U.S. Supreme Court Will Not Review Nevada Supreme Court Decision on Airport Height Ordinance

On February 20, 2007, the U.S. Supreme Court denied the petition for writ of certiorari filed by Clark County, Nevada seeking review of the Nevada Supreme Court’s decision in McCarran International Airport v. Sisolak, 137 P.3d 1110 (Nev. 2006). The Nevada Supreme Court held that Clark County’s regulation of building heights around McCarran International Airport constituted an uncompensated taking of private property. The County’s cert petition was supported by a broad array of airport and aviation industry groups, including Airports Council International – North America, the Air Transport Association, and the Air Line Pilots Association.

As reported in a previous Airport Law Alert, the Nevada Supreme Court declared the County’s height ordinance to be a per se regulatory taking under the U.S. Supreme Court’s analytical approach set forth in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). The Nevada Supreme Court found that the County’s height ordinance imposed a permanent physical occupation of the airspace above Sisolak’s property up to an altitude of 500 feet.

The Nevada Supreme Court’s decision is anomalous for a variety of reasons, including that the Nevada Supreme Court conducted its analysis under Loretto rather than the analytical approach set forth in Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978); and the court seemingly ignored FAA regulations stating that airspace below 500 feet is part of the navigable airspace when needed for takeoffs and landings. The court did not recognize the County’s possession of an avigation easement over part of the property as a valid defense.

The U.S. Supreme Court’s denial of the County’s cert petition left intact the state court judgment of more than $16 million. The decision further calls into question the validity of similar height ordinances around the country, which may be suspect if analyzed in the same manner as the Nevada Supreme Court.

D.C. Circuit Upholds Newark Airport Fees

On March 2, 2007, the U.S. Court of Appeals for the District of Columbia Circuit ruled on an airport fee dispute in Port Authority of New York and New Jersey v. Dept. of Transportation, 479 F.3d 21 (D.C. Cir. 2007). The court largely affirmed DOT’s decision that fee increases imposed on air carriers in the international terminal at Newark International Airport were reasonable. The court also affirmed DOT’s decision rejecting complainant’s claim of unjust discrimination. Notably, the court overruled DOT in holding that the statute authorizing “air carriers” to challenge airport rates and charges, 49 U.S.C. Section 47129, did not apply to foreign air carriers, which included 12 of the 13 complainants in the case. The court affirmed DOT’s decision that certain fees were unreasonable but remanded the case to DOT for further proceedings as to other fees declared unreasonable.

D.C. Circuit Strikes Down Ozone Implementation Rules

On December 22, 2006, the U.S. Court of Appeals for the District of Columbia Circuit struck down EPA’s implementation rule for the eight-hour ozone standard under the Clean Air Act. The decision in South Coast Air Quality Mgmt. Dist. v. EPA has affected a number of airports that are located in ozone nonattainment areas throughout the country. The decision has delayed the process of including airport projects in State Implementation Plans, affected general conformity analyses, and may influence the permitting of certain facilities on airports such as heating plants. EPA and other parties filed notices for rehearing of the decision on March 22, 2007, but a decision on these motions is not expected for some time. While EPA has issued interim guidance, there remains considerable confusion regarding the status of Clean Air Act requirements in ozone nonattainment areas.

U.S. Supreme Court Rules That EPA Has Power Over Greenhouse Gases

On April 2, 2007, the U.S. Supreme Court held in Massachusetts v. EPA that the Clean Air Act covers greenhouse gas emissions, such as carbon dioxide, from motor vehicles. The Court concluded that the Act provides EPA with authority to regulate greenhouse gases and that EPA’s justification for not exercising this authority was inadequate. The case is of particular interest to airports because it may prompt regulatory measures relating to climate change, including specific measures related to aviation. Indeed, the Clean Air Act provision relating to aircraft engines, 42 U.S.C. Section 7571, is quite similar to the section on motor vehicles that was at issue in the case.

