New York denies PA-NY Williams Northeast Supply natgas pipe

(Reuters) - New York environmental regulators on Friday denied a water permit for Williams Cos Inc’s proposed Northeast Supply Enhancement (NESE) natural gas pipeline from Pennsylvania to New York City.

The Department of Environmental Conservation (DEC) said the construction of the project would not meet the state’s rigorous water quality standards.

Williams has said the project, which includes an offshore pipe between New Jersey and Long Island, New York, will cost about $1 billion and could enter service in time for winter 2021 heating season.

Williams said in an email it was disappointed with the decision.

“We continue to believe that the fundamentals of our project align with New York’s clean energy goals because it would have improved local air quality and, at the same time, supported economic development and led to lower heating bills.”

The company did not immediately say what its next steps would be.

In mid-2019, regulators in New York and New Jersey denied Williams’ applications for the permits, called water quality certification, because the project could adversely impact water quality in the New York Bay.

After New York regulators denied the water certification, the U.S. unit of UK-energy firm National Grid Plc, which agreed to buy gas from Williams’ pipe, imposed a moratorium in on signing new customers in May 2019.

National Grid, which serves about 1.8 million customers in Brooklyn, Queens, Staten Island and Long Island, said it would not have enough gas to supply existing and new customers without the pipe.

That prompted New York Governor Andrew Cuomo to threaten to revoke National Grid’s license to operate its gas utility.

Ultimately, National Grid in November agreed to end the moratorium and pay $36 million, most of which it will spend on conservation and clean energy projects.

National Grid also agreed to come up with plan, part of which was released last week, to meet long-term demand of its downstate gas customers. One of two proposals in that plan included construction of Williams’ NESE pipe by winter 2021-2022.

If built, NESE would add about 37 miles (60 km) of new pipe and compression to Williams’ existing Transco system and transport an additional 0.4 billion cubic feet per day of gas from Pennsylvania to New York. One billion cubic feet is enough gas for about 5 million U.S. homes for a day.

Reporting by Scott DiSavino, Sumita Layek and Arpan Varghese; Editing by Sonya Hepinstall