Niagara Mohawk Power Corp. v. Federal Power Com'n

• Decision Date: 18 May 1967
• Docket Number: No. 19887.,19887.
• Citation: 379 F.2d 153
• Parties: NIAGARA MOHAWK POWER CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

379 F.2d 153 (1967)

NIAGARA MOHAWK POWER CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

No. 19887.

United States Court of Appeals District of Columbia Circuit.

Argued October 18, 1966.

Decided May 18, 1967.

Petition for Rehearing Denied June 12, 1967.

Mr. Lauman Martin, Syracuse, N. Y., for petitioner.

Mr. George F. Bruder, Atty., F. P. C. with whom Messrs. Richard A. Solomon, Gen. Counsel, Howard E. Wahrenbrock, Sol. at the time the brief was filed, Peter H. Schiff, Deputy Sol., and Joseph B. Hobbs, Atty., F. P. C., were on the brief, for respondent.

Before FAHY,^* DANAHER and LEVENTHAL, Circuit Judges.

LEVENTHAL, Circuit Judge:

Petitioner, Niagara Mohawk Power Corporation, is an electric utility that operates and maintains four hydroelectric projects on navigable waters within the State of New York. It seeks review of orders of the Federal Power Commission, issued in 1963 and 1964,¹ which granted licenses for these projects, insofar as they specified 1941 and 1949 effective dates for the licenses granted.

Each of the licenses issued by the Commission to petitioner contains the usual provisions requiring that the licensee pay annual charges under Section 10(e) of the Federal Power Act for the purpose of reimbursing the United States for costs of administration, and requiring that it establish amortization reserves under Section 10(d) from excess profits earned after the project has been in operation for twenty years.² Petitioner's complaint is that those provisions should not have been made effective retroactively, as of a date prior to the issuance of the order. The significance of the provision for amortization reserves appears from the provisions of Section 10(d) and Sections 14 and 16: The Commission may in its discretion apply these amortization reserves to reduce the net investment in the project; the net investment, not to exceed the fair value, plus severance damages, is the amount for which the project upon expiration of its license may be taken over by the United States or transferred to a new licensee.

I

The pertinent statutory and administrative background begins with the Federal Water Power Act of 1920³ — which reflected "a major change of national policy" and the Congressional intention to go beyond a mere prohibition of obstructions to navigation and achieve instead "a comprehensive development of national resources."⁴ The basic provisions of Sections 10, 14 and 15 were in the 1920 act. But the 1920 act reflected deficiencies in administration and implementation. In 1930 the Federal Power Commission, previously a committee of cabinet officers, was reorganized as an independent commission.⁵ In the Public Utility Act of 1935⁶ Congress amended the 1920 law and made it Part I of the Federal Power Act. Section 23(b), as amended in 1935 (16 U.S.C. § 817), expressly makes it unlawful not only to construct but also to operate or maintain any project works in any navigable water of the United States without a license issued under the Act or a valid permit issued prior to adoption of the 1920 act. The law also makes clear that after 1935 no project could lawfully be constructed in non-navigable waters over which Congress has jurisdiction without the filing of a declaration of intention with the Commission and its determination that such construction would not affect the interests of interstate or foreign commerce. The courts have made clear that since the use of the flow of a navigable stream reflects a revocable license not tantamount to a "vested right," the license provisions of the Act governing electric power projects are a regulation of commerce that must be accepted by one maintaining a project in a stream now held navigable even though the project was constructed at a time when the river was not considered a navigable waterway.⁷

Notwithstanding the statutory requirements, many hydro-electric projects have been operated, and many constructed, without the requisite authorization. Petitioner did not file applications for licenses for these projects until 1962. Yet the first three projects, built before 1935, were in reaches of the Sacandaga River (Project 2318) and Raquette River (Projects 2320 and 2330) that the Commission had in 1949 determined to be navigable waters.⁸ And in 1941 it constructed Project 2424 on the Erie Canal, which is part of the New York State Barge Canal System, without any declaration or application for authorization although it was in 1903 that the Supreme Court had found the Erie Canal to be a navigable water of the United States.⁹

The Commission's orders assigned 1949 effective dates and a 1993 termination date for the licenses governing the first three projects. The 1964 order granting a license for Project 2424 assigned an effective date of July 1, 1941 and a termination date of June 30, 1991. The Commission granted the rehearing sought by petitioner and adhered to these dates.¹⁰

Petitioner does not complain to us of the termination dates of the licenses,¹¹ but contends that the Commission had no authority whatever to set effective dates prior to issuance dates of the licenses. It does not argue in the alternative that if the Commission had this power it acted unreasonably or abused its discretion. Even so we think it helpful to retrace the path of the Commission's exercise of the power it considered within the ambit of its authority.

