BG Gulf Coast LNG v. Sabine-Neches

Case: 22-40158 Document: 00516471151 Page: 1 Date Filed: 09/14/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
September 14, 2022
No. 22-40158 Lyle W. Cayce
Clerk
BG Gulf Coast LNG, L.L.C.; Phillips 66 Company,
Plaintiffs—Appellants,
versus
Sabine–Neches Navigation District of Jefferson
County, Texas,
Defendant—Appellee.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 1:21-CV-470
Before Stewart, Elrod, and Graves, Circuit Judges.
Jennifer Walker Elrod, Circuit Judge:
The Sabine–Neches Waterway is located in the southeastern-most
parts of Texas and the southwestern-most parts of Louisiana, providing
passage from the Gulf of Mexico to Port Arthur, Beaumont, and Orange,
Texas, and beyond. It is vitally important to the local, state, and federal
economies. Despite its importance, sixty years have gone by without much
effort to maintain or otherwise improve it. The Sabine–Neches Navigation
District set out to change that. The price tag on the proposed improvements
totaled roughly $1.1 billion. After some bureaucratic wrangling, Congress
Case: 22-40158 Document: 00516471151 Page: 2 Date Filed: 09/14/2022
No. 22-40158
covered most of the cost with the District left to cover the rest. The District
planned to cover its share through port fees. But the same federal law that
led to congressional funding also sets limits on how costs can be passed onto
consumers by local entities. Two energy companies sued the District,
claiming that the port fees exceeded those limits. The district court
concluded that they failed to state plausible claims and dismissed the case.
We AFFIRM.
I.
As waterways here in America go, the Sabine–Neches Waterway is
one of our nation’s most critical. Not only does it rank near the top in
business and busyness, it is home to the U.S. military’s largest strategic
commercial seaport. But as ships became larger, the Sabine–Neches
Waterway largely stayed the same. Its lack of depth and width poses a
problem for many modern vessels.
To make the necessary improvements to the Waterway, the District
needed funds. Congress opened up the federal purse for such projects
through the Water Resources Development Act of 1986, 33 U.S.C. § 2201, et
seq. In the years before the Act’s passage, trying to improve waterways was
a bureaucratic nightmare. See New Orleans S.S. Ass’n v. Plaquemines Port,
Harbor & Terminal Dist., 874 F.2d 1018, 1024–25 (5th Cir. 1989) (digesting
the backstory of the Harbor Development and Navigation Improvement Act,
which was passed as part of the Water Resources Development Act). It could
take up to twenty-six years from first study to project completion, with as
many as nineteen independent reviews along the way. Id. When Congress
passed and President Reagan signed the Act, Congress had not approved a
project in nearly two decades. Id. Through the Act, Congress streamlined
the process and came up with a new way to finance waterway-construction
and -improvement projects. Id. at 1025. Rather than rely only on the federal
2
Case: 22-40158 Document: 00516471151 Page: 3 Date Filed: 09/14/2022
No. 22-40158
fisc, the federal government would shoulder some or most of the cost and
would share the rest with state and local entities. Id. Plus, state and local
entities had a greater practical interest in the waterway development, so they
were more likely to get it done faster. Id.The process begins with a feasibility study by the U.S. Army Corps of
Engineers. Once that is done, it is published in the Federal Register and the
Secretary of the Army gives it to Congress. Congress then reviews the study
and the projected costs and puts it to a vote. If it prevails and the President
signs it, Congress gives the local entities money to cover the first phase of the
project (called “new start” funds). The local entities then enter into a
cooperative agreement with the Army Corps of Engineers covering the
project, which includes “provid[ing] to the Federal Government the non-
Federal share of all other costs of construction of [the] project.” 33 U.S.C.
§ 2211(e)(3). See also Air Liquid Am. Corp. v. U.S. Corps of Engineers, 359 F.3d
358, 361 (5th Cir. 2004) (describing process).
