24

CASES 11-T-0401 and 12-G-0214

been identified that would have a view of the construction activities associated with the pipeline. Long-term facilities will include the small utility buildings located at the Sanford Station, at the northern beginning of the line. The existing woods that will remain

undisturbed around the perimeter of the Sanford Station will provide natural screening of the Sanford Station site. Consequently, the Sanford Station structures will not be visible at the nearest residences and will not have a substantial impact on the existing scenic quality of the area. Potential visual

impacts during construction of the Sanford Station will be minimized because the activities will be limited primarily to the access road and a footprint for the Sanford Station facilities not to exceed 10.5 acres. The nearest residence to the Sanford Station is more than 2,100 feet away from the station. Construction activities

associated with the above-ground Sanford Station facilities or the completed Sanford Station facilities will not be within view from this residence. The above-ground facilities will be

located in the center of an existing wooded tract that will act as a natural buffer to provide visual screening. Additionally,

the existing vegetation and terrain elevation differences will further minimize any potential visual impacts. 7. Cultural Resources Five inventoried archaeological resources have been identified within two miles of the proposed Facility project area. Four of the five were identified as part of a previous

Phase I archaeological survey undertaken for the Millennium Pipeline corridor. wooded slopes. All five inventoried sites occur on steep,

Due to the presence of these archaeological

resources, the northernmost mile of the Facility and the proposed Sanford Station are delineated as occurring within an

25

CASES 11-T-0401 and 12-G-0214

archeologically sensitive area.

The remainder of the proposed

alignment south to the New York-Pennsylvania border occurs outside any archeologically sensitive areas. The New York Office of Parks, Recreation, and Historic Preservation (OPRHP) has indicated that the Facility, as currently designed, will have no effect on cultural resources listed in the National Register of Historic Places (NRHP) or eligible for inclusion in the NRHP. No additional cultural

resources work will be required for the Facility. Additionally, in the event that cultural resources are discovered during the construction of the Facility, Bluestone has prepared an Unanticipated Discovery Plan. 40 This plan

provides procedures to follow if previously undiscovered archaeological resources or human remains are identified during soil sampling (excavation, boring, and coring) or during pipeline construction. 8. Noise and Traffic Impacts The Application identifies the potential visual, noise, and traffic impacts associated with construction and operation of the Facility. An ambient sound survey and noise impact evaluation has been conducted for the Facility. 41 Vehicular and pedestrian traffic impacts during construction will be minimal due to the rural nature of the pipeline route. To mitigate construction impacts, Bluestone

will use, as a marshaling yard, the property owned by State Line Resources LLC located at 180 Gulf Summit Road in Sanford. This

property is located approximately one-half mile from the rightof way. The Bluestone contractor will maintain at least one

lane of traffic open for detours around construction at road

40 41

Joint Proposal, Appendix A, Exhibit 12. See Application Exhibit C-13. 26

CASES 11-T-0401 and 12-G-0214

crossing locations, where practical, in accordance with Bluestones Traffic and Transportation Management Plan. 42 A private access road will be built from Pazzelli Road into the site to the area where the Sanford Station Facilities will be installed. During construction, intermittent truck

traffic will occur on the roads leading to the station site. Such traffic will consist of dump trucks, concrete trucks and freight delivery trucks. In addition, during the construction

period, daily traffic to and from the site will not exceed 30 vehicles used by workers employed at the site. After startup of

the Facility, the average number of vehicles accessing the Sanford Station during regular operation will not exceed five per day. To control for dust impacts due to increased traffic

during construction, Bluestones contractor will apply water as a dust control measure, as necessary. Traffic during normal operations of the pipeline and Sanford Station will consist of small commercial vehicles. Traffic will enter and exit the site between 7:00 a.m. and 7:00 p.m. Traffic flow will occur at regular intervals and will

be infrequent. Noise impacts expected during construction will be minimized by the rural and forested nature of the pipeline route. Typical construction noise impacts associated with the

Facility will occur as a result of construction activities, including limited excavation, earth moving, and possible blasting. Construction activities will be conducted from To mitigate construction noise, construction

