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BASF Corp. v. State Corp. Comm'n

Supreme Court of Virginia

April 16, 2015

BASF CORPORATION
v.
STATE CORPORATION COMMISSION, ET AL. JAMES CITY COUNTY, ET AL.
v.
STATE CORPORATION COMMISSION, ET AL

Page 459

FROM THE STATE CORPORATION COMMISSION.

Michael J. Quinan (E. Ford Stephens; Christian & Barton, on briefs), for appellant BASF Corporation.

Andrew R. McRoberts (Leo P. Rogers, County Attorney; Sands Anderson, on briefs), for appellants James City County, James River Association, and Save the James Alliance Trust.

John F. Dudley (Alisson P. Klaiber, on brief), for appellee State Corporation Commission.

Joseph K. Reid, III (Lisa S. Booth; Charlotte McAfee; Stephen H. Watts, II; Vishwa B. Link; Robert W. Loftin; Richard D. Gary; Timothy E. Biller; McGuireWoods; Hunton & Williams, on brief), for appellee Virginia Electric and Power Company.

Amici Curiae: National Trust for Historic Preservation, National Parks Conservation Association, Preservation Virginia, Scenic Virginia, and Garden Club of Virgina (Norman A. Thomas, on briefs), in support of appellants.

PRESENT: Lemons, C.J., Millette, Mims, McClanahan, and Powell, JJ., and Russell and Koontz, S.JJ. OPINION JUSTICE LEROY F. MILLETTE, JR. JUSTICE MIMS, with whom CHIEF JUSTICE LEMONS and JUSTICE McCLANAHAN join, concurring in part and dissenting in part.

OPINION

Page 460

LEROY F. MILLETTE, JR., JUSTICE

These consolidated appeals of right by James City County, Save the James Alliance Trust, and James River Association (collectively, " JCC" ), and BASF Corporation (" BASF" ) arise from proceedings before the State Corporation Commission (the " Commission" ).

Page 461

By an initial Certificate Order and an Amending Order, the Commission issued to Virginia Electric and Power Company d/b/a Dominion Virginia Power (" Dominion" ) certificates of public convenience and necessity (" CPCNs" ) authorizing the construction of electric transmission facilities (the " Project" ). BASF challenges the approval of the transmission line's route across a sensitive environmental remediation site on its property along the James River. JCC challenges the approval of two main features of the Project: a new 500 kilovolt (" kV" ) overhead transmission line that will cross the James River and an associated switching station that will be located in James City County. JCC argues that the switching station is a not a " transmission line" under Code § 56-46.1(F), and therefore subject to local zoning ordinances.

We conclude that the Commission did not err in its construction or application of Code § 56-46.1's requirements that Dominion " reasonably minimize adverse impact on scenic assets, historic districts, and environment of the area concerned," and that the record is not without evidence to support its findings. We hold, however, that the Commission did err in concluding that a switching station is a " transmission line" under Code § 56-46.1(F). We will therefore affirm the orders as to appellant BASF, and affirm in part, reverse in part, and remand as to the JCC appellants.

I. PROCEEDINGS

In 2012, Dominion filed an application with the Commission seeking the issuance of the CPCNs under Code § 56-265.2 of the Virginia Utility Facilities Act, and approval under Code § 56-46.1, to construct the Project.

Code § 56-265.2(A) provides that " [i]t shall be unlawful for any public utility to construct . . . facilities for use in public utility service . . . without first having obtained a certificate from the Commission that the public convenience and necessity require the exercise of such right or privilege." This provision also requires compliance with the provisions of Code § 56-46.1 for the issuance of a certificate to construct overhead transmission lines of 138 kV or more.

Code § 56-46.1 directs the Commission to consider several factors when reviewing the utility company's application for the certificate. As relevant here, subsection (A) of the statute provides: " Whenever the Commission is required to approve the construction of any electrical utility facility, it shall give consideration to the effect of that facility on the environment and establish such conditions as may be desirable or necessary to minimize adverse environmental impact." Code § 56-46.1(A). Here, the term " 'environmental' shall be deemed to include in meaning 'historic.'" Code § 56-46.1(D). Subsection (A) also directs that " the Commission (a) shall consider the effect of the proposed facility on economic development within the Commonwealth . . . and (b) shall consider any improvements in service reliability that may result from the construction of such facility." Code § 56-46.1(A).

Subsection (B) of Code § 56-46.1 then provides, in relevant part: " As a condition to approval the Commission shall determine that the [proposed transmission] line is needed and that the corridor or route the line is to follow will reasonably minimize adverse impact on the scenic assets, historic districts and environment of the area concerned."

