# Phillips 66 Company, V. Whatcom County Washington

> Court of Appeals of Washington · February 28, 2022

URL: https://www.frixlaw.com/law-library/cases/6318186

## Case

- **Court:** Court of Appeals of Washington
- **Decided:** February 28, 2022
- **Precedential status:** Unpublished
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

PHILLIPS 66 COMPANY, a Delaware
company, No. 82599-2-I

Appellant, DIVISION ONE

v. UNPUBLISHED OPINION

WHATCOM COUNTY WASHINGTON
and FRIENDS OF THE SAN JUANS, a
Washington nonprofit corporation,

Respondents.

APPELWICK, J. — Phillips 66 challenges a condition imposed in a mitigated

determination of nonsignificance issued by Whatcom County. The challenge is to

the propriety of monitoring for increased vessel traffic in the Salish Sea when the

County found that the project would not increase such traffic. The authority of the

hearing examiner to revise the condition and make a final determination of the

MDNS is also challenged. We affirm.

FACTS

Phillips 66 Company operates an oil refinery in Ferndale, Washington, close

to the Salish Sea. Phillips 66 applied for permits to install new oil storage tanks

approximately one-half mile from the sea. On May 15, 2019, Phillips 66 submitted

a revised Washington State Environmental Policy Act1 (SEPA) environmental

1 Chapter 43.21C RCW.
Citations and pin cites are based on the Westlaw online version of the cited material.
No. 82599-2-I/2

checklist. This checklist asked the applicant to provide information about the

project to determine its environmental impacts. In that checklist, Phillips 66 stated,

“The project does not require additional water, rail, or air transportation, as the

project is focused on improving existing quality not capacity.” On July 19, 2019,

the Whatcom County (County) director of Planning and Development Services

issued a mitigated determination of nonsignificance (MDNS) for Phillips 66’s

project. The MDNS gave a description of the project, along with four mitigating

conditions required for Phillips 66 to follow to complete this project. The MDNS

stated that an official review of Phillips 66’s SEPA environmental checklist

determined that “no significant adverse environmental impacts are likely.” The

County allowed public comments about the MDNS to be submitted through August

2, 2019.

The Friends of the San Juans (FSJ) is a group that “works to protect and

recover the 113 endangered species in the Salish Sea.” FSJ’s marine protection

program director responded to the MDNS during the open comment period. FSJ

expressed concern about potential vessel traffic from this project harming the

Southern Resident killer whales, an endangered species that resides in the vicinity

of the shipping lanes used to traffic oil and oil products to Phillips 66’s Ferndale

refinery. FSJ’s letter states, “[B]ecause [Phillips 66] did not provide direct answers

regarding the additional vessel traffic associated with this project, Whatcom

County did not address the proposed project’s additional vessel traffic impacts to

Southern Resident Killer Whales and increased oil spill risk.” It asked for Phillips

2
No. 82599-2-I/3

66 to provide details on vessel traffic and for the County to reconsider the MDNS.

Additionally, 28 citizens and groups responded to the MDNS during the public

comment period, with many focusing on the issue of vessel traffic.

Following the comment period, on August 12, 2019, the County asked

Phillips 66 to revise the SEPA environmental checklist to include a summary of

additional vessel traffic. On August 16, 2019, Phillips 66 submitted a new SEPA

checklist stating, “[T]he net effect on marine vessel traffic will not be increased.” It

also stated that “it would be wholly speculative to attempt to predict the number of

marine vessels that will call upon the Phillips 66 marine terminal.”

On August 20, 2019, the County issued a revised MDNS. This revision

included the addition of “Condition F,” which stated that Phillips 66 likely will have

no adverse impacts on killer whale habitats, and that annual marine fuel oil vessel

activity could be subject to additional SEPA review. “Condition F” states in full,

According to the SEPA checklist prepared by the applicant, there is
no material increase in marine vessel traffic expected as a
consequence of the proposed project. Therefore, there are no likely
significant adverse impacts to the habitat of the southern resident
killer whale. To ensure there is no significant increase in marine
vessel traffic resulting from the proposed project and, therefore, no
likely significant adverse impacts to the habitat of endangered
southern resident killer whales, the applicant shall monitor and report
annually to PDS [(Planning and Development Services)] on the
vessel trip activity at the marine terminal for inbound and outbound
transport of inputs/outputs for processing marine fuel oils.

