LPG Storage in Seneca Lake Caverns Doesn’t Require New Hearing, ALJ Rules

Public safety issues raised by community groups opposed to a plan to store liquid petroleum gas, or LPG, in unlined storage caverns next to Seneca Lake do not require an evidentiary hearing with cross-examinations, an administrative law judge ruled earlier this month.
The 74-page decision is a major procedural victory for Texas-based Crestwood Equity Partners LP, though not necessarily a green light for the long-stalled project.
James McClymonds, the chief administrative law judge for the state Department of Environmental Conservation, wrote that while the opponents’ evidence need not be aired in a formal adjudicatory hearing, it would all be included in material considered by “the final agency decision maker.”
That would be Basil Seggos, commissioner of the DEC, and ultimately, Gov. Andrew Cuomo, who have faced intense public pressure to block the project.
Finger Lakes LPG Storage, a Crestwood subsidiary, first applied for a state underground storage permit eight years ago.
Since then community groups representing more than 100 agriculture and tourism businesses in the Finger Lakes have rallied against the project on the grounds that a major accident could damage the regional economy. Meanwhile, hundreds of protestors have been arrested for trespassing at Crestwood’s property gate in Reading, about 2.5 miles northwest of Watkins Glen.
After the DEC released a draft underground storage permit in late 2014, McClymonds held a public issues conference in February 2015 to hear evidence from Crestwood and project opponents. The DEC staff tended to side with the company. His long-awaited decision signed Sept. 8 is in effect a summary judgement of those arguments presented without cross-examination.
Well before that, however, Crestwood declared that it intended to trim back the project considerably. In a surprise announcement last August, the company said it would eliminate rail and truck transportation to the site and reduce the LPG it stored from 2.1 million barrels of propane and butane to 1.5 million barrels of only propane.
By dropping butane storage, which was earmarked for a cavern often referred to as “Cavern 58,” the company sidestepped major safety issue. Expert geologists hired by project opponents said documents showed Cavern 58 was unstable and had suffered a roof collapse. The company and the DEC staff insisted there was never any collapse. Cutting out butane storage removed that debate from the table.
Opponents of the project have until Oct. 20 to appeal McClymonds’ ruling. Whether or not they file an appeal, opponents are sure to push McClymonds’ bosses for an outright denial of the permit.
“We trust DEC Commissioner Seggos will deny the permit to avoid the potentially devastating impacts of this ill-conceived project, including its threat to Gov. Cuomo’s economic development efforts,” said winery owner William Ouweleen, secretary of the Finger Lakes Wine Business Coalition.
Joseph Campbell, president of Gas Free Seneca, which was founded in 2011 to oppose Crestwood’s proposed LPG storage, added: “Soon the ultimate decision will be in Gov. Cuomo’s hands. We trust that in light of his legacy to promote wine and tourism in the region and reduce the use of climate changing fossil fuels, he will side with the people of the Finger Lakes and not a Texas gas corporation.”
Campbell said he expected to appeal the ALJ’s ruling.
Crestwood has not made a public statement on the ruling or responded to my request for comment. I will update when/if they do. Shares of Crestwood’s stock, symbol CEQP, were trading at $24.50 mid-day Sept. 27, virtually unchanged from their close of $24.70 on Sept. 8, the day of the McClymonds ruling.
In reaching his conclusions, McClymonds hewed closely to the arguments laid out by the company and the DEC staff, brushing aside — at least for any formal adjudication — several well-documented opposition stances.
Here is a sampling of his positions:

— The state geologist. (Clarified Sept. 29). A terse two-paragraph letter written in 2013 by an “acting associate state geologist” was sufficient to meet the legal requirement that all underground storage projects must be approved by the state geologist, a statutorily-defined position filled by the Board of Regents that has been vacant since 2010. McClymonds wrote that there was no “proof” that the “acting associate state geologist” didn’t have the same authority as a Board of Regents-appointed state geologist.

— Risk assessments. Dr. Rob Mackenzie of Trumansburg was not qualified to provide a risk assessment based on 40 years of data on hydrocarbon storage in U.S. salt caverns. The Harvard-trained Mackenzie, a retired hospital administrator, had calculated the chance of a serious or extremely serious accident at Crestwood at 40% over 25 years. A Crestwood-funded analysis by Quest Consultants that found far lower risks was deemed valid despite the fact it disregarded past storage accidents that involved human error.
— Cavern 58. An alleged roof collapse documented in DEC letters did not in fact occur, based Crestwood sonars years later and a Crestwood-paid engineer’s 2013 letter retracting his previous conclusion that the roof did collapse. (The engineer, Larry Sevenker, told me in a phone interview that a company official had dictated the wording of his retraction letter.)
— Rock faults. While experts hired by opponents of LPG storage said the company had failed to properly analyze horizontal stresses and faults that affect the caverns, litigating those details “would constitute and academic exercise.”
— Seneca lake salinity. Although Seneca Lake is saltier than any of the other 10 Finger Lakes and caverns used for hydrocarbon storage are suspected culprits, it is not necessary to conduct a proposed year-long pressure test of a storage cavern with independent monitoring of salt concentrations in Seneca Lake.
The same day McClymonds issued his 74-page decision rejecting adjudication for Crestwood LPG issues, he also wrote a 21-page ruling on confidentiality issues related to the permit application.
In several cases, he concluded that responses to Freedom of Information requests, including several I had submitted, were unjustifiably narrow in scope.