Aes Sparrows Point Lng, LLC v. Smith

539 F.Supp.2d 788

AES SPARROWS POINT LNG, LLC, et al., Plaintiffs, v. James T. SMITH, Jr., et al., Defendants.

Civil Action No. RDB-07-325.

United States District Court, D. Maryland.

June 22, 2007.

COPYRIGHT MATERIAL OMITTED

James W. Bartlett, III, Scott Hamilton Phillips, Semmes Bowen and Semmes PC, Baltimore, MD, Michael G. Pattillo, Jr., Williams and Connolly LLP, Washington, DC, for Plaintiffs.

Jeffrey Grant Cook, Towson, MD, for Defendants.

MEMORANDUM OPINION

RICHARD D. BENNETT, District Judge.

Plaintiffs AES Sparrows Point LNG, LLC and Mid-Atlantic Express, LLC ("Plaintiffs") have brought this action for declaratory and injunctive relief against James T. Smith, Jr., in his official capacity as the County Executive of Baltimore County, William J. Wiseman, III, in his official capacity as the Zoning Commissioner for Baltimore County, and Baltimore County, Maryland (collectively, "Defendants" or "the County"). The Plaintiffs seek a declaration that an amendment to section 105 of the Baltimore County Zoning Regulations, as set forth in Bill 9-07 ("the Zoning Amendment"), prohibiting the siting of liquified natural gas ("LNG") facilities in the Chesapeake Bay Critical Areas in Baltimore County, is preempted under the Supremacy Clause of the United States Constitution¹ by the Natural Gas Act, 15 U.S.C. §§ 717, et seq. (2007), as amended by the Energy Policy Act of 2005, Pub.L. No. 109-58, § 311, 119 Stat. 594, 685 (2005). Pending before this Court are the parties' cross-motions for summary judgment. The issues have been fully briefed by the parties and a hearing was held by this Court on June 6, 2007.

The County initially attempted to regulate LNG facilities by the passage of a zoning ordinance that prohibited the siting of LNG facilities within a certain distance of residential and commercial areas. This Court held that this earlier ordinance was unenforceable because it was preempted under the Supremacy Clause of the United States Constitution by the Natural Gas Act. See AES Sparrows Point LNG, LLC v. Smith, 470 F.Supp.2d 586 (D.Md.2007) ("AES I"). In that earlier opinion, this Court `noted that the 2005 amendments to the Natural Gas Act expressly reserve to the states their rights pursuant to three environmental statutes: the Coastal Zone Management Act of 1972, 16 U.S.C. §§ 1451, et seq., the Clean Air Act, 42 U.S.C. §§ 4201, et seq., and the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251, et seq.² Id. at 597. The Zoning Amendment at issue in this case, unlike the first zoning ordinance, only prohibits the construction of LNG facilities in Baltimore County's environmentally sensitive Chesapeake Bay Critical Areas and has now been incorporated into the State of Maryland's Coastal Zone Management Act program. For the reasons that follow, Defendants' Motion for Summary Judgment will be GRANTED, and the Plaintiffs' Motion for Summary Judgment will be DENIED. This Court declares that the Zoning Amendment, as set forth in Bill 9-07, is not preempted by the Natural Gas Act and is within the delegated authority of the State of Maryland and Baltimore County under the Coastal Zone Management Act.

BACKGROUND

I. Factual and Procedural Background

The facts of this case were previously noted in this Court's opinion in AES I. Plaintiff AES Sparrows Point LNG, LLC ("AES") entered into an option agreement on November 3, 2005, to lease a site at 600 Shipyard Road in Baltimore County, Maryland, in order to construct an LNG terminal and to import, store, and regasify LNG. (Am.Compl.Ex.1.) Pursuant to this option agreement, Mid-Atlantic Express, LLC proposes to construct and operate an 87-mile 30-inch outside diameter natural gas pipeline extending from the Sparrows Point site to interconnections with existing natural gas pipeline systems and terminating in Eagle, Pennsylvania. (Id. ¶ 13.) On March 24, 2006, Plaintiffs initiated the prefiling process necessary to file a formal application with the Federal Energy Regulatory Commission ("FERC") to build an LNG terminal at the Sparrows Point site. (Id. at Ex. 3.)

Upon hearing of AES's plans, local groups and elected officials expressed concern about the negative effects of the proposed plant on the surrounding community and the environment. In response to public opposition, on June 19, 2006, the Baltimore County Council approved Bill 71-06, amending section 256.4 of the Baltimore County Zoning Regulations. (Id. at Ex. 6.) The ordinance provided that an LNG terminal could only be constructed with a "special exception" and had to be at least 5 miles from residential zones and 500 feet from business `tones. (Id.) The ordinance would have `prevented the Plaintiffs from constructing an LNG facility at Sparrows Point.

