The U.S. Court of Appeals for the Fourth Circuit has upheld the State of Maryland’s denial of a water quality certification for a major industrial project required by the Clean Water Act (CWA). Two companies had petitioned Maryland’s Department of Environment for a CWA §401 water quality certification needed for a construction project at Sparrow’s Point, a heavily industrialized area adjacent to the Baltimore Harbor. The Fourth Circuit upheld the state’s denial of the water quality certification relying on the Court’s previous rulings in CWA cases arising from surface mining controversies in West Virginia.
The two companies sought a license from the Federal Energy Regulatory Commission (FERC) as required by the Natural Gas Act to construct a liquefied natural gas (LNG) terminal at Sparrow’s Point. As part of this licensing process, the companies were required to prepare an environmental impact analysis under NEPA, and to secure a §404 permit from the U.S. Army Corps of Engineers. The §404 permit encompassed three distinct activities: dredging approximately 118 acres to provide an approach channel and turning basin at the Harbor of Baltimore; identifying a location to place the approximately 3.7 million cubic yards of dredged material that would be removed and dewatered from the dredging project; and establishing a corridor for a natural gas pipeline running 88 miles from the Baltimore Harbor to interstate pipelines in Chester County, Pennsylvania.
Section 401 of the CWA provides at subsection (a) that “an applicant for a federal license or permit to conduct any activity . . . which may result in any discharge into the navigable waters, shall provide the licensing or permitting agency a certificate from the state . . . that any such discharge will comply with applicable provisions” of the state’s water quality standards. Although Maryland identified four bases for denying certification, the Court relied upon only one basis to uphold the state’s decision. The area at Sparrow’s Point, Maryland has been heavily industrialized for decades. Consequently, the sediment is heavily contaminated and the water quality in the harbor is marginal, particularly for dissolved oxygen levels in the dredged areas. Maryland’s Department of the Environment had determined that dredging the harbor an additional 45 feet would adversely affect dissolved oxygen levels and potentially impair benthic habitat at depths below 35 feet in the harbor. The companies attacked the Maryland agency’s decision as being arbitrary and capricious because a similar request for a certification had been granted to another company four years earlier.
The Fourth Circuit upheld the state agency’s decision relying substantially upon its decision issued earlier this year in OVEC v. Aracoma Coal Company, 556 F.3d 177 (Feb. 2009). In that case, the Court had reaffirmed the high level of deference that is granted to agencies in making complex decisions on matters arising out of the subject matter issues in which the agencies are statutorily required to determine. The Fourth Circuit also relied upon its earlier decision in OVEC v. Bulen, 429 F.3d 493 (4th Cir. 2005) that the appellate court is required to defer to an agency’s interpretation of its own rules.
Although the denial of the water quality certification was a blow to the LNG project and the permitting that was being undertaken by the two companies, the Maryland agency had conditioned its denial upon the submission of additional information in support of the project. The case is valuable because it reaffirms the central role of the states in determining whether projects that require federal licenses or permits, such as §404 permits issued by the Corps of Engineers, comply with state water quality standards.
The case is AES Sparrow’s Point v. Wilson, No. 09-1539 (Dec. 22, 2009). For additional information, contact Blair Gardner at 304-340-1146 or Bob McLusky at 304-340-1381.
This article was authored by Blair M. Gardner, Jackson Kelly PLLC. For more information on the author see here.