ACCOKEEK, MATTAWOMAN, PISCATAWAY CREEKS COMMUNITY COUNCIL v. PUBLIC SERVICE COMMISSION
S.T. 2016, No. 26
IN THE COURT OF APPEALS OF MARYLAND
December 16, 2016
Wilner, J.
Circuit Court for Baltimore City, Case No. 24-C-14-003896/AA, Argued 11/7/16
In a judicial review action, Accokeek claimed that (1) two of the Conditions, which required Dominion to make contributions to State programs designed to reduce greenhouse gas emissions and to assist low-income families in meeting utility bills, constituted an unauthorized tax, (2) the failure of PSC to specify the precise dollar value of the positive economic benefit to the State and county of the generating station deprived Accokeek of due process, and (3) there was insufficient evidence to support PSC‘s findings regarding the positive economic benefit of the generating station.
Affirming judgments of the Circuit Court for Baltimore City and the Court of Special Appeals, the Court of Appeals rejected Accokeek‘s complaints and held that (1) the two conditions complained of were not in the nature of a tax but were regulatory measures within the authority of PSC to impose, (2) PSC make appropriate findings regarding economic benefit based on the record, and (3) the evidence was sufficient to support those findings.
Dominion Cove Point LNG, LP (Dominion) owns and operates a liquefied natural gas (LNG) terminal near Cove Point in Calvert County. As initially constructed, the terminal received LNG from tanker ships, stored it, and, upon a customer‘s need, vaporized it and shipped it in gas form through a pipeline that connects the terminal to a local distribution company. That operation is ongoing. The terminal and its operation are subject to approval and regulation by the Federal Energy Regulatory Commission (FERC). See
In April 2013, Dominion applied to FERC and the Maryland Public Service Commission (PSC) for authorization to expand the terminal into a “bi-directional” facility, so that it could both import and export LNG. Exporting would be a reverse process – Dominion would obtain the domestic product in gas form, liquefy it, and ship it abroad in its liquid form. PSC approval, through the grant of a Certificate of Public Convenience and Necessity (CPCN), was needed because, as part of the expansion Project, Dominion proposed to construct a 130-megawatt electric generating station to provide the electricity necessary for the expanded operation, and, under
We granted certiorari to consider three issues raised by AMP:
- whether two of the Conditions imposed by PSC in its grant of the CPCN (Conditions J-3 and J-4) constitute taxes or mandatory payments that PSC had no authority to impose;
- whether PSC‘s (alleged) failure to identify the value it assigned to positive economic value in favor of the CPCN prevented AMP from effectively challenging the PSC decision; and
- whether PSC‘s valuation of the economic benefit created by the generating station is not supported by substantial evidence in the record.
As did the two lower courts, we find no merit in these complaints and therefore shall affirm the judgment of the Court of Special Appeals.
The procedure to be followed by PSC in evaluating a CPCN application for construction of an electric generating station is set forth in
- the recommendation of the governing body of the county in which the station is to be located; and
- the effect of the station on:
- the stability and reliability of the electric system;
- economics;
- esthetics;
- historic sites;
- aviation safety;
- air and water pollution; and
- availability of means for the timely disposal of waste produced by the generating station.
Evidence was presented on all of those factors, by Dominion, by the Maryland Power Plant Research Program (PPRP), a unit and coordinating body within the Department of Natural Resources, by the PSC Staff, by the Sierra Club, by AMP, and by others. AMP essentially argued that none of the considerations in
PPRP included in its Report and testimony a substantial list of Conditions necessary, in its view, for the Project to comply with environmental requirements or to ameliorate negative economic impacts of the Project. It concluded that, with those Conditions, the generating station would comply with all applicable environmental requirements. The PSC Staff submitted a report dealing with the impact of the generating station on the electric power grid. Subject to its list of Conditions, the Staff concluded that the station would not adversely affect the grid. Dominion accepted the Conditions proposed by PPRP and the PSC Staff.
