Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist.

• Decision Date: 07 March 2012
• Docket Number: Docket No. 10–4402–cv.
• Citation: 673 F.3d 84
• Parties: NIAGARA MOHAWK POWER CORPORATION, dba National Grid, Plaintiff–Appellant, v. HUDSON RIVER–BLACK RIVER REGULATING DISTRICT, New York State Department of Environmental Conservation, Defendants–Appellees,Sacandaga Protection Corporation, Intervenor–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

673 F.3d 84

NIAGARA MOHAWK POWER CORPORATION, dba National Grid, Plaintiff–Appellant,

v.HUDSON RIVER–BLACK RIVER REGULATING DISTRICT, New York State Department of Environmental Conservation, Defendants–Appellees,Sacandaga Protection Corporation, Intervenor–Appellee.

Docket No. 10–4402–cv.

United States Court of Appeals, Second Circuit.

Argued: Dec. 2, 2011.Decided: March 7, 2012.

Mark D. Lansing, Hiscock & Barclay, LLP, Albany, New York, for Plaintiff–Appellant.

David M. Cherubin, Brown & Weinraub, PLLC, Albany, New York, for Defendant–Appellee Hudson River–Black River Regulating District.

Owen Demuth, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, Andrew D. Bing, Deputy Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, Albany, New York, for Defendant–Appellee New York State Department of Environmental Conservation.Benjamin K. Ahlstrom, Hodgson Russ LLP, Buffalo, New York, for Intervenor–Appellee Sacandaga Protection Corporation.

Before: HALL, LYNCH, and LOHIER, Circuit Judges.

GERARD E. LYNCH, Circuit Judge:

Plaintiff-appellant Niagara Mohawk Power Corporation, doing business as National Grid (“National Grid”), challenges the constitutional and statutory authority of defendant-appellee Hudson River–Black River Regulating District (“the District”), a New York public benefit corporation, to assess it for benefits that its property along the Hudson River receives from a dam and reservoir that the District operates. National Grid argues that the District's assessment and apportionment scheme is federally preempted by the Federal Power Act (“FPA”), see 16 U.S.C. §§ 803(f), 821, and that even if the assessment authority exists, all assessments made prior to 2010 violated National Grid's equal protection rights under the U.S. Constitution and constituted impermissible takings under the U.S. and New York State constitutions. The district court (Norman A. Mordue, Chief Judge ) granted summary judgment for the defendants on National Grid's preemption claims but abstained from exercising jurisdiction over (and accordingly dismissed) the remaining constitutional claims, on the theory that they should more properly be addressed in National Grid's previously filed, pending state-court actions.

Because the FPA does not preempt the District's authority under New York state law to assess National Grid as it did here, we affirm the district court's judgment as to federal preemption. We further find that National Grid has abandoned its appeal of the district court's dismissal of the New York State Department of Environmental Conservation (“DEC”) from this action, and, in any event, that the district court's dismissal of the DEC was proper. However, because we conclude that abstention was not warranted as to National Grid's remaining constitutional claims, we remand those claims to the district court for resolution, expressing no view on their merits.

BACKGROUND

I. The PartiesA. Defendants–Appellees

Defendant-appellee the District is a New York State public benefit corporation, created in 1959 by legislation that combined two existing districts—the Hudson River Regulating District (formed in 1922) and the Black River Regulating District (formed in 1919). The District is charged with regulating the flow of those rivers as “required by the public welfare, including health and safety.” See N.Y. Envtl. Conserv. L. § 15–2103(1); see also id. § 15–2139(2). New York law gives the District broad powers to carry out its mission, including the authority to build and operate reservoirs, issue bonds, and apportion costs on statutorily defined beneficiaries to finance the construction, maintenance, and operation of its reservoirs. Id. §§ 15–2103(1), 15–2109, 15–2111, 15–2123, 15–2125, 15–2129, 15–2133.

The DEC is a New York state agency tasked with implementing and enforcing New York's Environmental Conservation Law. Among its duties, the DEC approves proposed apportionments certified by the District's board, id. § 15–2121(4), (5), and reviews “all necessary rules and regulations” that the board of the District has the “power to make,” id. §§ 15–2109(1), 15–2109(3). The DEC does not set downstream-beneficiary assessment rates, nor is it authorized to audit or revise the apportionments set by the District.

