Court Opinion

ID: 8206403
Source: CourtListenerOpinion
Date Created: 2022-09-14 18:00:27.669174+00
Date Added: 2024-06-11T16:41:15.384336
License: Public Domain

Case: 22-40158     Document: 00516471151        Page: 1     Date Filed: 09/14/2022

           United States Court of Appeals
                for the Fifth Circuit                                United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                    September 14, 2022
                                 No. 22-40158                          Lyle W. Cayce
                                                                            Clerk

   BG Gulf Coast LNG, L.L.C.; Phillips 66 Company,

                                                          Plaintiffs—Appellants,

                                     versus

   Sabine–Neches Navigation District of Jefferson
   County, Texas,

                                                          Defendant—Appellee.

                  Appeal from the United States District Court
                       for the Eastern District of Texas
                            USDC No. 1:21-CV-470

   Before Stewart, Elrod, and Graves, Circuit Judges.
   Jennifer Walker Elrod, Circuit Judge:
         The Sabine–Neches Waterway is located in the southeastern-most
   parts of Texas and the southwestern-most parts of Louisiana, providing
   passage from the Gulf of Mexico to Port Arthur, Beaumont, and Orange,
   Texas, and beyond. It is vitally important to the local, state, and federal
   economies. Despite its importance, sixty years have gone by without much
   effort to maintain or otherwise improve it. The Sabine–Neches Navigation
   District set out to change that. The price tag on the proposed improvements
   totaled roughly $1.1 billion. After some bureaucratic wrangling, Congress
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   covered most of the cost with the District left to cover the rest. The District
   planned to cover its share through port fees. But the same federal law that
   led to congressional funding also sets limits on how costs can be passed onto
   consumers by local entities. Two energy companies sued the District,
   claiming that the port fees exceeded those limits.        The district court
   concluded that they failed to state plausible claims and dismissed the case.
   We AFFIRM.
                                         I.
          As waterways here in America go, the Sabine–Neches Waterway is
   one of our nation’s most critical. Not only does it rank near the top in
   business and busyness, it is home to the U.S. military’s largest strategic
   commercial seaport.     But as ships became larger, the Sabine–Neches
   Waterway largely stayed the same. Its lack of depth and width poses a
   problem for many modern vessels.
          To make the necessary improvements to the Waterway, the District
   needed funds. Congress opened up the federal purse for such projects
   through the Water Resources Development Act of 1986, 33 U.S.C. § 2201, et
   seq. In the years before the Act’s passage, trying to improve waterways was
   a bureaucratic nightmare. See New Orleans S.S. Ass’n v. Plaquemines Port,
   Harbor & Terminal Dist., 874 F.2d 1018, 1024–25 (5th Cir. 1989) (digesting
   the backstory of the Harbor Development and Navigation Improvement Act,
   which was passed as part of the Water Resources Development Act). It could
   take up to twenty-six years from first study to project completion, with as
   many as nineteen independent reviews along the way. Id. When Congress
   passed and President Reagan signed the Act, Congress had not approved a
   project in nearly two decades. Id. Through the Act, Congress streamlined
   the process and came up with a new way to finance waterway-construction
   and -improvement projects. Id. at 1025. Rather than rely only on the federal

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   fisc, the federal government would shoulder some or most of the cost and
   would share the rest with state and local entities. Id. Plus, state and local
   entities had a greater practical interest in the waterway development, so they
   were more likely to get it done faster. Id.
           The process begins with a feasibility study by the U.S. Army Corps of
   Engineers. Once that is done, it is published in the Federal Register and the
   Secretary of the Army gives it to Congress. Congress then reviews the study
   and the projected costs and puts it to a vote. If it prevails and the President
   signs it, Congress gives the local entities money to cover the first phase of the
   project (called “new start” funds). The local entities then enter into a
   cooperative agreement with the Army Corps of Engineers covering the
   project, which includes “provid[ing] to the Federal Government the non-
   Federal share of all other costs of construction of [the] project.” 33 U.S.C.
   § 2211(e)(3). See also Air Liquid Am. Corp. v. U.S. Corps of Engineers, 359 F.3d
   358, 361 (5th Cir. 2004) (describing process).
           The District prepared for years, but did not formally begin the Sabine–
   Neches Waterway Channel Improvement Project until 2011. The District
   worked with the Army Corps of Engineers, and the Corps completed its
   study in March of that year. The Corps concluded that Congress should fund
   the Project: deeper waterways means bigger ships which fit more cargo,
   which means fewer ships, which means less congestion. The Secretary of the
   Army transferred the Project to Congress, Congress passed it, see Water
   Resources Reform and Development Act of 2014, Pub. L. No. 113–121, 128
   Stat. 1193, 1364, § 7002 (2014) (“WRDA-14”), 1 and President Obama signed

