Recent Wind Farm Decision Highlights Difference in State Processes

The article is not a substitute for legal advice.

A recent decision by Maryland’s Court of Special Appeals highlights the differences that proposed power generation facilities can bring before the Public Service Commission (PSC). For example, a proposed power generation facility can consider applying for a Certificate of Public Convenience and Necessity (CPCN) or for an exemption from the CPCN process. The recent decision in Dan’s Mountain WindForce, LLC v. Shaw highlights the differences between these two processes, which will be vital to understand as renewable energy development in the state increases.

Background

For over a decade, Dan’s Mountain Wind Force, LLC (Wind Force) has been trying to construct 17 wind turbines and a substation on Dan’s Mountain in Allegany County, Maryland. In 2016, the PSC rejected the Wind Force application for a CPCN for not being in the public interest. In 2020, Wind Force applied to the PSC, seeking an exemption from the CPCN process, which was granted. Concerned neighbors, however, challenged granting this exemption in the circuit court for Baltimore City. The circuit court reversed the PSC’s decision, denying the CPCN exemption. Wind Force appealed to the Court of Special Appeals.

CPCN Permit and Exemption

The court’s opinion highlights the differences between the two processes. To obtain a CPCN, an applicant must provide a detailed description of the proposed power generation facility, and a statement detailing how the facility will comply with all environmental laws, the potential impacts the facility will have on the State’s natural resources, socioeconomic effects of the proposed facility, description of environmental justice issues affected by the facility, explanation of efforts to engage the public and encourage public participation, and any condemnation required. Condemnation would be a legal process of eminent domain exercised by a governmental entity or a utility to take over the property and the owner paid reasonable compensation for the property. The CPCN process allows the State to approve the construction of a power generating facility.

If a proposed facility seeks a CPCN exemption, that removes the State from overseeing construction and requires the facility to go through the county for approval. The CPCN exemption process is simplified for certain facilities, including small wind-powered generating facilities. The PSC must determine if the proposed CPCN process:

  1. Ensures the safety and reliability of the electric system;
  2. Requires the owners of the facility to notify PSC within two weeks before exporting power; and
  3. Confirms that PSC can conduct the review and approval expeditiously.

If the PSC agrees that the facility meets the exemption requirements, then that transfers the responsibility for regulatory approval to the county the facility will be located.

Court of Special Appeals Decision

On appeal, the neighbors argued that the CPCN application in 2016 precluded the PSC from granting the 2020 CPCN exemption. The neighbors argue that either res judicata or collateral estoppel prevents granting the application. Res judicata prevents the same parties from litigating a second lawsuit on the same claim or any claims arising from the series of transactions lead to the first lawsuit. It is based on the principle that parties should not relitigate the same issues once a judgment has been issued. A res judicata defense requires of the parties to show:

  1. The parties to the second action are the same as the parties from the first action,
  2. Both the first and second actions present the same claim or cause of action, and
  3. There was a final judgment rendered on the merits by a court of competent jurisdiction in the first action.

The court, on appeal, has to determine if the 2020 CPCN exemption is the same “claim” as the 2016 CPCN application.

On appeal, Wind Force argued that the claims are not the same since each follows a different process. The neighbors argue that the CPCN exemption process is essentially the same but an abbreviated process as the CPCN application process. To the neighbors, both processes required the same evidence and involved Wind Force’s continued efforts to get the proposed project approved. As discussed earlier, with the CPCN process, the PSC preempts a local government and regulates the siting and construction of a power-generating facility. During that process, the PSC will consider siting and additional regulatory decisions needed to construct and complete the project; the PSC is just determining if the project qualifies for the exemption. If approved, the local government takes over siting and other requirements to construct the project. To the court, these are two separate processes with separate claims, and each process has different requirements. Therefore, the court rules that res judicata does not apply.

The court next turns to the neighbors’ claims that the exemption should be barred by collateral estoppel. Collateral estoppel prevents parties from relitigating an issue of fact or law in a different legal action. Collateral estoppel is a defense requiring the raising party (in this case, the neighbors) to show:

  1. The issue is identical to a previously litigated one,
  2. The prior proceeding determined the issue,
  3. With the issue, the current determination was a critical and necessary part of the prior decision,
  4. The prior decision was a final and valid judgment, and
  5. The party whom estoppel is asserted against had a full and fair opportunity to litigate the issue during the original case.

In this case, the parties are only focused on the first element.

Wind Force argues that the issues in the CPCN exemption are different from those in the original application. Neighbors argue that PSC found the project would have no public benefit, so the PSC cannot reverse course and grant the CPCN exemption. The issue is that the public benefit is not required in the exemption process.

The neighbors argued that the PSC did not have sufficient evidence to grant the CPCN exemption based on the denying the CPCN application. In reviewing the record, however, the court found that PSC had demonstrated Wind Force’s exemption request met statutory requirements. Therefore, PSC was not required to overcome a prior finding that the CPCN application was not in the public interest. Accordingly, the court reverses the lower court’s decision.

As mentioned earlier, Wind Force has been working to develop this site as a wind farm for over a decade. This decision will allow Wind Force to continue to work through the county permitting process to build this facility.

References

Dan’s Mountain WindForce, LLC v. Shaw, №1238, 2022 WL 1115005 (Md. Ct. Spec. App. Apr. 14, 2022).

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