Wolverine Power Co. v. F.E.R.C.

• Decision Date: 17 June 1992
• Docket Number: No. 90-1597,90-1597
• Citation: 963 F.2d 446
• Parties: , 131 P.U.R.4th 603, 22 Envtl. L. Rep. 21,429 WOLVERINE POWER COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 446

963 F.2d 446

295 U.S.App.D.C. 343, 131 P.U.R.4th 603,

22 Envtl. L. Rep. 21,429

WOLVERINE POWER COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 90-1597.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 1, 1991.

Decided May 5, 1992.

As Amended June 17, 1992.

Thomas E. Mark, with whom Ronald D. Jones, New York City, and Louis Rosenman, Washington, D.C., were on the brief, for petitioner.

Timm L. Aberdroth, Atty., F.E.R.C., with whom William S. Scherman, Gen. Counsel, and Jerome M. Feit, Sol., Washington, D.C., were on the brief, for respondent.

Henri D. Bartholomot and Peter B. Kelsey, for Edison Elec. Institute, et al., Jonathan W. Gottlieb, Washington, D.C., for Nat. Hydropower Ass'n and Amy S. Koch, Washington, D.C., for American Paper Institute, were on the joint brief, for amici curiae.

Before MIKVA, Chief Judge, HENDERSON and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge:

In 1986, Congress enacted the Electric Consumers Protection Act (ECPA), Pub.L. No. 99-495, 100 Stat. 1243 (1986), amending the Federal Power Act (FPA), 16 U.S.C. §§ 791a et seq. As part of the ECPA, Congress added section 31(c) of the FPA, 16 U.S.C. § 823b. Section 31(c) grants the Federal Energy Regulatory Commission (FERC) the authority to assess a civil penalty of up to $10,000 a day against "[a]ny licensee, permittee, or exemptee who violates or fails or refuses to comply" with, inter alia, FERC's regulations governing hydroelectric facilities. FERC assessed a civil penalty ($2,024,000) against Wolverine Power Company (Wolverine), an unlicensed utility, based on Wolverine's long-time failure to obtain the licenses required to operate several of its hydroelectric plants. ¹ The issue in this petition for review is whether section 31(c) authorizes FERC to assess a civil penalty against Wolverine. Because we conclude that section 31(c) does not authorize the imposition of a civil penalty on an unlicensed individual or entity, we grant the petition.

I.

Petitioner Wolverine owns and operates four hydroelectric plants on the Tittabawasee River in east-central Michigan. The plants are located at Sanford, Edenville, Smallwood and Secord, Michigan.

In February 1976, the Federal Power Commission, FERC's predecessor, ordered Wolverine to obtain licenses for its four plants. In December 1976, Wolverine filed an application for the Sanford plant and also proposed a filing schedule for the remaining plants which FERC accepted in February 1977. In April 1978, however, FERC found the Sanford application deficient. FERC dismissed the application in May 1980, after Wolverine failed to correct the deficiencies.

Then, in January 1983, Wolverine, having received several letters from FERC threatening civil and criminal action for failing to obtain licensure, filed a revised application for the Sanford plant. In October 1983, FERC accepted the application. For over three more years, however, Wolverine did not file license applications for its other three plants. Finally, in 1986, during a field inspection, FERC expressed its concern with Wolverine's failure to file the applications. In September 1986, Wolverine pledged to file the remaining applications by March 1, 1987. Wolverine filed the applications by January 7, 1987.

On March 30, 1987, FERC rejected the remaining applications because Wolverine had failed to provide necessary information ² and to consult with the United States Fish and Wildlife Service (FWS) and the Michigan Department of Natural Resources (MDNR) as required by 18 C.F.R. § 4.38. FERC gave Wolverine 45 days to consult with the agencies and 180 days to file additional information. When Wolverine failed to comply by July 30, 1987, FERC dismissed the three pending applications and advised Wolverine that its continued operation of the unlicensed plants would violate section 23(b) of the FPA, 16 U.S.C. § 817.

Shortly thereafter, on August 12, 1987, Wolverine informed FERC of its desire to comply with the licensing requirements and proceeded to prepare new applications. In brief, Wolverine conducted additional environmental studies, consulted as required with FWS and MDNR and revised its applications, filing them on July 24, 1989. On April 19, 1990, FERC conditionally accepted the applications as of their filing date and formally accepted them on July 13, 1990.

