Clark-Cowlitz Joint Operating Agency v. F.E.R.C., CLARK-COWLITZ

• Decision Date: 16 January 1986
• Docket Number: No. 83-2231,CLARK-COWLITZ,83-2231
• Citation: 775 F.2d 366
• Parties: , 54 USLW 2239, 69 P.U.R.4th 543 JOINT OPERATING AGENCY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, People of the State of California, et al., Pacific Power & Light Company, Edison Electric Institute, Sacramento Municipal Utility District, et al., Pacific Gas & Electric Company, Public Utility Commissioner of the State of Oregon, Washington State Department of Fisheries, et al., American Paper Institute, Inc., City of Santa Clara, California, et al., American Public Power Association, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 366

775 F.2d 366

249 U.S.App.D.C. 316, 54 USLW 2239,

69 P.U.R.4th 543

CLARK-COWLITZ JOINT OPERATING AGENCY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent People of the State of California, et al., Pacific Power &amp Light Company, Edison Electric Institute, Sacramento Municipal Utility District, et al., Pacific Gas & Electric Company, Public Utility Commissioner of the State of Oregon Washington State Department of Fisheries, et al., American Paper Institute, Inc., City of Santa Clara, California, et al., American Public Power Association, Intervenors.

No. 83-2231.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 18, 1984.

Decided Oct. 22, 1985.

As Amended Oct. 24 and 28, 1985.

Rehearing En Banc Granted, Judgment and Opinion Vacated Jan. 16, 1986.

J. Skelly Wright, Circuit Judge, concurred in part and filed opinion.

Petition for Review of an Order of the Federal Energy Regulatory commission.

Christopher D. Williams, Washington, D.C., with whom Robert L. McCarty, Washington, D.C., was on brief, for petitioner.

Jerome M. Feit, Sol., Federal Energy Regulatory Commission, Washington, D.C., with whom Arlene P. Groner, Atty., Federal Energy Regulatory Commission, Washington, D.C., was on brief, for respondent.

Hugh Smith, Portland, Or., with whom Thomas H. Nelson, Portland, Or., was on brief, for intervenor Pacific Power & Light Company.

James M. Johnson, Olympia, Wash., for intervenors Washington State Department of Fisheries, et al.

Robert C. McDiarmid, Daniel I. Davidson, Frances E. Francis, Marc R. Poirier, G. Philip Nowak and Charles H. Cochran, Washington, D.C., for intervenors Sacramento Municipal Utility District, et al.

James B. Liberman, Washington, D.C., Ira H. Jolles, New York City, and Peter B. Kelsey, Washington, D.C., were on the brief, for intervenors Edison Electric Institute.

Rigdon H. Boykin, New York City, was on brief for intervenor American Paper Institute, Inc.

W. Benny Won, Salem, Or., was on brief for intervenor Public Utility Commissioner of the State of Oregon.

Frederick H. Ritts and Mark D. Nozette, Washington, D.C., were on brief for intervenor American Public Power Association.

J. Calvin Simpson, San Francisco, Cal., entered an appearance for intervenor People of the State of California, et al.

Robert C. McDiarmid and Frances E. Francis, Washington, D.C., entered an appearance for intervenor City of Santa Clara, California, et al.

Malcolm H. Furbush, San Francisco, Cal., entered an appearance for intervenor Pacific Gas & Electric Co.

Before ROBINSON, Chief Judge, and WRIGHT and MIKVA, Circuit Judges.

MIKVA, Circuit Judge:

This case involves a contest over a license to run a major hydroelectric power project in the state of Washington. Its significance, however, extends substantially beyond the instant dispute and raises important questions about the meaning of Sec. 7(a) of the Federal Power Act, 16 U.S.C. Sec. 800(a) (1982), the significance of the definitive precedent interpreting it, and the binding effect of a decision rendered by one of our sister circuits. The resolution of these questions is of considerable importance to the future of hydroelectric power and the nation's utility industry.

Clark-Cowlitz Joint Operating Agency ("Clark-Cowlitz") petitions for review of two Federal Energy Regulatory Commission ("FERC" or "Commission") orders which overturned an Administrative Law Judge's ("ALJ") decision awarding Clark-Cowlitz the license to operate the Merwin Hydroelectric Power Project. After a hearing, the ALJ had determined that the two applicants were "equally well-adapted" to operate the project. Then, relying upon a major FERC decision, City of Bountiful, Utah, 11 F.E.R.C. (CCH) p 61,337 (June 27, 1980), reh'g denied, 12 F.E.R.C. (CCH) p 61,179 (Aug. 21, 1980), aff'd sub nom. Alabama Power Co. v. FERC, 685 F.2d 1311 (11th Cir.1982), cert. denied, 463 U.S. 1230, 103 S.Ct. 3573, 77 L.Ed.2d 1415 (1983) (Bountiful ), which declared the "municipal preference" applicable to relicensings, the ALJ had awarded the new license to the public applicant, Clark-Cowlitz, rather than its rival, the incumbent private applicant Pacific Power & Light Company ("Pacific Power").

