Fourth Branch Assoc. v. Fed. Energy Reg. Comm'n, 00-1173

• Decision Date: 19 June 2001
• Docket Number: No. 00-1173,00-1173
• Citation: 253 F.3d 741
• Parties: (D.C. Cir. 2001) Fourth Branch Associates (Mechanicville), Petitioner v. Federal Energy Regulatory Commission, Respondent Niagara Mohawk Power Corporation, Intervenor
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 741

253 F.3d 741 (D.C. Cir. 2001)

Fourth Branch Associates (Mechanicville), Petitioner v. Federal Energy Regulatory Commission, Respondent

Niagara Mohawk Power Corporation, Intervenor

No. 00-1173

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 8, 2001

Decided June 19, 2001

On Petition for Review of Orders of the Federal Energy Regulatory Commission Ben Finkelstein argued the cause for petitioner. With him on the briefs were Frances E. Francis, William S. Huang and Andrea G. Lonian.

Monique L. Watson, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief was Dennis Lane, Solicitor.

William J. Mertens was on the brief for intervenor.

Before: Edwards, Chief Judge, Sentelle and Randolph, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge:

The Federal Energy Regulatory Commission ("FERC") issued a joint license to Fourth Branch Associates (Mechanicville) and Niagara Mohawk Power Corporation to redevelop the Mechanicville Hydroelectric Plant, owned by Niagara Mohawk. The relationship between the co-licensees eroded, and a spate of litigation ensued. Within two years of receiving the license, Fourth Branch filed a complaint with the Commission alleging that Niagara Mohawk was engaging in anticompetitive conduct in violation of the Federal Power Act, see 16 U.S.C. § 803(h), in attempting to limit the power output of the Mechanicville plant by refusing to purchase power from the plant.

After efforts to mediate the dispute failed, the Commission issued an order dismissing the complaint because Fourth Branch had not articulated facts sufficient to establish a claim for anticompetiveness. See Fourth Branch Assocs. (Mechanicville) v. Niagara Mohawk Power Corp., 89 F.E.R.C. p 61,194 (1999). Explaining that the two parties were unable to continue operating the plant--because one is unwilling (Niagara Mohawk) and the other unable (Fourth Branch)-the Commission gave notice of its intent to accept the parties' implied surrender of the Mechanicville license. See id. at 61,598. The Commission subsequently denied Fourth Branch's request for rehearing. See Fourth Branch Assocs. (Mechanicville) v. Niagara Mohawk Power Corp., 90 F.E.R.C. p 61,250 (2000).

Fourth Branch petitions for review of these orders. First, it contends that the finding of implied surrender is unreasonable, arbitrary and capricious, and unsupported by substantial evidence. Second, it maintains that the dismissal of its anticompetitiveness complaint was arbitrary and capricious and not supported by substantial evidence. Because there has been no final agency action, we do not have jurisdiction to consider the implied surrender finding. Additionally, for reasons more fully set out below, we hold that the Commission did not err in dismissing Fourth Branch's complaint.

I. BACKGROUND

The Mechanicville Hydroelectric Plant, located on the Hudson River in New York, is listed on the National Register of Historic Places. In fact, until recently it was the oldest continuously operating hydroelectric plant in the country. The Mechanicville plant is also at the heart of a protracted battle between Fourth Branch and Niagara Mohawk.¹ At various times this battle has been waged before the New York Public Service Commission, the Albany County Supreme Court, the Third Department of the Appellate Division of the New York Supreme Court, the U.S. Bankruptcy Court for the Northern District of New York, the U.S. District Court for the Northern District of New York, the Federal Energy Regulatory Commission--and now this Court.

The relationship between Fourth Branch and Niagara Mohawk began peacefully in 1987, when they applied jointly to redevelop the Mechanicville plant under a new FERC license. In August 1989, the two companies entered into several contracts under which Fourth Branch agreed to operate the plant and Niagara Mohawk agreed to purchase power from the plant. Almost immediately the relationship began to deteriorate.

In 1990, the New York Public Service Commission rejected the power purchase agreement. Three years later, when the companies' efforts to renegotiate the purchase agreement collapsed, Niagara Mohawk terminated the operation agreement. These actions are the basis of ongoing litigation in New York's state courts.

Meanwhile, in 1993, FERC issued the license to Fourth Branch and Niagara Mohawk. The following year, after Niagara Mohawk stopped paying Fourth Branch for power it received from the Mechanicville plant, Fourth Branch filed for Chapter 11 bankruptcy. Fourth Branch asked the bankruptcy court to require Niagara Mohawk to accept and pay for power from the plant. After initially granting the request, the court authorized Niagara Mohawk to "cease accepting electricity" from Fourth Branch. In re Fourth Branch Assocs. Mechanicville, No. 94-10972, slip op. at 2 (Bankr. N.D.N.Y. Nov. 22, 1995) (order granting motion in part and denying motion in part). By 1996, the bankruptcy court dismissed Fourth Branch's Chapter 11 claim for lack of prosecution.

