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. Bluestone’s request for

lightened regulation will be addressed separately.

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

2

The parties have adequately addressed issues

identified in opposition to Bluestone’s application and

petition. Furthermore, Bluestone’s application and petition, as

conditioned by the Joint Proposal’s 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

On May 23, 2011, prior to the filing of Bluestone’s

Article VII application, the Commission instituted a separate

proceeding, an investigation regarding the premature clearing of

portions of Bluestone’s proposed right-of-way (ROW) for this

Facility.

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.

2

1 As discussed below, the project has been modified so that the

Facility is approximately 9.2 miles.

More specifically, Department of Public Service staff

began investigating significant tree clearing that had occurred,

apparently in preparation for the construction of Bluestone’s

2 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).

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

3

utility gas transmission facility without Bluestone’s having

obtained the required Certificate.

Regarding Bluestone’s 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 Facility’s 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

Commission’s 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 Commission’s 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). 4 Id. at 2.

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

4

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

5 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.

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

5

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. Ms.

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

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

6

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

Description of the Project

No party has opposed this

request. The Signatory Parties’ request is hereby granted.

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 York–Pennsylvania 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. Though compression will not be

6 As noted below, Ms. Iaboni was provided with an opportunity

to request an evidentiary hearing, but declined to do so. 7 A measurement of pressure, above atmospheric pressure,

expressed as pound-force per square inch, measured by a gauge.

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

7

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

Service’s 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.

8 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.

9 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

8

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 Proposal’s 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

9

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 Proposal’s 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 Proposal’s 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 Proposal’s 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 Commission’s

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. Ms.

Iaboni argues that although this misstatement was brought to

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

10

Bluestone’s 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. Iaboni’s opposition to the Facility.

Ms. Iaboni’s 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 Bluestone’s 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).

11 Laser, the only other party in these proceedings that is not a signatory to the Joint Proposal, did not file any statement.

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

11

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

to the Joint Proposal. According to the DRN, before the

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 Bluestone’s 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 DRN’s comments. DHC and

Bluestone were the only parties to submit a reply to DRN’s

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;

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

12

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

that the facility will serve the public interest,

convenience, and necessity.

and,

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 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:

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.

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).

13 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).

14 See Chapter 272 of the Laws of 1970, §1, Legislative Findings.

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

13

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 Bluestone’s 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 Bluestone’s 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

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 Bluestone’s consultation with FERC staff). This response was incorporated into the record as part of Joint Proposal, Appendix A.

FERC

staff agreed with Bluestone’s assessment that its Facility is

analogous to the Laser gathering facility. Based upon these

16 Laser Marcellus Gathering Company, LLC, FERC Docket No. CP10-35-000, 130 FERC ¶16,162; 2010 FERC LEXIS 410 (2010).

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

14

facts in the record, Bluestone’s Facility is exempt from FERC

jurisdiction as it will perform a gathering function.

The Overall Pennsylvania and New York Facility

The Joint Proposal’s 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 Commission’s 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 BCF17

17 Billion Cubic Feet; one BCF is approximately equal to one

trillion BTUs. (British Thermal Units).

from

approximately 30,000 acres in Susquehanna County. This

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

15

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

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

16

such regional production will displace higher cost supply from

more distant traditional supply regions.

Other public benefits of the Facility include long-

term 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

18 Joint Proposal, Paragraphs 13 through 15.

Therefore, DRN’s contention that the

Commission’s decision in these proceedings should await a final

19 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).

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

17

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

20 See generally, Application §2.5.1.

which is zoned as special zoning district.

Bluestone’s 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

Bluestone’s construction schedule outside this window, subject

to certain limitations and conditions.

21 Milepost 0.0 is the northernmost portion of the Facility and MP 9.0 is at the Pennsylvania border.

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

18

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 above-

ground Facility site. No long-term impacts on farming,

agricultural activities, or the designated Agricultural District

are anticipated as a result of this project. There will be no

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

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

wetlands or agricultural drain tiles. Approximately 68% of the

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 See Article VII Application, §2.5.1. 23 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.