Minnesota State Court Finds That MAC Failed to Provide Noise Mitigation

In January 2007, the District Court for Hennepin County, Minnesota, granted summary judgment in favor of the City of Minneapolis and other plaintiffs in litigation against the Metropolitan Airports Commission (“MAC”). The court found that MAC had failed to comply with its state law obligation to provide noise insulation in the DNL 60-65 decibel contour around the Minneapolis-St. Paul International Airport (“MSP”) as promised in the Environmental Impact Statement for the construction of the new Runway 17/35 and other documents. After a trial held in February, the court is considering whether the Minnesota Environmental Rights Act also requires noise insulation to protect “quietude” in the neighborhoods surrounding MSP. A final decision from the trial court is expected in late Spring. A separate class action lawsuit brought by homeowners is pending in Minnesota state court.

FAA Reauthorization in Flux

While the debate over user fees for air traffic services has garnered the most media attention, FAA Reauthorization promises to bring significant changes to the AIP and PFC programs and to create several new FAA initiatives. The Bush Administration released its bill, the Next Generation Air Transportation System Financing Reform Act of 2007

The Administration’s bill includes elimination of AIP entitlement funds for large and medium hub airports, recalculation of entitlement funds available to other airports, increases in the amount of individual PFCs, and reforms in project eligibility and the process for imposing and using PFCs. The bill also includes a considerable number of other reforms, including expanding the pilot program on airport privatization, creating pilot programs and funding eligibility for certain environmental initiatives, and creating programs and guidelines for airport congestion pricing.

Other News

Airlines challenge LAX rate increase

A group of airlines operating from Terminal 1, Terminal 3 and the Tom Bradley International Terminal at the Los Angeles International Airport are challenging recent rate increases imposed by Los Angeles World Airports. The dispute concerns the methodology used by LAWA to calculate the fees as well as issues of reasonableness and unjust discrimination. The dispute is governed by the expedited procedures of FAR Part 302. The Administrative Law Judge’s Recommended Decision is due in mid-May.

City of Las Vegas challenges change in aircraft departures from McCarran Airport

The City of Las Vegas is seeking review by the Ninth Circuit Court of Appeals of a November 2006 decision by the FAA to redirect some aircraft departing McCarran International Airport. The FAA’s decision reinstates a “right turn” for some aircraft departing to the west from McCarran, a move that is intended to reduce delay at the nation’s sixth busiest airport. Las Vegas sought and was denied a stay pending the appeal, arguing that the FAA failed to perform the required air quality conformity analysis before rendering its decision.

FAA issues new Advisory Circular on exclusive rights

In January 2007, the FAA released Advisory Circular No. 150/5190-6, Exclusive Rights at Federally-Obligated Airports. The new Advisory Circular continues and further clarifies longstanding FAA policies concerning the prohibition on granting exclusive rights to aeronautical users of airports.

FAA launches new website on airport noise maps

In compliance with federal law, the FAA has created a website with links to airport noise exposure maps for many airports around the country. The website contains maps prepared under FAR Part 150 and for other purposes. Airport sponsors are encouraged to review the website to ensure that the maps and information are correct.

FAA to issue guidance on disposition of noise buffer lands

The FAA will soon release guidance on airport sponsor acquisition, management and disposition of lands purchased for land use compatibility. The guidance is the FAA’s latest response to an audit by the DOT Office of Inspector General in 2005, which found that airport sponsors are not complying with statutory and grant assurance obligations regarding noise buffer lands.

New FAA Chief Counsel appointed

In March 2007, Secretary Peters announced the appointment of Kerry B. Long as the new FAA Chief Counsel. The Chief Counsel oversees 258 employees in Washington DC and eleven field offices. Mr. Long formally was a partner with Fulbright & Jaworski in Washington, DC.

Article published on the law of airline competition

The latest issue of the Journal of Airport Management is about to be published. The new edition contains an article by Dan Reimer, The law of airline competition in the USA: Recent developments and future outlook.

Airport Law Conference

The 23^rd Annual Basics of Airport Law and Legal Update will be held September 23-25, 2007, in the Baltimore/Washington DC area. The conference is being presented by the American Association of Airport Executives, the FAA, and Kaplan Kirsch & Rockwell LLP.

A PDF of this Airport Law Alert is available.