The various licensing orders set forth that the effective dates had been established in accordance with the Commission's so-called Androscoggin¹² decision, and we begin by reviewing at some length the principles there laid down. That case involved a project constructed before 1935, although the dam was rebuilt in 1958. The Company applied for a license in 1960 after the Commission, in another proceeding, found that the Androscoggin River was a navigable water of the United States on the basis of its use for transportation of logs. In the Androscoggin opinion, discussing a compliance problem that had "perplexed the Commission for many years," the Commission identified three principal factors to be taken into account.

(1) The licensee should not reap a windfall from the delay in filing. "To the extent feasible, it is the burden of a sound licensing policy to minimize such inequities." (27 FPC at 833).

(2) The Commission's past failure, for want of funds or manpower, to enforce general compliance and the large number of projects that had operated without a license since 1935 indicated the need for a discriminating approach in order to cope with the compliance problem.

(3) In regard to termination date the Commission took realistic account of the significance of certain 1943 decisions¹³ holding navigable a stream usable for log transport, and thus giving notice of the perils of further unlicensed operation to the owner of a project in such a stream. And so the Commission fixed December 3, 1993 — fifty years after that 1943 notice — as the termination date of the Androscoggin license.

As to effective date, the Commission rejected use of date of issuance since this would encourage delay in filing the license applications which the law requires. But the Commission decided not to use as an effective date the earliest date it felt it could justify.¹⁴ It did not even select the 1943 date of the decisions on navigability — used as a reference point for setting the termination date — though this treatment "would be a legitimate exercise of our discretion." Instead the Commission announced a general policy for future cases of tendering licenses effective April 1, 1962, the month of the Androscoggin decision, for cases that do not involve a prior finding of navigability on the particular river, an unauthorized construction after 1935, or other unusual circumstances (e. g., expenses due to applicant's recalcitrance). However, it believed a stricter policy was required for the Androscoggin case because there was a flagrant breach of statutory duty in 1958 when applicant failed to apply for a license even after the Commission's determination of jurisdiction over the Androscoggin River. It stated that it had avoided a date prior to 1958, lest this deter potential applicants from coming forward to comply with the statute, but might reconsider if experience shows that voluntary cooperation is not forthcoming in any event.

In selecting effective dates for petitioner's four projects, the Commission used a 1949 date for the pre-1935 projects which were constructed at a time when it might have been reasonably assumed that no license was required for construction on rivers like the Sacandaga and Raquette. Although the 1943 decisions on the logging criterion were notice of an obligation to file for a license, the Commission used the 1949 date of the decisions on the navigability of the particular rivers.

Project 2424 was governed by the stricter standard that Androscoggin warned was applicable to post-1935 construction begun without filing either a license application or declaration of intention, notwithstanding the express requirements of Section 23(b) of the Act. The Commission used the 1941 date on which Project 2424 was constructed, since the Erie Canal had long ago been determined to be a navigable water.

II

We conclude that the Commission does have statutory authority to assign an effective date earlier than the date of the issuance of the license when the project involved was one constructed or maintained without a license in violation of applicable law. We are in accord with the results of the decisions of the First Circuit. Central Maine Power Co. v. FPC, 345 F.2d 875 (1st Cir. 1965); Bangor Hydro-Electric Co. v. FPC, 355 F.2d 13 (1st Cir. 1966).

Petitioner relies on three contentions: that in the absence of clear expressions to the contrary, legislation must be construed to avoid retrospective application;¹⁵ that the retroactive ascertainment of administrative charges is a penalty not specifically authorized...