NATURAL GAS:

Court ruling imperils Baltimore LNG proposal

A federal appeals court has upheld Maryland's decision to deny a water quality certification for a liquefied natural gas terminal at Baltimore's Sparrows Point.

A three-judge panel of the 4th U.S. Circuit Court of Appeals denied Arlington-based AES Corp.'s petition for review late last month. AES had argued Maryland failed to decide on its application within a year of its proposal and the state's certification denial was "arbitrary and capricious" because it considered water flow a form of pollution under the Clean Water Act.

But the court panel ruled that Maryland regulators decided within one year of the Army Corps of Engineers' provision of necessary information -- not when AES had submitted its application.

Further, the opinion holds that Maryland properly considered how water flow would be affected by the additional dredging needed for LNG tankers. The court agreed with the state that the dredging would induce "pollutants" by creating deep channels where the dissolved oxygen levels would not meet water standards.

"Maryland examined the relevant data pertaining to the effect on water quality in the areas of the proposed deep channel dredging and articulated a satisfactory explanation for its denial on that basis," the panel wrote.

The ruling could have an effect on other proposed LNG facilities, especially those in Oregon where the state is still reviewing required permits and similar environmental concerns have been raised.

The 4th Circuit ruling came one week after the Federal Energy Regulatory Commission confirmed its decision to license the Maryland facility (Greenwire, Dec. 17).

The AES facility would be built on Sparrows Point, about 50 miles from an existing LNG facility. The proposed facility could send about 1.5 billion cubic feet per day of natural gas and store up to 480,000 cubic meters of LNG. Commercial shipping traffic in the Chesapeake Bay would increase 5 percent to 7 percent.

The project has been unpopular in the state. In 2008, the 4th Circuit ruled changes that Baltimore County had made to its coastal zoning regulations to prevent siting the LNG facility were not legal. Rep. Elijah Cummings (D-Md.) and other Maryland lawmakers have also voiced concerns about the project and had pushed for stronger regulations for security and safety of LNG tankers and terminals.

AES has not announced whether it will appeal to have the full court hear the case. The company did not respond to requests for comment today.

Click here to view the opinion.