During the course of these events, as we noted initially, Congress enacted the ECPA, which amended the FPA by adding section 31. Thereafter, on August 6, 1987, FERC issued a notice of proposed rulemaking providing that, under the authority of section 31, it would assess civil penalties against "a person who engages in conduct requiring a license or exemption but fails to obtain one." Procedures for the Assessment of Civil Penalties Under Section 31 of the Federal Power Act, 52 Fed.Reg. 29,216, 29,217 (1987). "On August 17, 1988, the rule became final, Procedures for the Assessment of Civil Penalties Under Section 31 of the Federal Power Act, 53 Fed.Reg. 32,035 (1988), and is codified at 18 C.F.R. § 385.1502(b). ³ "

On February 23, 1989, FERC issued a notice of proposed penalty charging Wolverine with violating section 23(b) of the FPA, 16 U.S.C. § 817, for its failure to obtain licenses for the Edenville, Smallwood and Secord plants. The notice proposed penalties totalling $2,000 a day, ⁴ with the violations running from the date of the ECPA's enactment (October 16, 1986) until Wolverine filed acceptable applications. The case was set for hearing before an administrative law judge (ALJ).

The hearing was held and on May 18, 1990, the ALJ concluded that Wolverine had violated the licensing requirements of section 23(b) of the FPA, 16 U.S.C. § 817. Wolverine Power Corp. 51 Fed.Energy Reg.Comm'n Rep. (CCH) p 63,012, 65,061 (1990) (initial decision). The ALJ noted Wolverine's "long continuing violations in the face of its actual knowledge" of the licensing requirements. Id. at 65,062. He also found there had been some environmental damage from Wolverine's operations even though the extent could not be fully determined because Wolverine had failed to perform the studies required by FWS and MDNR. Id. He further found that Wolverine had gained economic benefits ⁵ as a result of its unlicensed operations and that Wolverine had failed to make "meaningful remedial attempts" to obtain the required licenses. Id. at 65,062-64. The ALJ then reduced the penalty amount from $2000 to $400 a day and recommended that no penalty be imposed for the period from October 16, 1986, the date section 31 was enacted, until July 30, 1987, when FERC dismissed Wolverine's three applications. Id. at 65,066.

On review, FERC began by rejecting Wolverine's claim that section 31 does not authorize the imposition of a civil penalty against an unlicensed operator. Wolverine Power Corp., 53 Fed.Energy Reg.Comm'n Rep. (CCH) p 61,062, 61,197 (1990) (order modifying initial decision). FERC then reviewed the ALJ's findings. It rejected the finding that Wolverine had caused environmental damage, terming "the real issue" as "whether Wolverine's conduct precluded timely assessment and resolution of the potential environmental impact." Id. at 61,198. FERC concluded that "Wolverine's delay in filing its applications made it impossible for the Commission to assess the impact of its operations on a timely basis, and to timely remedy such adverse impact if it was occurring." Id. FERC also rejected the ALJ's finding that Wolverine had benefited economically by delaying licensing and continuing "peaking operations," stating that it could not speculate whether the licenses for Wolverine's remaining plants would limit them to "run of the river" operations. Id. at 61,198-99. FERC thus found this factor irrelevant to the sanction issue. Id.

FERC then lowered the boom. First, it rejected the ALJ's decision that the violation period run from July 31, 1987, until April 19, 1990. Id. at 61,199. Instead, FERC decided that the violations subject to sanction occurred from October 16, 1986, the date section 31(c) was enacted, until July 31, 1987. Id. FERC then noted that it did not consider Wolverine's ability to pay because of the "murky" evidence on that factor. Id.

Finally, FERC summarized its view of the record:

The factual record before us in this case ... reveals a flagrant, sustained, knowing, concerted, "contumacious" pattern of conduct that challenges the fundamental integrity of the Commission's regulatory processes, and of the statutory authority we are charged with implementing. Wolverine has manipulated and abused our regulatory processes for fourteen years, while operating its hydroelectric facilities without the licenses required by the Federal Power Act. That fundamental challenge to the integrity of our legal system substantially outweighs all of the other considerations argued to us.

Id. at 61,200. FERC then assessed a $2,024,000 civil penalty against Wolverine for its operation of the three unlicensed plants from October 16, 1986, through July 23, 1989. ⁶ Id. Wolverine brought this petition for review, challenging FERC's interpretation of its authority under section 31(c) to impose a civil penalty on an unlicensed individual or entity required to be licensed under the FPA. ⁷

II.

In reviewing an agency's interpretation of a statute it is charged with administering, this Court must apply the methodology prescribed by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under Chevron, we must first determine "whether Congress has directly spoken to the precise question at issue." 467 U.S. at 842, 104 S.Ct. at 2781. If so, our task is at an end for we "must give effect to the unambiguously expressed intent of Congress." 467 U.S. at 842-43, 104 S.Ct. at 2781-82. But "if the statute...