Montana Power Company v. Federal Power Commission

• Decision Date: 11 May 1964
• Docket Number: No. 18451.,18451.
• Citation: 330 F.2d 781
• Parties: The MONTANA POWER COMPANY, a Montana corporation, Petitioner, v. The FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

330 F.2d 781 (1964)

The MONTANA POWER COMPANY, a Montana corporation, Petitioner, v. The FEDERAL POWER COMMISSION, Respondent.

No. 18451.

United States Court of Appeals Ninth Circuit.

April 14, 1964.

Rehearings Denied May 25 and June 11, 1964.

William H. Coldiron and John C. Hauck, Butte, Mont., Weir, Gough & Booth, and Edwin S. Booth, Helena, Mont., and Willard W. Gatchell, Washington, D. C., for petitioner.

Richard A. Solomon, Gen. Counsel, Howard E. Wahrenbrock, Sol., Thomas M. Debevoise, Asst. Gen. Counsel, and Paul A. Sweeney, Sp. Consultant, Federal Power Commission, Washington, D. C., for respondent.

Before MERRILL and DUNIWAY, Circuit Judges, and FRED M. TAYLOR, District Judge.

FRED M. TAYLOR, District Judge, and DUNIWAY, Circuit Judge.

The Montana Power Company, a Montana corporation, has petitioned us to review an order of the Federal Power Commission issued on October 12, 1962, granting to the petitioner a license pursuant to Section 4(e) of the Federal Power Act, 16 U.S.C. § 797(e). Petitioner filed an application for rehearing which was denied by the Commission on December 13, 1962, as to the questions presented here. We have jurisdiction to review the Commission's order by virtue of § 313(b) of the Act, 16 U.S.C. § 825l (b). The facts presented on this review are not in dispute.

The Montana Power Company, a New Jersey Corporation (hereinafter referred to as Montana-New Jersey), was authorized to do business in the States of Montana, Idaho and Wyoming. In 1916 it secured from the United States Department of Agriculture a permit to perform preliminary work on a proposed hydroelectric facility in the State of Montana known as the Mystic Lake Project. In 1919, after preliminary work had been completed, Montana-New Jersey filed application for a Final Power Permit. On May 27, 1920, the Acting Secretary of Agriculture issued the Final Power Permit to occupy certain lands in the State of Montana and construct and operate thereon certain project works, to be known as the Mystic Lake Hydroelectric Development, for the purpose "of storing, conducting, and, or, using water for the development of power or the transmission, distribution, and use of power."¹ The permit provided that it should terminate and become void on the 31st day of December, 1969, but that the permittee could apply for a new permit before that date, and that the permittee could transfer the permit with the approval of the Secretary.²

The Mystic Lake Development was in full operation in 1926 and thereafter Montana-New Jersey produced, distributed and sold electric energy within the States of Montana, Idaho and Wyoming.

In 1961, Montana Power Company, a Montana corporation (hereinafter referred to as Montana-Montana), was organized and an agreement of merger dated April 19, 1961, was entered into between it and Montana-New Jersey for the purpose of transferring the domicile of the corporation from the State of New Jersey to the State of Montana. By this agreement all property, assets, debts, and liabilities of Montana-New Jersey would be transferred to Montana-Montana and it would then be the surviving entity. The officers and directors of Montana-Montana were authorized by the agreement to take any and all necessary actions to effectuate the transfer of the property, assets and liabilities for Montana-New Jersey on and after the date of merger in the name of and for the New Jersey corporation. The property, assets, debts, liabilities, operations and officers were to remain the same when the merger became effective. The objective was solely to have the business conducted by a corporation domiciled in Montana.³

On June 13, 1961, Montana-Montana and Montana-New Jersey filed a joint application for approval of the merger with the Commission as required by Section 203 of the Act, 16 U.S.C. § 824b. This application described the proposed merger as it would be executed under the terms of the merger agreement which was attached thereto as Exhibit "L"; stated that Montana-Montana would succeed to the Final Power Permit issued to Montana-New Jersey in 1920;⁴ and that the sole purpose of the merger was to change the domicile of the corporation from the State of New Jersey to the State of Montana.