           1
               Because each new project that goes through this process requires an act of
   Congress (literally), the parties refer to each new act as “WRDA” followed by a two-digit
   year, e.g., “WRDA-14.” They also refer to the 1986 Act (detailed above) as “WRDA-86.”

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   it into law. 2 The Project’s price tag was just over $1.1 billion, with the federal
   government covering around $748 million and the District just under $366
   million. Id. Congress then appropriated “new start” funds for the Project to
   get the ball rolling in 2019. See Energy and Water, Legislative Branch, and
   Military Construction and Veterans Affairs Appropriations Act, 2019, Pub.
   L. No. 115–244, 132 Stat. 2897, 2898–99 (2019). Those new-start funds
   would ultimately be used to complete the first part of the Project: the
   deepening of Anchorage Basin No. 1 from twenty feet to forty feet.
           The District and the Corps then entered into the statutorily required
   agreement. See 33 U.S.C. § 2211(e)(3). The Agreement listed the projected
   cost at over $1.2 billion (up a bit from WRDA-14), with a $732 million/$488
   million federal–District split (roughly 60%–40%). That number, of course,
   was a projection, and its fluidity becomes relevant later. The Agreement
   otherwise detailed the specifics on the deepening and widening of the
   Waterway and outlined the environmental effects of the Project. 3

   For ease of reference, we refer to the 1986 Act as “the Act” and otherwise refer to any
   other project-approval act as “WRDA-##.”
           2
             See David Hudson, President Obama Signs the Water Resources Reform and
   Development Act, and Honors the “Borinqueneers,” The White House (June 10, 2014),
   https://obamawhitehouse.archives.gov/blog/2014/06/10/president-obama-signs-water-
   resources-reform-and-development-act-and-honors-borinque.
           3
             “[D]eepening the Sabine Neches Waterway (SNWW) from 40 to 48 feet and the
   offshore channel from 42 to 50 feet in depth from offshore to the Port of Beaumont Turning
   Basin; extending the 50-foot deep offshore channel by approximately 13.2 miles to deep
   water in the Gulf, increasing the total length of the channel from approximately 64 to 77
   miles; tapering and marking the Sabine Bank Channel from 800 feet wide to 700 feet wide;
   deepening and widening the Taylor Bayou channels and turning basins; easing selected
   bends on the Sabine-Neches Canal and Neches River Channel; constructing new and
   enlarging/deepening existing turning and anchorage basins on the Neches River Channel;
   beneficial use of dredged material features consisting of the restoration of 2,853 acres of
   emergent marsh, improvement of 871 acres of shallow water habitat, and nourishment of
   1,234 acres of existing marsh in Texas; mitigation measures consisting of the restoration of

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           So the District needed $488 million. The first $20 million in “new
   start” funds went to deepening Anchorage Basin No. 1—before it was
   twenty-feet deep, now it is forty-feet deep. Once that was done, the District
   proposed the User Fee. The User Fee would apply only to ships with drafts
   greater than twenty feet—in other words, ships that were too big to use the
   Basin before the deepening.           The Fee could change based on certain
   (unrelated) conditions, but the basics are as follows:

                         hydrocarbon cargo                 non-hydrocarbon cargo
      minimum             $0.00 per short ton                 $0.00 per short ton
    starting rate         $0.20 per short ton                 $0.02 per short ton
     maximum              $0.35 per short ton                 $0.035 per short ton

           Every short ton loaded onto a ship or unloaded from a ship is charged. 4
   Key for our purposes, the ordinance says that the District would collect the
   Fee until the first of either (a) all construction costs are repaid, or (b) January
   1, 2049.
           Per the Act, the District published the proposed ordinance in the
   Federal Register and received public comment. 86 Fed. Reg. 7369-05 (Jan.
   28, 2021). 5 After a hearing, the Commissioners of the District passed the