7:00 a.m. to dusk.

equipment manufacturers sound muffling devices will be used and kept in good repair. Once the Facility is operational, noise levels at the Facility will be minimal.
42

No compression or similar

See Application Exhibit EE. 27

CASES 11-T-0401 and 12-G-0214

mechanically driven equipment will be located at the Sanford Station site. The only sources of noise associated with the

station include the occasional venting of gas as required for periodic maintenance and noise from the flow control valves, which are enclosed in an acoustically insulated building. 43 As

described in the noise analysis, the operation of the station has an estimated Leq sound level that is well below Commission precedent of 40 dBA at the residences nearest to the Facility. 44 Blasting activities are addressed separately, below. 9. Air Permitting The Facility poses only a small potential for air emissions from the equipment that will be located at the Sanford Station. Such equipment includes the flare, pressurized On February 1, 2012,

wastewater tank, and emergency generator.

Bluestone obtained a Minor Source State Air Facility Registration, issued by DEC. The terms and conditions of the Joint Proposal provide that all of the incoming gas to Sanford Station will be odorized. Bluestone periodically will vent the wastewater

storage tank and blowdown emissions through an enclosed flare, to mitigate any odors from the natural gas odorizing additive. The primary purpose of the flare is safe combustion of natural gas that is blown down (i.e., vented to the flare) to depressurize equipment for periodic maintenance. mitigate the release of odors from the station. 10. Road and Railroad Crossings Seven public road crossings are planned for the construction of the Facility, including William Law, School House, Tennent, County Road 28, NYS Route 17, and Laurel Lake The flare will

43 44

See Application Exhibit C-13. See Application Exhibit C-13, Noise Study. 28

CASES 11-T-0401 and 12-G-0214

Road.

Bluestone has received a road crossing permit for NYS One railroad will be crossed by Facility. 45

Route 17. All roads

and the railroad may be crossed using the open-cut crossing or conventional bore methods. 11. Workspace Application Exhibit F provides the location for all workspace along the proposed pipeline route. The workspace

acquired from a landowner will be used as set forth in the terms of the ROW agreement with that landowner. 12. Blasting Blasting may be utilized along the Facility ROW. Bluestones Blasting Plan serves as an overall guidance document for blasting on the Facility route. 46 Bluestone plans to blast

only in the areas where the rock cannot be economically excavated by conventional means. The primary type of blasting

will be ditch excavation, but blasting may also be required during the ROW grading operation. The Joint Proposals terms

and conditions provide that if blasting activities are required, Bluestone will retain the services of a duly licensed, bonded blasting contractor. In the event that blasting is required during construction, Bluestones blasting contractor will provide advance notice to all applicable and potentially-affected entities, including adjacent property owners, local municipalities, and other entities that may be required to be notified, as set forth in the terms and conditions of the Joint proposal and applicable regulations, as described in the

45 46

See Application Exhibit AA. See Joint Proposal, Appendix C, Attachment 3. 29

CASES 11-T-0401 and 12-G-0214 Bluestone Blasting Plan. 47

Bluestones contractor will provide

such notice at least 48 hours prior to each blasting event 13. Cumulative Impacts In its comments, DRN asserts that currently, no local, state, or federal body is reviewing the cumulative impact of pipeline construction activity in the Marcellus Shale Region, and therefore, the Commission should require a cumulative environmental impact analysis to be conducted for this Facility. To the extent DRN requests that the Commission consider future development of Marcellus Shale Region in New York, DRNs request is overbroad. DRN is essentially asking the

Commission to conduct the type of review that might be appropriate if Bluestone were proposing several projects in New York, or if the Commission were considering a generic policy for development of natural gas gathering lines in the Marcellus Shale Region of New York. 48 Here, the Commission is considering

a single facility and any substantial modification of this Facility would be subject to further Commission review. These proceedings have included a comprehensive review of all potential impacts of this Facility. As conditioned by

the Joint Proposals terms and conditions, any adverse environmental impacts from the Facility will be minimal and local, not regional, in nature. inconvenience. 49 Such impacts are primarily

limited to temporary, construction-related disturbance and Bluestone has agreed to several construction-

related measures and guidelines, in an effort to minimize

47 48

Within mile radius from the pipeline centerline. In its reply to DRNs comments, DHC affirms its support for Bluestones Facility, but also advocates consideration of cumulative impact analysis in the review of future similar projects and encourages the development of a method for cumulative impact review for such projects. See Joint Proposal, Paragraph 19, et seq.