Las Vegas Height Ordinances Held to Be a Taking of Private Property

On July 13, 2006, in McCarran International Airport v. Sisolak, the Nevada Supreme Court issued a precedent-setting decision finding that height ordinances designed to protect the airspace around Las Vegas’ McCarran International Airport constituted uncompensated taking under the Nevada and United States Constitutions. The court upheld a judgment of over $16 million for the property owner. As part of the decision, the court also determined that avigation easements secured by Clark County in exchange for certain land use approvals were unconstitutional exactions. While this decision does not bind any court outside of Nevada, Sisolak raises troubling issues for airports throughout the country to the extent that other courts may find its reasoning persuasive. It is particularly important in states with constitutional and statutory provisions similar to Nevada’s.

In Sisolak, the owner of vacant property a mile west of McCarran claimed that Clark County – the Airport proprietor and land use jurisdiction – took his property by enacting ordinances limiting the height of structures. His suit acknowledged that the County would approve construction of up to 66 feet above ground level.

The court found that property owners have a right to airspace up to 500 feet and that the use of the airspace is subject to, and subordinate to, the property owner’s interests. In a unique approach to the takings analysis, the court found that the height ordinances caused a taking of the owner’s property, because they “exclude the owners from using their property and, instead, allow aircraft to exclusively use the airspace.” The court based the “use of the airspace” on evidence in the record that aircraft flew within 500 feet of the ground, even though there was no evidence on the frequency or history of such flights. (Noise was not an issue in the case.) The court analogized the situation to the United States Supreme Court Loretto case which found that an ordinance requiring building owners to dedicate space to cable television utilities constituted a per se regulatory taking because of the physical invasion authorized by the ordinance.

The court distinguished other overflight takings cases that required property owners to show low and frequent overflights that eliminated economic use of a property. The court found that these cases were not controlling when an ordinance or other government act specifically sought to reserve airspace. “Although the airplanes flying over Sisolak’s property are not constantly occupying the airspace in a temporal sense, the invasion is nonetheless permanent because the right to fly through the airspace is preserved by the ordinances and expected to continue into the future.”

Sisolak also rejected the argument that the Airport held an avigation easement that it had secured in exchange for land use approvals. The Court found that the easement was an unconstitutional exaction, because there was no reasonable nexus between the approval sought and the avigation easement. “[R]equiring an uncompensated easement as a condition to development is improper and cannot be used by the County as a defense to the taking of the landowner’s airspace without compensation.” While the court’s logic would not necessarily invalidate all avigation easements (such as those purchased outright or obtained in exchange for sound insulation), it calls into question the use of avigation easements used to control future land use encroachments around airports. The court also awarded attorney’s fees based upon the federal Uniform Relocation Act even though the statute would not otherwise apply to the particular claim.

Airports and zoning jurisdictions should review their ordinances, easements and other provisions in light of the Sisolak decision. While there are good reasons why other state and federal courts may not follow the lead of the Nevada Supreme Court, the high stakes involved suggest that a careful review of height restrictions and avigation easements may be prudent.

Clark County has had discussions with other airports and industry groups about potential U.S. Supreme Court review.

Seventh Circuit Rejects United Airlines’ Claim on DIA Lease

On July 6, 2006, the United States Court of Appeals for the Seventh Circuit rejected United Airlines’ attempt to sever portions of the 1992 lease arrangement at Denver International Airport that were used to finance facilities at the new airport. Under bankruptcy law, a reorganizing debtor must either assume the lease and fully perform all of its obligations, or surrender the property. By contrast, in a secured loan arrangement, the debtor may be able to discharge a portion of the debt as part of the reorganization. To protect itself financially, United has been claiming that many of its arrangements with airports are loans, not leases. Distinguishing leases from loans is particularly challenging in the airports context because airports commonly combine elements of a lease and loan in a single agreement.

In the Denver case, the Court found that the “Special Facilities and Ground Lease” should be treated as a true lease, requiring United to continue making all of the payments under the lease. Critical to the court’s decision was the fact that the ground lease and the financing provisions were written into one overall agreement. The court found, as a matter of Colorado state law, that the provisions could not be severed, because the “contract is an inherently integrated bargain.” “[T]he parties would not have entered the bond-related portion in the complete absence of the leasing portion.”