Dominion's application addressed the need for the Project and described its proposed features. Dominion represented that the construction of this additional transmission capacity was needed to assure continued reliable electric service to its customers in the North Hampton Roads Area.[1] The Project, according to Dominion, was the best means for meeting this need while " reasonably minimiz[ing] adverse impact on the scenic assets, historic districts and environment of the area concerned," as required by Code § 56-46.1(B).

Page 462

The Commission undertook an investigation, received public comments and assigned a Hearing Examiner to conduct the proceedings and issue a report on Dominion's application. Two days of public witness hearings were then conducted, followed by a nine-day long evidentiary hearing for the purpose of receiving evidence offered by Dominion, respondents, including JCC and BASF, and the Commission's staff. Following its receipt of the Hearing Examiner's report, the Commission issued the first of the orders challenged in this appeal.

A. Evidentiary Hearing

The record below is extensive, but included the following basic facts.

Under federal law, Dominion must comply with North American Electric Reliability Corporation (" NERC" ) standards, which have been adopted by the Federal Energy Regulatory Commission (" FERC" ). See Piedmont Envtl. Council v. Virginia Elec. & Power Co., 278 Va. 553, 559-60, 684 S.E.2d 805, 808 (2009) (explaining federal regulation of public utilities like Dominion that operate " bulk electric transmission systems" ). Dominion presented evidence that, in order to monitor whether its electric transmission system is in compliance with NERC reliability standards, Dominion continually assesses the system's future reliability using load flow modeling studies. Based on the load flow modeling evidence in this case, previous studies had indicated that normal load growth in the North Hampton Roads Area would result in NERC reliability violations by 2019. However, in order to comply with new regulations, Dominion determined that six of its local coal-fired generation units (two at the Yorktown Power Plant and four at the Chesapeake Power Plant) would need to be shut down. According to Dominion, the retirement of just one unit at Yorktown was enough to cause reliability violations to begin in the summer of 2015.

To meet the above-stated need, Dominion proposed in its application for the CPCNs that the Project include the construction of (1) approximately seven to eight miles (depending upon the specific route across the James River) of a new 500 kV overhead transmission line (the " Surry-Skiffes Creek Line" ), (2) approximately 20 miles of a new 230 kV overhead transmission line (the " Skiffes Creek-Whealton Line" ), and (3) a new switching station required to interconnect the 500 kV line to the 230 kV line (the " Skiffes Creek Switching Station" ).[2]

Dominion's application, at issue in today's appeal, presented the Surry-Skiffes Creek Line over the James River and onto BASF's property, with several " Variations" as to the exact route crossing the James River. As an alternative to the Surry-Skiffes Creek Line, Dominion also offered for the Commission's consideration a different route extending 38 miles from Dominion's existing Chickahominy Substation in Charles City County to the new Skiffes Creek Switching Station in James City County (the " Chickahominy-Skiffes Creek Line" ). However, Dominion preferred the Surry-Skiffes Creek Line for the Project based on significant differences as to adverse impact and cost: the Chickahominy-Skiffes Creek Line would pass in close proximity to more residences than the Surry-Skiffes Creek Line. Dominion also stated that, because approximately 25 miles of the right-of-way is unimproved, the Chickahominy-Skiffes Creek Line " crosses significantly more forested land, open marshland, wetland and perennial waterbodies and will require much more forest land to be cleared and forested wetlands to be converted to scrub shrub community." In addition, Dominion's estimated cost of the Chickahominy-Skiffes Creek Line was more than $50

Page 463

million above the estimated cost of the Surry-Skiffes Creek Line.[3]

Under Code § 56-46.1, as part of the evaluation process, the Hearing Examiner and then Commission must determine whether new Projects " reasonably minimize adverse impact on the scenic assets, historic districts and environment of the area concerned." Code § 56-46.1(B). Both BASF and JCC presented evidence of adverse impacts caused by the proposed Surry-Skiffes Creek Line.

The BASF property is a former manufacturing site undergoing active remediation subject to both Environmental Protection Agency (" EPA" ) and Department of Environmental Quality (" DEQ" ) corrective action. Dominion's preferred route of the Surry-Skiffes Creek line (" Variation 1" ) crosses the middle of BASF's property, the most sensitive area of environmental remediation, containing zinc contaminants. This area is identified as Area 4C. The plans underway to remediate Area 4C contain three main mitigation measures: a capped landfill, a bio-barrier trench, and a phytoremediation plot of poplar trees. BASF offered expert testimony that a transmission tower in this area would interfere with the bio-barrier, that the transmission line will render the phytoremediation plot ineffective, and that Variation 1 would generally threaten and delay successful remediation.

BASF's position was that, if the Surry-Skiffes Creek line was selected, the route identified as Variation 4 was its preferred route. Variation 4 crosses the northern boundary of the property (approximately one half-mile north of Variation 1) and thereby avoids Area 4C. In order for Variation 4 to be viable, the James City County Economic Development Authority (the " EDA" ) would have to agree to provide Dominion a right-of-way easement, as Dominion determined that it does not have the authority to exercise eminent domain over the property.

