International Paper Co. v. F.E.R.C.

Decision Date22 June 1984
Docket NumberNo. 83-2032,83-2032
PartiesINTERNATIONAL PAPER COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Long Lake Energy Corporation, New York State Department of Environmental Conservation, Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

John W. Gulliver, Portland, Maine, with whom Thomas R. Doyle, Portland, Maine, was on the brief, for petitioner.

Arlene Pianko Groner, Atty., F.E.R.C., Washington, D.C., with whom Stephen R. Melton, Acting Gen. Counsel, and Barbara J. Weller, Deputy Solicitor, F.E.R.C., Washington, D.C., were on the brief, for respondent.

Marvin S. Lieberman, Washington, D.C., with whom Ann L. Rasenberger, Washington, D.C., was on the brief, for intervenor, Long Lake Energy Corp.

Robert Abrams, New York City, and N.P. Wardwell, Watertown, N.Y., were on the brief, for intervenor, New York State Dept. of Environmental Conservation. Charles W. Garrison, Washington, D.C., also entered an appearance for intervenor, New York State Dept. of Environmental Conservation.

Before MIKVA, BORK and STARR, Circuit Judges.

Opinion for the Court filed by Circuit Judge BORK.

BORK, Circuit Judge:

International Paper Company seeks review of a Federal Energy Regulatory Commission order vacating two exemptions from the hydroelectric licensing requirements of the Federal Power Act, 16 U.S.C. Secs. 791a-825r (1982). Because we find the Commission had no authority to vacate the exemptions, we reverse.

I.
A.

This court explained the procedure by which certain hydroelectric projects are exempted from the licensing requirements of the Federal Power Act in Hirschey v FERC, 701 F.2d 215 (D.C.Cir.1983). Part I of the Federal Power Act makes it unlawful for any person, "for the purpose of developing electric power, to construct, operate, or maintain a dam ... across, along, or in any of the navigable waters of the United States, ... except under and in accordance with the terms of a ... license granted pursuant to [the Act]." 16 U.S.C. Sec. 817 (1982). But FERC may relieve hydroelectric projects below a certain size from the Act's requirements. Section 405 of the Public Utilities Regulatory Policy Act of 1978, 16 U.S.C. Sec. 2705 (1982), allows the Commission, by rule or order, to "grant an exemption ... from the requirements (including the licensing requirements) of Part I of the [Act] to small hydroelectric power projects having a proposed installed capacity of 5,000 kilowatts [5 MW] or less...." 16 U.S.C. Sec. 2705(d) (1982).

The exemption procedures are governed by regulation. Applications are initially reviewed by the Commission staff to ensure compliance with the filing requirements. 18 C.F.R. Secs. 4.105(b), 4.31(c)-(g) (1983). If the filing is in compliance, the Commission notifies the applicant that its application has been accepted for filing. 18 C.F.R. Sec. 4.31(c)(1). Acceptance for filing does not preclude the Commission from later rejecting the application; however, it does indicate that the applicant has conformed to the Commission's rules for exemption applications.

FERC then gives public notice of the filing and invites protests, petitions to intervene, or competitive proposals. 18 C.F.R. Sec. 4.31(c)(2). Under its own rules, the Commission has 120 days to act on an application for an exemption. Unless the Commission affirmatively acts to grant the exemption in whole or in part, deny the exemption, or to suspend the 120-day rule, the application is automatically "deemed to be found consistent with the public interest and granted." 18 C.F.R. Sec. 4.105(b)(4)-(5). 1

That decision is final unless a rehearing is allowed. Any party may petition for rehearing within 30 days after the grant of an exemption; if no rehearing petition is timely filed, however, the exemption grant becomes unreviewable. 16 U.S.C. Sec. 825 l (1982). 2

Commission rules also provide that where mutually exclusive license applications are filed, the first-filed applicant will be favored "unless the Commission determines the plans of the subsequent applicant would better develop the ... affected water resources." 18 C.F.R. Sec. 4.104(e)(2) (the "first-in-time" rule). Notwithstanding FERC's representation to the contrary, see Brief for Respondent at 21-24, this rule does not mandate a comparative evaluation of the competing applications, Hirschey, 701 F.2d at 219; the decision to engage in formal comparative evaluation is a "purely discretionary matter." Id.

B.