The applicant shall utilize the Department of Ecology Advanced
Notice of Transfer System (ANTS) to track and report marine fuel oil
shipments by vessel. Vessel trips to/from the marine terminal that
cumulatively exceeded the range of average annual marine fuel oil
vessel activity identified in the 2017-2019 period (as identified in
ANTS) may be subject to additional SEPA review.

3
No. 82599-2-I/4

On August 30, 2019, FSJ appealed the revised MDNS to the County

Planning and Development Services, arguing that Phillips 66 did not quantify the

additional vessel traffic associated with the project. The appeal asked that the

County “[r]evise the MDNS with language clearly stating Whatcom County’s intent

to withdraw the MDNS and conduct additional SEPA review should vessel trips

to/from the marine terminal exceed the average activity from the 2017-2019

period.” It also asked the County to require the vessel traffic to be independently

monitored going forward.

On November 1, 2019, a hearing examiner heard FSJ’s administrative

appeal. The hearing examiner reviewed whether Phillips 66 should quantify the

vessel traffic and evaluate the vessel traffic’s potential adverse impacts, and

whether the MDNS should be revised to require review of the average vessel

activity and monitoring of vessel activity. The hearing included testimony from

various witnesses.

On November 17, 2019, the hearing examiner issued findings of fact,

conclusions of law, and decision following the appeal.2 The hearing examiner

found that “the County has correctly determined that the permit and MDNS as

issued should not present any additional risk or harm to the environment in general

or the Killer Whales in particular. The evidence shows that there will be no

increased vessel traffic.” The hearing examiner upheld the MDNS with some

changes. Changes included revisions and additions to Condition F, because “[t]he

2 This decision was revised on November 26, 2019.

4
No. 82599-2-I/5

language used in the second paragraph of that condition F . . . was erroneously

vague, as it set no standard, quantifiable or otherwise, as to what excess of the

‘range of average annual marine fuel oil vessel activity’ would in fact trigger

additional SEPA review.” (Emphasis omitted.) The hearing examiner changed the

second paragraph of Condition F to state that if Phillips 66’s average number of

vessel trips increased, then the vessel trips would be subject to additional SEPA

review. In this version, changes were made to the second paragraph of Condition

F:

The applicant shall utilize the Department of Ecology Advanced
Notice of Transfer System (ANTS) to track and report marine fuel oil
shipments by vessel. If vessel trips to/from the marine terminal
cumulatively exceed the highest of the average annual marine fuel
oil vessel activity identified in any calendar year from 2017 to 2019
(as identified in ANTS) this project shall be subject to additional
SEPA review. As part of their annual reporting to PDS, the applicant
shall arrange for PDS to receive the ANTS data.

(Emphasis added.)

Five days following this change, on November 21, 2019, Phillips 66

submitted a request for reconsideration arguing that “Condition F is legally invalid

because it mitigates an environmental impact the Project does not cause.” It also

claimed that the condition was added for the legally invalid reason of quelling

concerns raised in public comments. Phillips 66 noted that vessel traffic can

increase for multiple reasons, so, “Condition F should be revised to clarify that its

restrictions apply only to traffic associated with the tanks constructed under the

Project.”

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No. 82599-2-I/6

The order on the motion for reconsideration stated that Phillips 66 had not

timely appealed the first iteration of Condition F as stated in the August 20, 2019

MDNS. Additionally, the hearing examiner held that Condition F was properly

changed to correct erroneously vague language and to give the proper purpose

and meaning based on the record.

Phillips 66 appealed the November 17, 2019 findings of fact and

conclusions of law in Whatcom County Superior Court. Its arguments included

that Condition F was improperly added because of public pressure, that FSJ did

not have standing to raise issues about vessel tracking on appeal, and that

Condition F was improperly revised.

The superior court affirmed the final decision of the hearing examiner,

including the revised Condition F.3 The court stated, “Regarding Condition F, the

Court finds no error in the hearings examiner’s implementation and modification.”

Phillips 66 appealed the superior court’s order affirming the County hearing

examiner’s findings of fact and conclusions of law.

DISCUSSION

I. Standard of Review

The Land Use Petition Act (LUPA), chapter 36.70C RCW, “governs judicial

review of land use decisions.” Cingular Wireless, LLC v. Thurston County, 131

Wn. App. 756, 767, 129 P.3d 300 (2006). In LUPA cases, the appellate court

3 The court remanded to reinstate the original version of Condition E, but
this is not at issue on appeal here.

6
No. 82599-2-I/7

reviews the record that was before the hearing examiner, including findings of fact

and conclusions of law. City of Medina v. T-Mobile USA, Inc., 123 Wn. App. 19,

24, 95 P.3d 377 (2004). “‘[W]e must give substantial deference to both the legal

and factual determinations of a hearing examiner as the local authority with

expertise in land use regulations.’” City of Federal Way v. Town & Country Real

Estate, LLC, 161 Wn. App. 17, 38, 252 P.3d 382 (2011) (quoting Lanzce G.