49

30

CASES 11-T-0401 and 12-G-0214

adverse impacts to all property owners on or adjacent to the proposed ROW. These measures and guidelines in the Joint

Proposal include utilizing this Commissions generic EM&CS&P, a Blasting Plan, an Invasive Species Management Plan, and a Stormwater Pollution Prevention Plan. Other measures include

the elimination of proposed temporary construction workspace in two separate areas along the proposed ROW, thereby avoiding unnecessary impacts to two water bodies, and specific construction techniques in four locations along the proposed ROW to minimize the time that open trenches are present on steep slopes, thereby reducing the occurrence of soil erosion that typically results from construction on steep slopes. Under these circumstances, all impact analysis necessary in this case has been conducted in order for the Commission to reach the decision to issue the Certificate and CPCN. Location of Line Will Not Impose Undue Hazard The Facility will be designed, constructed, tested, operated, and maintained in accordance with the provisions of State and federal regulations. 50 These regulatory standards

require, among other things, the x-ray of 10% of the welds, because the Facility is located entirely within a Class I location under U.S. Department of Transportation (DOT) regulations. However, the Joint Proposals terms and conditions

provide that Bluestone will exceed these minimum requirements and perform nondestructive radiographic testing on 100% of the welds along the entire length of the pipeline. Furthermore,

Bluestone has designed the pipeline to meet the more stringent design requirements of a DOT Class II location for all DOT Class I locations.
50

16 NYCRR Part 255 and 49 CFR 192 (Transportation of Natural and Other Gas by Pipeline: Minimum Federal Safety Standards). 31

CASES 11-T-0401 and 12-G-0214

Additional safety measures include: Conformance with Gas Safety Regulations 51 to ensure

appropriate cover of the pipeline for all situations; Odorization and monitoring of the Facility on a

continual basis; Bluestones membership in Dig Safely New York as an Bluestones contractors, prior to

excavator and operator.

construction of the Facility, will make the required calls to the One Call System to have all utilities staked prior to commencement of construction; Real-time monitoring of the Facility 24 hours a day,

365 days a year, once the Facility is constructed and in service, by Bluestones gas control personnel, as described in Bluestones Operations and Maintenance Plan; and, Ensuring the gas delivered into the Facility will meet

the gas quality specifications of the Millennium pipeline, including monitoring on a real-time basis the quality of gas coming into all receipt points of the Facility and the quality of gas at the Sanford Station. Bluestone has the ability to

shut in the Facility at the Sanford Station or at any receipt point if gas quality does not meet Millenniums gas quality standards. Conditioning or processing of the production gas, to

the extent necessary, will be done in Pennsylvania upstream of the Facility. Such conditioning or processing may include the

use of water separation and dehydration facilities located upstream of the Facility. Conformity to Applicable State and Local Laws The record in this proceeding shows that if a Certificate and CPCN were to be granted subject to the terms and conditions of the Joint Proposal, including the proposed

51

See 16 NYCRR Part 255.327. 32

CASES 11-T-0401 and 12-G-0214

certificate conditions, Bluestone will be required to adhere to the substantive provisions of State laws and regulations in the construction and operation of the Facility. Similarly,

notwithstanding Bluestones exemption from the jurisdiction of local municipalities, the Facility will be constructed in a manner that conforms to all substantive local laws and ordinances. Incorporation Bluestone has satisfied the requirements of PSL 68 by filing with the Secretary a copy of Bluestones Certificate of Incorporation pursuant to the Transportation Corporations Law (filed with the N.Y.S. Department of State on April 21, 2010) and a Certificate of Good Standing (issued on May 7, 2012 by the N.Y.S. Department of State).

