C 0 U C H ‘01 H I T E

COUNSELORS AND ATTORNEYS AT LAW

Couch White, LLP 540 Broadway P.O. Box 22222 Albany, New York 12201-2222 (5 18) 426-4600

Leonard H. Singer Partner Direct Dial: (518) 320-3406 Telecopier: (5 18) 320-3499 email: Isinger@couchwhite corn

April 5, 2012 VIA HAND DELIVERY & EMAIL Hon. Jaclyn A. Brilling Secretary New York State Public Service Commission Empire State Plaza Agency Building Three Albany, New York 12223-1350 Re: Case 11 -G 0221 Proceeding on Motion of the Commission Investigating 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
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Dew Secretary Brilling: Bluestone Gas Corporation of New York, Inc. (“Bluestone”) hereby offers to settle the above referenced proceeding pursuant to the terms and conditions set forth herein. Bluestone believes that the terms and conditions set forth below represent a fair and reasonable resolution of the issues presented in this proceeding and should be adopted by the Commission in their entirety.

BACKGROUND
On May 23, 2011, the New York State Public Service Commission (“Commission”) issued an order instituting this proceeding to investigate “acts of significant tree clearing apparently in preparation for the construction of a major utility gas transmission facility without a required Certificate of Environmental Compatibility and Public Need pursuant to Article VII of

Offices in: Albany, New York City, Washington, D.C. and Farmington, Conneclicul

April 5, 2012 Page 2

the Public Service Law.”1 The Order directed Department of Public Service Staff (“Staff’) to conduct an investigation in this matter. Staff’s investigation, among other things, includes detailed interrogatories issued to Bluestone Gas Corporation of New York, Inc. (“Bluestone”), the individuals that own the property where the tree clearing took place, and the individuals that performed the actual tree clearing. In Case 1 1-T-0401, Bluestone is seeking authorization from the Commission to construct and operate the proposed Bluestone Gathering System (the “Project”) in the Town of Sanford, Broome County, New York. The Project is a natural gas gathering system that will aggregate and dehydrate natural gas production from wells in Susquehanna County, Pennsylvania for delivery into interstate pipelines located in New York. The Project also will have the capability to aggregate and dehydrate natural gas production from wells in Broome County, New York. Bluestone initially met with Staff in July 2010, prior to approaching any landowners, to introduce the Project and to identify any concerns or topics that Bluestone needed to address. From July, 2010, Bluestone began soliciting landowners to enter into option agreements for potential easements. The first option was signed in August 2010. Most of the negotiated option agreements generally give Bluestone the right to trigger the purchase of a defined permanent easement for a set price until December, 2014. The option agreements state that the property must be in the same condition as when optioned.

Case 1 l-G-021 1, Proceeding on Motion of the Commission Investigating 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) at 1 (the “Order”).

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The timbering plan discussed with landowners was structured such that, at the time the easement was triggered and Bluestone was ready to commence construction, Bluestone would either timber the right-of-way (“ROW”) and compensate landowners at an agreed-to price, or allow landowners to engage their own timber contractors under Bluestone’s supervision. The latter was a heavily favored option among landowners. As Bluestone negotiated with various landowners to define a preferred route, Bluestone’s standard practice was to survey and stake the limits of the ROW for all landowners (on the final preferred route as well as alternative routes that were never used in the final application package) so that landowners could better understand the area of impact. During the early stages of the Project, in February 2011, as Bluestone was investigating routes and negotiating with landowners, Bluestone agents observed tree clearing activities within the proposed ROW on a landowner’s property. As Bluestone had no rights to the property, other than as stated in the Option agreements, Bluestone did not, at that time, take any action. On March 2, 2011, a Staff member in the field observed the landowner’s clearing activity and contacted Bluestone stating that this was not allowed and that Bluestone needed to cease all activity. The activity had neither been performed by Bluestone or under Bluestone’s direction, nor had Bluestone requested that the landowner engage in the activity. Nevertheless, even though Bluestone had no contractual rights to stop the landowner’s activity, Bluestone immediately called the landowner and requested he stop, which he eventually did. On March 3, 2011, a Bluestone representative observed clearing activity at another landowner’s parcel. Bluestone requested that that landowner cease the activity and Bluestone

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notified Staff on March 4, 2011. This landowner also honored Bluestone’ s request to stop the activity. On March 7, 2011, Bluestone contacted all landowners by phone and requested that they not clear any timber from the optioned portion of their properties. A letter with that request was also sent to all landowners on March 18, 2011. occurred after March 7, 2011. On March 9, 2011, Bluestone submitted a written explanation to Staff summarizing the tree clearing activities and emphasizing that Bluestone did not have any role in such activities. On May 23, 2011, the Commission issued the order instituting this proceeding. On June 29, 2011, Staff served interrogatories on Gordon Hill, Carol Hill, and Lottie Hill one parcel where tree clearing activity occurred.

