Reuters

NEW YORK, May 16 (Reuters) - Constitution Pipeline Company LLC on Monday launched a last-ditch legal challenge to gain approval in New York for its 124-mile (200-km) natural gas pipeline project stretching from the U.S. shale heartland to the northeastern United States as local opposition grows.

Constitution said in a statement it has filed a lawsuit in the U.S. Court of Appeals fighting last month's ruling by the New York State Department of Environmental Conservation that denied the project a water permit in the state.

The water permit is the final regulatory hurdle for the flagship project, which would bring fracked Pennsylvania gas to New York and New England and has cost its owners $300 million over the past four years.

"We are ultimately seeking to have the court overturn this veiled attempt by the state to usurp the federal government's authority and essentially 'veto' a FERC-certificated energy infrastructure project," the pipeline owners said in the statement, referring to the Federal Energy Regulatory Commission (FERC).

Constitution Pipeline is owned by subsidiaries of Williams Partners LP , Cabot Oil & Gas Corp, Piedmont Natural Gas Company Inc and WGL Holdings Inc .

At stake is the future of the $875 million project, but the outcome of the case could also be a litmus test for other projects destined for New York, where fracking was banned in 2014. It will also be a test for other northeastern states where opposition to the controversial drilling practice is some of the fiercest in the nation.

The company also filed an action with the U.S. District Court for the Northern District of New York seeking a declaration that the State of New York's authority to exercise permitting jurisdiction over certain other environmental matters is preempted by federal law, it said.

On Friday, New York state Attorney General Eric Schneiderman raised a further potential legal block to the pipeline, calling on FERC to delay its December 2014 approval of the project until it finishes a probe into whether Constitution partners illegally cut trees along the pipeline path ahead of the issuance of the federal permit.

The future of the pipeline is being closely watched by the gas market. Even as inventories remain near record highs and the price rout deepens the industry's crisis, some analysts warned that delays to Constitution and other pipelines could cut U.S. output more than expected.

 

STIFF OPPOSITION FROM NEW YORK

For pipeline advocates, Constitution symbolizes the political and environmental challenges facing the industry as the fight over fracking moves from Marcellus and Utica shale regions to more densely-populated parts of Pennsylvania and other like New York and New Jersey.

Chris Stockton, a spokesman for Williams, told Reuters last week the company believes the regulator's denial last month was "driven more by New York State politics than environmental science."

Local activists led by grassroots group Stop The Pipeline have campaigned against the project, which would cross through a sensitive watershed area. It also comes at a time when New York state wants to boost renewable energy use.

Defending the plan, the pipeline companies say natural gas is critical to the region, will supply 3 million homes, help the states replace coal power and home heating oil with gas, and create 2,300 direct and indirect jobs.

If Constitution loses its legal fight, green activists hope it could influence regulators in other states.

Spectra Energy's > planned AccessNortheast pipeline expansion project between New York and Massachusetts is also facing strong local opposition. FERC will hold a public hearing on it on Tuesday.

John Hangar, former head of Pennsylvania's Department of Environmental Protection, said more conflicts are on the horizon as the industry moves into more adverse territory and fails to convince local landowners of the need for natural gas.

"These battles are not new but they are multiplying because the gas industry has poured kerosene on the fire of opposition," he said. (Reporting by Josephine Mason; Editing by Matthew Lewis and Diane Craft)

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