In 1923, the New York State Water Control Commission, the DEC's predecessor, approved the Hudson River Regulating District's proposed General Plan for regulating the flow of the Hudson River and its tributaries. This plan provided, among other things, for the construction of the Conklingville Dam and the Sacandaga Reservoir, now known as the Great Sacandaga Lake Reservoir (collectively the “GSL Project”). New York law required that the Hudson River Regulating District “apportion [the] cost [of constructing the Great Sacandaga Lake Reservoir], less the amount which may be chargeable to the state, among the public corporations and parcels of real estate benefited, in proportion to the amount of benefit which will inure to each such public corporation and parcel of real estate by reason of such reservoir.” N.Y. Envtl. Conserv. L. § 15–2121.

1. Assessment and Apportionment

From 1925 until 2010, the District (including its predecessor the Hudson River Regulating District) used the same method for assessing the beneficiaries of the GSL Project.¹ Under this method of apportionment for the upper Hudson River watershed area, the District attributed roughly 95% of the GSL Project's benefits to parcels of land with a fall (or “head”) on the river, and that therefore either derived or had the potential to derive the benefit of increased water-power production from the GSL Project—regardless of whether the property was used for hydroelectric purposes or industrial purposes, or was undeveloped. Among these “head” parcels, the District further allocates costs based on the amount of “head” each landowner possesses on the assessed portion of the Hudson. The District allocates the remaining 5% of the project's benefits to municipalities along the river, which enjoy flood control, river-flow augmentation, and various sanitary improvements thanks to the GSL Project.

In the 1990s, the Federal Energy Regulatory Commission (“FERC”) determined that the GSL Project required a federal license. Prior to that time, the federal government had expressly declined to require that the District secure a license for the project. But the government's approach shifted in the early 1990s, and federal regulators told the District that a federal license would now be necessary. At first, the District fought this change. Ultimately, however, after some negotiation, the District agreed to become a FERC licensee, and in 2000 signed an Offer of Settlement with the federal government, the Department of Environmental Conservation, and other agencies, businesses, and property owners. That agreement provided, inter alia, that the District would continue to fund its operations according to the apportionment scheme established under New York's Environmental Conservation Law, and that the District had a continuing “statutory right” under New York law “to implement changes to its benefits assessments through appropriate [ ] District procedures, which procedures are to be outside the jurisdiction of any new licenses for the subject projects.” In addition, the agreement specified that the District had “initiated a reassessment procedure under Article 15, Title 21 of the New York State Environmental Conservation Law for the Hudson River,” and that it would “publish a public notice of this reassessment procedure” and “make a good faith effort to complete the reassessment procedure in an expeditious manner, by June 30, 2000, or by the adoption of the next three-year budget, whichever first occurs.” In 2009, the District finally undertook a reapportionment.

In 2002, FERC issued a license to the District for the dam and reservoir at the GSL Project (“the project dam and reservoir components (Conklingville Dam and Great Sacandaga Lake) of a unit of hydropower development that also includes a powerhouse and generating facilities”). On the same day, FERC issued licenses to a hydropower company for four hydroelectric projects downstream from the GSL Project, on the Sacandaga and Hudson rivers.

2. The District's Permitting System

In addition to its assessment and apportionment functions, the District regulates some of the land around the Great Sacandaga Lake, including by issuing access permits to nearby residents, businesses, and other groups for certain exclusive-access areas near the lake. The District charges fees for these permits. The District's Hudson River Area Budget is funded by revenues from these permits, annual assessments charged to statutory beneficiaries such as National Grid, and revenues from a hydroelectric site agreement with hydropower company Erie Boulevard Hydropower, L.P., for use of head and water rights at the Conklingville Dam.

B. Plaintiff–Appellant

National Grid is in the business of transmitting and distributing energy to customers in the Northeast. Until 1999, it owned and operated power-generation facilities, including seventy-two hydroelectric power stations in New York. The company has since sold off those hydroelectric-generating stations, although it still owns several parcels of vacant land within the District's boundaries that were assessed by the District for headwater benefits from the GSL Project (the “Subject Parcels”). Until at least 2009, the District assessed the Subject Parcels according to the original 1925 apportionment method described above, even though National Grid was no longer in the business of generating hydroelectric power. The Subject Parcels are currently vacant and undeveloped, and, according to National Grid, “are not hydroelectric generating properties, are not developable as such, and are not FERC licensed to be hydroelectric properties.” The...