To Bluestone’s knowledge, no clearing activity

the owners of

On the same day, Staff also served

interrogatories on Anthony Calderio, Salvatore Cusmano, and Theresa Cusmano

the owners of

the second parcel where tree clearing activity occurred. Staff sent a follow-up letter on July 25, 2011 reminding each landowner of their obligation to respond and stating that if the landowners did not respond by August 1, 2011, Staff “will take appropriate action to compel compliance.” Responses to those interrogatories were then provided by the Hills on September 26, 2011 (the “Hill Responses”) and by the Calderios and Cusmanos on August “Calderio/Cusmano Responses”). On October 18, 2011, Staff served additional interrogatories on the Hills. Responses were provided on November 22, 2011 (“Hill Second Responses”). 10, 2011 (the

April 5, 2012 Page 5

On January 11, 2012, Staff served interrogatories on Derrick and Robert Macumber, the Hills’ nephews and the individuals whom the Hills hired to log their property. Staff served additional interrogatories on the Macumbers on March 5, 2012. Upon information and belief, the Macumbers have not yet answered Staff’s additional interrogatories.

TERMS AND PROVISIONS OF OFFER OF SETTLEMENT 1. Each provision of this Offer of Settlement is in consideration and support of all the other provisions of this Offer of Settlement and is expressly conditioned upon approval of all the terms of this Offer of Settlement in full by the Commission. If the Comniission fails to adopt all the terms of this Offer of Settlement, Bluestone shall be free to pursue its positions in this proceeding without prejudice. 2. The terms of this Offer of Settlement apply solely to, and are binding only in, the context of the present investigation. None of the terms or provisions of this Offer of

Settlement may be cited, or relied upon in any fashion as precedent or otherwise in any other proceeding before this Conmiission or any other regulatory agency or before any court of law for any purpose, except in furtherance of ensuring the effectuation of the purposes and results of this Offer of Settlement. 3. Bluestone believes that the record in this proceeding fully justifies the approval of the terms of this Offer of Settlement. It is its intent that the provisions of this Offer of

Settlement will be approved by the Commission as being in the public interest.

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4.

Bluestone recognizes that certain provisions of this Offer of Settlement

contemplate actions to be taken in the future to effectuate fully this Offer of Settlement that will also involve the Department of Public Service (‘DPS”). cooperate with DPS in good faith in taking such actions. 5. Tn the event of any disagreement over the interpretation of this Offer of Accordingly, Bluestone agrees to

Settlement or implementation of any of the provisions of this Offer of Settlement which cannot be resolved informally among Bluestone and DPS, such disagreement shall be resolved in the following manner: (a) Bluestone and DPS shall promptly convene a conference and in good faith attempt to resolve any such disagreement; (b) if any disagreement cannot be resolved within 10 days from the date the dispute arises independently by Bluestone and DPS, Bluestone and DPS shall request that an Administrative Law Judge be made available within 10 days of such request to mediate any such dispute; and, (c) if any such disagreement cannot be resolved by Bluestone and DPS with the assistance of an Administrative Law Judge, either such party may petition the Commission for resolution of the disputed matter. 6. Bluestone certifies that its undersigned representative is duly authorized by it to enter into the terms and conditions of this Offer of Settlement, to execute it on behalf of Bluestone, and to legally bind Bluestone on whose behalf this Offer of Settlement has been executed. 7. Bluestone proposes that that the Commission terminate its investigation

proceeding and not seek penalties under the Public Service Law, or apply administrative sanctions or financial penalties against Bluestone for any matter pertaining to any alleged

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violations of Section 121(1) of the Public Service Law for any site preparation for any action occurring prior to the filing date of this Offer of Settlement, without first having obtained a certificate of environmental compatibility and public need, subject to Bluestone fulfilling the obligations stated below. 8. Bluestone shall provide $400,000.00 for a public benefit fund to benefit the public in the Town of Sanford and/or Broome County in the manner defined in this Offer of Settlement and as further defined in such follow-on processes as are needed to implement the intent of this Offer of Settlement. Bluestone shall be authorized to provide these funds on an annual basis over a period of years provided, however, that such period shall not exceed 10 years. Within 14 days of the approval of this Offer of Settlement, Bluestone shall provide to DPS a Letter of Credit drawable at a location in New York State to secure its obligation, to be maintained until the obligation is satisfied. The amount of the letter of Credit may be periodically reduced as the obligation is satisfied by making payments to the Trustee. Prior to obtaining the Letter of Credit, any amendment thereto, or any replacement, Bluestone shall serve a copy of its proposed Letter of Credit on DPS. If DPS is dissatisfied with the terms of the proposed Letter of Credit and the differences between DPS and Bluestone cannot be resolved among themselves, the parties will resolve the differences in the manner set forth in Paragraph 5 above. 9. Bluestone shall engage the services of a Trustee and enter into an Irrevocable Trust Agreement for the administration of the public benefit fund. The cost of the services provided by the Trustee shall be paid by Bluestone separate from the public benefit fund. The term “irrevocable’ for this purpose means that under no circumstances shall the monies provided

