112 F.3d 1175 (D.C. Cir. 1997), 95-1494, State of N.C. v. F.E.R.C.

Docket Nº:95-1494, 95-1500.
Citation:112 F.3d 1175
Party Name:Envtl. STATE OF NORTH CAROLINA, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, The City of Virginia Beach, Virginia, Intervenor.
Case Date:May 09, 1997
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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112 F.3d 1175 (D.C. Cir. 1997)





The City of Virginia Beach, Virginia, Intervenor.

Nos. 95-1494, 95-1500.

United States Court of Appeals, District of Columbia Circuit

May 9, 1997

Argued Feb. 4, 1997.

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Bernard Nash and Patrick M. McSweeney argued the causes for petitioners, with whom Frederick M. Lowther, David L. Engelhardt, William B. Ellis and Alan S. Hirsch, Special Deputy Attorney General, North Carolina Department of Justice, Washington, DC, were on the briefs.

Edward S. Geldermann, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent, with whom Jerome M. Feit, Solicitor, was on the brief.

M. Scott Hart, Washington, DC, argued the cause for intervenor City of Virginia Beach, with whom George A. Somerville and Samuel M. Brock, III were on the brief. Howard E. Shapiro, Michael A. Swiger and John F. Kay, Jr. entered appearances.

Lois J. Schiffer, Assistant Attorney General, United States Department of Justice, John A. Bryson, Attorney, Jonathan Z. Cannon, General Counsel, Environmental Protection Agency, and Randolph L. Hill, Attorney, were on the brief for the United States as amicus curiae.

John Paul Woodley, Jr., Roger L. Chaffe and John R. Butcher were on the brief for the Commonwealth of Virginia as amicus curiae.

Alan H. Richardson, Donald H. Clarke and Henri D. Bartholomot were on the joint brief for the American Public Power Association, et al., as amicus curiae.

Ronald A. Shems, Assistant Attorney General, State of Vermont, was on the brief for the states of Vermont, et al., as amicus curiae.

Before: WALD, SILBERMAN and SENTELLE, Circuit Judges.

Dissenting opinion filed by Circuit Judge WALD.

SENTELLE, Circuit Judge:

Petitioners, the state of North Carolina and the Roanoke River Basin Association ("RRBA"), seek review of the decision of the Federal Energy Regulatory Commission ("FERC" or "Commission") to amend a FERC license under which a power project is operated within Lake Gaston on the Roanoke River. The amended license allows the City of Virginia Beach, Virginia to build an intake structure within the power project's boundaries and withdraw water for transport to Virginia Beach. Petitioners maintain that FERC improperly issued the license amendment without first requiring that a water quality certification be obtained from the state of North Carolina. Petitioners further contend that the decision to issue the license amendment was arbitrary and capricious. For the reasons detailed below, we reject each of these arguments and deny the petitions for review.

I. Background

This case arises from the nearly fourteen-year effort of Virginia Beach to secure a new source of water via a 76-mile pipeline originating at Lake Gaston and terminating in Norfolk, Virginia (the "Pipeline Project"). Lake Gaston is located on the Roanoke River, a navigable waterway traversing the states of Virginia and North Carolina. While Lake Gaston is primarily located in North Carolina, the intake structure for the Pipeline Project is to be located at Pea Hill Creek Cove in Virginia. That site is within the boundaries of FERC Project No. 2009, a FERC-licensed power project (the "Power Project") operated by Virginia Electric and Power Company ("VEPCO"). Upon completion of the Pipeline Project, Virginia Beach will be able to draw up to 60 million gallons per day ("mgd") of water from Lake Gaston, reducing the discharge of water through the Power Project's dam turbines in North Carolina by that same amount. The drawn water will then be transported through a 76-mile pipeline. This will result in a net increase of 54 mgd of water to Virginia Beach's daily water supply, after adjustment for amounts lost during transport.

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Construction of the Pipeline Project's intake facility was to result in sediment discharges into the waters of Lake Gaston. As a result, Section 403(a) of the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., otherwise known as the Clean Water Act ("CWA" or "Act"), required Virginia Beach to obtain a dredge-and-fill permit from the Secretary of the Army, acting through the Army Corps of Engineers ("Corps"). 33 U.S.C. § 1344(f)(2). The City filed its application for a Section 403(a) permit with the Corps on July 15, 1983.