The District prepared for years, but did not formally begin the Sabine–
Neches Waterway Channel Improvement Project until 2011. The District
worked with the Army Corps of Engineers, and the Corps completed its
study in March of that year. The Corps concluded that Congress should fund
the Project: deeper waterways means bigger ships which fit more cargo,
which means fewer ships, which means less congestion. The Secretary of the
Army transferred the Project to Congress, Congress passed it, see Water
Resources Reform and Development Act of 2014, Pub. L. No. 113–121, 128
Stat. 1193, 1364, § 7002 (2014) (“WRDA-14”), 1 and President Obama signed
1
Because each new project that goes through this process requires an act of
Congress (literally), the parties refer to each new act as “WRDA” followed by a two-digit
year, e.g., “WRDA-14.” They also refer to the 1986 Act (detailed above) as “WRDA-86.”
3
Case: 22-40158 Document: 00516471151 Page: 4 Date Filed: 09/14/2022
No. 22-40158
it into law. 2 The Project’s price tag was just over $1.1 billion, with the federal
government covering around $748 million and the District just under $366
million. Id. Congress then appropriated “new start” funds for the Project to
get the ball rolling in 2019. See 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). Those new-start funds
would ultimately be used to complete the first part of the Project: the
deepening of Anchorage Basin No. 1 from twenty feet to forty feet.
The District and the Corps then entered into the statutorily required
agreement. See 33 U.S.C. § 2211(e)(3). The Agreement listed the projected
cost at over $1.2 billion (up a bit from WRDA-14), with a $732 million/$488
million federal–District split (roughly 60%–40%). That number, of course,
was a projection, and its fluidity becomes relevant later. The Agreement
otherwise detailed the specifics on the deepening and widening of the
Waterway and outlined the environmental effects of the Project. 3
For ease of reference, we refer to the 1986 Act as “the Act” and otherwise refer to any
other project-approval act as “WRDA-##.”
2
See David Hudson, President Obama Signs the Water Resources Reform and
Development Act, and Honors the “Borinqueneers,” The White House (June 10, 2014),
https://obamawhitehouse.archives.gov/blog/2014/06/10/president-obama-signs-water-
resources-reform-and-development-act-and-honors-borinque.
3
“[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
4
Case: 22-40158 Document: 00516471151 Page: 5 Date Filed: 09/14/2022
No. 22-40158
So the District needed $488 million. The first $20 million in “new
start” funds went to deepening Anchorage Basin No. 1—before it was
twenty-feet deep, now it is forty-feet deep. Once that was done, the District
proposed the User Fee. The User Fee would apply only to ships with drafts
greater than twenty feet—in other words, ships that were too big to use the
Basin before the deepening. The Fee could change based on certain
(unrelated) conditions, but the basics are as follows:
hydrocarbon cargo non-hydrocarbon cargo
minimum $0.00 per short ton $0.00 per short ton
starting rate $0.20 per short ton $0.02 per short ton
maximum $0.35 per short ton $0.035 per short ton
Every short ton loaded onto a ship or unloaded from a ship is charged. 4
Key for our purposes, the ordinance says that the District would collect the
Fee until the first of either (a) all construction costs are repaid, or (b) January
1, 2049.
Per the Act, the District published the proposed ordinance in the
Federal Register and received public comment. 86 Fed. Reg. 7369-05 (Jan.
28, 2021). 5 After a hearing, the Commissioners of the District passed the
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[.]”
4
A “ton” in America and Canada is 2,000 lbs., while a “ton” in the United
Kingdom is 2,240 lbs. To avoid confusion, “short ton” is used for something that is 2,000
lbs. and “long ton” for 2,240 lbs.
5
The District actually went through notice and comment twice. The first proposed
ordinance set a flat $0.35/short ton for hydrocarbon cargo and no fee at all for the non-
hydrocarbon cargo. 85 Fed. Reg. 37,634, 37,635 (June 23, 2020). After a hearing and
talking with the Corps, the District revised the ordinance to what it is today. Id.5
Case: 22-40158 Document: 00516471151 Page: 6 Date Filed: 09/14/2022
No. 22-40158
Ordinance, and the District began levying the fee against the bigger ships on
May 1, 2021.