Douglass, Inc. v. City of Spokane Valley, 154 Wn. App. 408, 415, 225 P.3d 448

(2010)). We review any reasonable inferences in the light most favorable to the

party that prevailed in the highest forum exercising fact-finding authority. T-Mobile,

123 Wn. App. at 24. In this case, because they prevailed before the hearing

examiner, inferences are construed in favor of FSJ and the County.

Under LUPA, the court may “grant relief on a land use decision only if the

party seeking relief has carried the burden of establishing that one of the [LUPA]

standards is met.” Cingular Wireless, 131 Wn. App. at 767. Because Phillips 66

sought relief under LUPA in superior court, it has the burden to meet one of the six

standards set out in LUPA. See Town & Country, 161 Wn. App. at 36; RCW

36.70C.130(1). Phillips 66 argues that two LUPA standards apply here:

(b) The land use decision is an erroneous interpretation of the
law, after allowing for such deference as is due the construction of a
law by a local jurisdiction with expertise;

....

(d) The land use decision is a clearly erroneous application of
the law to the facts.

7
No. 82599-2-I/8

RCW 36.70C.130(1). Challenges under subsection (b) are legal questions that we

review de novo, but only “‘after allowing for such deference as is due the

construction of a law by a local jurisdiction with expertise.’” Town & Country, 161

Wn. App. at 37 (citation omitted) (quoting RCW 36.70C.130(1)(b)). Challenges

brought under subsection (d) involve applying the law to the facts, reviewed under

the “clearly erroneous” standard, which asks “‘whether we are left with a definite

and firm conviction that a mistake has been committed.’” Id. (quoting Cingular

Wireless, 131 Wn. App. at 768).

II. Exhaustion

On appeal, Phillips 66 argues that Condition F should be stricken in its

original form and its revisions. However, “[a] person who claims to be aggrieved

or adversely affected by a land use decision has standing to bring a land use

petition only if he has exhausted his administrative remedies to the extent required

by law.” Thompson v. City of Mercer Island, 193 Wn. App. 653, 659, 375 P.3d 681

(2016); RCW 36.70C.060(2)(d). “[E]xhaustion of administrative remedies is a

necessary prerequisite to obtaining a decision that qualifies as a ‘land use decision’

subject to judicial review under LUPA, whether the party seeking review is an

owner, applicant, or other aggrieved party.” Ward v. Bd. of County Comm’rs, 86

Wn. App. 266, 271, 936 P.2d 42 (1997). In Ward, a party did not appeal a decision

to the administrative board within the 14 day time period, and the court found that

this was a failure to exhaust administrative remedies. Id. at 269, 272.

8
No. 82599-2-I/9

The Whatcom County Code outlines the administrative process for

appealing a land disturbance permit, the type of permit at issue here. For Type I

and II applications, the director makes a final decision in the form of a written

determination or permit, and either can be subject to modifications, conditions, or

restrictions. WCC 22.05.110(1). Any person with standing has 14 days to appeal

a final permit decision made by the director to the hearing examiner. WCC

22.05.160(1)(a).

Phillips 66 did not appeal or move to reconsider the imposition of the original

language of Condition F within 14 days after it had been included in the MDNS.

Phillips 66 failed to exhaust its administrative remedies as to the original Condition

F. As a result, Phillips 66 cannot appeal the original language of Condition F to

this court. Nevertheless, Phillips 66’s standing to contest the modification of the

condition by the hearing examiner is not at issue.

III. Mitigation of Future, Speculative Impacts

Phillips 66 argues that the hearing examiner made improper revisions to

Condition F in the MDNS. It argues the revisions to Condition F, requiring that

future increased vessel traffic would be subjected to additional SEPA review,

improperly mitigates future, speculative impacts. We review de novo whether the

hearing examiner’s alterations of the condition was an erroneous interpretation of

the law. RCW 36.70C.130(1)(b); see Town & Country, 161 Wn. App. at 37.