On September 22, 2006, Plaintiffs filed a lawsuit in this Court against James T. Smith, Jr., in his official capacity as the County Executive of Baltimore County, William J. Wiseman, III, in his official capacity as the Zoning Commissioner for Baltimore County, and Baltimore County seeking declaratory and injunctive relief on the grounds that Bill 71-06 violated the Supremacy Clause of the United States Constitution and was preempted by the Natural Gas Act. The Defendants filed a motion to dismiss for lack of ripeness and subject matter jurisdiction, and the Plaintiffs filed a motion for summary judgment. After a hearing held on January 10, 2007, this Court issued an opinion granting the Plaintiffs' motion for summary judgment and denying the Defendants' motion to dismiss. AES I, 470 F.Supp.2d 586 (D.Md.2007). This Court declared the zoning ordinance to be unconstitutional under the Supremacy Clause and enjoined the County from enforcing it. Id. at 601.

On February 5, 2007, Baltimore County passed Bill 9-07 ("the Zoning Amendment"), which amends section 105 of the Baltimore County Zoning Regulations by adding LNG terminals to the list of prohibited uses in Chesapeake Bay Critical Areas.³ (Am. Compl. Ex. 9 [hereinafter "Bill 9-07"].) The bill defines an LNG facility in section 101 as [a] natural gas facility located onshore or in state waters that is used to receive, unload, load, store, transport, gasify, re, gasify, liquefy, or process natural gas that is imported to the United States from a foreign country, exported to a foreign country from the United States, or transported in interstate commerce by a waterborne vessel.

Id. There is no dispute that the Zoning Amendment would prevent AES from constructing an LNG facility at the proposed Sparrows Point site, as the site is located within Baltimore County's Chesapeake Bay Critical Area.⁴

AES and Mid-Atlantic Express filed suit in this Court on February 6, 2007 seeking essentially the same injunctive and declaratory relief as in AES I. The Plaintiffs moved for a temporary restraining order ("TRO") two days later to prevent the County from halting the project pursuant to its authority under the Coastal Facilities Review Act.⁵ A hearing was conducted on February 9, 2007, and this Court granted the Plaintiffs' motion for a TRO at that time, enjoining the County from certifying to the Maryland Department of the Environment that the proposed LNG facility would not meet local zoning regulations and enjoining enforcement of Bill 9-07. (Paper No. 6.) By Consent Order dated February 21, 2007, the TRO was to remain in effect until this Court ruled on the pending motions for summary judgment. (Paper No. 8.)

Meanwhile, on February 9, 2007, Baltimore County submitted a request to Maryland's Critical Area Commission for the Chesapeake and Atlantic Coastal Bays ("Critical Area Commission" or "the Commission") seeking to amend the County's Critical Area protection program to include Bill 9-07's restriction on LNG siting in coastal areas. (See Carroll Aff. Ex A.) On May 2, 2007, a four-person panel recommended to the. Commission that Baltimore County's request to amend its local Critical Area protection program should be denied. (See Defs.' Status Report Att. 1 at 5 (Paper No. 21).) The panel cited concerns that the Zoning Amendment was unenforceable because this Court had enjoined it and because it had to be approved by the National Oceanic and Atmospheric Administration ("NOAA"). (Id.) In response to the panel's report, Baltimore County asked the Commission to "table further action." (Pls.' Request for Hearing Att. 1 (Paper No. 22).)

The Plaintiffs filed a Motion for Summary Judgment on February 26, 2007 (Paper No. 12) and an Amended Complaint the following day (Paper No. 13). The Defendants filed a Motion for Summary Judgment on March 19, 2007. (Paper No. 16.) While this Court was conducting a hearing on the cross-motions for summary judgment on June 6, 2007, the Critical Area Commission, having reopened its review of Baltimore County's request, unanimously approved the adoption of the Zoning Amendment in the County's Critical Area protection plan. (See Defs.' Post-Hearing Mem. Ex. 1 (Paper No. 27).)

II. Legal Framework

A. Natural Gas Act

Under the Natural Gas Act ("NGA"), a party seeking to construct a liquefied natural gas ("LNG") terminal must first obtain authorization from the Federal Energy Regulatory Commission ("FERC"). 15 U.S.C. § 717b(a) (2007). FERC created an extensive pre-filing process in which an applicant must submit all pertinent information about the proposed site and building plans, any state and local agencies with permitting authority, the applicant's plans to receive input from the public, and additional matters. 18 C.F.R. § 157.21 (2007). Applicants must also comply with the requirements of the National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321, et seq. (2007), by examining the impact the facility would have Son the environment. 15 U.S.C. § 717b-1(a) (2007). After the applicant completes the pre-filing process and submits a formal application, FERC consults with a designated state agency on state and local safety issues, including "(1) the kind and use of the facility; (...