Pacific Northwest Generating v. Dept. of Energy
| Decision Date | 17 December 2008 |
| Docket Number | No. 06-74797.,No. 06-75361.,No. 06-74237.,No. 06-74223.,No. 06-73756.,No. 05-75638.,No. 05-75639.,05-75638.,05-75639.,06-73756.,06-74223.,06-74237.,06-74797.,06-75361. |
| Citation | 550 F.3d 846 |
| Court | U.S. Court of Appeals — Ninth Circuit |
| Parties | PACIFIC NORTHWEST GENERATING COOPERATIVE; Blachy-Lane County Cooperative Electric Association; Central Electric Cooperative Inc.; Clearwater Power Co.; Consumers Power, Inc., Coos-Curry Electric Cooperative, Inc.; Douglas Electric Cooperative; Fall River Rural Electric Cooperative, Inc.; Lane Electric Cooperative; Lost River Electric Cooperative, Inc.; Northern Lights, Inc.; Okanogan County Electric Cooperative, Inc.; Raft River Rural Electric Cooperative, Inc.; Salmon River Electric Cooperative, Inc.; Umatilla Electric Cooperative Association; and West Oregon Electric Cooperative, Inc., Petitioners, v. DEPT. OF ENERGY; Bonneville Power Administration, Respondents. Alcoa, Inc., Petitioner, Public Power Council, Intervenor, v. Bonneville Power Administration, Respondent. Alcoa, Inc., Petitioner, Columbia Falls Aluminum Company; Industrial Customers of Northwest Utilities; Public Power Council, Intervenors, v. Bonneville Power Administration; Dep't Of Energy, Respondents. Pacific Northwest Generating Cooperative; Blachy-Lane County Cooperative Electric Association; Central Electric Cooperative Inc.; Clearwater Power Company; Consumers Power Inc.; Coos-Curry Electric Coop., Inc.; Douglas Electric Cooperative; Fall River Rural Electric Cooperative, Inc.; Lane Electric Cooperative Inc.; Lost River Electric Cooperative, Inc.; Northern Lights Inc.; Okanogan County Electric Cooperative Inc.; Raft River Rural Electric Cooperative, Inc.; Salmon River Electric Cooperative Inc.; Umatilla Electric; West Oregon Electric Cooperative, Inc., Petitioners, v. Bonneville Power Administration, Respondent. Pacific Northwest Generating Cooperative; Blachy-Lane County Cooperative Electric Association; Central Electric Association Inc.; Clearwater Power Company; Consumers Power Inc.; Coos-Curry Electric Coop., Inc.; Douglas Electric Cooperative; Fall River Rural Electric Cooperative; Lane Electric Cooperative Inc.; Lost River Electric Cooperative, Inc.; Northern Lights Inc.; Okanogan County Electric Cooperative Inc.; Raft River Rural Electric Cooperative Inc.; Salmon River Electric Cooperative Inc.; Umatilla Electric; West Oregon Electric Cooperative, Inc., Petitioners, v. Bonneville Power Administration, Respondent. Alcoa, Inc., Petitioner, v. Bonneville Power Administration, Respondent. Industrial Customers of Northwest Utilities, Petitioners, v. Bonneville Power Administration, Respondents. |
Michael C. Dotten, Matthew Harrington, Heller Ehrman LLP, Seattle, WA, for petitioner-intervenor Alcoa, Inc.
Melinda J. Davison, Irion Sanger, Davison Van Cleve, P.C., Portland, OR, for petitioner Industrial Customers of Northwest Utilities.
R. Erick Johnson, Lake Oswego, OR, for petitioners Pacific Northwest Generating Cooperative, et al.
Karin J. Immergut, United States Attorney; Randy Roach, General Counsel; Stephen J. Odell, Assistant U.S. Attorney; David J. Adler, Special Assistant U.S. Attorney; Timothy Johnson, Assistant General Counsel; Kurt Runzler, Jon D. Wright, J. Courtney Olive; Portland, OR, for respondent Bonneville Power Administration.
Leonard J. Feldman, Heller Ehrman LLP, Seattle, WA, for intervenor Port Townsend Paper Company.
Mark R. Thompson, Portland, OR, for intervenor Public Power Council.
On Petition for Review of an Order of the Bonneville Power Administration.
Before: RAYMOND C. FISHER, MARSHA S. BERZON, Circuit Judges, and BARRY TED MOSKOWITZ,1 District Judge.
