Dominion Transmission, Inc. v. Robert Summers , 723 F.3d 238 ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 14, 2013 Decided July 19, 2013
No. 13-1019
DOMINION TRANSMISSION, INC.,
PETITIONER
v.
ROBERT SUMMERS, IN HIS OFFICIAL CAPACITY AS SECRETARY
OF THE MARYLAND DEPARTMENT OF THE ENVIRONMENT AND
MARYLAND DEPARTMENT OF THE ENVIRONMENT,
RESPONDENTS
MYERSVILLE CITIZENS FOR A RURAL COMMUNITY, INC.,
INTERVENOR
On Petition for Review of an Order of
the Maryland Department of the Environment
Christopher T. Handman argued the cause for petitioner.
With him on the briefs were J. Patrick Nevins and Sean
Marotta.
Joan Dreskin and Dan Regan were on the brief for amicus
curiae Interstate Natural Gas Association of America in
support of petitioner.
Roberta R. James, Assistant Attorney General, Office of
the Attorney General for the State of Maryland, argued the
2
cause for respondents. With her on the brief was Douglas F.
Gansler, Attorney General.
Carolyn Elefant argued the cause and filed the brief for
intervenor.
Before: HENDERSON, GRIFFITH, and KAVANAUGH, Circuit
Judges.
Opinion for the court filed by Circuit Judge GRIFFITH.
GRIFFITH, Circuit Judge: Hoping to construct a natural gas
compressor station in Myersville, Maryland, Dominion
Transmission, Inc., applied for and received a certificate of
public convenience and necessity from the Federal Energy
Regulatory Commission. To proceed with construction,
however, Dominion must also obtain an air quality permit from
the Maryland Department of the Environment (the
Department). After the Department twice refused to process
Dominion’s application for a permit, Dominion sought
expedited review by this court. Because we hold that the
Department’s failure to act is inconsistent with federal law, we
remand the case to the Department and direct it to adhere to a
schedule to ensure prompt action on Dominion’s application.
I
A
The Natural Gas Act (NGA), 15 U.S.C. §§ 717-717z,
establishes a “comprehensive scheme of federal regulation”
that vests FERC with “exclusive jurisdiction over the
transportation . . . of natural gas in interstate commerce for
resale.” Schneidewind v. ANR Pipeline Co., 485 U.S. 293,
300-01 (1988). Before a company may construct a facility that
3
transports natural gas, it must obtain from FERC “a certificate
of public convenience and necessity,” 15 U.S.C. § 717f(c), and
comply with all other federal, state, and local regulations not
preempted by the NGA.
One regulatory regime the NGA expressly does not
preempt is the system of state emissions regulations
established by the Clean Air Act (CAA), 42 U.S.C.
§§ 7401-7671q. See 15 U.S.C. § 717b(d)(2). Air quality
regulation under the CAA is an exercise in cooperative
federalism: The Environmental Protection Agency
“promulgates national ambient air quality standards
(‘NAAQS’) for air pollutants.” Michigan v. EPA, 213 F.3d
663, 669 (D.C. Cir. 2000) (citing 42 U.S.C. § 7410(a)(1)
(1994)). If states wish to have a hand in air quality regulation,
they “must then adopt state implementation plans (‘SIPs’)
providing for the implementation, maintenance, and
enforcement of the NAAQS; such plans are then submitted to
EPA for approval.” Id. To win approval, a SIP must include an
air quality permit program for the “construction of any
stationary source within the areas covered by the plan [in
order] to assure that [NAAQS] are achieved.” 42 U.S.C.
§ 7410(a)(2)(C).
Maryland’s SIP consists of a collection of regulations and
requirements that are incorporated by reference into the Code
of Federal Regulations. See 40 C.F.R. § 52.1070. The
Department, headed by respondent Secretary Robert Summers,
administers Maryland’s air quality control program, including
Maryland Code § 2-404, which governs the issuance of permits
to construct emissions sources. The present controversy
centers on § 2-404(b)(1), which prohibits the Department from
processing an application for a permit until the applicant
submits documentation:
4
(i) That demonstrates that the [proposed source] has
been approved by the local jurisdiction for all
zoning and land use requirements; or
(ii) That the source meets all applicable zoning and
land use requirements.
Md. Code § 2-404(b)(1). In other words, the successful
applicant must show that the project has received approval
from the local authority or otherwise satisfies local law.
Because the administrative demands of these various
requirements can impede “public convenience and necessity,”
15 U.S.C. § 717f(e), Congress designated FERC as “the lead
agency for the purposes of coordinating all applicable Federal
authorizations,” including air quality permits. 15 U.S.C.
§ 717n(b). Additionally, Congress provided for expedited
judicial review of federal or state agency action or inaction that
deprives a company building a FERC-certified natural gas
facility of an authorization it requires to proceed with
construction. 15 U.S.C. § 717r(d). We proceed under § 717r(d)
in this case.
