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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

Challenge To Kentucky Pioneer Merchant Power Plant Siting Dismissed  Posted: October 24, 2008
COMMONWEALTH OF KENTUCKY
CLARK CIRCUIT COURT
CIVIL ACTION NO. 03-CI-00680
DIVISION I

CHARLES T. WALTERS PETITIONER

V. REPLY MEMORANDUM IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT

KENTUCKY STATE BOARD ON ELECTRIC
GENERATION AND TRANSMISSION SITING,

AND

KENTUCKY PIONEER ENERGY, LLC

AND

EAST KENTUCKY POWER COOPERATIVE, INC. RESPONDENTS

* * * * *

IN THE MATTER OF: THE APPLICATION OF KENTUCKY PIONEER ENERGY LLC FOR A CONSTRUCTION CERTIFICATE PURSUANT TO KRS 278.704(1) TO CONSTRUCT A MERCHANT ELECTRIC GENERATING FACILITY;
SITING BOARD CASE 2002-00312

* * * * *

INTRODUCTION

In his opening memorandum, Petitioner Charles Walters (Walters) argued that the mere representation by an applicant seeking a construction certificate under KRS 278.706(2)(d) that it will at some future date comply with the comprehensive plan and zoning regulations was not sufficient to meet the statutory application requirements of the siting statutes nor to allow the Board to conditionally approve a construction certificate. Parsing the plain language of the siting statutes, Walters demonstrated that the General Assembly instead mandated that the planning and zoning review and approval precede Board acceptance of an application as complete and Board action thereon.

Responsive memoranda have been filed on behalf of the Kentucky State Board on Electric Generation and Transmission Siting (hereinafter “Board”), Kentucky Pioneer Energy, LLC (hereinafter “KPE”) and East Kentucky Power Cooperative. Petitioner responds to each filing in turn.

I. Matters Of Law Decided By The Board Are Subject To De Novo Review And The Board Lacks The Power To Ignore Or Rewrite The Terms of the Governing Statutes

In his opening Memorandum, Petitioner Walters argued that the proper standard of review in this case, involving questions of statutory construction against an undisputed factual background, is de novo review. The Board does not dispute that, but cites to the case of Com., ex rel. Stumbo v. Kentucky Public Service Commission, 243 S.W.3d 374 (Ky. App. 2007) for the proposition that while the Courts “ultimately review issues of law de novo, we afford deference to an administrative agency’s interpretation of the statutes and regulations it is charged with implementing.” Id. at 380.

Of more significance to the instant case is the earlier discussion by the Com., ex rel. Stumbo Court of the lack of authority of the Commission, as a creature of statute, to rewrite the law: Although the Commission is granted sweeping authority to regulate public utilities pursuant to the provisions of KRS Chapter 278, it is nonetheless a creature of statute. Therefore, it "has only such powers as granted by the General Assembly." PSC v. Jackson County Rural Elec. Co-op., Inc., 50 S.W.3d 764, 767 (Ky.App. 2000). Whether the Commission exceeded the scope of its authority is a question of law that we scrutinize closely and review de novo. Com., Transportation Cabinet v. Weinberg, 150 S.W.3d 75 (Ky.App. 2004). Cincinnati Bell Telephone Co. v. Kentucky Public Service Com'n, 223 S.W.3d 829, 836 (Ky.App. 2007). Finally, as always, we review questions of law de novo. City of Greenup v. Public Service Com'n, 182 S.W.3d 535, 539 (Ky.App. 2005).

Com. ex rel. Stumbo, supra, at 378.

In the Com. ex rel. Stumbo case, the Court of Appeals found the statute at issue to be ambiguous, and deferred to the agency interpretation as not being unreasonable or unlawful, using the two-step process adopted by the U.S. Supreme Court in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-5 (1984). The standard enunciated by the Chevron Court is this:

"When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute."

Id. at 843-4.

In this case, application of either step of the Chevron standard yields the same result. As Petitioner demonstrated in the opening Memorandum, the statute is not ambiguous in demanding proof of compliance with applicable zoning and planning requirements, including setbacks. Even if the statute were considered to be ambiguous, the Board’s construction of the statutes is unreasonable, since instead of requiring proof of compliance, it allows a mere promise to suffice.