9
No. 82599-2-I/10

To determine whether an environmental impact statement is required, an

agency must determine whether there is a probable significant adverse

environmental impact based on the SEPA checklist. WAC 197-11-330; WAC 197-

11-960. A determination of nonsignificance (DNS) is a written decision by an

agency indicating that a proposal will not have a significant adverse environmental

impact. WAC 197-11-734. If a DNS is issued, an environmental impact statement

(EIS) is not required. Id. A mitigated DNS (MDNS), allows an agency to consider

changes or modifications to be made to a proposal that the agency or applicant

will implement. WAC 197-11-350(1). Agencies can also clarify or change features

of their own proposal, specify mitigation measures based on the public comment

period, and specify procedures for enforcement for mitigation measures. WAC

197-11-350(5), (7). A mitigation measure must be related to “specific, adverse

environmental impacts” and shall be stated in writing by the decision maker. WAC

197-11-660(1)(b). Mitigation includes “monitoring the impact and taking

appropriate measures.” WAC 197-11-768(6).

Here, Phillips 66 has conceded that environmental concerns, including

harm to killer whales, could arise if vessel traffic increases. Phillips 66 “does not

dispute that Southern Resident Killer Whales are endangered, or that increased

vessel traffic poses a threat to that species.” Expert opinions corroborated that

increased vessel traffic would harm the whales. Clearly, if the evidence showed a

probable increase in vessel traffic attributable to the project, an EIS would have

been triggered. An MDNS would not have been an option.

10
No. 82599-2-I/11

When making impact determinations under SEPA, decision-makers are

required to consider more than just the “narrow, limited environmental impact of

the immediate, pending action.” Cheney v. City of Mountlake Terrace, 87 Wn.2d

338, 344, 552 P.2d 184 (1976). Experts warned that increased oil storage capacity

could increase vessel traffic in the future. Phillips 66 might change their usage in

the future which would increase vessel traffic and cause harm to the whales. And,

in that case, the County would not be able to exercise any regulatory review.

But, Phillips 66 argues that any risk of increased vessel traffic is speculative,

and therefore Condition F is not related to probable impacts. Phillips 66’s

argument has a certain logic to it. The County determined there would be no

probable increase in vessel traffic, and did not impose an express condition

requiring that the project not increase vessel traffic to and from the refinery.

“Probable” is defined as “likely or reasonably likely to occur,” and is used “to

distinguish likely impacts from those that merely have a possibility of occurring, but

are remote or speculative.” WAC 197-11-782.

Phillips 66 indicated multiple times throughout the process that installing the

new oil tanks would not increase vessel traffic to and from the Ferndale facility. In

its original SEPA checklist, Phillips 66 answered a question about increased traffic

stating, “The project does not require additional water, rail, or air transportation, as

the project is focused on improving existing quality not capacity.” In its revised

SEPA checklist, Phillips 66 reported that it will “produce and export less heavy fuel

oil . . . so the net effect on marine vessel traffic will not be increased.” In its

11
No. 82599-2-I/12

attachment to the SEPA appeal form, FSJ quoted Phillips 66’s MDNS and revised

MDNS, where Phillips 66 said, “[W]e can say with complete certainty that the

Logistics Flexibility project will not materially affect the number of marine vessels

utilizing the Phillips 66 marine terminal in any particular future time period.”

Whether these assurances prove true is solely within Phillips 66’s control.

The County could have included a condition in the MDNS commanding that no

increase would occur. But, in the record before us, the County was also entitled

to rely on Phillips 66’s representations as essential details of the project

application.

Under either of its options, the County is entitled to monitor the project to

make sure it complies with the application and any conditions imposed. WAC 197-

11-350(7) (“Agencies may specify procedures for enforcement of mitigation

measures in their agency SEPA procedures.”); WAC 197-11-768(6) (“‘Mitigation’

means . . . [m]onitoring the impact and taking appropriate corrective measures.”).

As written, Condition F makes Phillips 66 subject to SEPA review only if the

vessel trips cumulatively exceed the highest of the average of vessel trips between

2017 and 2019. However, Phillips 66 argues that Condition F, as revised, will

subject the company to additional SEPA review if increased traffic occurs for

reasons outside of this project. It argues that this condition will impose broad

restrictions on Phillips 66, as its vessel traffic could increase for reasons outside

of this project, but that traffic would still be subject to review. FSJ acknowledges

that Condition F cannot legally be the basis for imposing additional SEPA

12
No. 82599-2-I/13

restrictions based on increased vessel traffic not caused by the project. We agree.

But, Phillips 66’s argument is prematurely made here. The argument should be

reserved for the time that any proceeding relating to increased vessel traffic is

commenced.