   2,783 acres of emergent marsh, improvement of 957 acres of shallow water habitat, and
   stabilization and nourishment of 4,355 acres of existing marsh; and post-construction
   monitoring and adaptive management of the beneficial use features and mitigation areas[.]”
           4
             A “ton” in America and Canada is 2,000 lbs., while a “ton” in the United
   Kingdom is 2,240 lbs. To avoid confusion, “short ton” is used for something that is 2,000
   lbs. and “long ton” for 2,240 lbs.
           5
            The District actually went through notice and comment twice. The first proposed
   ordinance set a flat $0.35/short ton for hydrocarbon cargo and no fee at all for the non-
   hydrocarbon cargo. 85 Fed. Reg. 37,634, 37,635 (June 23, 2020). After a hearing and
   talking with the Corps, the District revised the ordinance to what it is today. Id.

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   Ordinance, and the District began levying the fee against the bigger ships on
   May 1, 2021.
           BG Gulf Coast LNG and Phillips 66 Company are energy companies.
   BG Gulf Coast has already paid well into the six figures because of the
   Ordinance. As of the filing of the Complaint, Phillips 66 had not yet sent any
   of its cargo on bigger ships. But it planned to. They both sued, alleging that
   the Ordinance violated several provisions of the Act. The District moved to
   dismiss under Rule 12(b)(6). The district court granted the motion on each
   claim, concluding that the District satisfied all of the requirements of the Act,
   including the requirement that any fees must be imposed “on a fair and
   equitable basis.” 6 The district court then dismissed the case with prejudice.
   The energy companies (hereinafter “BG Gulf Coast”) appealed.                             We
   subsequently granted the District’s motion to expedite the appeal.
                                                II.
           We review de novo the grant of a motion to dismiss under Rule
   12(b)(6). Residents of Gordon Plaza, Inc. v. Cantrell, 25 F.4th 288, 295 (5th
   Cir. 2022). “To survive a motion to dismiss, a complaint must contain
   sufficient factual matter, accepted as true, to ‘state a claim to relief that is
   plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
   (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has
   facial plausibility when the plaintiff pleads factual content that allows the

           6
              Dictionaries at the time the Act was passed defined “fair” as “[h]aving the
   qualities of impartiality and honesty; free from prejudice, favoritism, and self-interest,”
   Fair, Black’s Law Dictionary 534 (5th ed. 1979), and “equitable” as “[j]ust; conformable
   to the principles of justice and right,” Equitable, Black’s Law Dictionary 482 (5th ed. 1979).
   See also Webster’s Third New International Dictionary 815 (1971) (“equitable” means
   “characterized by equity”). The most recent edition of Black’s Law Dictionary includes
   this example for the term “fair”: “everyone thought Judge Reavley to be fair.” Fair,
   Black’s Law Dictionary 715 (11th ed. 2019).

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   court to draw the reasonable inference that the defendant is liable for the
   misconduct alleged.” Id. We accept all well-pleaded facts as true and draw
   all reasonable inferences in favor of the plaintiff. Id. But we do not presume
   that a complaint’s legal conclusions are true, no matter how well they are
   pleaded. Id.
                                          A.
           Section 2236 of the Act sets limits on (among other things) how and
   when a non-federal interest can pass costs onto consumers vis-à-vis “[p]ort
   or harbor dues.” One such condition is in § 2236(a)(1): “Port or harbor dues
   may be levied only in conjunction with a harbor navigation project whose
   construction is complete (including a usable increment of the project)[.]”
           To BG Gulf Coast, this means that the District can only impose a fee
   for either (a) its share of the entire $1.1 billion project once it is completed,
   or (b) its share of a “usable increment” of the Project, provided that the fee
   is imposed for use of that usable increment. Put another way, the District
   cannot impose the User Fee on vessels and cargo because of Anchorage Basin
   No. 1 to pay for any other part of the project, let alone (as the Ordinance says)
   the District’s entire share of the project. According to BG Gulf Coast, this
   follows textually from the words “in conjunction with” in subsection (a)(1).
   As well as by contextual inference from other parts of § 2236 in which
   Congress only allows fees for incurred costs, not speculative future costs. BG
   Gulf Coast finds some further support in certain language from Plaquemines,
   language which, it says, makes this an open-and-shut issue. See 874 F.3d at
   1025.
           The District says that BG Gulf Coast’s reading of the statute stops too
   soon; the full condition reads: “in conjunction with a harbor navigation
   project whose construction is complete (including a usable increment of the
   project) and for the following purposes and in amounts not to exceed those