On review, the Commission abruptly announced that Bountiful was wrong and that the Commission was not bound to follow it. The Commission asserted that Bountiful's affirmance by the United

States Court of Appeals for the Eleventh Circuit was irrelevant. Equally irrelevant, it claimed, was the fact that the Supreme Court had denied certiorari despite a specific request from the Solicitor General detailing FERC's change of position. Also allegedly irrelevant was the fact that both Merwin applicants had intervened in the Bountiful proceeding. The Commission also asserted that, in any event, because of "broad economic considerations," the two applicants were not equal. Clark-Cowlitz argues that (1) the Commission was bound by res judicata or collateral estoppel and could not overrule Bountiful with respect to the parties, (2) the Bountiful interpretation of the statute is, in fact, the correct one, and (3) that FERC's 'economic impacts' analysis is unreasonable on its face and arbitrary as applied. We find Clark-Cowlitz's contentions substantially correct. Accordingly, we reverse and remand to the Commission for proceedings consistent with this opinion.

FACTS

This case derives from a dispute as to which of two entities is entitled to the license to operate the Merwin Hydroelectric Power Project. Merwin is a dam situated on the Lewis River between Clark County and Cowlitz County, Washington. Merwin creates a reservoir covering about 4,000 acres and containing more than 400,000 acre feet of water and has a capacity of approximately 136 million watts.

Petitioner Clark-Cowlitz is a municipal corporation created for the purpose of seeking the license in question here. It represents a joint effort of the public utilities districts of Clark County and Cowlitz County. Clark-Cowlitz's constituent entities are in charge of electrical distribution in their respective counties and currently receive the bulk of their electricity from the Bonneville Power Administration ("BPA"). If Clark-Cowlitz were to secure the Merwin license, Merwin would supply all its electrical needs and it would no longer need to buy power from BPA. Clark-Cowlitz is a "municipality" within the meaning of the Federal Power Act.

Intervenor Pacific Power is a private corporation and the project's incumbent licensee. It took over the original 50-year license from another private corporation, Inland Power and Light Company ("Inland"). As licensee, Pacific Power has transmitted energy from the project to six states but has not served the communities in the vicinity of the dam. Were Pacific Power to fail in its efforts to have its license renewed, it would be forced to seek alternative sources of supply. Pacific Power does not meet the Federal Power Act's definition of a "municipality."

Like numerous other hydropower projects across the nation, Merwin was originally licensed in the 1920's (specifically 1929) for a 50-year period. Also like other projects, as a result of the absence of a public entity willing and able to undertake the project, Merwin was licensed to a private corporation, Inland. In 1941, the license was transferred--with Commission approval--to Pacific Power. The license was scheduled to expire in 1979. Consequently, in 1976, Pacific Power filed an application for renewal. Shortly thereafter, Public Utility District No. 1 of Clark County and Public Utility District No. 1 of Cowlitz County formed Clark-Cowlitz and filed a competing application.

Numerous other licenses were scheduled to expire at or about the same time as Merwin. Although in many cases the incumbent's application for relicensing was unopposed, in a substantial number, as here, public entities expressed interest in competing. These public entities noted and invoked the statute's "municipal preference" provisions. Section 7(a) of the Federal Power Act, 16 U.S.C. Sec. 800(a) (1982). It immediately became apparent that the preference provisions would be the decisive issue in those cases. One public entity, the City of Bountiful, Utah, recognized that the viability of its application for a project would turn on the municipal preference issue and that an adverse ruling on that issue would render litigation of other issues As soon as the Commission rendered its unanimous decision in Bountiful, Clark-Cowlitz began pressing FERC to schedule its Merwin application for a hearing as soon as possible. Three days before the proceedings were to begin, the United States Court of Appeals for the Eleventh Circuit handed down its decision affirming Bountiful. The Eleventh Circuit found FERC's conclusion (that the statutory municipal preference applied to all relicensing as well as to original licensing) correct. The court went a step further and noted that the alternative interpretation urged by the private utilities would lead to "absurd" results. Alabama Power Co. v. FERC, 685 F.2d 1311, 1318 (11th Cir.1982).

virtually superfluous. Accordingly, Bountiful moved for a declaratory determination that the municipal preference applied in relicensings. Other parties who were facing relicensing proceedings in which municipal preference would be determinative moved to intervene in that proceeding. All the applications for intervention were granted. In effect, Bountiful and the intervenors sought separate trials; a first trial in which the issue of law common to all the proceedings would be definitively resolved; and then individual trials in each case to resolve the largely factual questions which would determine whether the applicants were in fact equally well adapted. The Commission agreed that the proposed format was both appropriate from a legal point of view and desirable from the standpoint of consistency and efficiency. The...