Aes Sparrows Point Lng, LLC v. Smith, Civil Action No. RDB-06-2478.

• Citation: 470 F.Supp.2d 586
• Decision Date: 23 January 2007
• Docket Number: Civil Action No. RDB-06-2478.
• Parties: AES SPARROWS POINT LNG, LLC, et al., Plaintiffs, v. James T. SMITH, Jr., et al., Defendants.
• Court: U.S. District Court — District of Maryland

470 F.Supp.2d 586

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

Civil Action No. RDB-06-2478.

United States District Court, D. Maryland.

January 23, 2007.

COPYRIGHT MATERIAL OMITTED

James W Bartlett, III, Scott Hamilton Phillips, Semmes Bowen and Semmes PC, Baltimore, MD, Jeffrey A. Lamken, Ran

dolph Q. McManus, Baker Botts LLP, Washington, DC, for Plaintiffs.

John Edward Beverungen, Jeffrey Grant Cook, Towson, MD, for Defendants.

MEMORANDUM OPINION

RICHARD D. BENNETT, United States District Judge.

The 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 ("Defendants" or "the County"). The Plaintiffs seek a declaration that an amendment to section 256.4 of the Baltimore County Zoning Regulations, as set forth in Bill 71-06 ("the Zoning Amendment") and providing for absolute prohibitions and limitations on the siting of liquified natural gas ("LNG") importation facilities, is preempted under the Supremacy Clause of the United States Constitution¹ by the Natural Gas Act, 15 U.S.C. §§ 717, et seq. ("NGA" or "the Act"), as amended by the Energy Policy Act of 2005, Pub.L. No. 109-58, § 311, 119 Stat. 594, 685 (2005): The Plaintiffs have filed a Motion for Summary Judgment and the Defendants have filed a Motion to Dismiss. The issues have been fully briefed by the parties and a hearing was held by this Court on January 10, 2007.

State and local governments have a clearly defined role in providing input to the Federal Energy Regulatory Commission ("FERC") during the application process for the construction of a liquefied natural gas facility. That input includes consideration of local environmental requirements and any public opposition. However, the United States Congress has given FERC the exclusive authority to ultimately determine the siting of a liquefied natural gas facility through the Natural Gas Act, which controls natural gas distribution throughout the United States. A local government may not exercise veto power over this nationwide process by local zoning legislation.

For the reasons that follow, the Plaintiffs' Motion for Summary Judgment will be GRANTED, and the Defendants' Motion to Dismiss will be DENIED. This Court declares that the Zoning Amendment to section 256.4 of the Baltimore County Zoning Regulations as set forth in Bill 71-06 is unenforceable because it is preempted under the Supremacy Clause of the United States Constitution by the Natural Gas Act, as amended by the Energy Policy Act of 2005. Accordingly, a permanent injunction enjoining the Defendants from enforcing the Zoning Amendment against the Plaintiffs shall be entered.

BACKGROUND

The facts of this case are undisputed. 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, formerly occupied by Bethlehem Steel Corp. The site is currently zoned for industrial purposes. (See Pls.' Reply Mem. Supp. Summ. J. Ex. A.) Pursuant to that option agreement, AES proposes to construct a liquefied natural gas² ("LNG") terminal at this site and to import, store, and regassify LNG. 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. (Compl.¶¶ 12— 13.) On March 24, 2006, Plaintiffs initiated the pre-filing process necessary to file a formal application with the Federal Energy Regulatory Commission to build an LNG terminal at the Sparrows Point site.

Under the Natural Gas Act, a party seeking to construct an LNG terminal must first obtain authorization from FERC. 15 U.S.C. § 717b(a). 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. Applicants must also comply with the requirements of the National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321, et seq., by examining the impact the facility would have on the environment. 15 U.S.C. § 717b-1(a). 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; (2) the existing and projected population and demographic characteristics of the location; (3) the existing and proposed land use near the location; (4) the natural and physical aspects of the location; (5) the emergency response capabilities near the facility location; and (6) the need to encourage remote siting." Id. § 717b-1(b). It is undisputed that this entire process can take a considerable period of time at substantial monetary cost. (See Pls.' Mem. Opp'n Mot. Dismiss 6, 20; Defs.' Mem. Supp. Mot. Dismiss 6.)

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. The bill was effective on August 5, 2006. (See Defs. Mem. Supp. Mot. Dismiss 2.) This amendment provides that an LNG terminal can only be constructed with a "special exception" and must be at least 5 miles from residential zones and 500 feet from business zones. There is no dispute that this Zoning Amendment would specifically prevent the Plaintiffs from constructing an LNG facility at Sparrows Point.

On September 22, 2006, Plaintiffs filed this action seeking declaratory relief (Count I) and requesting injunctive relief (Count II). Plaintiffs seek a declaratory judgment that the Zoning Amendment violates the Supremacy Clause of the United States Constitution and is preempted by the Natural Gas Act, and the Plaintiffs further seek an injunction barring the enforcement of the Zoning Amendment. On October 16, 2006, Defendants filed a Motion to Dismiss this case (Paper No. 4) for lack of subject matter jurisdiction and lack of ripeness. On November 27, 2006, Plaintiffs filed a Motion for Summary Judgment (Paper No. 9). On. January 8, 2007, having completed the pre-filing process, the Plaintiffs submitted their formal application to the Federal Energy Regulatory Commission for approval. This Court conducted a hearing on both motions on January 10, 2007, pursuant to Local Rule 105.6 (D.Md. 2004).

STANDARDS OF LAW

I. Motion to Dismiss

A. Subject Matter Jurisdiction

Motions to dismiss for lack of subject matter jurisdiction are governed by Rule 12(b)(1) of the Federal Rules of Civil Procedure. "The plaintiff bears the burden of proving that subject matter jurisdiction properly exists in the federal court." Biktasheva v. Red Square Sports, Inc., 366 F.Supp.2d 289, 294 (D.Md.2005). The court may "consider evidence outside the pleadings" in a 12(b)(1) motion to determine if it has jurisdiction over the case. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). "The court should grant the 12(b)(1) motion only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Biktasheva, 366 F.Supp.2d at 294 (quoting Richmond, 945 F.2d at 768).

Pursuant to the "well-pleaded complaint" rule, subject matter jurisdiction exists when "a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987); see Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978). This well-pleaded complaint rule applies to declaratory judgment actions. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70 S.Ct. 876, 94 L.E d. 1194 (1950).

B. Ripeness

"Ripeness is a justiciability doctrine designed `to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.'" Nat'l Park Hospitality Ass'n v. Dep't of Interior, 538 U.S. 803, 807-08, 123 S.Ct. 2026, 155 L.Ed.2d 1017 (2003) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), overruled on other grounds by Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977)); see also Ohio Forestry Assoc., Inc. v. Sierra Club, 523 U.S. 726, 732, 118 S.Ct. 1665, 140 L.Ed.2d 921 (1998). The ripeness doctrine is "drawn both from. Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction[.]" Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57 n. 18, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993).

In assessing whether a dispute is ripe for adjudication, a court must evaluate "(1) the fitness of the issues for judicial decision and (2) the hardship to the parties of withholding court consideration." Nat'l Park Hospitality Ass'n, 538 U.S. at 808, 123 S.Ct. 2026 (citation omitted). As the United States Court of Appeals for the Fourth Circuit has recently explained, "[a] case is fit for judicial decision when the issues are purely legal...