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   necessary to carry out those purposes: (A)(i) to finance the non-Federal share
   of construction and operation and maintenance costs of a navigation project
   for a harbor under the requirements of [33 U.S.C. § 2211].” § 2236(a)(1).
   According to the District, this means that once a usable increment of the
   project is done, it may then “finance” its “share of construction and
   operation and maintenance costs of” the Project. In contrast to BG Gulf
   Coast’s reading—which requires the non-federal interest to build first and
   pay later—this allows for the process under the Act to work like this:
   (1) Congress funds the first phase of the project; (2) the non-federal interest,
   after going through notice and comment, imposes a fee to build revenue to
   cover its share; (3) the fee raises funds to pay for the next increment of the
   project; and (4) so on until the project is complete.
          The district court agreed with the District. It concluded that BG Gulf
   Coast’s approach was atextual, as it required reading that parenthetical
   “(including a usable increment of the project)” out of the statute. BG Gulf
   Coast’s way around the parenthetical was to say that “harbor navigation
   project” in (a)(1) must mean the same thing as “navigation project for a
   harbor” under (a)(1)(A)(i), and thus a fee for “a usable increment of the
   project” in (a)(1) meant that a fee could only finance the same “usable
   increment.” The district court concluded that, no, “a usable increment of
   the project” defines what it means for a project to be “complete,” not what
   it means to be a harbor navigation project. As for Plaquemines, the district
   court concluded that it did not apply as it was purely about subsection (a)(2)
   and emergency-service fees.
          We agree with the district court. BG Gulf Coast’s interpretation of
   “in conjunction with” is far too cramped. To be sure, “conjunction” was
   defined at the time as a “simultaneous occurrence in space or time.”
   Conjunction, American Heritage Dictionary 311 (2d College ed. 1982). BG
   Gulf Coast says that the User Fee is being levied “in conjunction with” the

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   District’s “plan to construct the Project’s remaining increments at some
   future date.” But that argument fails because subsection (a)(1) allows fees
   for projects “whose construction is complete (including a usable increment
   of the project).”    It also says that other subsections, like (a)(3)(B),
   contemplate using fees for “project features constructed under this
   subchapter,” which shows that fees are only for “incurred costs.” But
   subsection (a)(1) refers to “usable increment[s],” not “project features,”
   and it has no similar past-tense “constructed” language. See Christiana Tr.
   v. Riddle, 911 F.3d 799, 805 (5th Cir. 2018) (“When Congress includes
   particular language in one section of a statute but omits it in another, we
   presume[] that Congress intended a difference in meaning.” (quotation
   omitted)). So if anything, that cuts against its argument because Congress
   presumptively treated “usable increments” of projects differently than
   “project features,” and thus fees are allowed under different circumstances
   and require consideration of completely different factors.
          BG Gulf Coast again tries to tie fees to the specific “usable increment
   of the project,” so that fees may only be used after-the-fact to pay for that
   increment. But to do so, it has to argue that “(including a usable increment
   of the project)” modifies “a harbor navigation project,” so that later when
   subsection (a)(1)(A)(i) says “a navigation project for a harbor,” it means “a
   usable increment of the project.” But it makes far more sense that this
   language means that once a usable increment of the project is complete, a fee
   may be levied, not that a fee may only be levied to finance a usable increment
   of the project. Cf. Antonin Scalia & Bryan A. Garner, Reading Law: The
   Interpretation of Legal Texts 152–53 (2012) (the Nearest-Reasonable-
   Referent canon: “When the syntax involves something other than a parallel
   series of nouns or verbs, a prepositive or postpositive modifier normally
   applies only to the nearest reasonable referent.”).

