Dominion Transmission, Inc. v. Robert Summers

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.