The United States Supreme Court has held that the State of Delaware, acting within its sovereign capacity deny a permit for LNG terminal built on the New Jersey side of the Delaware River but protruding into a portion of the river that constitutes Delaware’s territory.
In one of its rare decisions arising from its original jurisdiction, the Supreme Court decided on March 31, that a proposed LNG terminal that would be constructed by a subsidiary of British Petroleum could not be constructed without a permit issued by the State of Delaware. The case involved an unusual and historical conflict between the two states over a portion of the Delaware River within a 12 mile radius of the City of New Castle, Delaware. For the third time the Supreme Court has adjudicated the sovereign rights of both states in that portion of the Delaware River. The first case, New Jersey v. Delaware, 205 U.S. 550 (1907), left unsettled the boundary question but withdrew a case filed by Delaware that pertained to fishing rights which was subsequently resolved by a 1905 compact between the two states. The second action, New Jersey v. Delaware, 291 U.S. 361(1934), finally set the Delaware boundary on the eastern side of the Delaware River at the low water mark of the river on the New Jersey shore. The 1934 decision did not, however, disturb a provision of a 1905 compact, “to exercise riparian jurisdiction of every kind and nature, and to make grants, leases and conveyances of riparian lands and rights under the laws of the respective state.” It is this provision of the 1905 compact that came into play in the permitting of BP’s LNG facility.
BP sought a permit from the State of New Jersey to construct an LNG facility that would include a gasification plant, storage tanks and other structures on shore in New Jersey, and a pier and related structures extending approximately 2,000 ft. from the New Jersey shore. The actual unloading platform in the Delaware River would comprise 6,000 sq. ft., affect approximately 29 acres of riverbed within Delaware’s territory and require the dredging 1.24 million cubic yards of river bottom. New Jersey granted the necessary permit to construct the onshore facilities and the off-shore pier. Delaware, acting pursuant to the Delaware Coastal Zone Act as approved by the U.S. Department of Commerce under its authority granted by the federal Coastal Zone Management Act, denied its permit. Under the Delaware statute heavy industry uses of any kind as well as offshore gas, liquid and solid bulk product transfer facilities are expressly prohibited.
New Jersey claimed the right to grant its permit and to act exclusively without regard to Delaware’s ownership of the riverbed beyond the low water mark of the river. Its claim was based in part upon the 2003 decision of the U.S. Supreme Court in Virginia v. Maryland, 540 U.S. 56 (2003). This decision involved the right of a municipal water authority to build a water intake structure in the Potomac River on the Virginia side that extended beyond Virginia boundary at the low water mark into Maryland territory. Maryland had challenged this construction in the absence of the water company securing a separate permit from a Maryland agency. The Supreme Court decided that both a 1785 compact between the two states and an 1877 decision of the Court gave Virginia citizens the right to use the Potomac—including the right to wharf out from the Virginia side or to otherwise construct facilities into the Maryland territory—without the requirement of securing permission from Maryland to do so. In the present case, the Court rejected New Jersey’s claim that the 2003 decision governed. It found, instead, that the compact and 1877 court decision was unique in its language and not directly applicable to the present controversy between Delaware and New Jersey.
The present case is significant apart from its historical curiosity for two reasons. The first is that it if demonstrates the continued difficulty in securing permits for large scale energy products such as LNG terminals. This is particularly true in situations in which more than one state may assert a jurisdictional claim over the territory affected by the facility.
A second reason, and one applicable even a non-coastal state, such as West Virginia, is the importance that a “course of conduct” can have a decision involving riparian rights in interstate waters. Apart from the specific language of the 1905 compact and the 1934 decision that the Supreme Court found persuasive, it also reviewed the historical conduct of parties in New Jersey seeking permission from Delaware authorities to undertake construction projects in the Delaware River. Among the course of conduct was a 1980 representation made by the State of New Jersey when it was seeking authority from the Commerce Department for its Coastal Zone Management Program. It that letter, the New Jersey official impliedly acknowledged the joint authority of both Delaware and New Jersey over the portion of the Delaware River that was the subject of the current case. The special master who prepared the recommended findings for the Supreme Court in this case also found at least three other instances in which construction projects undertaken in New Jersey had sought approval from Delaware authorities.
This course of conduct should serve as a reminder to municipalities and individuals in the Eastern Panhandle that withdraw water from the Potomac River. In light of the decision in Virginia v. Maryland, it is not necessary to seek permission Maryland authorities to make use of the Potomac River. Any previous authorizations granted by the agencies of Maryland are not binding and should be repudiated. An ongoing course of conduct by municipalities or persons in this regard could be utilized in a subsequent case by Maryland agencies should a conflict arise over a use of water withdrawals in the Potomac from West Virginia counties.
This article was authored by Blair M. Gardner, Jackson Kelly PLLC. For more information on the author see here.