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United States District Court for the District of Maryland Finds Municipality’s Regulations Affecting Natural Gas Compressor Site Null and Void, Except for those Enacted under Certain Federal Environmental Legislation

Dominion Transmission, Inc. v. Myersville Town Council
No. 13-0338 (D. Md. Oct. 7, 2013)
by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Dominion Transmission, Inc. v. Myersville Town Council, the United States District Court for the District of Maryland found that all of a municipality’s regulations affecting the intended site of a natural gas compressor station preempted under the Natural Gas Act (the “Act”), 15 U.S.C. §717, except those laws enacted pursuant to the Coastal Zone Management Act, the Clean Air Act, or the Federal Water Pollution Control Act. Writing the Memorandum Opinion of the Court, Judge Richard D. Bennett held that all of the municipality’s ordinances were null and void, with the exception of those enacted pursuant to certain legislative carve-outs to the Natural Gas Act’s broad field preemption. The Court also recognized that this case was subject to the Maryland Department of the Environment’s decision whether to issue an air quality permit to the plaintiff intending to build the station, and the continuing jurisdiction of the United States Court of Appeals for the District of Columbia.

Dominion Transmission, Inc. (“Plaintiff”) sought to build and operate a natural gas compressor station (the “Station”) in the Town of Myersville, Maryland (the “Town”). Under the Town’s zoning laws, the land on which Plaintiff sought to construct its Station was zoned “General Commercial.” This property was super-imposed, however, with a “Highway Employment Overlay District,” which required any development in the district to include public amenities and facilities. Plaintiff’s Station did not comport with the overlay zoning, and Plaintiff sought to acquire the permits and approvals necessary to begin construction. Among those permits necessary for Plaintiff to acquire were (1) a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission (“FERC”), (2) an amendment to the overly district master plan from the Town Council, and (3) an air quality permit from the Maryland Department of the Environment (“MDE”).

The FERC approved Plaintiff’s application for a Certificate of Public Convenience and Necessity, subject to environmental compliance conditions. The FERC’s order stated that “[a]ny state or local permits with respect to the jurisdictional facilities authorized herein must be consistent with the conditions of this certificate.” Dominion Transmission, Inc. v. Myersville Town Council, No. 13-0338, slip op. at 3 (D. Md. Oct. 7, 2013). The Town, however, denied Plaintiff’s amendment to master plan as inconsistent with the Town Comprehensive Plan. When Plaintiff applied to the MDE for an air quality permit, MDE refused to process Plaintiff’s application without documentation demonstrating compliance with local zoning laws as required by MD. CODE ANN., ENVIR. § 2-404.

Plaintiff filed a Petition for Review in the United States Court of Appeals for the District of Columbia, which has original and exclusive jurisdiction when a company alleges that a state administrative agency, acting pursuant to federal law, fails to act with respect to the issuance of any permit required under the Act. Plaintiff argued that it had effectively complied with § 2-404 because local zoning and land use laws were preempted by the Act. Plaintiff also filed suit in the United States District Court for the District of Maryland against the Town, the Town Council, and Mayor Wayne S. Creadick, Jr. (collectively, “Defendants”). Ultimately, Plaintiff filed a Motion for Summary Judgment seeking a declaration that all of the Town’s ordinances with respect to the Station’s site were preempted under the Act, along with permanent injunctive relief enjoining Defendants from implementing and enforcing the Town Code with respect to the Plaintiff’s Station. Before the District Court for Maryland reached its decision with respect to Plaintiff’s Motion for Summary Judgment, the D.C. Circuit Court of Appeals ruled on Plaintiff’s Petition for Review, and ordered MDE to process Plaintiff’s application for a permit.

The United States District Court for the District of Maryland held that the Town’s laws affecting Plaintiff’s Station were null and void, save those enacted pursuant to certain federal environmental laws. The Court observed that the preemptive effect of the Act was well recognized, and that Congress intended to occupy the field by using the Act to establish a comprehensive scheme of federal regulation of natural gas in interstate commerce. The Court noted, however, that the Act provides a statutory carve-out to its broad preemptive effect for laws enacted under the Coastal Zone Management Act, the Clean Air Act, or the Federal Water Pollution Control Act. Accordingly, the Court issued declaratory judgment that “those portions of the Town Code directly affecting the siting, construction, or operation of the [Station] are null and void as applied to Dominion except for those laws or regulations enacted pursuant to the State’s rights under [those federal environmental acts.]” Id. at 12. The Court’s decision was the result of Defendants’ position that ENVIR. § 2-404 flowed from the Clean Air Act. The Court recognized that the D.C. Circuit Court of Appeals determined that MDE should be permitted to make the initial determination of the preemption question under the federal environmental laws. Due to the MDE’s pending decision, and the fact that those proceedings will be subject to review by the D.C. Circuit, the Court found all of the Town’s regulation preempted, but decided not to rule on the question of whether § 2-403 is an exception to preemption under the Act. The Court denied, however, Plaintiff’s request for injunctive relief, determining that Plaintiff failed to demonstrate that it suffered an irreparable injury. The Court reasoned that Plaintiff could not proceed with construction on the Station until MDE issued an air quality permit; and therefore, Plaintiff could not proceed with construction regardless of the Court’s decision.