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into the fund revert back to Bluestone. Prior to executing the Irrevocable Trust Agreement, Bluestone shall serve on DPS a copy of its proposed Standby Trust Agreement and documentation sufficient to identify the proposed Trustee. If DPS is dissatisfied with the terms of the proposed Standby Trust Agreement and/or the proposed Trustee and the differences between DPS and Bluestone cannot be resolved among themselves, the parties will resolve the differences in the manner set forth in Paragraph 5 above.

10. Upon execution of the Irrevocable Trust Agreement, Bluestone shall transfer
the funds to the Trustee pursuant to the terms of the Trust Agreement. The Irrevocable Trust Agreement shall provide, among other terms, that upon its execution by Bluestone, Bluestone shall transfer $40,000.00 to the Trustee, and it shall further provide that Bluestone shall transfer an additional $40,000.00 to the Trustee, each year thereafter, for a period of 10 years. 11. The Trustee will allocate 30% of the public benefit fund to support the Town of Sanford Food Bank as beneficiary provided that the Trustee can obtain an agreement from such beneficiary that satisfactorily ensures that the monies will be used in the public interest for the benefit the public in the Town of Sanford andlor Broome County needing food assistance. Prior to executing the beneficiary agreement, the Trustee shall serve a copy of its proposed beneficiary agreement on Bluestone and DPS. If Bluestone and/or DPS are dissatisfied with the terms of the proposed beneficiary agreement and the differences cannot be resolved among themselves, the parties will resolve the differences in the manner set forth in Paragraph 5 above. If for any reason the public benefit fund is not used to support such beneficiary, Bluestone and

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DPS will propose another beneficiary for Commission approval using the manner set forth in Paragraph 5 above, if necessary, to resolve any differences. 12. The Trustee will allocate the remaining 70% of the public benefit fund to support the Broome Conmiunity College Environmental Science Program, an interdisciplinary program designed to prepare students for transfer into four-year Environmental Science and Studies programs modeled after the first two-years of Environmental Science and Studies programs at schools such as Binghamton University and the State University of New York • College of Environmental Science and Forestry, as beneficiary provided that the Trustee can obtain an agreement from such beneficiary that satisfactorily ensures that the monies will be used in the public interest for the benefit the public in the Town of Sanford andlor Broome County in a manner in keeping with the mission of the program that students learn basic scientific concepts and understand the interrelationship of these concepts with the environment with a strong emphasis on sustainability and ecological impact. The monies should be used primarily to

encourage field study in the Town of Sanford and/or Broome County to educate students and landowners about the value of long-range resource management and stewardship which helps create and sustain species diversity, protects water resources, and can enhance recreational opportunities while providing a long-term supply of quality forest products for the benefit of the local environment and economy. Prior to executing the beneficiary agreement, the Trustee shall serve a copy of its proposed beneficiary agreement on Bluestone and DPS. If Bluestone and/or DPS are dissatisfied with the terms of the proposed beneficiary agreement and the differences cannot be resolved among themselves, the parties will resolve the differences in the manner set

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forth in Paragraph 5 above. If for any reason the public benefit fund is not used to support such beneficiary, Bluestone and DPS will propose another beneficiary for Commission approval using the manner set forth in Paragraph 5 above, if necessary, to resolve any differences. 13. Bluestone will use its best efforts to complete all the arrangements for the Trustee and beneficiaries within 30 days of the approval of this Offer of Settlement. 14. The Trustee shall provide to Bluestone and DPS quarterly reports, including financial reports, of the activity of the public benefit fluid until it is depleted. 15. This Offer of Settlement is made on the express condition that there is no admission of liability by Bluestone with respect to any allegation against Bluestone in this case and that there will be no finding by the Commission that any of Bluestone’s actions constituted a violation of Section 121 (1) or any other provision of the Public Service Law and the allegations in this docket will not be raised or considered by the Commission as part of its review of Bluestone’s pending application in Case 11 -T-0401. Very truly yours, COUCH WHITE, LLP

Leonard H. Singer LHS/dap cc: Paul Agresta (via e-mail)
S:\DATA\CIientI2 14801-15100 14S72\Brilling Offer of Settlement Final 4-5-12 docx

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