In 1995, Fourth Branch filed a complaint with FERC alleging that Niagara Mohawk was engaging in anticompetitive conduct by attempting to limit the power output of the Mechanicville plant. In March 1996, after asking the parties to apply either for a license transfer or surrender, the Commission ordered that a settlement judge mediate the two companies' dispute. Niagara Mohawk Power Corp., 74 F.E.R.C. p 61,352, 62,081 (1996). Initially, the mediation seemed to be successful: Fourth Branch agreed to purchase Niagara Mohawk's interest in the Mechanicville project. Niagara Mohawk Power Corp., 78 F.E.R.C. p 63,004 (1997). Unfortunately, the success was short lived--Fourth Branch was unable to obtain funding to make the purchase. See id. at 65,127. FERC staff responded by again asking for a plan to transfer the Mechanicville license or surrender it. By that time, Fourth Branch had vacated the Mechanicville plant, "apparently as the result of an eviction action brought by Niagara Mohawk in a New York court." Fourth Branch Assocs., 89 F.E.R.C. at 61,590.

In 1997, Niagara Mohawk moved to dismiss Fourth Branch's complaint. In its motion, Niagara Mohawk contended that the complaint was moot in light of the bankruptcy court's ruling that Niagara Mohawk was not obligated to purchase power from the Mechanicville project. Around this same time, Niagara Mohawk completely stopped producing power at the plant.

The following year, Fourth Branch submitted a unilateral settlement offer, proposing to pay Niagara Mohawk fair market value for its interest in the Mechanicville project. (The value was to be determined by a federal district court in a condemnation proceeding initiated by Fourth Branch.) Within five months, Fourth Branch amended its offer, now proposing that Niagara Mohawk transfer its interest in the plant to Fourth Branch at no cost and then purchase power produced there by Fourth Branch. Not surprisingly, Niagara Mohawk opposed this offer and instead asked the Commission to deem the Mechanicville license impliedly surrendered.

On November 9, 1999, the Commission dismissed Fourth Branch's complaint and unilateral settlement offer. See id. at 61,589. In its decision, the Commission found that the Mechanicville license had not been violated and that the plant was being adequately maintained. See id. at 61,596-97 & n.64. The Commission also concluded that Fourth Branch had not "set forth any facts that warrant a further investigation of its allegation that Niagara Mohawk has engaged in anticompetitive behavior under the Mechanicville license." Id. at 61,597.

Finally, the Commission determined that the "public interest will be best served if the Mechanicville Project license is terminated." Id. It explained that "the doctrine of implied surrender" offered an appropriate resolution to the "exceptional circumstances" of this dispute. Id. at 61,597-98. Consequently, the November 1999 order gave Niagara Mohawk and Fourth Branch notice that the Commission "intend[s] to accept surrender of the license." Id. at 61,598. Accordingly, the Commission instructed its staff to "initiate a proceeding to prepare an environmental analysis, which will include consultation on the disposition of the historic property, to determine what restoration measures are appropriate before an order is issued accepting surrender of the license." Id. at 61,598 n.73.

Fourth Branch requested a rehearing. On March 16, 2000, the Commission denied this request. See Fourth Branch Assocs. (Mechanicville) v. Niagara Mohawk Power Corp., 90 F.E.R.C. p 61,250 (2000). In its denial, the Commission reiterated its earlier conclusions. The Commission also clarified that it will not make a "final decision on whether to accept the implied license surrender until" it has conducted analyses and consultations required under the National Environmental Policy Act, 42 U.S.C. § 4332, and the National Historic Preservation Act, 16 U.S.C. § 470f. 90 F.E.R.C. at 61,840 n.17. In addition, the Commission declared that it would examine "reasonable alternatives to license surrender." Id. at 61,840.

Fourth Branch petitions for review of these orders. In its petition, Fourth Branch primarily argues that (1) the finding that the co-licensees had impliedly surrendered the Mechanicville license is unreasonable, arbitrary and capricious, and unsupported by substantial evidence; and (2) the dismissal of its complaint alleging that Niagara Mohawk had engaged in anticompetitive behavior is arbitrary and capricious and unsupported by substantial evidence. In response, the Commission contends that we lack jurisdiction over Fourth Branch's petition. We must address this contention first.

II. JURISDICTION

Although the Commission maintains both that Fourth Branch lacks standing and that its petition is not ripe for review, we "need not identify every...