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          At first blush, some language in Plaquemines supports BG Gulf Coast,
   but that case concerned an entirely different provision of the Act. Knight v.
   Kirby Offshore Marine Pac., L.L.C., 983 F.3d 172, 177 (5th Cir. 2020) (“A
   statement is dictum if it could have been deleted without seriously impairing
   the analytical foundations of the holding and[,] being peripheral, may not
   have received the full and careful consideration of the court that uttered it.”
   (quoting United States v. Segura, 747 F.3d 323, 328–29 (5th Cir. 2014))).
   Plaquemines described § 2236(a)(1) as “forbid[ing] fees to finance harbor
   improvements until after the project is complete,” but that case was actually
   about subsection (a)(2), and how the Act does not otherwise constrain a
   port’s ability to assess a fee until a port “has undertaken a harbor
   improvement project.” 874 F.2d at 1026, 1024–25. So Plaquemines is only
   relevant to the extent it holds that the Act applies once a project begins, not
   when it ends, and the fact that subsection (a)(1) was in no way raised or
   relevant to the bottom-line conclusion is dispositive. See Knight, 983 F.3d at
   178 (dicta is “peripheral” and “may not have received [our] careful
   consideration”).
          BG Gulf Coast’s theory of subsection (a)(1) fails at every turn. The
   statute, properly construed, allows the District to finance its share of the
   project once a usable increment of the project is completed. Because
   Anchorage Basin No. 1 has been completed, subsection (a)(1) permitted the
   District to pass the Ordinance containing the User Fee.
                                         B.
          As discussed, upon completion of a usable increment of the project,
   § 2236(a)(1)(A)(i) allows a non-federal interest to levy a harbor fee “in
   amounts not to exceed those necessary to carry out” the following purpose:
   “to finance the non-Federal share of construction and operation and
   maintenance costs of a navigation project for a harbor under the requirements

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   of [33 U.S.C. § 2211].” Section 2211(a)(1)(B) says that the non-federal
   interest “shall pay, during the period of construction of the project,” 25% “of
   the cost of construction of the portion of the project which has a depth in
   excess of 20 feet but not in excess of 50 feet[.]”
          BG Gulf Coast reads these provisions together to argue that “amounts
   not to exceed those necessary” means that the District may only use the fee
   to finance 25% of the Project, as (according to BG Gulf Coast) the District
   “voluntarily agreed to pay more than 25% of the Project’s total cost[.]” The
   District agreed to cover around 40% of the project, but if the Project comes
   in under budget, BG Gulf Coast alleges that the District still plans to pay the
   amount it agreed to—in other words, it may end up covering 60%–80% of the
   Project. Because it voluntarily agreed to pay that much, “the additional
   amount above 25% is not a ‘requirement’ of [33 U.S.C. § 2211],” so the
   District has to cover anything above 25% with funds that do not come from
   the User Fee. Summing that up, BG Gulf Coast argues that § 2211(a)(1)(B)
   places a 25% cap on financing a non-federal interest’s share of an
   improvement project because anything not “require[d]” by § 2211(a)(1)(B)
   is not “necessary.”
          The District responds with a different provision of § 2211.
   Subsection (e) says that before any construction begins on harbors, the
   Secretary of the Army and the non-federal interests “shall enter into a
   cooperative agreement” and that the non-federal interests “shall agree to”
   “provide to the Federal Government the non-Federal share of all other costs
   of construction” of the project.        33 U.S.C. § 2211(e)(4).      So when
   § 2236(a)(1) says “amounts not to exceed those necessary to carry out” the
   financing of the Project, the District says that the cooperative agreement was
   necessary to carry out the Project, and so the User Fee can be used to cover
   its contractual obligation.