B
Dominion, which stores and transports natural gas across
the Northeast and Mid-Atlantic regions, is in the process of
building infrastructure and facilities in Maryland, Ohio,
Pennsylvania, and West Virginia as part of a long-range plan to
increase its capacity. One such facility is a compressor station
that Dominion hopes to build in Myersville, Maryland. 1 The
1
A compressor “boost[s] the system pressure” along pipelines
in order to “maintain required flow rates.” FERC, AN INTERSTATE
5
compressor station will include equipment that emits
pollutants.
On February 1, 2012, Dominion submitted an air quality
permit application to the Department. A week later, the
Department notified Dominion that it had failed to provide the
documentation of zoning compliance required by
§ 2-404(b)(1). Dominion replied on March 8 with a letter
explaining that the compressor station would comply with
zoning and land use requirements. The next month, Dominion
filed a zoning application with the Town of Myersville. Pet’r’s
Br. 11. A group of residents organized the Myersville Citizens
for a Rural Community (MCRC), the Intervenor in this case, to
oppose the application. On June 5, while the zoning application
was pending, the Department returned Dominion’s air quality
permit application “for lack of documentation that
demonstrates that the project has been approved by the local
jurisdiction for all zoning and land use requirements.” Sup.
J.A. 101. In August, the Town of Myersville denied
Dominion’s zoning application on the grounds that the
proposed compressor station was contrary to the local
development plan, endangered public health, and posed a
nuisance. 2
NATURAL GAS FACILITY ON MY LAND? WHAT DO I NEED TO
KNOW? 22 (2010).
2
Dominion subsequently filed a declaratory judgment action
against the Town of Myersville, its town council, and its mayor,
seeking a declaration that the town’s relevant ordinances, rules, and
regulations are preempted by federal law. Dominion Transmission,
Inc. v. Town of Myersville Town Council, Case No.
1:13-cv-00338-RDB (D. Md.). Although Dominion’s complaint in
that action presents some of the same questions of law as its petition
to this court, that action has no bearing on this petition.
6
On December 20, 2012, FERC issued a certificate of
public convenience and necessity for a number of Dominion
facilities, including the compressor station in Myersville.
Dominion Transmission, Inc., 141 F.E.R.C. ¶ 61,240 (2012).
FERC concluded that there was “strong evidence of market
demand” for natural gas transportation capacity, demonstrating
the need for the facility. Id. at 62,297. FERC’s detailed order
addressed comments critical of the proposed location but
ultimately concluded that “the Myersville site is the more
appropriate site for the Maryland compressor station.” Id.
The next day, with FERC’s certificate in hand, Dominion
applied to the Department once again for an air quality permit.
Its cover letter stated it now satisfied § 2-404(b)(1) because all
local zoning and land use requirements had been preempted by
FERC’s certificate and were therefore not “applicable.” J.A.
3-5. On January 15, 2013, the Department verbally informed
Dominion that it would not be able to process the application.
On January 17, responding to a protest MCRC sent to the
Governor, the Department sent a letter reassuring the group
that it would not proceed with the application because
Dominion had failed to provide the documentation of
compliance required by § 2-404(b)(1). The Department sent a
copy of the letter to Dominion, as well. After receiving the
letter, Dominion petitioned this court for review of the
Department’s reasons for refusing to process its application.
C
The Department argues that we cannot consider this case
because the requirements of our jurisdictional statute have not
been met and that, in any event, it is immune from our
jurisdiction by virtue of the Eleventh Amendment. We
consider and reject both arguments in turn.
7
The NGA authorizes us to review “an alleged failure to act
by a . . . State administrative agency acting pursuant to Federal
law to issue, condition, or deny any permit required under
Federal law . . . for a facility subject to . . . section 717f of this
title.” 15 U.S.C. § 717r(d)(2). The Department argues that
Dominion has not alleged the required “failure to act” because
the refusal to process the application was the result of
numerous actions, including a review of the application, a
determination that it was inadequate under § 2-404(b)(1), and
notifications to interested parties. But the Department’s
argument focuses too narrowly on the phrase “failure to act”
and disregards the rest of the provision. Section 717r(d)(2)
gives us jurisdiction over “an alleged failure to act . . . to issue,
condition, or deny” a permit. 15 U.S.C. § 717r(d)(2) (emphasis
added). The issue is not, as the Department would have it,
whether an agency has done anything at all in response to an
application. Rather, the issue is whether the Department has
failed “to issue, condition, or deny” a permit. Because the
Department has refused to take any of these actions, we have
jurisdiction to consider whether its decision is lawful.