BG Gulf Coast LNG and Phillips 66 Company are energy companies.
BG Gulf Coast has already paid well into the six figures because of the
Ordinance. As of the filing of the Complaint, Phillips 66 had not yet sent any
of its cargo on bigger ships. But it planned to. They both sued, alleging that
the Ordinance violated several provisions of the Act. The District moved to
dismiss under Rule 12(b)(6). The district court granted the motion on each
claim, concluding that the District satisfied all of the requirements of the Act,
including the requirement that any fees must be imposed “on a fair and
equitable basis.” 6 The district court then dismissed the case with prejudice.
The energy companies (hereinafter “BG Gulf Coast”) appealed. We
subsequently granted the District’s motion to expedite the appeal.
II.
We review de novo the grant of a motion to dismiss under Rule
12(b)(6). Residents of Gordon Plaza, Inc. v. Cantrell, 25 F.4th 288, 295 (5th
Cir. 2022). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the
6
Dictionaries at the time the Act was passed defined “fair” as “[h]aving the
qualities of impartiality and honesty; free from prejudice, favoritism, and self-interest,”
Fair, Black’s Law Dictionary 534 (5th ed. 1979), and “equitable” as “[j]ust; conformable
to the principles of justice and right,” Equitable, Black’s Law Dictionary 482 (5th ed. 1979).
See also Webster’s Third New International Dictionary 815 (1971) (“equitable” means
“characterized by equity”). The most recent edition of Black’s Law Dictionary includes
this example for the term “fair”: “everyone thought Judge Reavley to be fair.” Fair,
Black’s Law Dictionary 715 (11th ed. 2019).
6
Case: 22-40158 Document: 00516471151 Page: 7 Date Filed: 09/14/2022
No. 22-40158
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. We accept all well-pleaded facts as true and draw
all reasonable inferences in favor of the plaintiff. Id. But we do not presume
that a complaint’s legal conclusions are true, no matter how well they are
pleaded. Id.A.
Section 2236 of the Act sets limits on (among other things) how and
when a non-federal interest can pass costs onto consumers vis-à-vis “[p]ort
or harbor dues.” One such condition is in § 2236(a)(1): “Port or harbor dues
may be levied only in conjunction with a harbor navigation project whose
construction is complete (including a usable increment of the project)[.]”
To BG Gulf Coast, this means that the District can only impose a fee
for either (a) its share of the entire $1.1 billion project once it is completed,
or (b) its share of a “usable increment” of the Project, provided that the fee
is imposed for use of that usable increment. Put another way, the District
cannot impose the User Fee on vessels and cargo because of Anchorage Basin
No. 1 to pay for any other part of the project, let alone (as the Ordinance says)
the District’s entire share of the project. According to BG Gulf Coast, this
follows textually from the words “in conjunction with” in subsection (a)(1).
As well as by contextual inference from other parts of § 2236 in which
Congress only allows fees for incurred costs, not speculative future costs. BG
Gulf Coast finds some further support in certain language from Plaquemines,
language which, it says, makes this an open-and-shut issue. See 874 F.3d at
1025.
The District says that BG Gulf Coast’s reading of the statute stops too
soon; the full condition reads: “in conjunction with a harbor navigation
project whose construction is complete (including a usable increment of the
project) and for the following purposes and in amounts not to exceed those
7
Case: 22-40158 Document: 00516471151 Page: 8 Date Filed: 09/14/2022
No. 22-40158
necessary to carry out those purposes: (A)(i) to finance the non-Federal share
of construction and operation and maintenance costs of a navigation project
for a harbor under the requirements of [33 U.S.C. § 2211].” § 2236(a)(1).