Franchise from the Proper Municipal Authorities With its 68 Petition, Bluestone has filed a copy of the executed Road Use Agreement with the Town of Sanford. 52 In

this instance, Bluestone is seeking approval of the exercise of a franchise, the Road Use Agreement, between Bluestone and the Town of Sanford. 53
52

PSL 68 provides that a gas corporation seeking a CPCN must file with the Commission a verified statement of the president and secretary of the corporation, showing that it has received the required consent of the proper municipal authorities. Here, in lieu of such a filing, Bluestone has filed a copy of the Road Use Agreement with the Town of Sanford. In providing the agreement itself, Bluestone has substantially complied with this statutory filing requirement. As used in PSL 68, the term franchise includes consents to use municipal property. See Case 10-G-0462, Petition of DMP New York, Inc. and Laser Northeast Gathering Company, LLC, Order Granting Certificate of Public Convenience and Necessity and Providing for Lightened Rate Making Regulation (issued February 22, 2011) at 5. 33

53

CASES 11-T-0401 and 12-G-0214

The Facility will occupy and traverse under roads owned by the Town of Sanford. On October 6, 2011, a Road Use

Agreement was executed by Bluestone and the Town of Sanford. Public Interest, Convenience, and Necessity The discussion of the public interest, convenience, and necessity begins by addressing Ms. Iabonis remaining issues. 1. Bluestones Financial Capability Ms. Iaboni contends that Bluestone has not provided satisfactory assurance of its financial capabilities. Bluestone

is financing the Facility internally through its parent company, DTE Pipeline Company. DTE Pipeline Company is a wholly owned Bluestones management team subsidiary of DTE Energy Company. 54

comprises individuals that have successfully developed other, similar projects. Joint Proposal, Paragraph 121 describes Bluestones management team and financial capability, as follows: 121. Bluestone is an experienced and financially viable developer and operator of energy projects. Bluestone's management team experience includes the design and construction of several pipelines, including the Vector Pipeline, the Millennium Pipeline, and the Dawn Gateway Pipeline. Bluestone is financing the [Facility] internally through its parent company, DTE Pipeline Company. DTE Pipeline Company is a wholly owned subsidiary of DTE Energy Company ("DTE Energy"). DTE Energy is a publicly traded company listed on the New York Stock Exchange with $8.5 billion in equity market capitalization (as of June 30, 2011), $26 billion in assets (as of year end 2011) and in 2011 had $8.9 billion in revenues and $711 million in net income. DTE Pipeline Company's assets include a 26.25 percent in the Millennium Pipeline, located primarily in New York and a 40 percent interest in the Vector
54

See Joint Proposal, Paragraphs 120 and 121. 34

CASES 11-T-0401 and 12-G-0214

Pipeline that runs between Chicago, Illinois and Ontario, Canada. DTE Energy, through its subsidiaries, also is an experienced developer, builder, owner and operator of natural gas gathering systems having developed built and operated over 840 miles of gathering pipeline providing over 500 MMDth/day (peak) of throughput. Thus, the [Facility] is economically feasible, and, as described in this Joint Proposal, environmentally compatible, safe and in the public interest. In addition, Bluestone has entered into a binding, long-term agreement with Southwestern Energy Services (SES), an affiliate of Southwestern Energy, to provide gathering and dehydration services for SESs production currently under development in Susquehanna County, Pennsylvania. SES has committed to Bluestone a minimum of 875 BCF from approximately 30,000 acres in Susquehanna County. successfully drilled. 55 Furthermore, the Road Use and Crossing Agreement between Bluestone and the Town of Sanford requires Bluestone to obtain and deliver to the Town a bond in the amount of $1 million before starting construction under any town road. The Several wells that will

ultimately deliver natural gas to the Facility have already been

bond ensures that any damage to town roads will be repaired. The financial strength and development experience of DTE Energy, the contractual commitments from SES, and the requirement of the road use and crossing bond adequately establish Bluestones financial capabilities to construct, own, and operate the Facility. In sum, the record in these proceedings shows that Bluestone is an experienced and financially viable developer and operator of energy projects.

55

Joint Proposal, Paragraphs 14 through 16. 35

CASES 11-T-0401 and 12-G-0214

2.

