Tuesday, January 23, 2007

AES Sparrows Point LNG, LLC v. Smith (Maryland U.S.D.C.)

Decided January 23, 2007--Opinion by Judge Richard D. Bennett.

The Plaintiffs sought a declaration that an amendment to section 256.4 of the Baltimore County Zoning Regulations, as set forth in Bill 71-06 ("the Zoning Amendment") and providing for absolute prohibitions and limitations on the siting of liquified natural gas ("LNG") importation facilities, is preempted under the Supremacy Clause of the United States Constitution1 by the Natural Gas Act, 15 U.S.C. §§717, et seq. ("NGA" or "the Act"), as amended by the Energy Policy Act of 2005, Pub. L. No. 109-58, §311, 119 Stat. 594, 685 (2005). The Plaintiffs filed a Motion for Summary Judgment and the Defendants filed a Motion to Dismiss.


1. The Defendants invoke the variation on the well-pleaded complaint rule to argue that Plaintiffs' preemption claim is insufficient to support federal subject matter jurisdiction. In making this argument, Defendants relied on the "complete preemption" exception to the well-pleaded complaint rule. That exception permits a plaintiff to "invoke federal subject matter jurisdiction to obtain a declaratory judgment that a state law requirement or prohibition is preempted, notwithstanding the defensive nature of the preemption contention. . . ." Fleet Bank v. Burke, 160 F.3d 883, 886 (2d Cir. 1998), cert. denied, 527 U.S. 1004 (1999). Defendants maintain that this Court lacks subject matter jurisdiction over the instant matter because there is simply no basis for applying the doctrine of complete preemption in the "hypothetical wellpleaded complaint" presented by this case.

The Court found that the Defendants' argument failed because the Plaintiffs requested injunctive relief. Because the Complaint requests both declaratory and injunctive relief, this case is within the purview of Shaw v. Delta Air Lines, Inc and Verizon Maryland, Inc. v. Public Service Commission.

2. Defendants argued that this matter was not ripe for judicial review, because, until approval to build the proposed liquefied natural gas plant is received, the relation between the local zoning ordinance and the federal statute at issue remains "what is in reality an abstract question of law." The Court concluded, however, that any efforts for authorization by the FERC would be futile if the County can simply execute a veto by local zoning legislation. Delaying resolution of the preemption issued in this case, moreover, would frustrate one of the purposes of the recent amendments to the Natural Gas Act, i.e., clarifying the respective roles played by FERC and the states in the administrative process. In sum, there is no need to withhold court consideration under such circumstances.

3. The Plaintiffs have sufficiently established that they have standing.The injury to the Plaintiffs is "certainly impending" in that any efforts for FERC approval is futile if the Baltimore County Council can exercise veto power by the subject Zoning Amendment.

4. The text, context, and legislative history of the Natural Gas Act ("NGA") clearly reflect the intent of the United States Congress to preempt local governments with respect to the siting of liquefied natural gas ("LNG") facilities.

5. Apart from the express preemption, in the alternative, the Court found that the Zoning Amendment is preempted because Congress intended for the NGA and its regulations to occupy the entire field of LNG regulation.

6. The Court also found that the Zoning Amendment is in direct conflict with the NGA and is therefore preempted (i.e., "conflict preemption").

7. The Court found that there are no circumstances under which the Zoning Amendment could be constitutionally valid. Thus, the U.S. v. Salerno standard is satisfied and the Zoning Amendment is facially unconstitutional.


The amendment to section 256.4 of the Baltimore County Zoning Regulations enacted pursuant to Baltimore County Bill 71-06 is unenforceable because it is preempted under the Supremacy Clause of the United States Constitution by the Natural Gas Act, as amended by the Energy Policy Act of 2005 and the Defendants are enjoined from enforcing the Zoning Amendment.

The opinion is available in PDF. The Order and Judgment may be found here.

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