According to the District, this means that once a usable increment of the
project is done, it may then “finance” its “share of construction and
operation and maintenance costs of” the Project. In contrast to BG Gulf
Coast’s reading—which requires the non-federal interest to build first and
pay later—this allows for the process under the Act to work like this:
(1) Congress funds the first phase of the project; (2) the non-federal interest,
after going through notice and comment, imposes a fee to build revenue to
cover its share; (3) the fee raises funds to pay for the next increment of the
project; and (4) so on until the project is complete.
The district court agreed with the District. It concluded that BG Gulf
Coast’s approach was atextual, as it required reading that parenthetical
“(including a usable increment of the project)” out of the statute. BG Gulf
Coast’s way around the parenthetical was to say that “harbor navigation
project” in (a)(1) must mean the same thing as “navigation project for a
harbor” under (a)(1)(A)(i), and thus a fee for “a usable increment of the
project” in (a)(1) meant that a fee could only finance the same “usable
increment.” The district court concluded that, no, “a usable increment of
the project” defines what it means for a project to be “complete,” not what
it means to be a harbor navigation project. As for Plaquemines, the district
court concluded that it did not apply as it was purely about subsection (a)(2)
and emergency-service fees.
We agree with the district court. BG Gulf Coast’s interpretation of
“in conjunction with” is far too cramped. To be sure, “conjunction” was
defined at the time as a “simultaneous occurrence in space or time.”
Conjunction, American Heritage Dictionary 311 (2d College ed. 1982). BG
Gulf Coast says that the User Fee is being levied “in conjunction with” the
8
Case: 22-40158 Document: 00516471151 Page: 9 Date Filed: 09/14/2022
No. 22-40158
District’s “plan to construct the Project’s remaining increments at some
future date.” But that argument fails because subsection (a)(1) allows fees
for projects “whose construction is complete (including a usable increment
of the project).” It also says that other subsections, like (a)(3)(B),
contemplate using fees for “project features constructed under this
subchapter,” which shows that fees are only for “incurred costs.” But
subsection (a)(1) refers to “usable increment[s],” not “project features,”
and it has no similar past-tense “constructed” language. See Christiana Tr.
v. Riddle, 911 F.3d 799, 805 (5th Cir. 2018) (“When Congress includes
particular language in one section of a statute but omits it in another, we
presume[] that Congress intended a difference in meaning.” (quotation
omitted)). So if anything, that cuts against its argument because Congress
presumptively treated “usable increments” of projects differently than
“project features,” and thus fees are allowed under different circumstances
and require consideration of completely different factors.
BG Gulf Coast again tries to tie fees to the specific “usable increment
of the project,” so that fees may only be used after-the-fact to pay for that
increment. But to do so, it has to argue that “(including a usable increment
of the project)” modifies “a harbor navigation project,” so that later when
subsection (a)(1)(A)(i) says “a navigation project for a harbor,” it means “a
usable increment of the project.” But it makes far more sense that this
language means that once a usable increment of the project is complete, a fee
may be levied, not that a fee may only be levied to finance a usable increment
of the project. Cf. Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 152–53 (2012) (the Nearest-Reasonable-
Referent canon: “When the syntax involves something other than a parallel
series of nouns or verbs, a prepositive or postpositive modifier normally
applies only to the nearest reasonable referent.”).
9
Case: 22-40158 Document: 00516471151 Page: 10 Date Filed: 09/14/2022
No. 22-40158
At first blush, some language in Plaquemines supports BG Gulf Coast,
but that case concerned an entirely different provision of the Act. Knight v.
Kirby Offshore Marine Pac., L.L.C., 983 F.3d 172, 177 (5th Cir. 2020) (“A
statement is dictum if it could have been deleted without seriously impairing
the analytical foundations of the holding and[,] being peripheral, may not
have received the full and careful consideration of the court that uttered it.”
(quoting United States v. Segura, 747 F.3d 323, 328–29 (5th Cir. 2014))).