Section 401(a)(1) of the CWA provides that "[a]ny applicant for a Federal license or permit to conduct any activity ... which may result in any discharge into the navigable waters, shall provide the ... permitting agency a certification from the State in which the discharge originates or will originate...." The certification must provide that the discharge "will comply with the applicable" water quality standards. Id. § 1341(a)(1). As for those states in which the discharge does not "originate" but which may otherwise be "affected" by the discharge, Section 401(a)(2) of the CWA provides a separate set of procedures to ensure compliance with the affected state's water quality standards. Id. § 1341(a)(2).

Because the Corps' dredge-and-fill permit is a "Federal license or permit" for purposes of Section 401(a)(1), Virginia Beach was required to obtain a water quality certification from the state of Virginia. Accordingly, Virginia Beach filed an application with the Virginia State Water Control Board ("VSWCB"), requesting certification of the withdrawal of up to 60 mgd of water from Lake Gaston. No certification was sought or received from North Carolina at this time. On September 12, 1983, the VSWCB issued a Section 401(a)(1) certification for the Pipeline Project, subject to certain conditions needed to preserve water quality.

Following the issuance of the water quality certification, the Corps held public hearings on Virginia Beach's application for a dredge-and-fill permit. Both North Carolina and RRBA intervened in this proceeding. Upon conclusion of the hearings, the Corps found that 60 mgd would be needed in the Virginia Beach area by the year 2030, that the Pipeline Project would have no noticeable impact on downstream water quality, and that the project would have no significant impact on the environment. As a result, the Corps issued a dredge-and-fill permit to Virginia Beach. The issuance of this permit was ultimately upheld on appeal. North Carolina v. Hudson, 665 F.Supp. 428 (E.D.N.C.1987), appeal decided after remand, 731 F.Supp. 1261 (E.D.N.C.1990), aff'd sub nom. Roanoke River Basin Ass'n v. Hudson, 940 F.2d 58 (4th Cir.1991), cert. denied, 502 U.S. 1092, 112 S.Ct. 1164, 117 L.Ed.2d 411 (1992).

In 1991, VEPCO filed an application with FERC, requesting that the Power Project license be amended to permit the withdrawal of water for the Pipeline Project. The license for the Power Project was initially issued in 1951 by the Federal Power Commission, the predecessor of FERC. Virginia Elec. and Power Co., Project No. 2009: Application for License Under Federal Power Act, 10 F.P.C. 1 (1951) [hereinafter License Application Order]. The Federal Power Act ("FPA"), 16 U.S.C. § 791a et seq., governs amendments to FERC licenses and provides that an amendment may be granted "only upon mutual agreement between the licensee and the Commission after thirty days' public notice." 16 U.S.C. § 799. Under VEPCO's requested amendment to the Power Project license, Virginia Beach would be permitted to withdraw 60 mgd of water from Lake Gaston, decreasing the flow of water through the Power Project dams by the same amount.

North Carolina intervened in the license amendment proceeding and requested that FERC prepare an environmental impact statement ("EIS") pursuant to the National Environmental Policy Act, 42 U.S.C. § 4321 et seq. On July 23, 1993, FERC issued a draft environmental assessment ("EA") tentatively concluding that the Pipeline Project would have no unmitigable adverse environmental impacts. After receiving numerous comments on the draft EA, FERC staff, on June 23, 1994, issued a final EA finding that the proposed Pipeline Project "constitutes a major federal action significantly affecting the quality of the human environment." As a result, FERC determined to prepare an EIS

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to "reflect updated population and water consumptive projections." In the meantime, North Carolina had petitioned the Commission to stay its proceeding until VEPCO obtained a Section 401(a)(1) certification from North Carolina's water control agency. The Commission took no action on the stay request.

On July 7, 1995, FERC issued a final EIS finding that the five-city area in the vicinity of Virginia Beach (including Chesapeake, Norfolk, Portsmouth, Virginia Beach, and Suffolk) will need 54 mgd of water by the year 2030; that the proposed water supply project will ensure Virginia Beach a safe, reliable, and relatively inexpensive source of potable water; that the Pipeline Project is the best source for meeting that water need; and that the project, subject to additional mitigation measures, should be approved. Final Environmental Impact Statement for Virginia Beach Water Supply Project at xxii [hereinafter Final EIS]. On July 14, 1995, North Carolina and RRBA filed a joint motion asking the Commission to condition any order approving the Project on North Carolina's issuance of a water quality certification pursuant to CWA § 401(a)(1). The Commission took no action on this motion.

Finally, on July 26, 1995, the Commission issued an order approving VEPCO's application to amend the license under which the Power Project is operated. Virginia Elec. and...

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