The County had authority to impose Condition F to monitor impacts of the

project as proposed by Phillips 66 in its application.

IV. Examiner’s Authority

Phillips 66 also argues that the hearing examiner is authorized to affirm or

deny the MDNS, but did not have authority to modify Condition F.

Authority to make final permit decisions is found in WCC 22.05.110:

(1) The director or designee’s final decision on all Type I or II
applications shall be in the form of a written determination or permit.
The determination or permit may be granted subject to conditions,
modifications, or restrictions that are necessary to comply with all
applicable codes.

(2) The hearing examiner’s final decision on all Type III applications
per WCC 22.05.020 or appeals per WCC 22.05.160(1)[4] shall either
grant or deny the application or appeal.

(a) The hearing examiner may grant Type III applications
subject to conditions, modifications or restrictions that the
hearing examiner finds are necessary to make the application
compatible with its environment, carry out the objectives and
goals of the comprehensive plan, statutes, ordinances and
regulations as well as other official policies and objectives of
Whatcom County.

4
WCC 22.05.160(1) grants the hearing examiner the authority to hear and
decide appeals per WCC 2.11.210. WCC 2.11.210(K) authorizes the hearing
examiner to review SEPA appeals.

13
No. 82599-2-I/14

Phillips 66 argues that this section allows the hearing examiner to impose

conditions and modify grants of only Type III applications. That is true. But, unlike

Type I and Type II decisions, the hearing examiner, not the director, is the initial

county decision maker for Type III applications. WCC 22.05.020(1). Thus, the

code clearly states that the hearing examiner has the same authority as the

director to impose conditions in the first instance. WCC 22.05.110(2)(a). This

subsection addresses only initial applications, not appellate authority, so we draw

no inference from it as to the authority of the hearing examiner in its appellate role.

All parties agree that the permit in question is a Type I permit. 5 And, the

hearing examiner is the appellate body for Type I and Type II applications. WCC

22.05.020(a). The authority of the hearing examiner is established in WCC

2.11.010 et seq. It authorizes a hearing examiner to make a final decision for

appeals of a SEPA MDNS:

In accordance with the provisions of Chapter 22.05 WCC, the
hearing examiner shall conduct open record hearings and prepare a
record thereof, and make a final decision upon the following matters:

....

K. Appeals from SEPA determinations of significance,
determinations of nonsignificance, and mitigated determinations of
nonsignificance.

WCC 2.11.210.

5The differences between the types of permits is outlined in WCC
22.05.020.

14
No. 82599-2-I/15

A closed record appellate review is limited to an affirmance or reversal of

the issues on appeal. But, appeals of Type I and Type II applications require an

open record public hearing. WCC 22.05.090. Such a hearing was held in this

case. Taking testimony and evidence suggests the hearing examiner engaged in

de novo decision making as to whether to grant or deny the appeal of the

application. We conclude that incident to the de novo review, the hearing examiner

was empowered to strike or add conditions to the MDNS, consistent with the

evidence in the record, when reaching the final decision on open record review.

And, the hearing examiner here did not add a condition to the MDNS. He merely

clarified the condition imposed by the director. We hold the hearing examiner did

not exceed his authority in doing so.6

Phillips 66 also contends that courts strictly construe the limits of a hearing

examiner’s jurisdiction. To support this statement, Phillips 66 relies on In re

Jurisdiction of King County Hearing Exam’r, 135 Wn. App. 312, 320, 144 P.3d 345

(2006). There, we held that a hearing examiner could not deny an appeal and then

order a supplemental environmental impact statement (EIS). See id. at 320-21.

The court reached this decision because the King County Code specifically stated

that the agency could issue a supplemental EIS, without specifically granting that

authority to the hearing examiner. Id. That case is clearly inapposite.

6 Phillips 66 also argues that, under WCC 16.08.170(4), the hearing
examiner can reverse the SEPA DNS threshold determination only if it is clearly
erroneous. It argues the determination was not clearly erroneous, and the hearing
examiner erred by not affirming the director’s determination. Since the hearing
examiner did not reverse the threshold determination, we need not address
whether he applied the correct standard.

15
No. 82599-2-I/16

Phillips 66 has failed to demonstrate that the hearing examiner lacked

authority to clarify or modify Condition F of the MDNS. Phillips 66 has also failed

to demonstrate that the revision of Condition F was erroneous under the LUPA

standards set forth in RCW 36.70C.130(1)(b) or (d).

We affirm.

WE CONCUR:

16

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6318186. Public record. Not legal advice.