Michigan Court of Appeals rules Tuscola County judge repeatedly erred in wind farm ruling 

Pegasus appealed the Circuit Court’s order affirming the AZBA’s denial of eight variance applications for additional wind turbines in Tuscola County.

The Court of Appeals reversed in part the Circuit Court’s ruling and sent the case back to that county court, while noting, “This controversy has an extensive procedural and factual history involving local regulatory authorities’ decisions on a wind energy system being built by Pegasus.”

Read the full Court of Appeals ruling here: Pegasus Wind vs Tuscola County

BACKGROUND

Pegasus is constructing a commercial wind energy system in Tuscola County. Some of the planned wind turbines are within the Tuscola Area Airport zoning area. The Airport Authority owns the airport and the AZBA is therefore responsible for deciding whether to grant variances from airport zoning regulations.

According to court documents, on June 11, 2019, Pegasus filed applications for variances with the AZBA for 33 proposed wind turbines near the airport. The AZBA denied the variance applications. Pegasus appealed to Tuscola County Circuit Court. In November 2019, the Circuit Court reversed the AZBA’s decision.

On Oct. 22, 2019, Pegasus then submitted eight additional variance applications for the construction of eight additional turbines. Along with these applications, Pegasus submitted the Federal Aviation Administration’s (FAA) determinations of no hazard for the proposed turbines and a letter from Michigan Department of Transportation (MDOT) confirming that MDOT “concurs with the FAA’s determination of no hazard,” and that MDOT Tall Structure permits would be issued for the turbines after the variances were granted.

Public hearings regarding the variance applications were held on Jan. 13 and 17, 2020, after which the AZBA denied Pegasus’s request on Jan. 17, 2020. Pegasus again appealed the denial to the county’s Circuit Court. In its Sept. 11, 2020, order, the Circuit Court said the AZBA’s denial was supported by substantial, competent, and material evidence that Pegasus had failed to establish three of the four criteria necessary to permit the AZBA to grant a variance.

Specifically, the Circuit Court said Pegasus failed to establish that 1) there is a practical difficulty in the literal enforcement of the ordinance, 2) the variances would not be against the public interest and approach protection, and 3) granting the variances would be in accordance with the spirit of the ordinance.

However, the Circuit Court reversed the AZBA’s determination that granting the variances would not do substantial justice.

The Circuit Court further concluded that the AZBA’s denial on the basis that the grant of such variances would not be “in accordance with the spirit of the ordinance” was also supported by substantial evidence.

Pegasus filed a motion for reconsideration arguing, in part, that the Circuit Court’s determination that there was evidence supporting the substantial justice factor, but not the remaining three factors, was internally inconsistent, which the Circuit Court subsequently denied. Pegasus then appealed with the state appellate court.

APPELLATE COURT ANALYSIS

The Court of Appeals noted an airport Zoning Board of Appeals must grant a variance if the applicant establishes the statutory factors for a variance as delineated in the Michigan Airport Zoning Act.

In contrast to the Airport Zoning Act, Tuscola County’s ordinance mandates that the AZBA grant a variance if a petitioner establishes any one of the factors as long as the FAA and the Michigan Aeronautics Commission has issued permits or determinations of non-hazard. Tuscola County’s ordinance also states, “In addition, variances shall be allowed for any of the following reasons:

• A literal application or enforcement of the regulation would result in practical difficulty or unnecessary hardship.

• Relief granted would not be contrary to the public interest and approach protection.

• Relief granted would do substantial justice.

• Relief granted would be in accordance with the spirit of the regulations of this ordinance.”

Tuscola County’s ordinance then states, “Nothing in this section shall be construed to permit a use that would conflict with any general zoning ordinance or regulation of any political subduction in the same area. However, a variance may conflict with a zoning ordinance or regulation adopted exclusively for airport zoning purposes.”

The Court of Appeals determined Pegasus appeared to have sought “nonuse” variances for the construction of the eight wind turbines.

‘PRACTICAL DIFFICULTY’

As noted earlier, the AZBA is required to grant a variance “if a literal application or enforcement of the regulations would result in practical difficulty or unnecessary hardship and the relief granted would not be contrary to the public interest, but would do substantial justice and be in accordance with the spirit of the regulations.”

The Court of Appeals has held that in determining whether a practical difficulty exists, it considers “whether the denial deprives an owner of the use of the property, compliance would be unnecessarily burdensome or granting a variance would do substantial justice to the owner.” The use of the term “or” in AZBA language indicates that Pegasus need only meet one of these standards.

