Town of Barnstable v. Berwick

• Decision Date: 02 May 2014
• Docket Number: Civil Action No. 14–10148–RGS.
• Court: U.S. District Court — District of Massachusetts
• Parties: TOWN OF BARNSTABLE, MASSACHUSETTS, et al. v. Ann G. BERWICK, et al.

17 F.Supp.3d 113

TOWN OF BARNSTABLE, MASSACHUSETTS, et al.

v.Ann G. BERWICK, et al.

Civil Action No. 14–10148–RGS.

United States District Court, D. Massachusetts.

Signed May 2, 2014.

Bryan F. Bertram, Martha Coakley, Office of Attorney General, Kevin P. Budris, John D. Donovan, Jr., Matthew L. McGinnis, Ropes & Gray LLP, Erika J. Hafner, Michael J. Koehler, David S. Rosenzweig, Keegan Werlin LLP, Boston, MA, Timothy James Casey, Office of the Attorney General, Worcester, MA, Geraldine E. Edens, Christopher H. Marraro, Pro Hac Vice, Baker & Hostetler LLP, N.W. Washington, DC, Duncan R. MacKay, Northeast Utilities Service Company, Berlin, CT, for Ann G. Berwick, et al.

Robert A. Bianchi, Robert A. Bianchi & Associates, Hyannis, MA, Matthew S. McKenzie, Pro Hac Vice, Matthew E. Price, Adam G. Unikowsky, Pro Hac Vice, Jenner & Block LLP, Washington, DC, Joshua M.D. Segal, Ira H. Zaleznik, Lawson & Weitzen, LLP, Boston, MA, for Town Of Barnstable, Massachusetts, et al.

MEMORANDUM AND ORDER ON STATE DEFENDANTS' MOTION TO DISMISS

STEARNS, District Judge.

This Complaint is the latest chapter in a long-running saga involving the siting of a wind farm in Nantucket Sound. The dispute pits the Commonwealth of Massachusetts and the diversified energy policy espoused by Governor Deval Patrick against an obdurate band of aggrieved residents of Cape Cod and the Islands. Both sides in the dispute claim the mantle of environmentalism, although for present purposes, plaintiffs¹ have doffed their green garb and draped themselves in the banner of free-market economics. Plaintiffs filed the Complaint on January 21, 2014, seeking declaratory and injunctive relief against various State Defendants,² while naming Cape Wind Associates, LLC (Cape Wind) and NSTAR Electric Company (NSTAR) as required parties, pursuant to Fed.R.Civ.P. 19(a). Plaintiffs allege violations of the “dormant” Commerce Clause and the Supremacy Clause of the United States Constitution and pray that the court abrogate an order of the DPU approving an energy-supply contract entered into between NSTAR and Cape Wind. All defendants have moved to dismiss (the State Defendants collectively, and Cape Wind and NSTAR separately).³

BACKGROUND

Cape Wind is a for-profit company with plans to develop a wind-powered renewable energy generation facility in federal waters in Nantucket Sound, a triangular-shaped 750 square-mile tract of the Atlantic Ocean bounded by Cape Cod and the Islands of Martha's Vineyard and Nantucket. The proposed wind facility is to consist of 130 horizontal-axis wind turbines dispersed over 24 square miles of open ocean, and is designed to generate 454 megawatts of electricity at peak operation.

In 2001, Cape Wind applied for a permit to build the wind facility on Horseshoe Shoals in the Sound, some five miles from the Cape Cod coastline and roughly 16 miles from the Town of Nantucket. In August of 2002, the U.S. Army Corps of Engineers granted Cape Wind a permit to build a meteorological tower to gather data in preparation for the project. As Judge Tauro presciently predicted in rejecting a suit against the Corps of Engineers' action, this was just “the first skirmish in an eventual battle.” Ten Taxpayers Citizen Grp. v. Cape Wind Assocs., LLC, 278 F.Supp.2d 98, 99 (D.Mass.2003). The Alliance, the leading plaintiff in this action, filed a parallel (and equally unsuccessful) lawsuit also challenging the permitting authority of the Corps of Engineers. See Alliance to Protect Nantucket Sound, Inc. v. U.S. Dep't of the Army, 288 F.Supp.2d 64 (D.Mass.2003), aff'd, 398 F.3d 105 (1st Cir.2005).⁴

In 2005, the Massachusetts Energy Facilities Siting Board approved the construction of two undersea electric transmission cables to connect the proposed wind facility with the regional power grid. The Alliance promptly filed suit protesting the approval.⁵ In 2007, the Secretary of the Executive Office of Energy and Environmental Affairs issued a certificate approving Cape Wind's Final Environmental Impact Report. The Ten Taxpayers Group filed a suit in response.⁶ The Supreme Judicial Court (SJC) and the Superior Court ultimately dismissed the two lawsuits, separately holding that the Board and the Secretary had each exercised their approval authority appropriately by deferring where necessary to federal jurisdiction.⁷ The Town of Barnstable, also a plaintiff in this case, meanwhile filed a lawsuit of its own against the Siting Board. See Town of Barnstable v. Mass. Energy Facilities Siting Bd., 25 Mass. L. Rptr. 375, 2009 WL 1449032 (2009). The Alliance, the Ten Taxpayer Group, and the Town of Barnstable then joined all of their grievances in another Superior Court lawsuit, Town of Barnstable v. Cape Wind Assocs., LLC, 27 Mass. L. Rptr. 1111 (2010), followed by another onslaught against the Facilities Siting Board. See Alliance to Protect Nantucket Sound, Inc. v. Energy Facilities Siting Bd., 457 Mass. 663, 932 N.E.2d 787 (2010) (affirming the Siting Board's authority to issue the environmental certificate).⁸