The Board argues that Petitioner’s reliance on White v. Check Holders, Inc., Ky., 996 S.W.2d 496, 498 (1999) is misplaced because the underlying proceeding was adversarial in nature. Petitioner cited White for the proposition advanced by that Court that
“construction of a law or regulation by officers of an agency continued without interruption for a long period of time is entitled to controlling weight,” since in this instance the construction of the statute by the Board has not continued without interruption for a long period of time, but instead has arisen in a case of first impression and has been construed inconsistently by the Board in the context of a single case.

The initial Order of April 16, 2003 demanded that the applicant “demonstrate[] that the proposed facility will et all local planning and zoning requirements” and stated that “should Kentucky Pioneer comply with existing zoning regulations within 6 months of the date of this Order the Board will reconsider this application[.]” April 16, 2003 Order (Emphasis added). KPE then requested a second evidentiary hearing, stating that it would demonstrate “evidence of compliance with planning ordinances”, but at that second hearing failed to produce any evidence of compliance, instead promising that it would do so in the future. Order, November 10, 2003, pp.5-6.

If the first step of the Chevron test applies and the General Assembly has spoken to the “precise question at issue” as Petitioner believes it has, then the issue of deference to the agency does not arise, for “[i]f the intent of [the legislature] is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of [the legislature].”

It is only where the statute is ambiguous that the question of deference arises, and applying the Chevron standard and the White analysis on which the Board relies, such wildly inconsistent interpretations by the Board of the same statutes from the first to the second Order in the same case of first impression, should result in this Court refusing to grant any deference to the Board’s interpretation of the applicable statutes.

II. KRS 278.706(2)(d) Requires That Zoning Approval Be Obtained Prior To Siting Board Review, Since In Order To Be Deemed Complete, An Application to The Board For A Construction Certificate Must Disclose Setbacks “Established” By The Local Planning and Zoning Commission

In his opening Memorandum, Petitioner demonstrated that Board issuance of a construction certificate premised on future compliance with zoning and planning obligations was inconsistent with the governing statutes. Initially, with respect to setbacks, KRS 278.706(2)(d) requires in relevant part that the completed application “shall include the following:

(d) A statement certifying that the proposed plant will be in compliance with all local ordinances and regulations concerning noise control and with any local planning and zoning ordinances.

KRS 278.706(2)(d).

The Board argues that the “statement” can take the form of “sworn testimony by Kentucky Pioneer’s CEO, that the facility will be in compliance with all local planning and zoning requirements before beginning construction and that Kentucky Pioneer plans to fully abide by the decisions of the local planning authorities.” Board Response at pp.5-6.

With due respect, the Board is flatly mistaken. Far from being a matter of “conjecture and supposition,” the very next sentence of KRS 278.706(2)(d) makes clear that in order for an application to be deemed complete, the statement required by (2)(d) “shall also disclose setback requirements established by the planning and zoning commission as provided under KRS 278.704(3).” (Emphasis added). The statute speaks in the past tense in demanding that the statement disclose setbacks “established” by the local planning and zoning commission; it does not allow the applicant to supply conjecture regarding setbacks that the applicant supposes might be established by a local planning and zoning commission in the future once an actual application for zoning approval is filed. Nor can the statement required by KRS 278.706(2)(d) take the form of a sworn testimony promising future compliance, given under oath at a second evidentiary hearing on an application filed pursuant to KRS 278.706, because 278.706(2)(d) demands that the statement disclosing the setbacks established by the planning and zoning commission be a part of the completed application, long before a hearing could be had on the completed application.

A promise to comply with zoning approvals is not sufficient to meet the requirements of KRS 278.706(2)(d). The law is clear in demanding that the applicant secure zoning and planning approval first, since a planning and zoning commission establishes setbacks only in the context of a zoning case, and in order for an application to be deemed complete under KRS 278.706(2)(d), the application must include a statement disclosing “setback requirements established by the planning and zoning commission as provided under KRS 278.704(3)[.]” (Emphasis added).

III. The Board Is Without The Authority To Ignore The Language Of The Statute In Favor Of “Fulfilling” What It Perceives Is “The Legislative Intent”

It is axiomatic that in construing a legislative enactment of the General Assembly, that

“[I] is this Court’s duty … to give effect to the General Assembly’s intent[.]”Revenue Cabinet v. O’Daniel, 153 SW3d 815 (Ky. 2005). But no rule of interpretation … require[s] us to utterly ignore the plain . . . meaning of words in a statute.” In fact, ‘the plain meaning of the statutory language is presumed to be what the legislature intended, and if the meaning is plain, then the court cannot base its interpretation on any other method or source.’ We ‘ascertain the intention of the legislature from words used in enacting statutes rather than surmising what may have been intended but was not expressed.’ In other words, we assume that the ‘[Legislature] meant exactly what it said, and said exactly what it meant.’ Only ‘when [it] would produce an injustice or ridiculous result’ should we ignore the plain meaning of a statute.’”

