Montana Power Company v. Federal Power Commission

• Decision Date: 15 July 1970
• Docket Number: No. 21904,21767.,21904
• Citation: 445 F.2d 739
• Parties: The MONTANA POWER COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, The Confederated Salish and Kootenai Tribes of the Flathead Reservation, Montana, Secretary of Interior, Intervenors. The CONFEDERATED SALISH AND KOOTENAI TRIBES OF the FLATHEAD RESERVATION, MONTANA, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, The Montana Power Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

445 F.2d 739 (1970)

The MONTANA POWER COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, The Confederated Salish and Kootenai Tribes of the Flathead Reservation, Montana, Secretary of Interior, Intervenors.

The CONFEDERATED SALISH AND KOOTENAI TRIBES OF the FLATHEAD RESERVATION, MONTANA, Petitioners, v. FEDERAL POWER COMMISSION, Respondent, The Montana Power Company, Intervenor.

Nos. 21904, 21767.

United States Court of Appeals, District of Columbia Circuit.

Argued December 5, 1968.

Reargued November 24, 1969.

Decided July 15, 1970.

Certiorari Denied January 18, 1971.

COPYRIGHT MATERIAL OMITTED

Mr. Charles A. Horsky, with whom Messrs. G. Joseph Vining, Willard W. Gatchell, Washington, D. C., and Joseph A. McElwain, Butte, Mont., were on the brief, for petitioner in No. 21,904 and intervenor in No. 21,767. Mr. John C. Hauck, Butte, Mont., also entered an appearance for petitioner in No. 21,904.

Mr. Richard A. Baenen, Washington, D. C., with whom Messrs. Charles A. Hobbs and Jerry C. Strauss, Washington, D. C., were on the brief, for petitioners in No. 21,767 and intervenors in No. 21,904.

Mr. Peter H. Schiff, Solicitor, Federal Power Commission, with whom Messrs. Richard A. Solomon, General Counsel at the time the brief was filed, Drexel D. Journey, Asst. Gen. Counsel, William H. Arkin and David F. Storer, Attorneys, Federal Power Commission, were on the brief, for respondent.

Mr. A. Donald Mileur, Attorney, Department of Justice, with whom Mr. Clyde O. Martz, Asst. Atty. Gen. at the time the brief was filed, Messrs. Roger P. Marquis, Attorney, Department of Justice, and George Miron, Associate Solicitor, Reclamation and Power, Department of the Interior, were on the brief, for intervenor in No. 21,904.

Before BAZELON, Chief Judge, WRIGHT, McGOWAN, TAMM, LEVENTHAL, ROBINSON and MacKINNON, Circuit Judges, sitting en banc.

Reargued En Banc November 24, 1969.

Certiorari Denied January 18, 1971. See 91 S.Ct. 566.

LEVENTHAL, Circuit Judge:

These cases involve the readjustment of the annual rentals due Indian tribes for the use of tribal land by a power company in connection with its operation of a hydroelectric project licensed by the Federal Power Commission.

For convenience we provide a brief introductory sketch of the central issue: The license issued in 1930 provides for readjustment of rental charges, after 20 years of service, based on the commercial value of the tribal lands for the most profitable purpose for which suitable, including power development. In 1930 the pertinent statute provided that the Commission shall fix a reasonable annual charge for the use of tribal lands and that after 20 years of service the "charges may be readjusted * * * in a manner to be described in each license." The particular license provided for adjustment by agreement of the licensee, the Commission and the Secretary of the Interior, or failing agreement by submission to arbitration. In 1935, after the Commission had been reorganized as an independent regulatory agency, the statute was amended to provide that such charges shall be fixed by the Commission, and after 20 years of service, may "be readjusted by the Commission * * * upon notice and opportunity for hearing" and subject to opportunity for judicial review. Montana Power contends that this clause is applicable only to licenses issued subsequent to the 1935 statute. We hold that the 1935 statute, which made no changes in the substantive standard applicable under outstanding license for readjustment of tribal land charges, intended to prescribe the Commission as the tribunal for readjustment under outstanding as well as future licenses. Section 28 of the act, which provides that amendments of the act shall not affect licenses theretofore issued, does not preclude a change in procedure unless there is a showing, which we do not find in this case, that the prior procedure was bargained for as a significant element in the license agreement.