One of the major problems with which the parties and PSC had to contend, particularly in attempting to estimate and evaluate the economic and environmental impacts of the Project, was that the generating station was needed, and was intended to be used, solely to support the export operation – to run the compressors necessary to liquefy the domestic gas. No part of the electricity to be generated was to connect with the grid or be sold to customers. Because of that, in some important respects it was difficult to estimate the impact of the generating station as a stand-alone entity, apart from the
Though lamenting the lack of evidence from Dominion and PPRP directed solely to the generating station, PSC recognized the problem. It noted in its Order “that the Generating Station and the larger liquefaction Project are integrally related” and that its task had been made more difficult “by the fact that [Dominion], and, to some extent, other parties, have provided testimony that addresses the Project as a whole and have not seriously attempted to isolate information that applies uniquely to the Generating Station that we must review.”3 It concluded, however, that:
- the environmental impacts of the generating facility had to be evaluated “as part of the entire project” pursuant to the requirements of the Federal Clean Air Act, and
similarly, the evaluation of potential safety and security impacts of siting the generating station adjacent to and intertwined with the liquefaction facility and storage tanks also needed to take into account the possibility of a combined accident; but - the economic and reliability impacts of the generating station can be evaluated independently of the economic impacts of the liquefaction facility, which would be reviewed by FERC.
Applying that decision where applicable, PSC concluded:
- As to §7-201(e)(1), the Calvert County Board of Commissioners unanimously supported the CPCN.
- As to §7-207(e)(2)(i) – stability and reliability of the electric system – because there would be no tie between the generating station and the grid, there was no evidence that the station would contribute to the grid or have any adverse effect on it.
- As to §7-207(e)(2)(iii), (iv), (v), and (vii) – esthetics, historic sites, aviation safety, and waste disposal – that the Conditions proposed by PPRP would adequately address the concerns raised by AMP and the Sierra Club.
The major part of PSC‘s discussion concerned
With respect to positive effects, PSC noted that PPRP‘s economic consultant, Dr. Peter Hall, estimated that the employment and income effects of the LNG Project would be significant but that only a small portion of those effects would be attributable to the
Dominion estimated that it would pay $40 million in new revenue to Calvert County through a Payment in Lieu of Taxes (PILOT) agreement with the county. The county estimated that it would receive an average of $55 million in annual revenue once the facility was completed. AMP argued that annual payments to the county would amount to only $34 million. PSC found that (1) because it would not be connected to the grid, the generating station would provide no economic benefit to Maryland consumers as a source of electricity, and (2) because it would be exempt from purchasing Regional Greenhouse Gas Initiative (RGGI) carbon emission allowances, even though it would emit significant carbon emissions, it would not contribute to the strategic energy infrastructure. As a result, not only would there be no benefit from the purchase of RGGI allowances, but there would be a loss of industrial allowances that might otherwise be used by a future industrial project or power plant.
PSC considered the more substantial economic impacts in its evaluation of the statutory factors. It noted a conclusion by Dominion‘s Consultant, Navigant Consulting, Inc., that, due to the additional demand created by the exporting of natural gas from the
Based on the record, PSC concluded that construction of the generating station with just the conditions proposed by PPRP would not provide sufficient economic and other benefits to residents of Maryland to justify granting a CPCN.
In the aggregate, it found that “the negatives created by the construction and operation of the Generating Station require the provision of additional economic benefits to the State before the CPCN can be approved.” It concluded that Dominion‘s last minute agreement to a $20.38 million in-kind contribution to support Maryland‘s Greenhouse Gas Reduction Act goals (Condition J-4) was “too speculative and insufficient” to provide the necessary offsetting economic benefits. In place of that, the PSC focused on contributions that would benefit both the environmental and economic interests of the State by benefitting renewable and clean energy resources, mitigating climate change effects, and promoting beneficial changes in generation and electric usage by consumers.
PSC also found the proposed J-3 Condition – a one-time $400,000 contribution to the Maryland Energy Assistance Program (MEAP) to offset the impact from the Project of increasing natural gas rates to Maryland consumers – to be inadequate. It directed instead that that contribution be increased 20-fold – an annual contribution of $400,000 to MEAP or other low income assistance programs to be specified by PSC for a period of 20 years, a total of $8 million.