Plaquemines described § 2236(a)(1) as “forbid[ing] fees to finance harbor
improvements until after the project is complete,” but that case was actually
about subsection (a)(2), and how the Act does not otherwise constrain a
port’s ability to assess a fee until a port “has undertaken a harbor
improvement project.” 874 F.2d at 1026, 1024–25. So Plaquemines is only
relevant to the extent it holds that the Act applies once a project begins, not
when it ends, and the fact that subsection (a)(1) was in no way raised or
relevant to the bottom-line conclusion is dispositive. See Knight, 983 F.3d at
178 (dicta is “peripheral” and “may not have received [our] careful
consideration”).
BG Gulf Coast’s theory of subsection (a)(1) fails at every turn. The
statute, properly construed, allows the District to finance its share of the
project once a usable increment of the project is completed. Because
Anchorage Basin No. 1 has been completed, subsection (a)(1) permitted the
District to pass the Ordinance containing the User Fee.
B.
As discussed, upon completion of a usable increment of the project,
§ 2236(a)(1)(A)(i) allows a non-federal interest to levy a harbor fee “in
amounts not to exceed those necessary to carry out” the following purpose:
“to finance the non-Federal share of construction and operation and
maintenance costs of a navigation project for a harbor under the requirements
10
Case: 22-40158 Document: 00516471151 Page: 11 Date Filed: 09/14/2022
No. 22-40158
of [33 U.S.C. § 2211].” Section 2211(a)(1)(B) says that the non-federal
interest “shall pay, during the period of construction of the project,” 25% “of
the cost of construction of the portion of the project which has a depth in
excess of 20 feet but not in excess of 50 feet[.]”
BG Gulf Coast reads these provisions together to argue that “amounts
not to exceed those necessary” means that the District may only use the fee
to finance 25% of the Project, as (according to BG Gulf Coast) the District
“voluntarily agreed to pay more than 25% of the Project’s total cost[.]” The
District agreed to cover around 40% of the project, but if the Project comes
in under budget, BG Gulf Coast alleges that the District still plans to pay the
amount it agreed to—in other words, it may end up covering 60%–80% of the
Project. Because it voluntarily agreed to pay that much, “the additional
amount above 25% is not a ‘requirement’ of [33 U.S.C. § 2211],” so the
District has to cover anything above 25% with funds that do not come from
the User Fee. Summing that up, BG Gulf Coast argues that § 2211(a)(1)(B)
places a 25% cap on financing a non-federal interest’s share of an
improvement project because anything not “require[d]” by § 2211(a)(1)(B)
is not “necessary.”
The District responds with a different provision of § 2211.
Subsection (e) says that before any construction begins on harbors, the
Secretary of the Army and the non-federal interests “shall enter into a
cooperative agreement” and that the non-federal interests “shall agree to”
“provide to the Federal Government the non-Federal share of all other costs
of construction” of the project. 33 U.S.C. § 2211(e)(4). So when
§ 2236(a)(1) says “amounts not to exceed those necessary to carry out” the
financing of the Project, the District says that the cooperative agreement was
necessary to carry out the Project, and so the User Fee can be used to cover
its contractual obligation.
11
Case: 22-40158 Document: 00516471151 Page: 12 Date Filed: 09/14/2022
No. 22-40158
The district court did not squarely address that argument because it
held that the 25% “requirement” is a floor, not a ceiling or a set amount. As
everyone agrees, the District may voluntarily assume more than 25% of the
cost of the project, which necessarily means that 25% is not both a floor and a
ceiling. Shall does not mean shall only, and the statute contains no “up to”
or “at least” language either. BG Gulf Coast then must turn to § 2236(a)(1)
which limits fees to the “amount not to exceed those necessary” under
§ 2211. The district court said that it “cannot be that Section 2211 imposes
a cap for the fee-based non-Federal share but not the alternatively funded
non-federal share because that reading would require an express statutory
provision. Section 2236(a)(1)’s language—‘amount not to exceed those
necessary’—is not enough.”