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

19

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. However, it is not within one of the major fly

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. In some areas along

the route, invasive species are prevalent. During field

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). The terms and conditions

of the Joint Proposal include an Invasive Species Management

Plan.24

24 Joint Proposal, Appendix C, Attachment 5.

Bluestone’s compliance with the Invasive Species

Management Plan will minimize the introduction and spread of

invasive species within the Facility project area.

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

20

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 Proposal’s terms and conditions provide

waterbody crossing methods.25

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.

Use of best management practices

identified in the EM&CS&P will result in only temporary impacts

to the waterbodies. Furthermore, the Joint Proposal’s 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.

26 Most waterbodies will be crossed via

the open cut method, utilizing either a dry crossing, flume, or

dam and pump method. The Joint Proposal’s 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 See the EM&CS&P and Joint Proposal, Appendix C, Attachment 4.

This certificate condition was developed in

26 Joint Proposal, Appendix C, Attachment 4. 27 Joint Proposal at 16-17. 28 Id. at Appendix C, p. 8.

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

21

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, DRN’s request for a

condition expressly prohibiting the use of “wet cut” waterbody

crossing method is unnecessary because the Joint Proposal’s

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 Proposal’s 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

The four streams that the Facility (or related access

roads) will cross are protected waterbodies. These four streams

Stream crossings conducted outside of these

windows will utilize bored crossings to minimize impacts to

aquatic resources.

29 See Title 5 Article 15 of the Environmental Conservation Law. 30 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.

31 See Joint Proposal Appendix D.

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

22

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 Watershed32 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

DRN’s contention that Bluestone must obtain approval

of the DRBC regarding construction of this pipeline mis-

apprehends the record in these proceedings. By letter dated

April 3, 2012, the DBRC advised Bluestone that the Facility is

not reviewable under the DRBC’s 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

No adverse impacts to watersheds are anticipated.

Instead,

Bluestone will obtain the water needed for hydrostatic testing

from locations outside of the Delaware River Basin.

Consequently, DRN’s 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.

32 From MP 0.0 to 8.7. 33 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.

34 The DRBC and the Susquehanna River Basin Commission. 35 Joint Proposal, Paragraph 42.

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

23

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

area for the Facility.36

The total acreage of wetlands that occur within the

Facility footprint is 1.72 acres. However, only 1.25 acres will

be permanently impacted.

No state-regulated wetlands are located

within the survey area for the Facility.

37

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

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.

These wetlands range in size from

0.003 acre to 0.17 acre.

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 At MPs 3.11 and 6.31. 37 See Joint Proposal, Paragraph 44. 38 See Joint Proposal, Appendix A, Exhibit 11. 39 A ROW Restoration Plan that contains provisions for restoring

impacted wetlands is included with the Article VII Application as Exhibit FF.

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

24

proximity to the Facility route. Eleven landowners identified

well locations approximately 500 feet from proposed construction

areas. No adverse impacts to springs or wells are anticipated.

6. 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

incorporate the preferred alternative in the proposed ROW. The

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

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

25

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. All five inventoried sites occur on steep,

wooded slopes. 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

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

26

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

8. Noise and Traffic Impacts

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.

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 right-

of way. The Bluestone contractor will maintain at least one

lane of traffic open for detours around construction at road

40 Joint Proposal, Appendix A, Exhibit 12. 41 See Application Exhibit C-13.

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

27

crossing locations, where practical, in accordance with

Bluestone’s 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, Bluestone’s 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

7:00 a.m. to dusk. To mitigate construction noise, construction

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. No compression or similar

42 See Application Exhibit EE.

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

28

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

wastewater tank, and emergency generator. On February 1, 2012,

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 de-

pressurize equipment for periodic maintenance. The flare will

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

43 See Application Exhibit C-13. 44 See Application Exhibit C-13, Noise Study.

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

29

Road. Bluestone has received a road crossing permit for NYS

Route 17.

One railroad will be crossed by Facility.45

11. Workspace

All roads

and the railroad may be crossed using the open-cut crossing or

conventional bore methods.

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.