Id., at 819.

The Board has not suggested that ignoring the plain language of the statutes is necessary here to avoid an injustice or ridiculous result. KRS 278.706(2)(d) plainly requires that the statement to be included in an application before it is deemed complete must disclose setbacks established by the local planning and zoning commission. The Board is without authority to add to or subtract from the language of the statute.

The Board suggests that “[f]rom a practical standpoint” there is no consequence to allowing the applicant to later obtain appropriate zoning and planning approvals, and that Petitioner’s claim “elevates form over substance.” Yet, even assuming that the agency had free rein to ignore statutory constraints and to restructure the application contents and sequencing of local zoning approval and Board application review, there is most definitely a consequence both to the public and to Intervenors such as Petitioner Walters. The Commonwealth of Kentucky, as well as Intervenor here, have expended significant amounts of time and public monies, processing an application, conducting hearings, and ultimately litigating an appeal, where there has been no prior determination by local officials that the requirements of planning and zoning have been satisfied.

A prior determination of compliance by zoning and planning officials, as mandated by the General Assembly, would obviate the need for invoking the Board’s jurisdiction if the application failed to secure local zoning approval, and would place the question of the propriety of the chosen site in the hands of those local authorities in a manner both more efficient and more appropriate to the legislative intent to defer to local authorities in the establishment of setbacks to assure compatibility with surrounding land uses. Perhaps the Board believes that wasteful expenditure of public funds on the processing of incomplete applications in order to issue conditional certificates for projects that may never secure necessary local zoning approvals is of no consequence, but Intervenor certainly does not think it is a matter of form over substance.

IV. That The Local Setback Statute Is Elective Does Not Support Board Review And Conditional Approval Based On An Incomplete Application

The Board mistakenly asserts that Petitioner has sought to “concoct as conflict between [KRS 278.706(2) and KRS 278.704(3)] and the Siting Board’s Final Order” where no conflict exists.

A review of those two statutes reflects that the Board’s conditional issuance of the construction certificate based on the promise of future zoning compliance, is flatly inconsistent with both statutes.

In addition to KRS 278.706(2)(d) demanding that the completed application disclose setbacks established by the planning and zoning commission, KRS 278.704(3) and KRS 278.708(3) underscore that the local planning and zoning approval is to precede Board processing of an application for a construction certificate.

KRS 278.706(2)(l) requires that in order for an application to be deemed complete it must also include “[a] site assessment report as specified in KRS 278.708.”

KRS 278.708(3) demands that the site assessment report must include “[a] description of the proposed facility that shall include a proposed site development plan that describes: 7. Compliance with applicable setback requirements as provided under KRS 278.704(2), (3) or (5)[.]”

KRS 278.704 provides several methods by which setbacks are imposed. KRS 278.704(2) explains the interaction of subsections (3), (4) and (5), providing that except as provided in subsections (3), (4) and (5), no person shall commence to construct a merchant electric generating facility within certain established distances. Since Clark County, the proposed location of the KPE facility, has planning and zoning, it is subsection (3) that applies:

If the merchant electric generating facility is proposed to be located in a county or a municipality with planning and zoning, then setback requirements from a residential neighborhood, school, hospital, or nursing home facility may be established by the planning and zoning commission. Any setback established by a planning and zoning commission for a facility in an area over which it has jurisdiction shall:

(a) Have primacy over the setback requirement in subsections (2) and (5) of this section; and

(b) Not be subject to modification or waiver by the board through a request for deviation by the applicant, as provided in subsection (4)of this section.

KRS 278.704(3).

