Appomattox River Water Authority v. F.E.R.C., 83-1932

• Decision Date: 21 June 1984
• Docket Number: No. 83-1932,83-1932
• Citation: 736 F.2d 1000
• Parties: APPOMATTOX RIVER WATER AUTHORITY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Brasfield Development Ltd., Intervenor.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1000

736 F.2d 1000

APPOMATTOX RIVER WATER AUTHORITY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Brasfield Development Ltd., Intervenor.

No. 83-1932.

United States Court of Appeals Fourth Circuit.

Argued April 2, 1984.

Decided June 21, 1984.

McNiell Watkins, II, Washington, D.C. (Bishop, Liberman, Cook, Purcell & Reynolds, Washington, D.C., on brief), for petitioner.

Joel M. Cockrell, Washington, D.C. (Stephen R. Melton, Acting Gen. Counsel, Barbara J. Weller, Deputy Sol., Washington, D.C., on brief), for respondent.

Peter C. Lesch, Washington, D.C. (Gallagher, Boland, Meiburger & Brosnan, Washington, D.C., on brief), for intervenor Brasfield Development Ltd.

Before HALL, ERVIN, and CHAPMAN, Circuit Judges.

K.K. HALL, Circuit Judge:

Appomattox River Water Authority (the "Authority") petitions for review of an order by the Federal Energy Regulatory Commission (the "FERC") issuing a preliminary permit to Brasfield Dam Development, Ltd. ("Brasfield"), and denying a permit to the Authority, for exploration of the development of hydroelectric power. We affirm.

I.

The George F. Brasfield Dam is located on the Appomattox River approximately five miles upstream of the City of Petersburg in Chesterfield County, Virginia. A reservoir, Lake Chesdin, is impounded by the dam to provide water for the area's residents and for recreation. Brasfield and the Authority filed competing applications for a preliminary permit to explore the development of hydroelectric power at the dam.

On October 27, 1980, Brasfield filed its application. Brasfield's proposed plan included: (1) use of the existing dam; (2) use of the existing reservoir; (3) construction of a proposed powerhouse with an estimated installed generating capacity of 4,500 kilowatts ("kw") and an estimated installed average annual energy output of 24,100 megawatt-hours ("mwh"); and (4) potential upgrading of approximately 2.5 miles of a low voltage transmission line to interconnect with a major transmission line of Virginia Electric Power Company (VEPCO). Brasfield proposed to sell the power produced at the facility to either the Authority or VEPCO.

More than three months later, on February 10, 1981, the Authority filed a competing, preliminary permit application. Its proposed plan included: (1) use of the existing dam; (2) use of the existing reservoir; (3) construction of a proposed powerhouse with an estimated installed generating capacity of 6,000 kw and an estimated annual average output of 21,000 mwh; and (4) construction of a small power line to interconnect with VEPCO's line. The Authority proposed to utilize some of the power produced at the facility itself and to sell some of the power to VEPCO. The Authority's application, as second filed, also contained a statement of reasons why its plan was better adapted than the plan submitted by Brasfield, "to develop, conserve, and utilize in the public interest the water resources of the region." ¹

On August 26, 1981, the Director of the FERC's Office of Electric Power Regulation (the "Director"), issued a preliminary permit to Brasfield. The Director found that neither applicant had presented a plan for hydroelectric generation based on detailed studies and concluded that, at this early stage, there were no significant, substantiated differences in the two applications which would enable him to determine which plan was superior. Relying on the FERC's first-to-file regulation, 18 C.F.R. Sec. 4.33(g)(2), ² the Director denied the Authority's application.

The Authority appealed, contending: (1) that the FERC should prefer local ownership of and responsibility for the project over an absentee landlord; (2) that development by the Authority was more feasible than development by Brasfield; and (3) that hydroelectric development by a party other than the Authority would conflict with the project's function as a water supply. The FERC held that the Authority's contentions were "unsubstantiated and at the permit stage not dispositive since permit proposals are speculative in nature." The FERC concluded that geographic distance from the proposed site was not a determining factor in evaluating permit proposals. The FERC further concluded that to base a best-adapted finding at the permit stage on alleged lower cost would be premature since the plans of both Brasfield and Appomattox were supported by only preliminary studies and estimates. The FERC, therefore, denied the appeal and affirmed the decision of the Director. The Authority petitions this Court for review.

II.

On appeal, the Authority contends that the FERC erred in failing to evaluate and compare the merits of the two competing applications for preliminary permit and in awarding a permit to the first applicant to file. The Authority maintains that it was the superior applicant. First, the Authority argues that because it owns the dam and reservoir and has established a superior record of stewardship of the land and resources, it is singularly qualified to discharge the public interest responsibilities of licensees. Second, it argues that its development of the project would be economically superior to that proposed by Brasfield primarily because it will not incur any costs for the acquisition of the dam, reservoir, and lands underlying the project. Finally, the Authority argues that the FERC did not meaningfully compare the merits of the applications and that its reasons for refusing to evaluate the Authority's evidence are inadequate and irrelevant. We disagree.

The Federal Power Act, 16 U.S.C. Secs. 791a et seq., authorizes the FERC to regulate the development of hydroelectric power on United States land or on waters over which Congress has jurisdiction. The FERC exercises that authority by issuing licenses or granting exemptions from licensing for the construction and maintenance of the necessary facilities for such water development. Id. Secs. 797(e); 823a; 2705(d).

The Act, as a predicate to the licensing process, authorizes the FERC to issue preliminary permits to enable prospective license applicants to gather data for submission of license applications and obtain necessary financial commitments. Id. Sec. 797(f). FERC regulations require applicants for a preliminary permit to submit the following information: (1) a description of the proposed project; (2) a description of studies conducted or proposed to be conducted during the term of the preliminary permit; and (3) a statement of estimated costs and expected sources of financing. 18 C.F.R. Sec. 4.81.

Where more than one person applies for a preliminary permit, the Act creates a mandatory preference for applications by states and municipalities and:

[A]s between other applicants, the Commission may give preference to the applicant the plans of which it finds and determines are best adapted to develop, conserve, and utilize in the public interest the water resources of the region, if it be satisfied as to the ability of the applicant to carry out such plans.

16 U.S.C. Sec. 800(a). In all other cases, if the FERC finds the preliminary proposals equally well-adapted to efficient use of the water, the first filing party receives the permit. 18 C.F.R. Sec. 4.33(g)(2). A preliminary permittee maintains priority of application for a license against potential rivals for the period of the permit, not to exceed three years, during which time the recipient may conduct the necessary examinations and surveys, prepare maps, plans, specifications, and estimates, and make financial arrangements. 16 U.S.C. Sec. 798.

At the licensing stage, the FERC accepts and evaluates proposals from all interested parties. More detailed information is required of license applicants than permit applicants. 16 U.S.C. Sec. 802; 18 C.F.R. Secs. 4.40-.70. The licensee will not necessarily be the permittee; however, if license applicants' plans are equally well-adapted, the FERC will prefer the permittee. 16 U.S.C. Secs. 798, 800; 18 C.F.R. Sec. 4.33(h)(1).

The scope of our review of the FERC's action is narrow. This Court may set aside the FERC's order only if we find it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, 5 U.S.C. Sec. 706(2)(A), or unsupported by substantial evidence, id. Sec. 706(2)(E), 16 U.S.C. Sec. 825 l(b). See also City of Dothan, Alabama v. FERC, 684 F.2d 159,...