Bluestone’s Blasting Plan serves as an overall guidance document

for blasting on the Facility route.46

In the event that blasting is required during

construction, Bluestone’s 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

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 Proposal’s terms

and conditions provide that if blasting activities are required,

Bluestone will retain the services of a duly licensed, bonded

blasting contractor.

45 See Application Exhibit AA. 46 See Joint Proposal, Appendix C, Attachment 3.

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

30

Bluestone Blasting Plan.47

13. Cumulative Impacts

Bluestone’s contractor will provide

such notice at least 48 hours prior to each blasting event

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, DRN’s 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

These proceedings have included a comprehensive review

of all potential impacts of this Facility. As conditioned by

the Joint Proposal’s terms and conditions, any adverse

environmental impacts from the Facility will be minimal and

local, not regional, in nature. Such impacts are primarily

limited to temporary, construction-related disturbance and

inconvenience.

Here, the Commission is considering

a single facility and any substantial modification of this

Facility would be subject to further Commission review.

49

47 Within ¼ mile radius from the pipeline centerline.

Bluestone has agreed to several construction-

related measures and guidelines, in an effort to minimize

48 In its reply to DRN’s comments, DHC affirms its support for Bluestone’s 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.

49 See Joint Proposal, Paragraph 19, et seq.

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

31

adverse impacts to all property owners on or adjacent to the

proposed ROW. These measures and guidelines in the Joint

Proposal include utilizing this Commission’s 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

50 16 NYCRR Part 255 and 49 CFR 192 (Transportation of Natural

and Other Gas by Pipeline: Minimum Federal Safety Standards).

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 Proposal’s 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.

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

32

Additional safety measures include:

Conformance with Gas Safety Regulations51

Odorization and monitoring of the Facility on a

continual basis;

to ensure

appropriate cover of the pipeline for all situations;

Bluestone’s membership in “Dig Safely New York” as an

excavator and operator. Bluestone’s contractors, prior to

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 Bluestone’s gas control personnel, as described in

Bluestone’s 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 Millennium’s 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.

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

33

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 Bluestone’s 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 Bluestone’s 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.

53 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.

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

34

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. Iaboni’s remaining

issues.

1. Bluestone’s 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

subsidiary of DTE Energy Company.54

Joint Proposal, Paragraph 121 describes Bluestone’s

management team and financial capability, as follows:

Bluestone’s management team

comprises individuals that have successfully developed other,

similar projects.

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.

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

35

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 SES’s 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. Several wells that will

ultimately deliver natural gas to the Facility have already been

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

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 Bluestone’s

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.

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

36

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

Proposal’s terms and conditions provide that Bluestone must

obtain necessary property rights through negotiation with the

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

37

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. Iaboni’s 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. Iaboni’s 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 pre-

condition to Bluestone’s 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

intended meaning of the terms of the Joint Proposal. Therefore,

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

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

38

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

Facility’s 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. Iaboni’s

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

Bluestone’s 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. Iaboni’s 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.

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

39

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

Bluestone’s original application proposed a route traversing 986

linear feet of her property, the Joint Proposal’s route proposes

traversing 2176 linear feet of her property. This proposed

increase, Ms. Iaboni implies, is not justified and, compared to

Bluestone’s 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. Iaboni’s 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

Facility’s 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. In addition, the original route

56 See PSL § 121-a(3)(a).

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

40

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. Iaboni’s conclusory statement that the Facility

should be re-routed is not sufficient to warrant a change to the

route of the Facility. Consequently, Ms. Iaboni’s 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. Broad support has been

demonstrated for the Joint Proposal. 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 Bluestone’s 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 Proposal’s 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,

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

41

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 Bluestone’s original application. The current project eliminates these features and therefore addresses these concerns.

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

42

for a similarly-sized natural gas gathering line located in the

same geographic region as the Bluestone Facility.58

The record in these proceedings demonstrates that the

overall sum of the Joint Proposal’s 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.

Construction

of the Facility will not have any significant permanent adverse

impacts.

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 69—89 (“Laser Order”).

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

43

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 DPS’s 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.

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

44

9. The Secretary may extend any deadlines

established by this order for good cause shown.

10. These proceedings are continued.

(SIGNED) Commissioner