The Department also asserts Eleventh Amendment
immunity to our jurisdiction on the ground that it is an agency
of the State of Maryland. See U.S. CONST. amend. XI (“The
Judicial power of the United States shall not be construed to
extend to any suit in law or equity, commenced or prosecuted
against one of the United States by Citizens of another
State . . . .”); see also Pennhurst State Sch. & Hosp. v.
Halderman, 465 U.S. 89, 100 (1984) (“It is clear, of course,
that in the absence of consent a suit in which the state or one of
its agencies or departments is named as the defendant is
proscribed by the Eleventh Amendment.”). Dominion
responds that Maryland has waived its sovereign immunity by
exercising its enforcement powers under the CAA. See, e.g.,
Islander E. Pipeline Co., LLC v. Conn. Dep’t of Envt’l
8
Protection, 482 F.3d 79, 89-90 (2d Cir. 2006) (holding that
participation in federal permitting programs waives immunity
from suits under § 717r(d)). We need not decide whether
Maryland has done so because we hold that Dominion may
proceed against Secretary Summers under the doctrine of Ex
Parte Young, which provides that the Eleventh Amendment
does not bar suits against state officers for prospective relief.
See Verizon Md. v. Md. Pub. Serv. Comm’n, 535 U.S. 635, 645
(2002) (We conduct “a straightforward inquiry into whether
[the petition] alleges an ongoing violation of federal law and
seeks relief properly characterized as prospective.”).
Dominion’s petition easily satisfies that standard: Dominion
alleges that the Department’s failure to act was “contrary to
law,” Pet’r’s Br. 35, and seeks prospective relief in the form of
an order directing Secretary Summers to process Dominion’s
application. Id.
II
Turning to the merits, we must determine whether the
Department’s failure to act on Dominion’s application for an
air quality permit was “inconsistent with . . . Federal law.” 15
U.S.C. § 717r(d)(3). The parties agree that, in this context, we
must ask whether the Department’s failure was arbitrary,
capricious, an abuse of discretion, or otherwise contrary to law.
See Pet’r’s Br. 18-19; Resp’ts’ Br. 13-14; Intervenor’s Br.
16-17; see also AES Sparrows Point LNG, LLC v. Wilson, 589
F.3d 721, 727 (4th Cir. 2009); Islander E. Pipeline, 482 F.3d at
94.
A
Dominion argues that the Department acted contrary to
law by requiring a demonstration under § 2-404(b)(1) that the
proposed compressor station was in compliance with local law.
9
The NGA preempted that state law requirement, Dominion
argues, to the extent that it calls for more from a natural gas
facility than does FERC. We disagree that the NGA preempted
§ 2-404(b)(1). It is true, as the Supreme Court observed, that
Congress intended to occupy the field to the exclusion of state
law by establishing through the NGA a “comprehensive
scheme of federal regulation of all wholesales of natural gas in
interstate commerce.” Schneidewind, 485 U.S. at 300 (internal
quotation marks omitted). But Congress expressly saved
states’ CAA powers from preemption. 15 U.S.C. § 717b(d)(2).
In other words, laws that are part of a state’s SIP are not
preempted, unless the NGA says otherwise. Our inquiry
therefore turns on whether § 2-404(b)(1) is part of Maryland’s
SIP. Dominion argues it is not because it is absent from the
section of the Code of Federal Regulations that lists the
Maryland laws that EPA has approved as part of Maryland’s
SIP. See 40 C.F.R. § 52.1070(c). But Dominion takes too
narrow a view of Maryland’s SIP. When EPA approves a state
SIP, it incorporates the relevant state law into the Code of
Federal Regulations by reference. See id. § 52.1070(b). The
Code of Federal Regulations lists provisions of the Code of
Maryland Regulations (COMAR), and two of the regulations,
in turn, quite clearly incorporate § 2-404(b)(1). See COMAR
§§ 26.11.02.01(B)(7), 26.11.02.11(D). Incorporation by
reference makes § 2-404(b)(1) part of Maryland’s SIP. The
provision is therefore saved from preemption by the NGA.
B
Even so, Dominion asserts, the Department’s argument
cannot rely on § 2-404(b)(1) because Dominion has in fact
complied with its terms. Recall that § 2-404(b)(1) requires an
applicant to provide documentation that establishes that its
project has been approved by local authorities or, lacking that
approval, demonstrates how that project nevertheless meets
10
“all applicable zoning and land use requirements.” Unable to
show local approval, Dominion attempted to show compliance
with zoning and land use requirements. With its second
application for an air quality permit, Dominion included
FERC’s certificate of public convenience and necessity and a
letter arguing “that the requirements of § 2-404(b)(1) are
satisfied.” J.A. 5. Dominion’s letter points out that
§ 2-404(b)(1) requires documentation of compliance with
“applicable” local requirements, then argues, correctly, that
local law preempted by a federal law is not “applicable”
because the Supremacy Clause bars its enforcement by a state
agency. FERC’s certificate preempts all local requirements
that regulate in the same field as the NGA – including,
according to Dominion, those requirements on which the
Myersville Town Council based its zoning decision. Because
those local requirements are preempted by federal law, they are
no longer “applicable,” and Dominion reasons that it need not
demonstrate compliance with them to satisfy § 2-404(b)(1).