The overall conclusion of PSC, stated in its Order, was that:
“if all conditions imposed under this Order are met to address environmental, economic, health and safety impacts demonstrated in this proceeding, the Generating Station can be built in conformity with applicable Maryland and Federal laws and standards; and in a way that will be consistent with the public convenience and necessity standard.”
Dominion was given ten days to determine whether to accept the modified Conditions. The company timely accepted them, and the Order became final.
As recently stated in Hollingsworth v. Severstal Sparrows Point, 448 Md. 648, 654, 141 A.3d 90, 93 (2016), “[i]n an appeal from judicial review of an agency action, we review the agency‘s decision directly, not the decision of the Circuit Court or the Court of Special Appeals.”
The general standard, or scope, of review of final PSC Orders is set forth in
In CWA v. Public Service Commission, 424 Md. 418, 36 A.3d 449 (2012), we put the familiar gloss on that, noting that, although questions of law are “completely subject to review by courts,” as a general matter, “[s]o long as a reasoning mind could have reached the same conclusion as the agency, we will not disturb the agency‘s decision” and that because PSC “is well informed by its own expertise and specialized staff, a court reviewing a factual matter will not substitute its own judgment on review of a fairly debatable matter.” Confirming earlier pronouncements, we added that “[a]s long as an administrative agency‘s exercise of discretion does not violate regulations, statutes, common law principles, due process or other constitutional requirements, it is ordinarily unreviewable by the courts.” In Easton v. PSC, 379 Md. 21, 30, 838 A.2d 1225, (2003), we added that a PSC decision will not be disturbed on the basis of a factual question “except upon clear and satisfactory evidence that it was unlawful and unreasonable.”
These principles are in general accord with those applied to most judicial review actions (see Cashcall & Reddam v. Comm‘r of Fin. Reg., 448 Md. 412, 426, 139 A.3d 990, 998-99 (2016)), but this Court has tended to accord particular deference (though not total deference) to PSC decisions. As noted in Balto. Gas & Elec. v. Public Serv. Comm‘n, 305 Md. 145, 170, 501 A.2d 1307, 1320 (1986), “[i]n light of [the predecessor statute to
CONDITIONS J-3 AND J-4
Conditions J-3 and J-4 emanated initially from PPRP in an April 17, 2014 submission. Condition J-3 directed that, prior to operation of the facility, Dominion make a one-time contribution of $400,000 to MEAP or other Maryland low income
Condition J-4 was that Dominion provide $20.38 million in in-kind contributions and funding to support Maryland‘s Greenhouse Gas Reduction Act (
“The State of Maryland is particularly vulnerable to the threats associated with climate change, and is taking proactive steps to address these challenges through initiatives such as the Greenhouse Gas Reduction Act Plan, participation in the Regional Greenhouse Gas Initiative, and sound investments in energy efficiency, conservation, and renewable resources. Therefore, PPRP and its sister agencies continued to work with [Dominion] after the evidentiary hearings to explore mechanisms for support of Maryland‘s greenhouse gas reduction goals.”
As noted, PSC found that Condition to be both insufficient and too speculative to provide offsetting economic benefits and replaced it with a $40 million contribution to SEIF.
Relying heavily on Eastern Diversified v. Montgomery Cty., 319 Md. 45, 570 A.2d 850 (1990) (Eastern Diversified), AMP argues that the payments to State agencies mandated by Conditions J-3 and J-4 constitute a tax, which the General Assembly has not authorized PSC to impose, but without which the CPCN would not have been granted. PSC and Dominion both take issue with that argument. They maintain that the two Conditions are not primarily for the purpose of raising revenue, which is the hallmark of a tax, but constitute proper regulatory requirements designed to offset the negative economic impact of the Project that would occur without them. Dominion offers two additional rebuttals – that the Conditions are not taxes because Dominion has agreed,
We shall dispose first of Dominion‘s standing argument. Dominion informs us that it has located no other Maryland case in which a third party was permitted to challenge the lawfulness of a putative tax that an unrelated entity was paying but that the complainant was not required to pay. The cases cited by AMP, Dominion argues, all involved an action challenging a tax to which the complaining party was subject.