Eminent Domain Procedure Law Considerations Ms. Iaboni asserts that the Joint Proposal incorrectly

states the requirements of the Eminent Domain Procedure Law (EDPL) and that the Commission should require Bluestone to comply with the provisions of the EDPL.

Joint Proposal, paragraph 116 provides that: Bluestone agrees that it is prohibited by law from commencing construction of the Facility on any parcel of property if it has not obtained the necessary property rights for such parcel of property. Joint Proposal, Appendix C, Paragraph 1(q), provides: At least 5 days prior to the commencement of construction, Bluestone shall file with the Secretary all landowner easement agreements or other documents evidencing the right to access such property. For property that will be acquired pursuant to the Eminent Domain Procedure Law, Bluestone shall file with the Secretary proof that it has filed a Notice of Pendency and a Petition pursuant to New York Eminent Domain Procedure Law 402 at least 5 days before the commencement of construction. Ms. Iaboni asserts that the phrase necessary property rights in Joint Proposal, Paragraph 116, is vague. Reading

Appendix C and Paragraph 116 together, Ms. Iaboni is concerned that, after filing a Notice of Pendency and a Petition pursuant to EDPL 402, Bluestone will assert it has the necessary property rights to enter and commence construction of the Facility on lands subject to eminent domain proceedings, before a Judicial determination of property rights has been reached under the EDPL. Both Bluestone and Staff contend that the Joint Proposals terms and conditions provide that Bluestone must obtain necessary property rights through negotiation with the

36

CASES 11-T-0401 and 12-G-0214

landowner, or through eminent domain proceedings, before it can enter upon or construct the facility on that property. Staff states that the purpose of Paragraph 1(q) is to ensure that before the start of construction on any parcel of property, Bluestone will demonstrate, by a filing with the Secretary, either that it has already acquired the necessary property rights or that it will shortly be acquiring such rights through eminent domain, for the entire length of the Facility. Bluestone and Staff contend that the terms and conditions of the Joint Proposal are sufficiently clear and Ms. Iabonis concerns are misplaced. However, the language of the Joint Proposal, Appendix C, Paragraph 1(q) can be revised to provide further clarification to address Ms. Iabonis concern. Paragraph 1(q)

can be revised to clarify that the filing with the Secretary of a Notice of Pendency and a Petition pursuant to the EDPL for property that will be acquired by eminent domain is a precondition to Bluestones commencement of construction upon the other lands for which Bluestone has obtained landowner easement agreements or other documents evidencing the right to access such property. Bluestone and Staff agree that this is the Therefore,

intended meaning of the terms of the Joint Proposal. the operative language is revised, as follows:

Bluestone shall not begin construction of the Facility until 5 days after it has filed with the Secretary proof that it has filed a Notice of Pendency with the applicable County Clerk and a Petition with a court of competent jurisdiction pursuant to New York Eminent Domain Procedure Law (EDPL) 402 with respect to all properties that will be acquired pursuant to the EDPL. Bluestone shall not begin construction upon any property until 5 days after it has filed with the Secretary documentation evidencing vesting of title to that property, such as a recorded deed or easement obtained from the original landowner 37

CASES 11-T-0401 and 12-G-0214

or an acquisition map filed pursuant to an order of a court of competent jurisdiction pursuant to the EDPL. Also, Ms. Iaboni expresses concerns about the Facilitys potential impacts to mineral deposits, such as bluestone or shale gas, located on and under her property and the property of other owners on or adjacent to the proposed ROW. Bluestone contends that this concern should not serve as a basis for rejecting or modifying the Joint Proposal. Ms. Iabonis

concern, Bluestone asserts, relates to property values. Bluestone contends that to the extent it already has agreements or commitments with other property owners, those property owners have been or will be compensated for the potential disturbances to their property. Such property valuation issues, Bluestone

asserts, are not properly addressed within the scope of an Article VII proceeding. Instead, Bluestone argues, property

valuation issues are properly addressed either through Bluestones negotiation with individual property owners or, failing to reach a negotiated agreement, through an eminent domain proceeding in the courts. In addition, Bluestone contends that Ms. Iaboni has not presented any evidence that the Facility will adversely impact any mineral deposits on her property. In the event that

Bluestone and Ms. Iaboni cannot reach a negotiated agreement regarding the value of Ms. Iabonis land, Bluestone intends to acquire the necessary property rights pursuant to the EDPL. In

that event, Bluestone contends that the EDPL provides Ms. Iaboni with an opportunity to present evidence to a court of law regarding the value of the portion of her land that Bluestone seeks to acquire for the Facility, including interests in mineral rights.

