Aes Sparrows Point Lng, LLC v. Smith

• Decision Date: 19 May 2008
• Docket Number: No. 07-1615.,07-1615.
• Parties: AES SPARROWS POINT LNG, LLC; Mid-Atlantic Express, LLC, Plaintiffs-Appellants, v. James T. SMITH, Jr., County Executive, Baltimore County; William J. Wiseman, III, Zoning Commissioner, Baltimore County; Baltimore County, Maryland, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

527 F.3d 120

AES SPARROWS POINT LNG, LLC; Mid-Atlantic Express, LLC, Plaintiffs-Appellants, v. James T. SMITH, Jr., County Executive, Baltimore County; William J. Wiseman, III, Zoning Commissioner, Baltimore County; Baltimore County, Maryland, Defendants-Appellees.

No. 07-1615.

United States Court of Appeals, Fourth Circuit.

Argued: January 30, 2008.

Decided: May 19, 2008.

ARGUED: Jeffrey A. Lamken, Baker Botts, L.L.P., Washington, D.C., for Appellants. John Edward Beverungen, County Attorney, Baltimore County Office of Law, Towson, Maryland, for Appellees. ON BRIEF: James W. Bartlett, III, Scott H. Phillips, Semmes, Bowen & Semmes, Baltimore, Maryland; Randolph Q. McManus, Mark Cook, Michael G. Pattillo, Jr., Adam J. White, Rachel M. McKenzie, Baker Botts, L.L.P., Washington, D.C., for Appellants. Jeffrey Grant Cook, Assistant County Attorney, Baltimore County Office of Law, Towson, Maryland, for Appellees.

Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and LIAM O'GRADY, United States District Judge for the Eastern District of Virginia, sitting by designation.

Reversed and remanded by published opinion. Judge SHEDD wrote the opinion, in which Judge O'GRADY joined. Chief Judge WILLIAMS wrote a separate opinion concurring in the judgment.

OPINION

SHEDD, Circuit Judge:

AES Sparrows Point LNG, LLC and Mid-Atlantic Express, LLC (together, "AES") brought this suit against Baltimore County, Maryland, its executive, and its zoning commissioner (together, "the County") seeking a declaration that County Bill 9-07, which prohibits the siting of any liquefied natural gas ("LNG") terminal in the County's Chesapeake Bay Critical Area, is preempted by the Natural Gas Act ("NGA"). The district court granted summary judgment to the County, concluding that Bill 9-07 is saved from preemption because it "is within the delegated authority of the State of Maryland and the County under the Coastal Zone Management Act" ("CZMA") and "is enforceable as part of the State of Maryland's Coastal Management Program." J.A. 271, 284. AES now appeals. We hold that Bill 9-07 is not part of Maryland's federally approved Coastal Zone Management Plan ("CMP"), and therefore is not saved from preemption as an exercise of Maryland's rights under the CZMA. Accordingly, we reverse the judgment of the district court and remand for further proceedings.

I

Before turning to the facts of this case, we describe briefly the relevant statutory framework. The Natural Gas Act, 15 U.S.C. §§ 717 et seq., requires a party seeking to construct an LNG terminal to first obtain authorization from the Federal Energy Regulatory Commission ("FERC"). 15 U.S.C. § 717b(a). In order to do so, applicants must comply with the NGA's requirements as well as complete FERC's extensive pre-filing process. See 18 C.F.R. § 157.21. FERC must then consult with the appropriate state agency on numerous state and local issues. See 15 U.S.C. § 717b-1(b). The NGA also contains two provisions, added in 2005, that are pertinent to this appeal. The first provides that "[FERC] shall have the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal." 15 U.S.C. § 717b(e)(1).¹ The second (the "Savings Clause") provides that "nothing in the [NGA] affects the rights of States under" the CZMA and two other federal statutes.² 15 U.S.C. § 717b(d).

The CZMA, 16 U.S.C. §§ 1451, et seq., was designed "to encourage states to develop land-use planning programs that will preserve, protect, and restore the environment of their coastal zones." Shanty Town Assocs. Ltd. P'ship v. EPA, 843 F.2d 782, 793 (4th Cir.1988). To that end, the CZMA authorizes states to create CMPs setting forth the state's "objectives, policies, and standards to guide public and private uses of lands and waters in the coastal zone." 16 U.S.C. § 1453(12). The CZMA sets forth detailed requirements that a CMP must meet in order to obtain federal approval. See 16 U.S.C. §§ 1454-55. Once a state's CMP is approved by the National Oceanic and Atmospheric Administration ("NOAA"),³ the state is eligible to receive federal grants for the purpose of administering its coastal zone management programs. 16 U.S.C. § 1455. In addition, the CZMA requires that any federal agency activity affecting the state's coastal zone "be carried out in a manner which is consistent to the maximum extent practicable with the enforceable policies of approved [CMPs]." 16 U.S.C. § 1456(c)(1). The CZMA therefore gives states with approved CMPs the right to engage in "consistency review," permitting them to conditionally veto federally permitted projects that are not consistent with "the enforceable policies of the state's approved [CMP]," subject to a final override by the Secretary of Commerce. 16 U.S.C. § 1456(c)(3)(A); see generally Cal. Coastal Comm'n v. Granite Rock Co., 480 U.S. 572, 590-91, 107 S.Ct. 1419, 94 L.Ed.2d 577 (1987) (explaining consistency review). Finally, the CZMA specifies the procedures a state must follow in order to amend its CMP, which include presentation of any such amendment to NOAA for approval. See 16 U.S.C. § 1455(e).