Standing to bring an action for judicial review of an administrative agency‘s final decision is ordinarily a matter of statute. Merchant v. State, 448 Md. 75, 100, 136 A.3d 843, 858 (2016). In Sugarloaf v. Dept. Of Environment, 344 Md. 271, 287, 686 A.2d 605, 614 (1996), involving an action for judicial review under the State Administrative Procedure Act (
This action was not brought under the State Administrative Procedure Act. It was brought under
The issue raised by AMP regarding the two Conditions – tax or regulation? -- has been before this Court a number of times, but we may start and end with Eastern Diversified. The question there was whether a development impact fee imposed by Montgomery County constituted a valid regulatory fee under the county‘s home rule power or a tax that the county had no authority to impose. Diversified desired to build an automobile sales and service facility. After its subdivision plat was approved, it filed an application for a building permit.
The application was approved subject to payment of a $118,000 impact fee. A local ordinance imposed such a fee on new development in two areas of the county to help finance the cost of road construction in those areas; it was payable as a condition to obtaining a building permit. The hearing examiner, the local Board of Appeals, and the Circuit Court rejected Eastern Diversified‘s challenge to the fee as an unlawful tax, on the ground that the fee was not a tax, in that it was not for general revenue purposes and
We started with the proposition that counties have no general taxing authority, but only that which has been granted by the State. Pursuant to the “Express Powers Act,” however, Charter counties do have broad authority to enact ordinances not inconsistent with State law that “may aid in maintaining the peace, good government, health, and welfare of the county.” See
Building on several earlier decisions, we confirmed that there was a distinction between “the imposition of fees as a necessary part of a regulatory measure and the imposition of a tax for revenue purposes” but observed that (1) a regulatory measure may produce revenue and a revenue measure may provide for regulation, and (2) “[t]here is no set rule by which it can be determined in which category a particular Act [or in this case an administrative Order] primarily belongs.” Eastern Diversified, 319 Md. at 52-53, 570 A.2d at 854. The best we could do was this:
“In general, it may be said that when it appears from the Act itself that revenue is its main objective, and the amount of the tax supports that theory, the enactment is a revenue measure. ‘In general. . . where the fee is imposed for purposes of regulation, and the statute requires compliance with certain conditions in addition to the payment of the prescribed sum, such sum is a license proper, imposed by
virtue of the police power, but where it is exacted solely for revenue purposes and its payment give[s] the right to carry on the business without any further conditions, it is a tax‘” (quoting in part from 33 Am. Jur., Licenses, ¶ 19, p.340.
Applying those guidelines, the Court concluded that the impact fee was a tax. The revenue objective, we said, was evident in the statute. It was to raise money for county road construction. The fees were not based solely on the service provided to the property owner or to defray the expenses of the regulatory process. As the developer argued, there was no indication that the amount charged had any relevance or relationship to road construction made necessary by the particular development. Our conclusion was that the fee was exacted “solely for revenue purposes . . . to finance road construction which benefit the general public.”
This case is far different. As a preface, the application for the CPCN was filed pursuant to both
Apart from any general incidental authority PSC may have to attach conditions to approvals,
The payments required by Conditions J-3 and J-4 are not general exactions on all applicants for a CPCN to construct an electric generating station. They were not for the primary purpose of raising revenue, as there was no evidence that any of the recipients were in need of additional revenue. In determining whether to grant a CPCN, PSC was required by law to consider and weigh any positive economic or environmental impact against any negative impact – a purely regulatory matter. The Conditions were particular to that end – to offset the prospect of an increase in natural gas prices in the future due to the exporting of LNG by Dominion from the Cove Point facility by a contribution to MEAP, to help low-income families who would be specially affected by such an increase, and to offset the impact of the emission of pollutants from the fossil-fueled electric generating station by contributions to the State‘s greenhouse gas reduction programs. Accordingly, we hold that the exactions imposed by the two Conditions were primarily regulatory rather than revenue measures and did not constitute taxes. In light of that conclusion, we need not address whether compliance with those exactions was voluntary. Nor need we address Dominion‘s argument that, though clearly aware of the two Conditions, AMP never raised the issue of whether they amounted to unlawful taxes before PSC.