“However, practical difficulties cannot be self-created,” the Court of Appeals wrote. “Therefore, the issue is whether the denial of the variance deprived Pegasus of the use of the property or whether compliance would be unnecessarily burdensome. In addition, even if Pegasus has shown entitlement under either of these standards, the court must consider whether the practical difficulty was self-imposed.”

The AZBA determined Pegasus had not shown that a literal interpretation or enforcement of the height requirements could result in a practical difficulty for Pegasus with respect to the eight turbines. The Circuit Court concluded that the AZBA’s denial of the variances based on Pegasus’ failure to establish that there was a practical difficulty in the literal enforcement of the ordinance was supported by competent, material and substantial evidence.

“Because there appears to be confusion between the requirements of practical difficulty and unnecessary hardship, we use this case as an opportunity to distinguish those requirements in the application of variances,” the Court of Appeals wrote.

The Court of Appeals noted that the Michigan Zoning Enabling Act provides that “practical difficulty” applies only to nonuse variances while “unnecessary hardship” applies only to use variances, which the Court of Appeals said further supports its conclusion that practical difficulty and unnecessary hardship are two distinct and separate standards. The court thus rejected the arguments from the AZBA and the Circuit Court on this matter.

‘DEPRIVATION OF USE’

Neither the AZBA’s findings nor the Circuit Court addressed the “deprivation of use” and the “unnecessarily burdensome” factors separately, so the Court of Appeals addressed both factors together.

The AZBA determined Pegasus had not provided sufficient evidence to establish that the wind project was not financially viable if shorter or fewer turbines were used, and did not establish that shorter turbines were unavailable “with anything more than conclusory statements.” However, the Court of Appeals noted that the record from the previous variance denial appeal was part of the instant record and that record clearly established both of these things as recognized in the Circuit Court’s order in the prior appeal regarding the 33 variances. In addition, Pegasus noted it was not required to establish that the use of alternative turbines or other locations was impossible.

Pegasus had argued that complying with the AZBA’s ordinance by using shorter turbines “would be unnecessarily burdensome and possibly detrimental to the wind project’s economic viability.” Pegasus said it could not use shorter turbines because “virtually all commercial wind turbines sold on the market and used by developers like Pegasus today are in excess of 400 feet” and would be in violation of the height limitations in the ordinance. Pegasus was purchasing its turbines from GE and the shortest commercial turbine actively produced by GE has a height of 486 feet at the tip; also, the shorter “special purpose” turbines were taller than 400 feet.

Pegasus said the turbines shorter than 400 feet would be less efficient, which would require Pegasus to site more turbines to provide the megawatt total needed for compliance with its power purchase agreements; and that using fewer turbines was not a viable option because Pegasus cannot comply with its power purchase agreements and its interconnect agreement if the variances were not granted.

The AZBA determined that Pegasus’ arguments were not related to any practical difficulties with the property, and the Circuit Court affirmed the AZBA’s decision.

“However, by attaching all of these arguments to whether they were related to practical difficulties unique to the property, the AZBA and the Circuit Court have cut off any utility to these findings because, as previously noted, case law contains no ‘unique to the property’ requirement for practical difficulties,” the Court of Appeals wrote.

“Here, Pegasus has no use for the land without the variance because its lease agreements all relate to the placement and use of turbines. The AZBA has relied on the agricultural nature of the parcels to assert continued economic use. However, Pegasus does not own those parcels and its leases do not permit alternate uses for the properties. Therefore, the AZBA’s truism only highlights Pegasus’ position – the denial of the variances have rendered its lease agreements valueless and prohibited any use of its interest in the various properties.”

‘PRACTICAL DIFFICULTY’

Lastly, the AZBA concluded that any practical difficulty was self-created by Pegasus. A person seeking a variance is required to show the condition giving rise to the need for the variance was not self-created.

The Circuit Court affirmed the AZBA’s determination that any hardship that existed in this case was self-created. Both the AZBA and Circuit Court argued that a hardship can be deemed self-created when the disputed parcels can be used in a manner consistent with the existing zoning, even if the use is not the use desired by the applicant.

The Circuit Court cited the court case Detroit Board of Zoning as support for its ruling, however, the Court of Appeals determined that case does not support the Circuit Court’s ruling.

“This is not a case in which Pegasus purchased the lots for agricultural use and subsequently sought to use it some other way,” the Court of Appeals wrote. “Pegasus leased these properties because they sit in the sole place where all of the conditions necessary for building a wind farm are found together. It entered into the agreements for the sole purpose of being able to use the land for the wind farm. Neither its awareness of the ordinance, nor the ability of the landowners to use their properties for agricultural purposes under the current zoning is relevant.