The Court’s decision differed from two earlier Seventh Circuit lease-versus-loan cases arising from the United bankruptcy. In the two previous cases, involving San Francisco and Los Angeles Airports, the court agreed with United and found that the agreements were loans, not leases. The court noted the “critical distinction … is that the parties in the present case cemented their deal into one document.” “In the San Francisco and Los Angeles cases (in which we held two supposed lease arrangements to be secured loans), the underlying ground leases were addressed in separate documents.” This trilogy of United bankruptcy cases on leases provides critical guidance for airports seeking to understand the potential bankruptcy risks associated with different lease and finance arrangements.

U.S. EPA Issues Rule Regarding Thresholds for Particulate Matter Analysis for General Conformity Rules

On July 17, 2006, the United States Environmental Protection Agency (“EPA”) issued a rule relevant to the hundreds of airports located in nonattainment areas for fine particulate matter (“PM2.5”). The agency issued a final rule providing “de minimis thresholds” for PM2.5 under the agency’s general conformity regulations.

Under the EPA general conformity regulations, federal agencies such as the FAA must determine whether proposed federal actions (such as AIP funding or Airport Layout Plan approvals) “conform” to state or local air quality plans if the action will cause emissions to exceed specified de minimis thresholds. These conformity determinations can be critical and complex requirements for many airport development projects. The conformity regulations can, under some circumstances, require extensive mitigation, project changes or risk project delay.

EPA designated scores of counties as being in nonattainment for PM2.5 in 2005, making the general conformity rules applicable to projects in these areas. However, until this new rule, EPA did not provide the de minimis thresholds applicable to PM2.5. Under the new rule, a federal action must cause an increase in emissions of PM2.5 or its precursors of at least 100 tons per year before triggering the requirement to conduct a full conformity determination.

Note that EPA also intends to issue a different notice of proposed rulemaking regarding broader potential changes in the general conformity rules, but has not set a certain timeline for this proposed rule. This proposed rule could contain a number of provisions significant to airports.

For background information on air quality rules as they apply to airports, Kaplan Kirsch & Rockwell published Introduction to Airport Air Quality Law.

Other News

FAA Height Program (FAR Part 77)

On June 13, 2006, the FAA released a Notice of Proposed Rulemaking for FAR Part 77, which concerns obstructions and hazards around airports. This is the first major rewrite of Part 77 in decades. It would completely reorganize the regulation and make many important changes to, for example, the deadline for filing FAA Form 7460-1, the types of structures for which notice is required, obstruction standards, and the content of aeronautical studies. The proposed rule also would address electromagnetic interference for the first time. Comments are due by September 11, 2006.

TSA Issues Guidelines for Airport Security Planning

On July 20, 2006, the Transportation Security Administration announced the release of a new guidance document: Recommended Security Guidelines for Airport Planning, Design and Construction. This 333-page resource includes detailed information on incorporating security considerations into the planning and design for every part of an airport. In addition, the guidelines provide specific advice on assessing and overcoming vulnerabilities to security breaches of various kinds. Although federal law and TSA regulations impose only limited security requirements on airports, the guidelines will assist airports, particularly when undertaking new capital improvement projects, to ensure the highest possible level of safety and security.

22^nd Annual AAAE Airport Law Conference

Kaplan Kirsch & Rockwell is once again organizing the annual AAAE Basics of Airport Law Workshop and Regulatory Update. The conference has been sponsored jointly by AAAE and International Municipal Lawyers Association. This year, the American Bar Association joins as a conference sponsor. It is the only national conference dedicated specifically to airport legal issues and is designed for both the seasoned airport lawyer and the government lawyer who is new to airport issues. The agenda includes a mix of basics on airport law and discussion of regulatory and legal developments.

The conference this year will be held October 22-24 at the Downtown Doubletree Hotel in Memphis, Tennessee. Watch your e-mail for more information and registration information or contact Tom Zoeller at AAAE at tom.zoeller@airportnet.org to be added to the e-mail list for updates.