BASF has already spent over $15 million dollars in the process of remediating the property and preparing it for redevelopment. BASF presented testimony that Variation 1 could delay remediation efforts and result in BASF failing to meet its EPA-mandated remediation deadline in 2020, thereby resulting in treble damages. Further, according to BASF witnesses, a transmission line bisecting the property substantially damages prospects for future development of the property.

In addressing the issue of scenic and historic preservation, JCC presented expert testimony that any overhead transmission line would disrupt scenic vistas and historic landmarks, and expressed its desire for an underground transmission line. As the experts observed, the Surry-Skiffes Creek Line would be located in the vicinity of the Historic Triangle of Jamestown, Yorktown and Williamsburg. According to the experts, a portion of the overhead line would be visible from the Colonial National Historic Parkway. The line would be most visible from Carter's Grove, a mid-eighteenth century dwelling and a National Historic Landmark located on the north shore of the James River, where the line would be located between one-half mile to one mile south of Carter's Grove, depending upon the line's route across the James River. As for the James River itself, according to the experts, the line would pass within a portion of the river that has been designated by Code § 10.1-419 as a " [H]istoric [R]iver," and would be visible from the Captain John Smith National Historic Water Trail. JCC presented testimony that these sites have received state and national recognition on historic registers and should be free from such visual intrusion. JCC further presented testimony that the historical, cultural, and ecological importance of the area would be impacted by an overhead transmission line, and the Project could potentially damage the ongoing attempt to have the area designated as a World Heritage Site.

Dominion countered with its own experts, who argued that while these adverse impacts do exist, they could be reasonably minimized. The specific responses of these experts are addressed in Parts IV.B. and V.B., infra,

Page 464

where we analyze the evidentiary issues under Code § 56-46.1.

B. Hearing Examiner's Report

In August 2013, the Commission's Hearing Examiner issued a 178 page report that summarized the extensive record, analyzed the evidence and issues, and made numerous findings and recommendations for the Commission's consideration. As relevant here, after finding a need to upgrade Dominion's electric system, the Hearing Examiner's express findings and recommendations included the following:

o The [p]roposed Project is the least cost[ly] viable alternative for addressing the identified NERC reliability violations presented in this case, can be constructed in a timely manner, and is the best alternative in this case; [4]
o The [p]roposed Project's overhead crossing of the James River will have a limited visual impact on one section of the Colonial Parkway and a very limited impact on a small portion of Jamestown Island. Overall, the [p]roposed Project will reasonably minimize the adverse impacts on the scenic assets, historic districts, and environments;
o The route crossing the James River should follow James River Crossing Variation 4 on the condition that the [EDA] and Dominion . . . conclude a right-of-way agreement within three weeks of the Commission's final order. If such an agreement is not [so] concluded . . . then the route crossing the James River should be James River Crossing Variation 1;
o The Commission may or may not decide to address whether Skiffes Creek Switching Station is a " transmission line" for purposes of [Code] § 56-46.1[(F).]

The Hearing Examiner therefore recommended that the Commission adopt the findings of the Report and grant the Application subject to the recommendations in the report.

C. Commission's Certificate Order

Based on its review of the record and the Hearing Examiner's findings and recommendations, the Commission issued the November 26, 2013 order (the " Certificate Order" ) granting the CPCNs to Dominion. After evaluating numerous alternatives offered for its consideration, the Commission found that " [t]he engineering evidence in this case is overwhelming" in establishing that the construction of an overhead 500 kV transmission line is the best way to address the needed upgrade to Dominion's electric system. The Commission then compared Dominion's two alternative 500 kV proposals: the Surry-Skiffes Creek Line and the Chickahominy-Skiffes Creek Line. The Commission concluded that the record supported the Hearing Examiner's findings that the Surry-Skiffes Creek Line " 'is the least cost[ly] viable alternative for addressing the identified NERC reliability violations presented in this case, can be constructed in a timely manner, and is the best alternative in this case.'" Further, the Commission cited and agreed with the Hearing Examiner's finding that the proposed Project " reasonably minimize[ the] adverse impact on the scenic assets, historic districts[,] and environment [in] the area concerned" in accordance with Code § 56-46.1(B).

The Commission also agreed with the Hearing Examiner's recommended approval of Variation 4 as the route for the Surry-Skiffes Creek Line. The Commission found that " the environmental and economic development considerations in particular" favored Variation 4 over Variation 1. The Commission declined, however, to adopt the Hearing Examiner's recommendation for the contingency approval of Variation 1, should Dominion's negotiations with the EDA over the right-of-way prove fruitless. The Commission

Page 465

indicated that it fully expected Dominion and the EDA to complete the negotiations ...


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