The Board argues that “[t]he imposition of local setback requirements is a permissive right, however, and not mandatory” and that “[o]nce local setback requirements are established, . . . they have primacy over the default setback requirements of KRS 278.704(2) and (5).” It is difficult to understand how the Board can construe these two statutory sections to allow Board processing of the construction certificate application in advance of local planning and zoning commission action. Initially, whether the imposition of setbacks by a local planning and zoning commission is discretionary or not, KRS 278.706(2)(d) demands that if such setbacks have “been established,” that the completed application disclose them. (Emphasis added). Additionally, KRS 278.708(3)(e) requires that the site assessment report describe “compliance with applicable setback requirements as provided in KRS 278.704(2), (3) or (5)[.]” Until the local planning and zoning commission decides whether to exercise that discretion to impose setbacks or not, the site assessment report cannot demonstrate such compliance. Finally, unless the General Assembly had intended the local planning and zoning commission review precede the application for a construction certificate, it would have been unnecessary for the General Assembly to include the prohibition in KRS 278.704(3)(b) that the Board cannot grant a KRS 278.704(4) modification to “[a]ny setback established by a planning and zoning commission for a facility”. (Emphasis added). Since the Board’s construction of the statute would allow the planning and zoning commission to establish setbacks (if any) after approval of a construction certificate, a prohibition against the Board entertaining a “request a modification or waiver by the board through a request for deviation by the applicant” would be entirely superfluous because no such setbacks would have been established and the “applicant” would have no basis on which to request such a deviation.

In sum, the statutes harmoniously fit together in contemplating that a complete application under KRS 278.706(2)(d) and (2)(l) include the setbacks imposed, (if any) by the local planning and zoning commission. The Board’s final order is in irreconcilable conflict with the clear mandate of the General Assembly.

V. The Issuance Of A Certificate Conditioned On Subsequent Compliance With Planning and Zoning Requirements Violates KRS 278.704(1)

In his opening Memorandum, Petitioner argued that the Board lacked the authority to conditionally approve the construction certificate, since KRS 278.704(1) limits the ability of the Siting Board to condition the grant of a construction certificate to “necessary air, waste and water permits.” The Board suggests that Petitioner’s argument is inconsistent with the position that zoning and planning commission review is required to precede Board review.

No such contradiction exists, for the simple reason that Planning and Zoning Commissions don’t issue “permits” but instead prepare comprehensive plans, KRS 100.183, and initiate and/or review “proposals” for “zoning map amendment” once the legislative body or fiscal court has adopted zoning regulations and zoning maps. KRS 100.211.

It is clear that the General Assembly intended to limit the ability of the Board to conditionally grant construction certificates, wherein it provided that The construction certificate shall be valid for a period of two (2) years after the issuance date of the last permit required to be obtained from the Environmental and Public Protection Cabinet after which the certificate shall be void. The certificate shall be conditions upon the applicant obtaining necessary air, water, and waste permits. If the applicant has not obtained all necessary permits and has not commenced to construct prior to the expiration date of the certificate, the applicant shall be required to obtain a valid certificate from the Board.

Had the General Assembly contemplated that local zoning and planning setback decisions could occur after Board issuance of a construction certificate, it would not have required disclosure of established setbacks, and would instead have included local zoning and planning approvals as among those for which the Board may condition a construction certificate. The explicit limitation on conditioning of a construction certificate to the applicant subsequently obtaining “necessary air, water, and waste permits” while not including zoning and planning approval as among those that could be later obtained, provides further evidence that the zoning review was intended to precede Board review. KRS 278.704(1) limited the validity of the construction certificate to two years after the issuance date of the last permit from the state environmental regulatory agency, specifies that the permits that the General Assembly contemplated would be later obtained were “necessary air, water, and waste permits”, all of which are issued by that agency. The phrase “all necessary permits” relates back to the immediately preceding sentence describing “necessary air, water, and water permits.”

The Board cannot expand that category of necessary permits to include planning and zoning approvals, without ignoring the plain language of KRS 278.706(2)(d), (2)(l), and 278.708(3)(a)7, all of which clearly require that the planning and zoning action have occurred and the locally-established setbacks (if any) be disclosed and compliance with those setbacks be demonstrated in order for the construction certificate application to be deemed “completed.” The Board is authorized to grant or deny a construction certificate only if there is an “administratively complete application”, and an application cannot be complete without the statements and demonstrations of compliance with local zoning and planning requirements as outlined above.

CONCLUSION

For the reasons contained herein and in the opening Memorandum, Petitioner Charles T. Walters respectfully requests that the determination of the Kentucky Board on Electric Generation and Transmission Siting granting the application of Kentucky Pioneer Energy, LLC for a merchant power plant construction certificate in Clark County, be vacated and set aside as being arbitrary, capricious, unreasonable and unlawful, and for any and all other relief to which the Petitioner may appear entitled.

Respectfully submitted,
Thomas J. FitzGerald
P.O. Box 1070
Frankfort, Kentucky 40602-1070

Counsel for Petitioner Charles Walters


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