A PDF of this Airport Law Alert is available.

FAA Staff Finds Flight Training Restrictions at Pompano Beach Air Park Unreasonable

On December 15, 2005, the FAA’s Office of Airport Safety and Standards found that several limitations on flight training at the Pompano Beach (Florida) Air Park are unreasonable. This represents the first major FAA decision on aircraft use restrictions after the U.S. Court of Appeals rejected the FAA’s decision on the Stage 2 jet ban at the Naples Municipal Airport.

In Spring 2004, the Aircraft Owners and Pilots Association (AOPA) and nine of its members filed a complaint with the FAA under FAR Part 16 against the City of Pompano Beach. AOPA challenged six limits imposed by the City, including prohibitions on stop-and-go operations, manned glider operations and intersection take-offs; and time-of-day limits on touch-and-go and “taxi-back” operations and prolonged engine run-ups. AOPA claimed that these limits were unreasonable and unjustly discriminatory and therefore violated the requirements of the deed transferring the Air Park from the U.S. Government to the City in 1947.

The City had defended its restrictions citing, among other things, safety and noise concerns and the fact that the restrictions were minimally restrictive, long-standing and previously accepted by the FAA Airports District Office. The FAA issued a Director’s Determination on December 15, 2005, declaring that the restrictions were unreasonable because (1) the FAA recently conducted a “safety study” which concluded that the agency had “no information” that the prohibited conduct was “inherently unsafe,” and (2) the City had not justified the restrictions based on incompatible land use within areas exposed to noise in excess of DNL 65 dB.

The Director’s Determination is notable in a number of respects. First, the FAA did not address whether and how its decision would affect the hundreds of very similar use restrictions in effect at small airports around the country. While the enforcement action is limited to Pompano Beach, the Director’s Determination strongly suggests that similar types of restrictions are susceptible to attack. Importantly, the FAA indicated that restrictions based on safety must receive express approval from FAA Flight Standards Office to be considered reasonable. Second, the FAA, citing its prior decision on the Naples Stage 2 jet ban, said that the Pompano Beach restrictions are required to, but did not, reflect a “balanced approach” that considers both local and federal interests. The FAA suggested that the Pompano Beach restrictions failed this criterion in large part because they were not subject to thorough review through a Part 150, Part 161 or comparable study. This too is significant for other airports, because it suggests that all forms of aircraft use restrictions, regardless of their date of adoption and their severity, must undergo rigorous scrutiny comparable to a Part 161 study.

Los Angeles and LAX Neighbors Set to Sign Historic Agreement on LAX Master Plan

In mid-January 2006, the City of Los Angeles and surrounding communities are scheduled to finalize an agreement that will allow parts of the LAX Master Plan to proceed.

The LAX Master Plan was approved by the FAA in May 2005 and contains massive changes for LAX, including reconfiguring the airfield; reconfiguring the midfield terminals; and constructing a new intermodal transportation center, ground transportation center, consolidated rental car facility, and automated people mover system. The Master Plan is designed to accommodate 79 million annual passengers by 2015. The approved Master Plan was the result of many years of planning and environmental review.

The Master Plan also has been the subject of intense controversy and has been challenged by the County of Los Angeles, El Segundo, Culver City, and the Alliance for Regional Solution to Airport Congestion (ARSAC). The proposed agreement between Los Angeles and these communities would resolve the outstanding litigation and allow Los Angeles to begin work on the first phase of the Master Plan.

As part of the agreement, Los Angeles will discontinue using 10 of its existing passenger gates, at a rate of two gates per year starting in 2010. This is perhaps the most legally significant aspect of the agreement because it may constitute a limit or restriction on airport activity. The FAA explicitly approved this element, finding that its burden would be offset by the benefits conferred by the agreement. This represents only the second time in recent years that the FAA has accepted this kind of trade-off in an airport expansion project; the first involved a new runway at Boston-Logan Airport. It may be the first instance in history in which the FAA expressly has approved a reduction in the number of gates at an airport intended to control passenger traffic.