I. BACKGROUND FACTS AND PROCEDURES

Moving to a fuller statement of the background facts and procedure, we note that the license dated May 23, 1930, was issued to Rocky Mountain Power Company, a wholly owned subsidiary of the present licensee and operator, Montana Power Company ("Company"), for works at Project No. 5, the Kerr Dam, and other facilities of the Kerr hydro-electric project, located at the southern side of Flathead Lake, Montana. The Company used the lands of the Confederated Salish and Kootenai Tribes of the Flathead Reservation, Montana ("Tribes").¹ The original license for works at Project No. 5 was issued on May 23, 1930, for a term of 50 years, pursuant to the Federal Water Power Act of 1920,² and the Act of March 7, 1928.³

We defer a more specific reference to pertinent provisions of the license and statutes, and set forth the procedural stance of the controversy.

On May 19, 1959, the Tribes filed with the Commission a petition for readjustment of the rentals, paid by the Company under its license. The license, as issued in 1930, and thereafter amended by the parties, permitted readjustment at this time. In 1965 the Commission set the matter for hearing. Montana Power filed suit in the District Court for Montana to compel compliance with the arbitration provision of the license and for appointment of an arbitrator. That court dismissed, holding that it would not have jurisdiction unless it was held in the proceeding pending before the Commission, subject to review in a court of appeals, that the arbitration provision in the license controlled.

The proceeding before the Commission went forward in 1965, with extensive evidence presented by the Tribes, the Company, the Secretary of the Interior, and the Commission staff.

The Examiner's decision issued on August 4, 1966. On October 4, 1967, the Commission rendered Opinion and Order No. 529. The Commission, which largely agreed with the Examiner, held that the arbitration provision was not controlling, and readjusted the annual charges payable by Montana Power to the Tribes from $238,375 to $950,000, with the increase retroactive to May 20, 1959. Applications for rehearing were filed by the Company and by the Tribes. On November 3, 1967, the Secretary of Interior signified his acceptance of this order, without prejudice to application for rehearing by the Tribes. On March 22, 1968, the Commission entered its order denying rehearing.

A petition to review was filed by the Tribes in this court with respect to one portion of the order (No. 21767). The Company's petition to review (No. 21904) objected to the level of readjusted charges set by the Commission, and also presented a threshold contention that the Commission was without jurisdiction to entertain the proceeding to readjust the charges. A division of this court issued an opinion which ordered the Commission to dismiss the readjustment proceeding for want of jurisdiction. Suggestions for rehearing en banc were filed by the Commission, the Tribes, and the Secretary. This court ordered rehearing en banc, limited to the jurisdictional issue. This court en banc holds that the Commission had jurisdiction over the proceeding, and schedules further proceedings before the court.

II. PERTINENT PROVISIONS OF STATUTE AND LICENSE

The license was issued under and in accordance with the provisions of the Federal Water Power Act (supra, note 2), which authorized the Commission to issue licenses for the purpose, inter alia, of constructing dams, power houses, or other project works, for the utilization of power from bodies of water over which Congress has jurisdiction, or upon any part of the public lands and reservations of the United States (§ 4). Section 6 of the Act provides that licenses shall be issued for a period not exceeding 50 years. The 1930 license established a 50-year term and authorized construction of three generating units aggregating not less than 150,000 hp. to be completed within three years.

Section 10 provides that all licenses shall be on certain prescribed conditions. Subsection (e) relates to charges payable by the licensee. The provisions relating to what might be called the usual fees charged by the Commission, for administration and for use of Government property, are not involved in this case; indeed they were waived for the project by the 1928 law (supra, note 3). What is particularly before us is a proviso of § 10(e) that refers to the special case of a user charge payable "when licenses are issued involving the use of Government dams or other structures owned by the United States or tribal lands embraced within Indian reservations." As enacted in 1920, this proviso continued — "the commission shall fix a reasonable annual charge for the use thereof, and such charges may be readjusted at the end of twenty years after the beginning of operations and at periods of not less than ten years thereafter in a manner to be described in each license."

The license issued in 1930 by the Commission, which then consisted of the Secretaries of War, Interior, and Agriculture (see 41 Stat. 1063), contained terms which had received the specific approval of the Secretary of the Interior as required by the special 1928 law pertinent to the Flathead Reservation tribal lands (supra, note 3). Article 30(A) set forth the annual charge as a flat fee, rising in amount from $60,000 in the first two years, through various steps, reaching $175,000 per year for the 16th — 20th years "and/or until readjustment" pursuant to (D). Article 30(D) provided for readjustment of annual charges after 20 years (1) by mutual agreement between the Commission and the licensee, with the approval of the Secretary of the Interior, or (2) failing that, by arbitration in the manner provided for in the United States Arbitration Act, 9 U.S.C. § 1 ff. (1964).

Article 30(D) further set forth as the governing criterion — "such readjusted annual charges to be reasonable charges fixed upon the basis provided in Section 5...