BG Gulf Coast LNG, LLC v. Sabine-Neches Navigation Dist. of Jefferson Cnty.

587 F.Supp.3d 508

BG GULF COAST LNG, LLC, Phillips 66 Company, Plaintiffs,

v.SABINE-NECHES NAVIGATION DISTRICT OF JEFFERSON COUNTY, TEXAS, Defendant.

CIVIL ACTION NO. 1:21-CV-00470

United States District Court, E.D. Texas, Beaumont Division.

Signed February 24, 2022

Utsav Mathur, Darryl Wade Anderson, Francisco Jose Escobar-Calderon, Warren Szutse Huang, Norton Rose Fulbright US LLP, Houston, TX, for Plaintiffs.

Harry M. Reasoner, Stacey Neumann Vu, Vinson & Elkins, Houston, TX, Gary Neale Reger, Gilbert Irvine Low, Orgain, Bell & Tucker LLP, L. DeWayne Layfield, Attorney at Law, Beaumont, TX, James Texas Dawson, Michael Smith McCambridge, Vinson & Elkins LLP, Washington, DC, Thomas S. Leatherbury, Vinson & Elkins LLP, Dallas, TX, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND DENYING AS MOOT PARTIES’ JOINT MOTION FOR PROTECTIVE ORDERS

Michael J. Truncale, United States District Judge

Plaintiffs BG Gulf Coast LNG ("BG") and Phillips 66 Company ("Phillips"), two major energy companies, bring suit against Defendant Sabine Neches Navigation District ("SSND"), a political subdivision of the State of Texas responsible for the construction and maintenance of ports and harbors in southeast Texas. Defendant began levying a fee against users of the Sabine-Neches Waterway ("Waterway") to fund construction improvements made to the Waterway. Plaintiffs contest this fee. Before the Court are Defendant's Motion to Dismiss, [Dkt. 5], and the Parties’ Joint Motion for Protective Orders. [Dkt. 34]. For the following reasons, Defendant's Motion to Dismiss is GRANTED . Parties’ Joint Motion for Protective Orders is DENIED AS MOOT .

I. BACKGROUND

Before the Court rests not only a matter of first impression but also a matter of utmost importance to this region, this nation, and the global economy. Defendant SSND, a political subdivision of the State of Texas responsible for southeast Texas’ ports and harbors, is spearheading a $1.2 billion infrastructure project ("Project") to modernize the Waterway. The Waterway feeds the Ports of Beaumont, Port Arthur, and Orange, Texas. It is the country's third largest waterway by total shipping tonnage and critical to national security.

Like much of the nation's water infrastructure, the Waterway has not been improved since the 1960s. Ships have become larger, and technology has advanced, but growth of the Waterway has lagged. At only forty feet in depth, it is unable to accommodate many modern, larger vessels.

To remedy this, Defendant partnered with the United States Army Corps of Engineers ("USACE") to improve the Waterway through a process proscribed by the Water Resources Development Act of 1986, 33 U.S.C. § 2201 et seq. ("WRDA-86").¹ Congress passed the WRDA-86 in the mid-1980s to revamp the arduous process of updating the nation's ports and harbors. Prior to the WRDA-86, "[e]very project underwent nineteen independent reviews, with an average of twenty-six years passing between the first study of a project and the project's completion." New Orleans S.S. Ass'n v. Plaquemines Port, Harbor & Terminal Dist. , 874 F.2d 1018, 1024–25 (5th Cir.), opinion amended on denial of reh'g , 891 F.2d 1153 (5th Cir. 1989). Furthermore, given the serious financial burden these projects imposed, Congress did not have enough funding for the projects that needed it most. 132 Cong. Rec. S3402 (1986). The length of time for approving and the difficulty in financing these projects hampered their implementation. In fact, "[n]o new project was authorized between 1970 until shortly before passage of the [WRDA-86]. Federal spending on harbor construction declined 78% after the 1960's [sic]; mounting pressures on the federal budget made increased appropriations for projects unlikely." Id.

In response, the WRDA-86 overhauled the system for financing both new construction and improvement projects for America's ports and harbors. Instead of relying solely on federal funding, the WRDA-86 split the costs of construction with state and local entities ("non-Federal interests"). By involving non-Federal interests, Congress intended to boost local investment and hasten project completion.

The process prescribed by the WRDA-86 begins with a feasibility study performed by the USACE. 33 U.S.C. §§ 2215, 2282. This study is published in the Federal Register, then transferred to Congress by the Secretary of the Army. Id. ; see also Air Liquide Am. Corp. v. U.S. Army Corps of Eng'rs , 359 F.3d 358, 365 (5th Cir. 2004) (describing the process for harbor-restoration projects under the WRDA-86 and subsequent legislation authorizing new projects under the Water Resources Development Act of 1996, Pub. L. No. 104–303, 110 Stat. 3658 (1996) ). Upon congressional approval, which includes projected costs, Congress allocates funding ("New Start funding") to initiate the first phase of the project. See Air Liquide , 359 F.3d at 365. The USACE and the non-Federal interest then enter into a partnership agreement covering the project. 33 U.S.C. § 2211(e). This agreement must provide the federal government with the non-Federal share of costs.

