New York Approves a Controversial Pipeline. Energy Politics Are Changing.

Ships travel through New York Harbor. (Victor J. Blue/Bloomberg)

Key Points

• New York state regulators approved water permits for the Northeast Supply Enhancement (NESE) pipeline, reversing previous denials.
• The NESE pipeline, an expansion of an existing network, will transport natural gas to serve 2.3 million people in New York.
• Environmental groups plan to challenge the approval in court, citing concerns about marine habitat destruction and toxic material dredging.

A proposal to pipe natural gas underwater into New York City won approval for water permits from state regulators on Friday, reversing prior decisions that had said the pipeline was too dangerous to health and marine life.

The ruling is a win for Williams Co, the Tulsa-based company behind the project, which is known as the Northeast Supply Enhancement (NESE) pipeline. Its stock was up 1.5% on Friday as the company is closer to its goal of unlocking more natural gas supplies to the Northeast. “We’re proud to move NESE forward and do our part in providing New Yorkers access to clean, reliable and affordable natural gas,” said Chad Zamarin, president and CEO of Williams, in a statement. Natural gas is used for heating and electricity generation.

The approval also appears to be a sign that some Democratic-controlled states are changing their stance on the impact of new fossil-fuel infrastructure. The decision was made by the state’s Department of Environmental Conservation (DEC), part of the executive branch under Gov. Kathy Hochul. Just five years ago, the same agency—then under former Gov. Andrew Cuomo—had denied the permit, citing the likelihood that it would dredge up toxic material. It was also denied another time before that.

“There is no legal or scientific basis for taking a 180-degree turn from the state’s past denials,” said Mark Izeman, a lawyer for the Natural Resources Defense Council. “If built, the pipeline would tear up 23 miles of miles of the New York-New Jersey Harbor floor; destroy marine habitats; and dredge up mercury, copper, PCBs and other toxins.”

The NESE project is an expansion of a massive natural-gas pipeline network that stretches from Texas to New York, carrying 15% of the nation’s natural gas. This segment will travel from Pennsylvania through New Jersey over land, before heading under the water into the harbor. It will pass Staten Island and some beaches, including Coney Island in Brooklyn, before connecting to an existing pipeline network near Rockaway Beach in Queens. The company says it can provide enough natural gas to serve 2.3 million people.

Hochul has said she is neutral on the pipeline, but project opponents think she made a deal with President Donald Trump to get it approved. The intrigue started several months ago, when the Trump administration blocked an offshore wind project that was expected to serve New York. After meeting with Hochul, Trump relented and allowed the project to restart, but his administration implied that a deal had been made. On the same day the wind project was rebooted, Secretary of the Interior Doug Burgum posted on X that Hochul was pro-pipeline. “I am encouraged by Governor Hochul’s comments about her willingness to move forward on critical pipeline capacity,” he wrote.

Hochul has denied making any deal, saying instead that any projects needed to go through the standard approval process. In response to Friday’s approval, her office released a statement that said the governor is concerned about energy reliability and “a top priority is making sure the lights and heat stay on for all New Yorkers as we face potential energy shortages downstate as soon as next summer. We need to govern in reality.”

“While I have expressed an openness to natural gas, I have also been crystal clear that all proposed projects must be reviewed impartially by the required agencies to determine compliance with state and federal laws,” she continued. “I am comfortable that in approving the permits, including a water quality certification, for the NESE application, the DEC did just that.”

Asked what had changed between its prior denial and today, the DEC pointed to its approval documentation. In a cover letter about the approval, the agency said that it believes the pipeline can comply with standards as long as Williams takes the necessary precautions. One change from the last review is that the DEC wants the pipeline buried four feet below the sea floor, instead of the six feet that had been proposed last time. The shallower depth should lead to less sediment being released during construction, the agency said. The pipeline company will also have to mitigate harm to fish and clams.

The pipeline also received approval from New Jersey regulators on Friday.

Williams is also planning another project called the Constitution Pipeline that would run from Pennsylvania to near Albany, N.Y. It pulled its application for that project because of timing issues, but the company says it expects to bring it back.

The Natural Resources Defense Council and other organizations have already sent out notices that they plan to challenge NESE’s federal approval in court. Izeman said in an interview that the environmental group also plans to challenge the New York state ruling.

Write to Avi Salzman at avi.salzman@barrons.com