38

CASES 11-T-0401 and 12-G-0214

The Facility property valuation issues identified by Ms. Iaboni are appropriately addressed either through negotiation or in an eminent domain proceeding. 3. Location of Facility on the Iaboni Property Ms. Iaboni asserts that Bluestone does not have to locate the Facility on her property or, in the alternative, does not have to locate the Facility on her property to the extent proposed in the Joint Proposal. Ms. Iaboni states that, whereas

Bluestones original application proposed a route traversing 986 linear feet of her property, the Joint Proposals route proposes traversing 2176 linear feet of her property. This proposed

increase, Ms. Iaboni implies, is not justified and, compared to Bluestones original application, shows that less of her property is needed. In response, Bluestone asserts that its original application, filed pursuant to PSL 121-a(3), provides no basis to support Ms. Iabonis request to re-route the Facility to avoid her property. PSL 121-a(3), Bluestone emphasizes,

expressly exempts applicants seeking to construct a natural gas transmission line of less than 10 miles from providing a description of any reasonable alternate location for the proposed facility, a description of the comparative merits and detriments of each location submitted, or a statement of the reasons why the primary proposed location is best suited for the facility. 56 Moreover, Bluestone contends the record in these proceedings shows that the proposed route is appropriate. The Facilitys original route traversed property that contained several buildings and structures in close proximity to each other, including one building that would have been only 39 feet from the proposed ROW.
56

In addition, the original route

See PSL 121-a(3)(a). 39

CASES 11-T-0401 and 12-G-0214

traversed three invasive species areas.

The current route

completely avoids these structures and invasive species areas. Following consultation with Staff, Bluestone determined that the currently proposed route is better suited to the construction and operation of the Facility than the originally-proposed route. Ms. Iabonis conclusory statement that the Facility should be re-routed is not sufficient to warrant a change to the route of the Facility. Consequently, Ms. Iabonis request that

the Facility be re-routed to avoid, or traverse less of, her property must be rejected. * * *

Certification of the Facility will serve the public interest, convenience and necessity. demonstrated for the Joint Proposal. Broad support has been Among the Signatory

Parties, the state agencies, as well as DHC, have a role to protect the public interest. DHC holds conservation easements

donated to it as a benefit to the general public and states that its role is to protect the public interest. The compromises set forth in the Joint Proposal are reasonable and appropriate. A comparison of Bluestones initial

proposal to the recommendations set forth in the Joint Proposal demonstrates that the settlement results are within the bounds of a litigated outcome. For example, Bluestone initially

proposed to install compression and dehydration equipment at the Sanford Station. Under the Joint Proposals terms and

conditions, Bluestone has withdrawn that request and will seek future Commission approval if or when compression is needed at the Sanford Station. Bluestone agreed that all natural gas

entering the Facility will be dehydrated before entering New York State and will meet the gas quality specifications in Millennium Pipeline's tariff approved by the FERC. In addition,

40

CASES 11-T-0401 and 12-G-0214

Bluestone has modified the angle of crossing at two points of the Route 17 crossing in order to minimize the visual impact of the Facility at those crossing locations. These modifications

to the Facility indicate substantial negotiation among the parties, resulting in reduced adverse impacts in New York. 57 This Facility is needed to transport gas from gas wells in Pennsylvania to the Millennium pipeline in New York. Millennium helps supply local distribution companies in the Southern Tier of New York and in New York City gas markets. Significant local need and demand for the Facility exists. Furthermore, the Facility is expected to produce economic benefits to the local economy during construction and operation of the Facility. The development, financing, construction and operation of the Facility will be on an entrepreneurial basis with no reliance on cost-of-service rates set for Bluestone by either a Federal or State regulatory entity. Furthermore, the Facility

will not be included in utility rate base, either directly or indirectly through a contractual arrangement with a regulated utility. The Joint Proposal is a reasonable compromise of the Signatory Parties diverse interests and positions. The terms

and conditions of the Joint Proposal, including the proposed Certificate Conditions, will maximize the safety of the Facility and will minimize its adverse environmental impacts. Many of

the proposed Certificate Conditions are similar to, or more stringent than, conditions that the Commission recently adopted

