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Cove Point LNG Terminal in Lusby, Md. (File)

Cove Point project can move ahead, Md. appellate court rules

CSA rejects challenge to plans for electric generating station to power proposed LNG plant

A plan to construct an electric generating station to power a proposed liquefied natural gas export facility in Calvert County can move ahead despite objections raised by an environmental advocacy organization, the state’s intermediate appellate court has held.

The Court of Special Appeals affirmed Tuesday a lower-court ruling upholding the Maryland Public Service Commission’s 2014 decision to grant Dominion Cove Point a certificate of public convenience and necessity, allowing the company to build the generating station provided it adheres to a set of conditions designed to offset social and environmental harm caused by the station.

In raising objections to the commission’s approval of the certificate, the Accokeek, Mattawoman, Piscataway Creeks Communities Council Inc., or AMP, had argued the decision was unconstitutional, unsupported by substantial evidence, outside its authority and arbitrary or capricious.

The ruling is the latest in multiple legal challenges brought by community and environmental groups surrounding the projected $3.8 billion liquefied natural gas facility on the western shore of the Chesapeake Bay, the first such facility federal regulators have approved on the East Coast.

Sean Canavan, an Accokeek solo practitioner representing AMP, said the organization plans to appeal the decision.

“As the PSC conceded, the station at issue in this case will harm Maryland environmentally and economically,” he wrote in an email. “The fact that the PSC admitted this but nevertheless granted a [certificate of public convenience and necessity] was illegal and we are hopeful the Court of Appeals will recognize that.”

Balancing act

Before granting the certificate, the PSC considered factors such as the potential for air and water pollution, as well as the impact of the generating station on the economy and the recommendation of the Calvert County Board of Commissioners.

AMP argued the commission failed to detail specific findings related to the project’s economic benefits in writing and had therefore deprived AMP of the opportunity to challenge the way the commission balanced the economic benefit of the project with its potential for environmental harm in coming to a decision.

But the Court of Special Appeals, in an unreported opinion filed Tuesday, ruled that argument incorrectly equates the commission’s complex decision-making process with a simple mathematical formula.

“AMP’s argument is creative but unpersuasive,” Judge Kevin F. Arthur wrote for the unanimous three-judge court. “AMP, in seeking to challenge the Commission’s balancing of the competing considerations, incorrectly reasons that this flexible multi-factor balancing can be reduced (and in fact was reduced) to mere ‘calculations.’ Like many other determinations that the General Assembly has entrusted to the Commission’s discretion, however, the public convenience and necessity standard … requires that the Commission consider all relevant facts and factors and exercise reasonable judgment, not that the Commission employ a particular formula or method.”

Not a tax

As a condition of the commission’s approval, Dominion will be required to pay $40 million over five years to the state’s Strategic Energy Investment fund to finance investments in energy efficiency programs and renewable energy resources, as well as pay $8 million over 20 years to a low-income energy assistance program to account for the increased gas prices that the project is anticipated to cause.

AMP argued that the combined $48 million amounts to a tax that the commission was not authorized to levy, while the commission responded that the charges are not taxes but rather conditions it is permitted to impose.

The appellate court sided with the PSC, stating that the defining characteristic of a tax is not simply that the charge results in government revenue but that it generates revenue. In this case, the court ruled, the primary purpose of the $48 million is to offset the harmful effects of the project.

“The required payments are part of a unified package of regulatory conditions designed to ensure that, overall, Dominion’s project meets the public convenience and necessity standard,” Arthur wrote.

AMP also argued that most of the evidence considered by the PSC as to the economic effects of the generating station are actually related to the larger liquefied natural gas export facility that the station would power, and that the commission lacked substantial evidence to reach a conclusion about the isolated economic effects of the generating station.

However, the court said, because the generating station would be located within the larger facility and would be “closely intertwined” with its operations, evidence concerning the effects of the larger project would still be relevant.

J. Patrick Nevins of Hogan Lovells LLP, an attorney for Dominion, declined to comment on the ruling.

The case is Accokeek, Mattawoman, Piscataway Creeks Communities Council Inc. v. Maryland Public Service Commission et al., No. 2437, September Term 2014.

About Lauren Kirkwood

Lauren Kirkwood covers the business of law beat at The Daily Record.