The question is what § 2236(a)(1)(A)(i) means when it says that fees
must be “in amounts not to exceed those necessary to carry out” the purpose
of “financ[ing]” the Project “under the requirements of” § 2211. BG Gulf
Coast says that the “necessary” amount under § 2211 is the 25% requirement
in subsection (a). The District says that the “necessary” amount under
§ 2211 is the amount that the District agreed to cover in the cooperative
agreement with the federal government in subsection (e). Sadly, Congress
did not say what subsection it was thinking of when it said “under the
requirements of” § 2211, and the most natural reading is that it meant all of
its requirements.
The word “necessary” has been hard to pin down since McCulloch v.
Maryland, 17 U.S. (4 Wheat.) 316, 414 (1819). Black’s Law Dictionary, before
even getting to what the definition is, opens with this warning: “This word
must be considered in the connection in which it is used, as it is a word
susceptible of various meanings. It may import absolute physical necessity
or inevitability, or it may import that which is only convenient, useful,
appropriate, suitable, or conducive to the end sought.” Necessary, Black’s
12
Case: 22-40158 Document: 00516471151 Page: 13 Date Filed: 09/14/2022
No. 22-40158
Law Dictionary 928 (5th ed. 1979). And between the two, at least in the legal
context, courts “rarely use ‘necessary’ in the latter sense.” Payne v. United
States, 289 F.3d 377, 389 (5th Cir. 2002) (Garza, J., dissenting in part). The
term “necessary” here “does not exist in a vacuum,” and its meaning “must
be determined in the context in which [it] appear[s].” Texas v. E.P.A., 983
F.3d 826, 837, 837 n.2 (5th Cir. 2020).
Section 2236(a)(1) is concerned with fees being levied “for the
following purposes and in amounts not to exceed those necessary to carry out
those purposes.” The purpose relevant here is “to finance.” And what can
it finance? The District’s share of the “construction and operation and
maintenance costs” of the Project “under the requirements of” § 2211.
Section 2211 has many requirements about costs under different specific
circumstances, but if the purpose is “to finance” the District’s share of the
Project, the focus should be on what it had to do to secure financing. So it is
true that paying 25% of the costs was necessary to secure financing vis-à-vis
the fees, but the District also had to secure an agreement with the federal
government under § 2211(e).
As BG Gulf Coast concedes, the Act gives the District discretion to go
beyond that 25% amount for costs; it only sets a maximum on what percentage
the federal government can spend. See 33 U.S.C. § 2280. With that
discretion, because the amount of fees must be necessary to secure financing,
and because the District had discretion to vary upward on the percentage of
costs it covers, the term “necessary” more likely accords with the more
permissive definition of the term. Texas, 983 F.3d at 837. What follows is
that “necessary” means something more like “convenient, useful,
appropriate, suitable, or conducive to the end sought.” Black’s, supra at 928
(emphasis added). Cf. 33 U.S.C. § 2236(a)(1) (“necessary to carry out those
purposes” (emphasis added)). In this light, while it may not be strictly
necessary to cover 40% of the costs under § 2236(a)(1) and § 2211(a), it was
13
Case: 22-40158 Document: 00516471151 Page: 14 Date Filed: 09/14/2022
No. 22-40158
convenient and conducive to financing the Project. Thus, the District did
not violate the Act by pledging to cover the costs above 25% with the proceeds
of the User Fee.
BG Gulf Coast’s argument hinges on a strict reading of “necessary.”
But context is needed to determine whether “necessary” means “absolute
physical necessity” or merely “conducive to the end sought.” Under these
circumstances, it is the latter. Thus, the District can cover more than 25% of
the cost with the User Fee proceeds.
C.
BG Gulf Coast briefed several other arguments regarding the legality
of the District’s imposition of the User Fee. In its thorough and well-
reasoned opinion, the district court explained why those claims must be
dismissed. We agree with the conclusions reached by the district court and
thus we do not disturb its holdings on appeal.
* * *
Because the district court properly dismissed each of BG Gulf Coast’s
claims, we AFFIRM.
14