“The question is whether Pegasus has any use for this land under the current zoning – it does not – and whether entering into the agreements with knowledge that the land was subject to the zoning ordinance rendered these hardships self-created – also no,” the Court of Appeals wrote. “Accordingly, none of the AZBA’s three stated reasons for concluding that Pegasus failed to establish a practical difficulty is supported by the record, let alone supported by substantial evidence, and the Circuit Court misapplied the practical difficulty standard. “Therefore, we conclude that the Circuit Court erred by affirming this determination.”

AIRPORT CONCERNS

The Court of Appeals also ruled that the Circuit Court erred by affirming the AZBA’s determination that the eight variances would be contrary to the public interest and airport approach protection.

The AZBA’s resolution stated concerns about turbines posing a danger to pilots during in-flight emergencies; visual flight rule operation safety; creating additional risk due to minimum descent requirements; primary radar interference; and a claim that the turbines would jeopardize the airport’s ability to obtain federal grants.

“There is also no evidence that the energy that will be generated by the project is needed or would be utilized in the surrounding community,” the AZBA added in its determination.

The Circuit Court affirmed the AZBA’s complete ruling, even the portion about airport grant money – even though Pegasus refuted that the turbines would jeopardize any current or future ability to meet grant assurances, noting that federal grant money comes from the FAA and the FAA had determined that the turbines were not hazardous to the airport. Pegasus even agreed that if grants were affected, it would indemnify the airport for up to five years for the $2.6 million in grant money that the airport received from the FAA.

On appeal, Pegasus argued that the Circuit Court erred because it “engaged in little substantive analysis” to reach its conclusion and instead it “repeated the parties’ arguments without explaining which argument prevailed or the strength or weaknesses of each.”

Pegasus noted that the sole evidence analyzed by the Circuit Court were public comments made by two local pilots. The Court of Appeals determined that the AZBA took one of the pilot’s comments out of context; therefore, the AZBA’s arguments regarding risks created by emergencies and student pilots lack substantial evidence.

The Court of Appeals also found that the Circuit Court erred when it concluded that the AZBA’s determination that Pegasus had not shown that the variances would not impact public safety or approach protections was supported by substantial, competent and material evidence.

“The record does not contain any evidence supporting a finding that the addition of these eight turbines would or could create risks and situations different from what is already happening as a result of the numerous wind turbines already built,” the Court of Appeals wrote. “Therefore, on this record, no reasonable person could conclude that the addition of these eight turbines would create the risks and concerns that the AZBA and the county have identified.”

In its footnotes on this opinion, the Court of Appeals noted, “This is not to say that the existence of numerous turbines in this area requires all future variance requests for turbines to be approved. There may be a point when the addition of more turbines will cause additional problems and risks or be detrimental to the area.”

‘SPIRIT OF THE ORDINANCE’

Lastly, the Court of Appeals concluded that the Circuit Court erred when it affirmed the AZBA’s determination that the variances were not in the spirit of the ordinance.

According to the county’s resolution, the spirit of the ordinance at issue is “to promote the health, safety and welfare of the inhabitants of the county of Tuscola by preventing the establishment of airport hazards, restricting the height of structures and objects of natural growth and otherwise regulating the use of property in the vicinity of Tuscola Area Airport (and) providing for the allowance of variances from such regulations.”

The AZBA ruled, “In light of the aviation limitations and risks posed by the wind turbines, denial of the eight variance applications is most consistent with the spirit of the ordinance.”

However, the Court of Appeals concluded that there was no substantial evidence to support the AZBA’s finding.

“The closeness of the eight proposed turbines to the numerous existing turbines and the lack of any evidence from anyone that any of these alleged concerns had come to pass as the result of the placing or use of the previously installed turbines within the airport’s 6.6-mile radius precluded these alleged risks and limitations from supporting the AZBA’s conclusion, and the AZBA provided nothing more in support of its position,” the court wrote.

“Although defendants assert that the ordinance provides for outright prevention of hazards rather than their minimization, the plain language of the ordinance expressly provides for the provision of variances, rendering the grant of variances equally within the spirit of the ordinance. In this case, other turbines had received variances, those turbines were sited within the airport’s 6-6-mile radius and no evidence was presented that their existence had created any of the purported ‘future’ risks used by the AZBA to justify its decision.

“Given that the variance being requested was entirely consistent and in line with other land uses in the area, which also had to have met this standard, it is hard to think of a circumstance in which, once the other requirements for a variance are met, the spirit of the ordinance does not include granting the variance. Because the record does not show any substantial material or relevant evidence in support of the AZBA’s assertion that the turbines create risks and limitations that somehow do not already exist from all of the other turbines, the AZBA’s decision is without support and the Circuit Court erred by affirming it,” the Court of Appeals opinion concluded.