The Project has complied with these requirements. The USACE produced its feasibility study in March 2011. The study recommended that Congress allocate funding for the Project because it benefits the hydrocarbon industry and the United States Military. [Dkt. 5-3 at 3, 7, 12–14]. Namely, the Project would ease congestion and allow the Waterway to accommodate larger ships. The Secretary of the Army then transferred the study to Congress, which approved the Project in 2014. Water Resources Reform and Development Act of 2014, Pub. L. No. 113-121, 128 Stat. 1193, 1364 (2014) ("WRDA-14"). The WRDA-14 listed the projected costs as $1.1 billion, with the federal government funding $748 million and Defendant footing the remaining $365 million. Id. In 2019, Congress allocated New Start funding for the Project. Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019, Pub. L. No. 115-244, 132 Stat. 2897, 2898–99 (2019). This New Start funding, approximately $20 million, funded the first portion of the Project, Anchorage Basin No. 1. [Dkt. 1 at ¶¶ 31, 50]. In July 2019, the USACE and Defendant entered into a Partnership Agreement ("Partnership Agreement"), which lists a projected $1.2 billion construction cost,² with $732 million coming from federal coffers and the remaining $488 million coming from Defendant. Defendant's projected share of costs amounts to forty percent of the total cost of construction.

Pursuant to the Partnership Agreement, the Project will update many features of the Waterway, including:

[D]eepening the Sabine Neches Waterway (SNWW) from 40 to 48 feet and the offshore channel from 42 to 50 feet in depth from offshore to the Port of Beaumont Turning Basin; extending the 50-foot deep offshore channel by approximately 13.2 miles to deep water in the Gulf, increasing the total length of the channel from approximately 64 to 77 miles; tapering and marking the Sabine Bank Channel from 800 feet wide to 700 feet wide; deepening and widening the Taylor Bayou channels and turning basins; easing selected bends on the Sabine-Neches Canal and Neches River Channel; constructing new and enlarging/deepening existing turning and anchorage basins on the Neches River Channel; beneficial use of dredged material features consisting of the restoration of 2,853 acres of emergent marsh, improvement of 871 acres of shallow water habitat, and nourishment of 1,234 acres of existing marsh in Texas; mitigation measures consisting of the restoration of 2,783 acres of emergent marsh, improvement of 957 acres of shallow water habitat, and stabilization and nourishment of 4,355 acres of existing marsh; and post-construction monitoring and adaptive management of the beneficial use features and mitigation areas[.]

[Dkt. 5-7 at 1–2]. Construction on the first portion of the Project, Anchorage Basin No. 1, has been completed. This portion of the Project deepened Anchorage Basin No. 1 from twenty feet to forty feet.

To fund its share of Project costs, SSND passed a User Fee Ordinance ("Ordinance") in April 2021, which charges a User Fee ("Fee") on ships with drafts in excess of twenty feet. [Dkt. 1-1]. Prior to enacting the Ordinance, SSND published it in the Federal Register in January 2021 and received public comment. SNND User Fee Notice, 86 Fed. Reg. 7369-05 (Jan. 28, 2021). The Fee collects between $0.02–$0.035 per short ton of non-hydrocarbon cargo and $0.20–$0.35 per short ton of hydrocarbon cargo. The Fee may be adjusted to as low as $0.00 for all types of cargo. [Dkt. 1 at ¶ 38(g)]. SSND will collect the Fee until either all construction costs are repaid or January 1, 2049, whichever comes first. Id. SSND began levying the Fee upon completion of Anchorage Basin No. 1 on May 1, 2021. Id. at ¶ 37.

Plaintiffs’ ships make extensive use of the Waterway.³ Attached to the Complaint is a list of BG ships that have been subject to the Fee, each with a fully laden forward and aft sailing draft between thirty-six and thirty-nine feet. [Dkt. 1-2]. At the time of filing, BG incurred $326,983.70 in Fees. Although Phillips has not yet paid the Fee, it has executed contracts which will subject it to the Fee in the immediate future. [Dkt. 1 at ¶ 43].

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In reviewing a Rule 12(b)(6) motion, the Court "accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Sonnier v. State Farm Mut. Auto. Ins. Co. , 509 F.3d 673, 675 (5th Cir. 2007). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions [and] ... Rule 8 does not unlock the doors of discovery for a plaintiff armed with nothing more...