II

The facts of this case are not disputed. To meet the demand for natural gas in the Mid-Atlantic region, AES proposes to build an LNG import terminal with the necessary transmission pipeline at Sparrows Point, a heavily industrialized coastal area on the Chesapeake Bay in the County. LNG, which is natural gas that has been cooled to -260° Fahrenheit to form a liquid, occupies one six-hundredth of the volume of natural gas in its gaseous state. AES' proposed terminal would receive LNG, store it, and regasify it for transportation and delivery to residential, commercial, and industrial end users. Because LNG can be economically transported by sea from gas-producing areas worldwide to many domestic and foreign markets, LNG import terminals are typically sited in coastal areas with shipping access to foreign countries.

In 2006, responding to public opposition to the siting of an LNG terminal at Sparrows Point, the County Council approved Bill 71-06, which amended the County's Zoning Regulations to provide that an LNG terminal can only be constructed with a "special exception" and must be located at least five miles from residential zones and 500 feet from businesses. J.A. 79. This zoning amendment would have prevented AES from constructing an LNG facility at Sparrows Point.

Following passage of Bill 71-06, AES brought suit in federal court, arguing that Bill 71-06 was preempted under the Supremacy Clause of the United States Constitution by the NGA's grant of exclusive authority to FERC to site LNG terminals. The district court agreed and enjoined the County from enforcing the zoning ordinance. See AES Sparrows Point LNG, LLC v. Smith, 470 F.Supp.2d 586, 601 (D.Md.2007)("AES I").

The County responded in 2007 by passing Bill 9-07, which takes a different approach to banning LNG facilities at Sparrows Point. Instead of restricting LNG terminal siting based on proximity to residential and commercial areas, Bill 9-07 makes the restriction on LNG facilities a matter of coastal concern by amending the County's Zoning Regulations to include LNG terminals among the prohibited uses in the Chesapeake Bay Critical Area.⁴ Because the proposed Sparrows Point site is located within the County's Chesapeake Bay Critical Area,⁵ Bill 9-07 prevents AES from constructing an LNG facility there.

AES then filed the present suit, seeking essentially the same injunctive and declaratory relief as in AES I. The County responded by requesting that Maryland's Critical Area Commission for the Chesapeake and Atlantic Coastal Bays (the "Critical Area Commission") amend the County's Chesapeake and Atlantic Coastal Bays Critical Area Protection Program ("CAPP") to include Bill 9-07's restriction on LNG terminal siting in coastal areas. The CAPP was enacted pursuant to Md.Code Ann., Nat. Res. §§ 8-1801 et seq., and is one of over 50 state laws identified in Maryland's CMP as effectuating Maryland's coastal management policies.⁶ Before the district court rendered its decision, the Critical Area Commission approved the adoption of Bill 9-07 into the CAPP. Maryland however, never presented Bill 9-07 to NOAA for approval by that agency, pursuant to the CZMA's procedures for amending state CMPs.

The district court concluded that Bill 9-07 was not preempted by the NGA. Reasoning that by adopting Bill 9-07 into the County's CAPP, Maryland also had incorporated it into its CMP, the district court concluded that Bill 9-07 represented an exercise of Maryland's "delegated authority" under the CZMA and was thus saved from preemption by the NGA's Savings Clause. The district court also held that Bill 9-07 does not facially discriminate against or unduly burden interstate and foreign commerce in violation of the Commerce Clause of the United States Constitution. Accordingly, the district court denied AES' request for declaratory and injunctive relief and granted summary judgment in favor of the County. This appeal followed.

III

AES' primary contention on appeal, as below, is that Bill 9-07 is preempted by the NGA. We review this legal question de novo. Cox v. Shalala, 112 F.3d 151, 153 (4th Cir.1997).⁷

A.

The Supremacy Clause of the United States Constitution provides that "[t]his Constitution, and the Laws of the United States which shall be made in Pursuance thereof ... shall be the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. Under the Supremacy Clause, state law that conflicts with federal law is "without effect." Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (internal quotation omitted). Nevertheless, in evaluating arguments based on the Supremacy Clause, we begin with "the assumption that the historic police powers of the States [are]...