City of Anaheim, Cal. v. Duncan
| Decision Date | 13 October 1981 |
| Docket Number | No. 79-3803,79-3803 |
| Citation | 658 F.2d 1326 |
| Parties | CITY OF ANAHEIM, CALIFORNIA, City of Riverside, California, and City of Banning, California, Plaintiffs-Appellants, v. Charles W. DUNCAN, * individually and as Secretary of Energy, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robert L. Klarquist, Washington, D. C., Daniel J. McAuliffe, Phoenix, Ariz., argued for defendants-appellees; Richard S. Allemann, Asst. U. S. Atty., Snell & Wilmer, Phoenix, Ariz., on brief.
Appeal from the United States District Court for the District of Arizona.
Before GOODWIN, SKOPIL and REINHARDT, Circuit Judges.
The cities of Anaheim, Banning and Riverside appeal from the summary judgment entered in favor of the appellees, various government officials and agencies and several private utility companies (hereinafter "the utilities"). This is the fourth appeal arising out of the Navajo thermal-generation power plant in Page, Arizona. 1 The Navajo plant eventually will supply power to the United States for the Central Arizona Project ("CAP"). See Arizona Power Pooling Association v. Morton, 527 F.2d 721 (9th Cir. 1975), cert. denied, 425 U.S. 911, 96 S.Ct. 1506, 47 L.Ed.2d 761 (1976), for an exhaustive discussion of these projects. The facts of this case are set forth at length in City of Anaheim v. Kleppe, 590 F.2d 285 (9th Cir. 1978) (). 2
In 1968 the United States first considered participating in the Navajo thermal-generation power plant in order to have power available for CAP. The Navajo plant was expected to become operational in 1974. The United States did not expect to be able to use the power until 1980. Thus, before it would commit itself to the Navajo project, the United States sought firm commitments from other users to buy the "interim power" (i.e., the power generated from 1974 to 1980). For various reasons, the United States had only three months to find such purchasers. 3 During this period Anaheim was aware that the United States was seeking to sell the "interim power," 4 but Banning and Riverside were not. At this time none of the cities had the transmission capacity to accept the interim power. After some difficulty the United States obtained firm commitments from the private utility companies to buy the interim power. 5
In 1972 Anaheim developed the ability to receive power from the Navajo plant. 6 It offered to buy the interim power. The United States refused because it had already contracted to sell the power to the utilities. The cities sued. The district court granted summary judgment in favor of the utilities and the government.
The cities make three different arguments, but all are based on the "preference clause" of the Federal Reclamation Act of 1939. 7 The preference clause applies to the interim power generated at the Navajo plant, see Arizona Power Pooling Association v. Morton, supra, 527 F.2d at 725, and requires that preference in sales be given to certain entities, including municipalities. All of the appellants are preference entities, none of the utilities are.
The cities' first argument is that the United States' obligation to contract with preference entities is triggered by an affirmative expression of interest, which need not amount to a formal offer. They argue that Anaheim made a sufficient expression of interest. The cities next argue that the sale of power to nonpreference entities was illegal because Banning and Riverside (preference entities) were not notified of the intended sale. They also argue that the contracts with the private utilities should have contained a "withdrawability" provision allowing the United States to withdraw power from nonpreference entities in order to supply preference customers.
We begin with the first argument. The body of law relative to the preference clause is limited. It consists of three other Navajo plant cases, see n.1, supra, and an Attorney General Opinion construing a similar preference clause. 8 41 Op.Att'y.Gen. 236 (1955) (the "Clark Hill" opinion). The cities rely heavily on the following language from the Clark Hill opinion:
"(I)f there are two competing offers to purchase such power, one by a preference customer and the other by a non-preference customer, and the former does not have at the time the physical means to take and distribute the power, the Secretary of the Interior must contract with the preference customer on condition that within a reasonable time to be fixed by him, it will obtain the means for taking and distributing the power." Id.
The cities argue that this means that the government had the duty not to contract with nonpreference entities once a preference entity indicated that if the transmission means were available it would buy the power. The cities argue that any other construction would render Clark Hill meaningless because they could not make an offer until they knew that they could accept the power.
We need not decide what constitutes an "offer" or the degree of interest required to trigger the preference clause. This case is much simpler. It is undisputed that the Secretary of the Interior had to advise Congress by September 30, 1969, whether to proceed with the Navajo plant. 9 It is also undisputed that the Secretary would have advised participating only if the United States had firm commitments to buy the interim power. Thus, it is clear that in this case if a contract to sell the power were to be made, the commitments to buy the power would have to be made before September 30, 1969. The cities do not argue that they offered to buy the power in 1969. They do not even argue that they made a conditional offer to buy the power at some future time. Nor do they argue that there was any possibility in 1969 that they would offer to buy the power. 10 The United States did not refuse to contract with anyone; in fact, it was aggressively looking for a buyer.
In essence the cities ask us to hold that the United States must refrain from contracting with a nonpreference entity if a preference entity might be willing at some future date, several years away, to contract for the same power. The cities ignore the reality that the government was not in a position to wait. The government had to contract immediately or forget the project. The preference clause does not require an absurd result.
The legislative history shows exactly what was intended by Congress. There was extensive debate over the preference clause. 84 Cong.Rec. 10219-26 (1939). The original house bill (H.R. 6984) contained a preference clause similar to the one that was enacted. The House Committee struck the preference provisions. The Senate proposed an amendment which inserted the existing preference clause into the bill. With one dissenting vote, the joint conference committee on the bill endorsed the amendment. See S.Rep. 758, 76th Cong., 1st Sess. 3 (1939); H.R.Rep. 1252, 76th Cong., 1st Sess. 2 (1939).
The thrust of the debate over the preference clause was whether the amendment improperly "brought the power question into an irrigation and reclamation project." Id. at 10222 (remarks of Representative Winter). One opponent of the preference clause argued that "the effect of the Senate's amendment is to change the emphasis in this bill from reclamation and water conservation to power promotion." Id. at 10223 (remarks of Representative Case).
The proponents of the amendment argued that the opponents were making "a mountain out of a mole hill." Id. at 10223 (remarks of Representative Murdock). They stated that the amendment merely codified existing practice. Id. at 10221 (remarks of Representative Connor). Proponents met the attacks on the amendment by stating that it did not give preference to power over reclamation. See, e. g., id. 10220 (remarks of Representative White). Moreover, the proponents of the preference clause saw it as a means to further reclamation and water conservation purposes. Id. at 10223 (remarks of Representative Murdock).
In this case, the interpretation urged by the municipalities conflicts with the legislative intent. Their interpretation would have impeded, if not indeed cancelled, the government's involvement, and the Navajo project. The preference clause was not meant to interfere with the primary purpose of the act water conservation and reclamation. Thus, we conclude that the legislative history does not support the result urged by the municipalities. Accord, 30 Op.Att'y.Gen. 197 (1912) .
Thus, we hold that given the facts of this case and the unique time pressure under which the United States was operating, the government did not violate the preference clause when it contracted in 1969 to sell the interim power to the utilities.
We now turn to the third argument made by the cities. They argue that the contract with the utilities should have contained a "withdrawability" clause. They cite the following language from the Clark Hill opinion:
"If ... the preference customer does not (contract with the United States) ... the Secretary is then authorized to contract with the non-preference customer, subject to the condition that should the preference customer subsequently obtain the means to take and distribute the power, the Secretary will be enabled to deal with the preference customer." 41 Op.Att'y.Gen. at 236.
We need not and do not decide whether, in the normal case, a withdrawal and renegotiation clause is required. Even assuming that...
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