In April of 2010, Kenneth Salazar, the United States Secretary of the Interior, issued a Record of Decision giving federal approval to the Cape Wind project.⁹ The Secretary also issued a lease to Cape Wind to operate a wind energy facility on Horseshoe Shoals, effective November 1, 2010. Notwithstanding, as one academic observer has accurately stated, “[d]espite full federal and state approval of the project, CWA has continued to face vehement opposition from local groups.”¹⁰

The Green Communities Act

In 2008, the Massachusetts Legislature passed the Green Communities Act (GCA), Mass. St.2008, ch. 169.¹¹ Section 83 of the GCA requires Massachusetts electric utilities to solicit long term supply proposals from renewable energy generators. Among the favored suppliers are generators of wind energy like Cape Wind. The GCA requires DPU-regulated utilities to obtain at least three percent of their total energy supply from “green” sources.

As originally enacted, the GCA contained a provision requiring that all eligible alternative energy suppliers be located within Massachusetts or its adjacent state and federal waters. On June 9, 2010, the DPU suspended the territorial restriction¹² after TransCanada Power Marketing Ltd. challenged the limitation in federal court under the dormant Commerce Clause.¹³ In 2012, the Legislature amended the GCA to eliminate the geographical restriction.

The National Grid—Cape Wind Contract

In December of 2009, National Grid, a competitor of defendant NSTAR, sought approval from the DPU to enter into negotiations with Cape Wind over a long-term energy-supply contract.¹⁴ The parties signed a Power Purchase Agreement (PPA) on May 7, 2010. Plaintiffs allege that the contract prices that National Grid agreed to pay were significantly above the market price for electricity in general and well above the price being charged by other generators of renewable energy in 2010. Compl. ¶ 48. In May of 2010, National Grid submitted two Cape Wind contracts to DPU for approval. DPU approved the first contract (for 50% of Cape Wind's anticipated power supply to be distributed by National Grid), but rejected the second (for the remaining 50%, to be assigned to another purchaser for distribution).¹⁵

Two separate avenues of appeal were taken from DPU's approval of the National Grid contract. The Alliance (along with TransCanada) appealed directly to the SJC, asserting, among other claims, that DPU's approval of the contract violated the dormant Commerce Clause. The SJC rebuffed the objections and affirmed DPU's decision, specifically rejecting the dormant Commerce Clause claim. See Alliance, 461 Mass. at 174, 959 N.E.2d 413 (noting that “[t]he constitutional challenge advanced by the Alliance and TransCanada fails”).¹⁶ A second group of plaintiffs filed a challenge with the Federal Energy Regulatory Commission (FERC), alleging that the DPU had violated the Supremacy Clause by encroaching on FERC's exclusive prerogative under the Federal Power Act (FPA) to set national wholesale electricity prices. FERC rejected the argument for, among other reasons, the fact that the contract as approved by DPU explicitly required the parties to obtain wholesale rate clearances from FERC. See Californians for Renewable Energy, Inc. (CARE) & Barbara Durkin v. Nat'l Grid, Cape Wind, & DPU, Order Dismissing Complaint, 137 FERC ¶ 61j13 (2011).¹⁷

The NSTAR—Cape Wind Contract

After the suspension of the geographical limitation, DPU had directed NSTAR and other utilities to reopen their Requests for Proposals (RFPs) to take bids from out-of-state generators. Compl. ¶ 53. NSTAR did so and ultimately contracted with three land-based wind generators, Groton Wind, LLC, New England Wind, LLC, and Blue Sky East, LLC. I d. ¶ 54. Plaintiffs allege that the price of wind energy from NSTAR's contracts with the three land-based generators was approximately one-half the initial price agreed to by National Grid in its contract with Cape Wind. Id . ¶¶ 55–57. NSTAR chose not to enter a contract with Cape Wind. Id . ¶ 56. Plaintiffs allege that NSTAR's “refusal” to contract with Cape Wind threatened the very existence of the project because National Grid had secured DPU approval to distribute only half of the wind farm's output (the second National Grid contract, for the remaining 50% had been rejected by the DPU). Id. ¶ 58.

On November 24, 2010, NSTAR filed an application with DPU for approval of a merger between it and Northeast Utilities.¹⁸ The Department of Energy Resources (DOER), the agency responsible for implementing the state's renewable energy priorities (see Mass. Gen. Laws ch. 25A, § 6 ), intervened in the merger proceedings. DOER had no power to veto the merger,¹⁹ but requested that DPU modify its standard of review from “no net harm” to one that would “determine whether the proposed merger will provide a substantial net benefit to the public interest....” Compl. ¶ 66. In response, DPU entered an...