Accokeek, Mattawoman, Piscataway Creeks Community Council, Inc. v. Public Service Commission

Wilner, J. 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 15 U.S.C. § 717b. 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 consti'uct a 130-megawatt electric generating station to provide the electricity necessary for the expanded operation, and, under Md. Code, Public Utility Article (PUA), §§ 7-207 and 7-208, a CPCN from PSC was required for the construction of that station.

Petitioner, Accokeek, Mattawoman, Piscataway Creeks Community Council, Inc. (hereafter AMP), a consortium dedicated ⁵ to protecting local waterways, was allowed to intervene in the administrative proceeding in opposition to Dominion’s application. After three days of hearings and consideration of several thousands of pages of testimony and documents, PSC entered an 83-page Order granting the CPCN, subject to approximately 200 Conditions included in a 64-page Appendix. Dissatisfied, AMP sought judicial review in the Circuit Court for Baltimore City, which affirmed the PSC Order. On AMP’s appeal, the Court of Special Appeals affirmed the Circuit Court judgment.

Accokeek, Mattawoman & Piscataway v. PSC, 227 Md.App. 265 , 133 A.3d 1228 (2016). We granted certiorari to consider three issues raised by AMP: (1) 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; (2) 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 (3) 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. BACKGROUND The procedure to be followed by PSC in evaluating a CPCN application for construction of an electric generating station is set forth in PUA §§ 7-207(e) and (d).

Those sections provide for notice to interested persons and a public hearing, and no one contends that those procedures were not followed in this case. Section 7-207(e) lists the factors that PSC must consider ⁶ in determining whether to grant a CPCN. In relevant part, they are: (1) the recommendation of the governing body of the county in which the station is to be located; and (2) the effect of the station on: (A) the stability and reliability of the electric system; (B) economics; (C) esthetics; (D) historic sites; (E) aviation safety; (F) air and water pollution; and (G) 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 § 7-207 favored the granting of a CPCN, including the assertion that the unanimous recommendation of the Calvert County Board of County Commissioners that the CPCN be granted was invalid and that, because the generating station would serve only the LNG operation at the terminal and not connect to the electric power grid 1 , it would have no public benefit that could offset the pollution that would occur from its fossil-fuel based generation. 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 ⁷ 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 overall LNG Project.

Both Dominion and PPRP took the position that the generating station was so intertwined with the overall Project that it was impossible to evaluate the impact of the generating station as a separate item, and they made little or no effort to do so. 2 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 ap ⁸ plies uniquely to the Generating Station that we must review.” 3 It concluded, however, that: (1) 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 (2) 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: (1) As to § 7—201(e)(1), the Calvert County Board of Commissioners unanimously supported the CPCN. (2) 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.

(3) 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 §§ 7-207(e)(2)(ii) and (vi)—economics and pollution. The analysis of economic impact was a multi-phase one, involving both positive and negative effects. With respect to positive effects, PSC noted that PPRP’s economic consultant, Dr. Peter Hall, estimated that the em ⁹ ployment and income effects of the LNG Project would be significant but that only a small portion of those effects would be attributable to the generating station.

Dominion did not provide an estimate of the employment impact but proffered that approximately 20 percent of the “dollar impact” from the overall Project could be attributed to the generating station. PPRP’s estimate was much lower—five percent of total temporary construction jobs and two percent of overall wages. PSC noted the variance but acknowledged that it had “nothing beyond that to further refine the appropriate number.” 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 Cove Point facility, the price of natural gas would increase 5.7 percent by 2020, which would translate into an incremental cost to Maryland consumers of $26.8 million per year in real dollars, to which must be added a loss of $16 million in revenues associated with compliance costs through year 2020. PSC estimated that the annual costs to Maryland consumers could exceed $75 million by 2025. It noted as well, ¹⁰ as negative factors, the increased emissions of pollutants, Dominion’s use of a limited supply of industrial greenhouse gas emission allowances, increased noise, cutting of trees, and the burden on transportation infrastructure and water resources. 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. To those ends, it proposed, as a substitute J-4 Condition, that Dominion contribute $40 million, over a five-year period, to the State’s Strategic Energy Investment Fund (SEIF), a Fund administered by the Maryland Energy Administration, to be used for the purpose of investing in the promotion, development, and implementation of renewable and clean energy resources, greenhouse gas reduction or mitigation programs, cost-efficiency and conservation programs, or demand response programs designed to promote changes in electric usage by customers. 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 in ¹¹ creased 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. STANDARD OF REVIEW 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 PUA § 3-203.

A PSC Order is prima facie correct and shall be affirmed unless it is clearly shown to be (1) unconstitutional, (2) outside PSC’s statutory authority or jurisdiction, (3) made on unlawful procedure, (4) arbitrary or capricious, (5) affected by other error of law, or (6) if entered in a contested proceeding after a hearing, which the Order before us was, it is unsupported by substantial evidence in the record considered as a whole. 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 ¹² 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 Baltimore 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 PUA § 3-203], we have consistently held that [PSC] orders enjoy a high degree of judicial deference on review.... Recognizing the experience and special expertise of the Commission and its staff, a reviewing court must not substitute its judgment for that of the Commission.” See also People’s Counsel v. MPSC, 355 Md. 1, 14 , 733 A.2d 996, 1003 (1999) (PSC decision “is accorded the respect due an informed governmental agency that is aided by a competent and experienced staff.”) 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 energy assistance program to be specified by PSC. 4 Its expla ¹³ nation for this Condition was exceedingly brief. It argued that the contribution “offsets some of the burden low income Marylanders may face if the project does indirectly cause higher natural gas prices for Maryland consumers.” Condition J-4 was that Dominion provide $20.38 million in in-kind contributions and funding to support Maryland’s Greenhouse Gas Reduction Act (Md. Code, Environment Article, §§ 2-1201 through 2-1211).

Specifically, for a price of one dollar, Dominion would offer a perpetual license of its EDGE Energy Efficiency Program to five listed Maryland electric distribution utilities, the license to include installation and start-up user training, and, for each utility that adopted the program, Dominion would service, maintain, and provide software updates at no cost for the first four years. PPRP estimated the aggregate value of the EDGE product licenses at $20.38 million ($9.28 million to BGE, $4.67 million to Pepeo, $2.15 million to Delmarva, $1.8 million to SMECO, and $2.48 million to Potomac Edison). 5 In support of that Condition, PPRP pointed out that inter-venors and the public had raised concerns about greenhouse gas emissions from the Project and its overall contribution to climate change. PPRP added: “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, ¹⁴ 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