On August 29, 1961, before the application for approval of the merger had been acted upon by the Commission, Montana-New Jersey filed an application with the Commission seeking a fifty year "fair value" power license under Section 23(a) of the Act, 16 U.S.C. § 816.⁵ The first paragraph of this application contained a request that Montana-New Jersey "be granted authority to continue the operation of this project pending the issuance of a license in the event the joint application of the Applicant and the Montana Power Company, a Montana Corporation, in docket E-7000 for the approval of the merger * * * be approved prior to the issuance of the license herein requested." This application further stated: "Applicant proposes to transfer the license herein applied for to said Montana Corporation if the Federal Power Commission approves the merger as requested in said Docket No. E-7000."⁶ We have no doubt that this application was filed by Montana-New Jersey alone because that corporation knew that it could not transfer the permit to Montana-Montana, by merger or otherwise. (See footnote 4) That is why the application for the license contained the language quoted above and in the margin.

On November 1, 1961, four and one-half months after filing the application for approval of merger and two months after filing the above application for a Section 23(a) "fair value" license, the Federal Power Commission issued an order approving the merger.⁷ The order provided that authorization of the merger would expire unless the transactions authorized and approved therein were consummated within sixty days. The transactions authorized and approved by the order are set forth in footnote 7 of this opinion and include the transfer of permits and licenses. For the reasons stated in footnote 4, this approval could not authorize a transfer to Montana-Montana of the Final Power Permit.

Nothing in the order authorizing the merger requires the corporations to proceed; it merely provides that the authorization will expire if the merger is not consummated within sixty days. The order does not specifically refer to the Final Power Permit; it does not mention Montana-New Jersey's pending application for a license; it says nothing about the request contained in that application for authority to Montana-New Jersey to continue operation of the project if the merger be first approved. The corporations did not ask for a clarification or for an extension of the sixty day time limit. Nor did they call off the merger, as either of them had the unqualified right to do under the merger agreement. On the contrary, they proceeded with the merger, and they did this in spite of the fact that the merger agreement, the application and the Commission's approval all specifically provided that Montana-New Jersey would cease to exist when the merger was consummated. Thirty days after the order approving the merger was issued, November 30, 1961, the merger had been consummated except that the Final Power Permit, which could not be transferred by the merger, had not been transferred and the Commission had not acted upon Montana-New Jersey's application for a Section 23(a) license or the special request contained therein.

On October 12, 1962, the Commission entered its order relative to Montana-New Jersey's application for a Section 23(a) "fair value" license.⁸ By its order, which treated Montana-Montana as the applicant, the Commission held, inter alia: that Montana-Montana formerly was a corporation organized under the laws of New Jersey; that Montana-New Jersey, the actual applicant, had ceased to exist as of November 30, 1961, the effective date of the merger and the Final Power Permit issued to it likewise ceased to be of legal effect from that date on; that therefore Montana-Montana was not giving up anything of value in applying for a license under the Federal Power Act for the lawful operation of its project and has not shown that it is entitled to a license under Section 23(a) of the Act; and that the Final Power Permit issued in 1920 would have expired on December 31, 1969, if the New Jersey corporation had not ceased to exist.

The Commission thereupon issued to Montana-Montana a Section 4(e) "original cost less depreciation" license, effective as of December 1, 1961, and terminating December 31, 1969, for the continued operation and maintenance of Constructed Mystic Lake Project No. 2301.

Petitioner has specified eight errors. They may be summarized as follows: (1) The Commission erred in refusing to issue to either Montana-Montana or Montana-New Jersey a Section 23(a) "fair value" license; (2) that by reason of such refusal, one of those corporations was deprived of a valuable property right without due process of law; (3) that the Commission erred in refusing to issue a "fair value" license for a term of fifty years; and (4) that it erred in issuing its order on the application for license without first having held a hearing, and that it erred in failing to hold a hearing on the petition for rehearing.

The parties seem to agree that if the Commission issues a license to one who holds a valid Final Power Permit issued before June 10, 1920, the date of the enactment of the Federal Power Act, Section 23(a) of that Act, 16 U.S.C. § 816, requires that the license so issued shall be a "fair value" license; that one who is not the holder of a valid permit issued before June 10, 1920, cannot receive a "fair value" license; that the Final Power Permit issued to Montana-New Jersey on May 27, 1920, could not have been transferred to Montana-Montana by virtue of the merger; that Montana-Montana was not entitled in its own right to a "fair value" license; and that the only way...