In its January 17 letter to MCRC and in its briefs to this
court, the Department relied on two reasons for rejecting
Dominion’s analysis. In the Department’s view, a letter from a
permit applicant is not the type of documentation called for by
§ 2-404(b)(1), and FERC’s certificate did not do all that
Dominion claims because it did not expressly preempt
Myersville’s zoning and land use requirements.
According to the Department, a statement of compliance
from the local zoning authority is the only documentation that
satisfies § 2-404(b)(1). The Department asserts that it “has
consistently interpreted the documentation requirement in
§ 2-404(b) [as] requiring a letter or statement from a local
zoning authority that any proposed construction project has
local zoning approval or otherwise meets local zoning and land
11
use requirements.” Resp’ts’ Br. 24. 3 But this interpretation is
inconsistent with the plain meaning of § 2-404, which
expressly permits the applicant to avoid involvement by the
local zoning authority altogether. Subsection (ii) states that
§ 2-404(b)(1) may be satisfied by documentation “that the
source meets all applicable zoning and land use requirements.”
If subsection (ii) required a statement or letter from the local
zoning authority, then it would differ in no meaningful respect
from subsection (i), which permits applicants to satisfy
§ 2-404(b)(1) with documented approval by the local zoning
authority. This is not a sensible reading of the statute, which
separates (i) and (ii) with a disjunctive “or.” The Department’s
reading would render one provision or another mere
surplusage. The Department’s purported requirement of a
written statement from the local zoning authority is therefore
contrary to law.
Although it is true that the FERC certificate “does not
definitively state that all of Myersville’s applicable zoning
requirements are preempted in this particular case . . . ,” J.A. 1,
that does not relieve the Department of its obligation to explain
3
The Department cites a single source advancing this allegedly
long-standing interpretation: a letter to another permit applicant
stating that “[t]he required documentation must be in the form of a
letter or written statement from the local zoning authority.” Resp’ts’
Br. Addendum A-64. That letter, which we have no reason to believe
is publicly available, does not even support the Department’s
strained interpretation. Instead, it refers only to § 2-404(b)(1)(i),
stating that the applicant “must submit documentation that
demonstrates that the proposal has been approved by the local
jurisdiction for all zoning and land use requirements.” Id. It is
unclear to us why the letter does not refer to § 2-404(b)(1)(ii), the
alternative to subpart (i) that does not require approval by the local
jurisdiction.
12
why it has refused to process Dominion’s application. Section
2-404(b)(1) forbids the Department from processing only those
applications for projects that do not comply with “applicable”
local laws, so the Department may not rely on that provision to
refuse to process an application if the only local laws with
which an applicant fails to demonstrate compliance are
preempted. As FERC explained, “state and local regulation is
preempted by the NGA to the extent they [sic] conflict with
federal regulation, or would delay the construction and
operation of facilities approved by” FERC. Dominion
Transmission, 141 F.E.R.C. at 62,298. Presented with a FERC
certificate that approves Dominion’s compressor station, the
Department must apply this standard to determine which of
Myersville’s zoning and land use requirements it preempts,
and which remain “applicable” to Dominion’s compressor
station. The absence of express preemption in FERC’s
certificate should play no role in that analysis. FERC properly
chose to let the Department – the agency charged with
administering § 2-404(b)(1) – determine in the first instance
which of Myersville’s requirements are preempted, and which
are “applicable.” Dominion Transmission, 141 F.E.R.C. at
62,298.
Believing, like FERC, that the Department is better
situated to determine whether Dominion has complied with
§ 2-404(b)(1), we remand. See 15 U.S.C. § 717r(d)(3). Cf.
PPG Indus., Inc. v. United States, 52 F.3d 363, 365 (D.C. Cir.
1995) (“[W]hen [we] determine[] that an agency made an error
of law, [our] inquiry is at an end: the case must be remanded to
the agency for further action consistent with the corrected legal
standards.”). On remand, the Department must either identify
one or more “applicable” (that is, not preempted) zoning or
land use requirements with which Dominion has not
demonstrated compliance, or it must process Dominion’s
application for an air quality permit. An order directing the
13
parties to propose a schedule for prompt action on remand
accompanies this decision.
III
Because the Department’s failure to act to grant,
condition, or deny Dominion’s air quality permit was
inconsistent with federal law, we grant Dominion’s petition
and remand for further action consistent with this opinion.
So ordered.