A district court ruled that Washington state officials did not violate federal regulations when they denied a water quality certificate for a proposed coal export terminal, potentially gutting the developers' efforts to move the project forward in the courts.

Lighthouse Resources Inc., which is seeking to build the terminal through its subsidiary Millennium Bulk Terminals-Longview LLC to gain access to Asian coal markets, sued over the denied permit and was joined by BNSF Railway Co., which would haul coal to the terminal.

Lighthouse and BNSF said the Interstate Commerce Commission Termination Act, or ICCTA, as well as the Ports and Waterways Safety Act, which regulates the movement of vessels in U.S. harbors, pre-empt some of the basis for the state's denial.

"In order for federal pre-emption to apply under the ICCTA, the activity in question must first fall within the statutory grant of jurisdiction to the [Surface Transportation Board]," which regulates work done "by, or under the auspices of, a rail carrier," U.S. District Judge Robert Bryan wrote in a Dec. 11 order granting the state's motion for summary judgment on the pre-emption claims.

"There is no ICCTA pre-emption because the state's decision to deny Lighthouse a water quality certificate does not regulate transportation by a 'rail carrier.'"

Bryan also dismissed BNSF's pre-emption claims, writing that "BNSF fails to point to issues of material fact that the state's denial of Lighthouse's application for a clean water certificate is a pre-empted action because it was not a regulation of BNSF or denial of an application by BNSF. This central problem permeates BNSF's theory of its ICCTA claim."

The Ports and Waterways Safety Act does not pre-empt the state's decision, Bryan ruled, because Washington "did not set regulations that attempted to control vessel traffic or navigation on the Columbia River" and "does not require conduct that conflicts with federal law."

In addition, Lighthouse and BNSF failed to show that the court "could grant relief to remedy their claimed injuries," Bryan wrote. "While Lighthouse maintains that a declaration from this court (that some of the grounds for the decision were improper) and injunction prohibiting consideration of the rail and vessel impacts would help in the ongoing state court challenges to the decision, it fails to explain how it would help, beyond mere speculation."

Lighthouse's suit, which is scheduled to go to trial in May, also claimed the state's denial of the permit violated the dormant commerce clause of the U.S. Constitution by usurping powers reserved for Congress to regulate commerce with foreign nations and among the states.

The company "remains confident that it will prevail on its core claim," Vice President of Legal and Business Development and General Counsel Michael Klein said.

Kristen Boyles, a staff attorney with Earthjustice who has led the environmental law nonprofit's legal efforts on the case in support of the state, said the pre-emption claims were "a big chunk" of the developers' argument.

"It was gratifying that the court saw so clearly the argument that, again, one permit denial for a water quality certification for a proposed private, corporate facility does not rise to the level of these … federal violations of law," she said.

Paul Seby, an attorney with Greenberg Traurig LLP who has counseled clients in the energy and mining industries, said the developers could appeal Bryan's decision, but "I think that the big issues in the case have been decided."

The dismissal did not "shut the door" on federal pre-emption, he said, and other cases can make the same interstate commerce arguments.

"Given their importance to interstate commerce and coal transport and markets for U.S. coal," Seby said, "these issues, having not been addressed properly, can and should be pursued further and would be best pursued by all stakeholders who are adversely impacted by coastal states throwing up barriers to these otherwise lawful activities."

Tara Lee, deputy director of communications for Washington's governor's office, said the state was not surprised by the court's decision.

"As we have said before, we think the agency ran a rigorous process in accordance with our environmental laws and we will continue to defend the decision," she said.