To Prevail Over Preemption in LNG Proceedings, States Must Follow the Process

I’ve already posted about how even the increased federalization of the LNG siting process by EPAct 2005 leaves open the door for states to reject a project through use of their powers under the CZMA. But that state authority comes with a caveat, as demonstrated by the Fourth Circuit’s ruling in AES-Sparrows Point LNG v. James Smith, Baltimore County Executive : states must follow the appropriate procedures under the CZMA to prevail over preemption.

Sparrow’s Point involves relatively simple facts. Following one unsuccessful effort to prevent AES from siting an LNG facility at Sparrow’s Point in Baltimore County Maryland, the Baltimore County Council tried another approach. In 2007, the Council amended its zoning laws to make LNG facilities a prohibited use in the Chesapeake Bay Critical area. Because the Sparrow’s Point project would be sited in a Chesapeake Bay Critical area, the Council’s amendment would bar the project. Maryland subsequently incorporated the Council’s amendment into its Coastal Management Plan (CMP).
AES filed a declaratory suit in federal district court, arguing that the Natural Gas Act preempted the Council’s action. The lower court disagreed, finding that the LNG ban in the CMP fell within Maryland’s authority under the Coastal Zone Management Act (CZMA) and as such, was saved from preemption under the NGA’s savings clause.

The Fourth Circuit reversed. The court concluded that the state had not followed the appropriate procedure for amending the CMP to include the LNG ban, since it had not obtained NOAA’s approval for the change. In the absence of approval from NOAA, the LNG ban was preempted by the CZMA.

The court noted that Maryland and other states can still use the CZMA to bar LNG facilities from coastal waters. So long as states mind their Qs (by getting their CMP amendments in the queue for NOAA approval), they can also have their P’s (prevailing over preemption to prohibit LNG facilites).