I've created a website within the company that utilizes our active directory server to authenticate. I am concerned about security surrounding setting up relying parties with "localhost" domains.
I've pretty much followed this guide on setup. You'll notice about halfway down the page, there is a step to set up the development environment, localhost:44336 as a relying party.
I am concerned that someone could easily get the location of our federation metadata document, and simply roll their own project utilizing the same port and get access to our active directory. Is this a valid concern, or am I worrying over nothing? What would be a better alternative to having to use localhost in this configuration?
Yes it's safe. The metadata document only describes information about endpoints and about the token that active directory is issuing. It doesn't inherently have anything sensitive about it.
The actual authentication is still going to be handled by AD and unless the curious user already has a way to successfully authenticate against your AD then it's rather useless for him to hookup into that document.
Could they potentially create an app that uses your authentication protocol? Sure, but what would be the point if nobody can actually authenticate against it. Allowing this sort of behavior to happen is one of the points of ADFS.