One of the things PSC was required to consider was whether and to what extent the economic benefit of the electric generating station would offset any negative economic impact from the station. AMP complains that PSC failed to state any finding in that regard – that, although it did assign some value to positive economic benefit, it did not state “what value, or range of values” it assigned to the positive effects.
In what would seem, at worst, to be an alleged failure by PSC to make a statutorily-required finding, AMP complains that it was denied due process because, by failing to state the value of the positive economic impact it assigned to the generating station, PSC “made it impossible to effectively challenge how the [statutory] balancing test was implemented.”
AMP does not tell us, and we do not understand, how any imprecision in a required finding, if there was one, prevented AMP from challenging the PSC decision, much less how it has been denied due process of law. It is true, as this Court held in Blue Bird Cab v. Dep‘t Emp. Sec., 251 Md. 458, 466, 248 A.2d 331, 335(1968) and later in Overpak v. Baltimore, 395 Md. 16, 40, 909 A.2d 235, 249 (2006) that “a fundamental
As we have observed, given the unusual (though not unprecedented) nature of the Project, with the generating station to be used solely to support the exporting phase of the entire LNG facility, it was difficult for the parties (other than AMP, which contended that there was no economic benefit from the generating station because it was not to be connected to the grid) and for PSC to isolate entirely the economic benefit of the generating station from the economic benefit of the Project as a whole. There was evidence of some increased employment, both during the construction of the station and later from its operation and some additional taxes based on the value of the station, once constructed, and PSC, though regarding it as minimal, took that into account.
In its Order, PSC recounted the conclusions of the major participants regarding the positive and negative economic impacts, including rough estimates in dollars of the positive economic impact, which is all that it had. It was enough to find that, absent Conditions J-3 and J-4, the positive impact was insufficient to offset the negative impact but that, with those Conditions, totaling $48 million, the positive and negative impacts would be sufficiently in balance. It is a fair inference that, in concluding that, absent those Conditions, the net negative economic impact would not justify the granting of a CPCN, PSC estimated that the positive economic impact, absent those conditions, would be approximately $48 million less than the value of the negative economic impact, which
SUFFICIENCY OF EVIDENCE
Finally, AMP complains that the evidence of the separate economic impact of the electric generating station was legally insufficient for PSC to draw any conclusion regarding that factor. AMP acknowledges that there was a good bit of evidence regarding the economic impact of the Project as a whole, but very little regarding the generating station itself.
This argument implicates the problem noted above -- the difficulty in isolating and estimating the overall economic impact of just the electric generating station when its sole function was to support the larger Project. There was evidence, which was disputed, regarding the economic benefit that would accrue from the employment of people to build and operate the station and from property taxes that would accrue to Calvert County under the PILOT agreement. It is not clear whether there was any evidence of whether Dominion could have proceeded with the export operation without building the generating station – i.e., draw the needed electricity from the grid – or, if so, what the positive and negative effects of that might have been compared to those arising from building the generating station. There is no reference by any of the parties to any such evidence in the record.
It is clear from the submissions of PPRP and Dominion that the favorable economic impact of the entire Project would have been far greater in terms of employment and taxes than the impact of just the generating station, and PSC had to consider whether taking the strict view espoused by AMP, as opposed to accepting the evidence that PPRP and Dominion said was all they were able to produce, would have the effect of scuttling a Project that FERC might approve (and did approve) that could produce significant economic benefit to the State and county.
AMP insists that PSC should have denied the CPCN, not because of anyone‘s failure to produce additional evidence that could have been produced but because of the failure to produce evidence that the parties concluded, and PSC reluctantly accepted, could not have been produced due to the integration of the generating station into the overall Project. We again note PPRP‘s statement that, due to that intertwining, “many of the impacts from constructing and operating the electric generating equipment cannot be separated from the larger project and, thus, cannot be evaluated on a stand-alone basis.” .
JUDGMENT OF COURT OF SPECIAL APPEALS AFFIRMED; PETITIONER TO PAY THE COSTS.