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North Carolina v. Virginia Beach, City of

ELR Citation: 22 ELR 20323
Nos. No. 91-2314, 951 F.2d 596/(4th Cir., 12/06/1991)

The court holds that acity may commence construction of portions of a water pipeline project that are not subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) before the city obtains FERC approval of easements for the project's pipeline to cross land at a FERC-licensed hydropower facility. The city proposed the project to divert 60 million gallons of water a day from Lake Gaston on the Virginia-North Carolina border to the city's water supply. Although the city obtained an Army Corps of Engineers permit for the project, North Carolina obtained an injunction halting construction, including construction outside the hydropower facility and not subject to FERC jurisdiction, until FERC approved the easements. The state argued that the commencement of construction of any part of the project would place an enormous amount of public and political pressure on FERC to approve the project, preventing FERC from making a reasoned and independent decision on the effects of the project. The city sought to modify the injunction to allow construction of six overhead river crossings and portions of a pump station outside of the hydropower facility's borders.

The court finds that nothing in the record suggests that proceeding with the river crossings and pump station, which are estimated to cost $8.4 million of the project's estimated $218.9 million cost, will unduly influence FERC, particularly when more than $18 million has already been spent on the project. Further, in a notice of proposed rulemaking, FERC has placed applicants for FERC project approvals on notice that it will not be pressed into approving a project because an applicant has invested a great deal of money in it. Additionally, in a meeting with FERC representatives, the city confirmed that it fully accepted responsibility for the loss of preliminary construction costs if the project were not approved. The court rules that construction beyond the boundaries of FERC's jurisdiction can be enjoined only when it has a direct and substantial probability of influencing FERC's decision. The court holds that under this standard, the district court's injunction prohibiting two relatively minor phases of construction cannot be justified.

The court next holds that although FERC may choose to conduct a review under the National Environmental Policy Act (NEPA) beyond its required jurisdiction, this does not mandate issuance of an injunction. A NEPA review has already been conducted by the Corps, and FERC's required jurisdiction is limited. The court reverses the district court's order denying the city's motion to modify the injunction and directs it to permit the commencement of construction of at least the two portions described in the city's motion.

A dissenting judge would affirm the district court's decisions enjoining construction of the pipeline pending examination of its environmental impact by FERC and denying the city's motion to alter or amend the injunction. Applying an "abuse of discretion" standard, he would hold that the district court correctly interpreted the circuit court's prior decisions, since allowing construction to proceed prior to FERC approval may as a practical matter foreclose refusal for what has become a fait accompli. Even if he concluded that the majority's de novo review of the district court's injunction was proper, the dissenting judge would remand to the district court for findings of fact in light of the new standard.

[Decisions in related litigation are published at 17 ELR 21260, 20 ELR 21070, and 21 ELR 21238.]

Counsel for Appellant
John F. Kay Jr.
Mays & Valentine
P.O. Box 1122, 1111 E. Main St., Richmond VA 23219
(804) 775-1061

Counsel for Appellees
Alan S. Hirsch
North Carolina Department of Justice
P.O. Box 629, Raleigh NC 27602
(919) 733-3377

Patrick M. McSweeney
McSweeney, Burtch & Crump
P.O. Box 1463, Richmond VA 23212
(804) 783-6812