57

Public comments opposing the Facility identified concern about health effects and adverse environmental impacts of the compression units and dehydration equipment proposed in Bluestones original application. The current project eliminates these features and therefore addresses these concerns. 41

CASES 11-T-0401 and 12-G-0214

for a similarly-sized natural gas gathering line located in the same geographic region as the Bluestone Facility. 58 Construction

of the Facility will not have any significant permanent adverse impacts. The record in these proceedings demonstrates that the overall sum of the Joint Proposals terms and conditions is in the public interest. The Certificate of Environmental

Compatibility and Public Need and the Certificate of Public Convenience and Necessity are granted, subject to this order, which adopts the terms and conditions of the Joint Proposal, except as expressly modified above. It is ordered: 1. Bluestone Gas Corporation of New York, Inc. is

granted a Certificate of Environmental Compatibility and Public Need, and a Certificate of Public Convenience and Necessity (for road use and crossings) authorizing construction and operation of the Facility, as detailed in the Article VII application, the PSL 68 Petition, and supplemental filings, including the August 8, 2012 Joint Proposal. 2. The terms and conditions of the August 8, 2012

Joint Proposal, submitted by the Signatory Parties and attached to this order, are adopted and made a part of this order, except for Appendix C, Paragraph 1(q) of the Joint Proposal, which is modified as described herein above. 3. Bluestone Gas Corporation of New York, Inc.

shall, within five days after the issuance of the Certificates, submit to the Secretary a verified statement that it accepts and will comply with the Certificates and the conditions placed upon

58

Case 10-T-0350, Application of DMP New York, Inc. and Laser Northeast Gathering Company. LEC, Ordering Granting Certificate of Environmental Compatibility and Public Need, (issued February 22, 2011) at 6989 (Laser Order). 42

CASES 11-T-0401 and 12-G-0214

the Certificates.

Failure to comply with this condition shall

invalidate the Certificates. 4. Bluestone Gas Corporation of New York, Inc. shall

construct, operate and maintain all fuel gas transmission lines less than ten miles long in accordance with the DPSs Revised EM&CS&P, effective December 7, 2006, as adopted in PSC Case No. 06-T-1383, except to the extent specific measures and techniques are indicated in the conditions contained in Appendix C of the Joint Proposal. 5. The maximum pressure of the pipeline shall not

exceed 1,440 pounds per square inch gauge; the Company shall design, construct, test, operate and maintain the pipeline in accordance with the provisions of 16 NYCRR Part 255 applicable to steel transmission lines; the Company shall be a member of the one-call notification system in the area where the line is located and comply with the requirements for excavators and operators for the protection of underground facilities set forth in 16 NYCRR Part 753; at least 30 days before construction commences, the Company shall submit an Appendix 7-D to Gas Safety Staff in Albany; also, the Company shall notify Dig Safely New York of the addition of this pipeline to its system prior to the pipeline in-service date. 6. Bluestone shall perform nondestructive

radiographic testing on 100% of the welds along the entire length of the pipeline. 7. Bluestone Gas Corporation of New York, Inc. shall

integrate and coordinate maintenance of the certified Facility with that of adjacent facilities. 8. Bluestone Gas Corporation of New York, Inc. shall

promptly notify the Secretary in writing should it decide not to complete construction of all or any portion of this Project and shall serve a copy of such notice upon all parties.

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CASES 11-T-0401 and 12-G-0214

9.

The Secretary may extend any deadlines

established by this order for good cause shown. 10. These proceedings are continued.

(SIGNED) Commissioner

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