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          The district court did not squarely address that argument because it
   held that the 25% “requirement” is a floor, not a ceiling or a set amount. As
   everyone agrees, the District may voluntarily assume more than 25% of the
   cost of the project, which necessarily means that 25% is not both a floor and a
   ceiling. Shall does not mean shall only, and the statute contains no “up to”
   or “at least” language either. BG Gulf Coast then must turn to § 2236(a)(1)
   which limits fees to the “amount not to exceed those necessary” under
   § 2211. The district court said that it “cannot be that Section 2211 imposes
   a cap for the fee-based non-Federal share but not the alternatively funded
   non-federal share because that reading would require an express statutory
   provision. Section 2236(a)(1)’s language—‘amount not to exceed those
   necessary’—is not enough.”
          The question is what § 2236(a)(1)(A)(i) means when it says that fees
   must be “in amounts not to exceed those necessary to carry out” the purpose
   of “financ[ing]” the Project “under the requirements of” § 2211. BG Gulf
   Coast says that the “necessary” amount under § 2211 is the 25% requirement
   in subsection (a). The District says that the “necessary” amount under
   § 2211 is the amount that the District agreed to cover in the cooperative
   agreement with the federal government in subsection (e). Sadly, Congress
   did not say what subsection it was thinking of when it said “under the
   requirements of” § 2211, and the most natural reading is that it meant all of
   its requirements.
          The word “necessary” has been hard to pin down since McCulloch v.
   Maryland, 17 U.S. (4 Wheat.) 316, 414 (1819). Black’s Law Dictionary, before
   even getting to what the definition is, opens with this warning: “This word
   must be considered in the connection in which it is used, as it is a word
   susceptible of various meanings. It may import absolute physical necessity
   or inevitability, or it may import that which is only convenient, useful,
   appropriate, suitable, or conducive to the end sought.” Necessary, Black’s

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   Law Dictionary 928 (5th ed. 1979). And between the two, at least in the legal
   context, courts “rarely use ‘necessary’ in the latter sense.” Payne v. United
   States, 289 F.3d 377, 389 (5th Cir. 2002) (Garza, J., dissenting in part). The
   term “necessary” here “does not exist in a vacuum,” and its meaning “must
   be determined in the context in which [it] appear[s].” Texas v. E.P.A., 983
   F.3d 826, 837, 837 n.2 (5th Cir. 2020).
          Section 2236(a)(1) is concerned with fees being levied “for the
   following purposes and in amounts not to exceed those necessary to carry out
   those purposes.” The purpose relevant here is “to finance.” And what can
   it finance? The District’s share of the “construction and operation and
   maintenance costs” of the Project “under the requirements of” § 2211.
   Section 2211 has many requirements about costs under different specific
   circumstances, but if the purpose is “to finance” the District’s share of the
   Project, the focus should be on what it had to do to secure financing. So it is
   true that paying 25% of the costs was necessary to secure financing vis-à-vis
   the fees, but the District also had to secure an agreement with the federal
   government under § 2211(e).
          As BG Gulf Coast concedes, the Act gives the District discretion to go
   beyond that 25% amount for costs; it only sets a maximum on what percentage
   the federal government can spend. See 33 U.S.C. § 2280. With that
   discretion, because the amount of fees must be necessary to secure financing,
   and because the District had discretion to vary upward on the percentage of
   costs it covers, the term “necessary” more likely accords with the more
   permissive definition of the term. Texas, 983 F.3d at 837. What follows is
   that “necessary” means something more like “convenient, useful,
   appropriate, suitable, or conducive to the end sought.” Black’s, supra at 928
   (emphasis added). Cf. 33 U.S.C. § 2236(a)(1) (“necessary to carry out those
   purposes” (emphasis added)). In this light, while it may not be strictly
   necessary to cover 40% of the costs under § 2236(a)(1) and § 2211(a), it was

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   convenient and conducive to financing the Project. Thus, the District did
   not violate the Act by pledging to cover the costs above 25% with the proceeds
   of the User Fee.
          BG Gulf Coast’s argument hinges on a strict reading of “necessary.”
   But context is needed to determine whether “necessary” means “absolute
   physical necessity” or merely “conducive to the end sought.” Under these
   circumstances, it is the latter. Thus, the District can cover more than 25% of
   the cost with the User Fee proceeds.
                                          C.
          BG Gulf Coast briefed several other arguments regarding the legality
   of the District’s imposition of the User Fee. In its thorough and well-
   reasoned opinion, the district court explained why those claims must be
   dismissed. We agree with the conclusions reached by the district court and
   thus we do not disturb its holdings on appeal.
                                  *        *         *
          Because the district court properly dismissed each of BG Gulf Coast’s
   claims, we AFFIRM.

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