Los Angeles also is committing to spend $266 million in surrounding communities for sound insulation, environmental mitigation and similar projects. The agreement also would create a public process to revisit certain controversial aspects of the Master Plan such as the proposed ground transportation center.

EPA Proposes to Exempt Airport Mobile Refuelers from Secondary Containment Standard

On December 12, 2005, the U.S. Environmental Protection Agency (EPA) released a draft rule that would exempt airport operators from the requirement to provide certain secondary containment for fuel trucks and similar vehicles.

The current regulations, contained in the Spill Prevention, Control and Countermeasure Rule (40 C.F.R. Part 112), require airport operators to provide a secondary means to contain the capacity of the largest single compartment or container of a refueling vehicle. This can be accomplished through, for example, dikes or catchment basins. The airport industry advised that this requirement was unrealistic given the operating conditions at airports, potentially contrary to other regulatory requirements, and poses a threat to safety and security.

In light of these concerns, the EPA has proposed to exempt mobile refuelers from this secondary containment requirement but not other elements of the SPCC Rule. In particular, airport operators still must provide passive or active containment or diversion to prevent leaks beyond the containment system. Airports also must regularly test the integrity of mobile refuelers.

EPA Proposes to Strengthen Air Quality Standard

On December 21, 2005, EPA published a proposed rule that would tighten the standards for allowable levels of particulate matter in the ambient air. EPA most recently tightened the particulate standards in 1999 but only recently (in December 2004) designated nonattainment areas for the standard. EPA’s action in 2004 had the effect of subjecting a number of additional airports to general conformity and other requirements. If issued, the proposed tighter standards could increase the number of areas that would be in nonattainment status for particulate matter and thus the number of airports facing these conformity and other requirements.

Under a consent decree, EPA must issue a final particulate standard by September 2006. It is taking comments from the public on the proposed rule for 90 days. The Clean Air Act requires the EPA to set ambient air quality standards at levels requisite to protect public health and reevaluate these standards periodically to account for new information about the heath effects and other aspects of air pollutants.

The EPA map on the next page shows areas that may be in nonattainment status if the new standards are adopted.

Other News

GA Security. On December 15, 2005, the Congressional Research Service released a report entitled “Securing General Aviation.” The report does not include conclusions or recommendations but contains a comprehensive review of the subject of general aviation security, including a thorough  examination of the various alternatives proposed to address known and perceived threats.

Environmental Regulations. On December 20, 2005, the FAA published a proposal to revise portions of FAA Order 1050.1E, Environmental Impacts: Policies and Procedures. The proposed revisions are designed primarily for clarification and consistency.

Property Purchases for Noise.  In September 2005, the Department of Transportation Office of Inspector General released a report criticizing airport compliance with requirements governing the use and sale of property purchased for noise mitigation purposes. While the report only addressed eleven airports, it is an important reminder to the FAA and airports of the stringent requirements for selling property and using sale proceeds.

Proprietary Exclusive Right.  Review is underway in the U.S. Court of Appeals on the FAA’s “proprietary exclusive right” by which many airports around the country provide fuel and other aeronautical services on an exclusive basis. A petition for review was filed in September 2005 by an FBO at Naples Municipal Airport who had lost its challenge before the FAA on the Airport Authority’s exclusive right to sell fuel. The FBO’s appeal alleges that the federal laws prohibiting exclusive rights cover the airport as well as FBOs. If accepted, this would eliminate the exception for airports recognized by the FAA for more than 30 years. ACI-NA has filed an amicus brief in support of the FAA’s decision.

A PDF of this Airport Law Alert is available.

Almost all airports in the United States are owned and operated by state or local government entities. The Transportation Security Act of 2001 and the Homeland Security Act of 2002 imposed numerous new duties and responsibilities on airport owners and operators. Compliance with these new requirements has been both operationally and financially challenging for airports. Airport owners and operators have a unique knowledge of their particular facilities. The goal of protecting airport patrons from terrorist activities will only be achieved if there is a true partnership between the federal government and the state and local government entities which own and operate airports, resulting in a cooperative and coordinated approach to security.

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