In Hirschey, petitioner had applied for, and received, a license exemption pursuant to the automatic exemption rule. Although no party had sought rehearing, the Commission sua sponte vacated the exemption. FERC asserted that it had inadvertently failed to suspend the 120-day rule and that because mutually exclusive applications had been filed, a comparative evaluation of the competing proposals was required. According to the Commission, vacating Hirschey's exemption was therefore necessary. 701 F.2d at 217.

On appeal, FERC contended that it had authority to vacate petitioner's exemption under sections 313(a) and 309 of the Federal Power Act. 3 The court rejected these contentions. Section 313(a), the court said, gave the Commission power to correct its orders before the record on appeal had been filed or " 'the time for filing a petition for judicial review ha[d] expired.' " 701 F.2d at 218 (emphasis in original) (quoting Pan American Petroleum Corp. v. FPC, 322 F.2d 999, 1004 (D.C.Cir.), cert. denied, 375 U.S. 941, 84 S.Ct. 346, 11 L.Ed.2d 272 (1963)). Because the time for seeking appellate review had expired, the court held that "section 313(a) provide[d] no authority for the FERC's action ...." Id.

Resort to section 309 was equally unavailing. That section, the court found, simply had no application to this case:

The general authority of section 309 does not empower the FERC to vacate final and nonreviewable license exemptions. To imply such authority from section 309 would make a sham of the carefully crafted license exemption regulations and render superfluous the specific revocation procedures set forth in 18 C.F.R. Sec. 4.106.

701 F.2d at 218 (emphasis in original) (footnote omitted).

According to the Hirschey court, "the grant of exemption marks the end of the application proceeding." 701 F.2d at 218. While FERC had statutory authority to act upon the application--even to reject it--within the 120-day period, when the Commission did not act within the relevant time, "petitioner's application was automatically granted by virtue of Commission inaction with respect to a purely discretionary matter." Id. at 219. The opinion's conclusion as to the Commission's power to vacate an exemption was unequivocal:

The exemption, when finally granted and the time fixed for rehearing it has passed, is not subject to revocation in whole or in part except as specifically authorized by Congress. Consequently, the Commission was without authority to revoke the exemption.

Id. at 218 (emphasis in original) (citations omitted).

Hirschey rejected the Commission's argument that a comparative evaluation of competing applications was required: "FERC can point to nothing in the relevant statutes or regulations, or in any proven agency practice, that requires comparative evaluation of mutually exclusive applications for exemptions. Although 18 C.F.R. Sec. 4.104(e)(2) contemplates the filing of competing applications, that provision simply provides that the first filed will be favored unless the FERC affirmatively finds that the later filed application is measurably better." 701 F.2d at 219 (emphasis in original) (footnote omitted).

The opinion concluded that strong policy reasons underlie the requirement that the Commission be bound by its own rules:

There is a strong interest in repose under any regime of legal rules. And particularly in this context--given the expense of developing hydroelectric projects--applicants, other potential investors and lending institutions must be able confidently to rely on the predictability of the FERC's procedural rules. To sustain the sudden reversal of a final and nonreviewable FERC decision on nothing more than an assertion of inadvertent error would run contrary to these important interests.

701 F.2d at 219-20 (emphasis in original).

C.

This dispute is identical in all material respects to the Hirschey case. On December 14, 1981, International Paper filed applications for exemptions for two distinct projects which would use already-existing dams on the Lachute River in New York State. Those applications competed with the previously-filed license applications of the intervenors, Long Lake Energy Corporation and the State of New York. Both intervenors were served with notice of petitioner's filing. Brief for Petitioner at 7-8. Long Lake moved, at that time, to have petitioner's applications rejected, arguing that International Paper's two proposals were, in effect, a single project that exceeded the 5 MW limit for exemptions. Long Lake also asserted that petitioner did not possess the requisite property interests to qualify for an exemption. Brief for Respondent at 6.

The Commission did not respond to Intervenor's objections; instead, FERC notified International Paper on February 11, 1982 that its applications had been accepted for filing, and that both exemptions would automatically be granted unless the Commission acted upon them within 120 days. See Joint Appendix ("J.A.") at 35-40. 4

The Commission did not act within the 120-day period. International Paper's exemption applications were thus "deemed ... consistent with the public interest and granted" by operation of law on June 11, 1982. On that date the thirty-day period for filing petitions for rehearing began to run. Despite having filed competing license applications and having notice of the Commission's prior acceptance, neither intervenor filed a petition for...

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