A. Introduction
At their origins during the New Deal, the Bonneville Project's hydroelectric operations in the Pacific Northwest, administered by the Bonneville Power Administration ("BPA"), were promoted as spreading the benefits of affordable federal power widely, to "the farmer and the factory, and all of you and me."2 At the same time, the Project gave a vital boost to the aluminum industry of the Pacific Northwest. Indeed, in the early days of the Project, what was good for BPA was good for the aluminum industry, and what was good for the aluminum industry was good for BPA. Aluminum manufacturers received low-cost federal hydroelectric power to operate energy-intensive smelting operations in the Pacific Northwest, and BPA gained a reliable market for a supply of electric power that otherwise greatly exceeded demand in a region where rural electrification was still a work in progress. See H.R.Rep. No. 96-976, pt. 2, at 27 (1980), as reprinted in 1980 U.S.C.C.A.N. 6023.
BPA's synergistic relations with the aluminum industry during this early period were widely seen as a public good. The aluminum manufacturers and the region's nascent aviation industry, which they supplied, not only brought many high-wage jobs to the Pacific Northwest, but also served as a vital strategic asset for the United States during World War II and the Cold War decades that followed.3
Times have changed. Public utilities and electrical cooperatives serve a larger regional population with greater needs for electrical power, see id., to which they are statutorily guaranteed preferential access. See 16 U.S.C. § 832c(a).4 Rising energy prices have made the relatively inexpensive federal power generated by BPA more attractive than ever, not only to BPA's regional "`preference' customers," Aluminum Co. of America v. Central Lincoln Peoples' Util. Dist. ("Alcoa"), 467 U.S. 380, 384, 104 S.Ct. 2472, 81 L.Ed.2d 301 (1984), but also to utilities outside the Pacific Northwest.5
At the same time, due to a variety of factors—among them higher energy costs—the region's aluminum industry has fallen on hard times. The smelting operations of the major aluminum manufacturers, which traditionally ran on electric power purchased directly from BPA, are generally being operated at reduced capacity, and in some cases, have shut down entirely. This case centers on how much BPA can or must do, under the authority and mandate conferred upon it by Congress, to aid its longtime, but now ailing, customers.
The assistance largely at issue here consists of three three-party contracts BPA executed in June 2006, each with a local public utility company and one of the aluminum companies that are "direct service industrial" customers ("DSIs") of BPA. In the contracts, BPA committed itself to make payments to the aluminum company DSIs ("aluminum DSIs") totaling a maximum of $59 million per year for five years in lieu of supplying them with actual electrical power, while retaining the option to sell them physical power instead in the final two years. In addition, in September 2006, BPA arranged for the sale of physical power to Port Townsend Paper Company ("Port Townsend"), the sole existing DSI that is not an aluminum manufacturer, via a contract between BPA and a local utility company, Public Utility District Number 1 of Clallam County ("Clallam"), for the sale of physical power, which Clallam would then supply to Port Townsend. Challenges to these four contracts by aluminum DSI Alcoa; the Pacific Northwest Generating Cooperative, an organization of electrical cooperatives that are preference customers of BPA (collectively, "Cooperative"); and Industrial Customers of Northwest Utilities, an organization of firms which purchase electricity from utility companies, rather than directly from BPA (collectively, "Industrial Customers"), form the basis of the seven petitions that have been consolidated in this case. Both Port Townsend and the Public Power Council, an association of consumer-owned utilities, have intervened as interested parties.
B. The Statutory Context
To set out the complex statutory landscape against which we consider these challenges, we briefly review the enactments in which Congress over the past seven decades has established and regulated BPA's authority to sell the output of the Federal Columbia River Power System, as the regional energy generation operations which began with the Bonneville Project are known. See Golden Nw. Aluminum, 501 F.3d at 1041.
The Bonneville Project Act of 1937 ("Project Act"), 16 U.S.C. § 832-832j, created BPA as the authority responsible for the "sale and disposition" of the electric energy generated by the federal hydroelectric projects in the Pacific Northwest. See § 832a. The Project Act directed that "in disposing of electric energy generated at [the Bonneville] project, [BPA shall at all times] give preference and priority to public bodies and cooperatives." § 832c(a). At the same time, the Project Act also authorized BPA, subject to this preference and priority restriction, to enter into contracts for the "sale at wholesale of electric energy ... to private agencies and persons." § 832d(a). Historically, there have been two types of private entities that purchase electric power directly from BPA: investor-owned utility companies ("IOUs") and DSIs. See Ass'n of Pub. Agency Customers, Inc. v. BPA, 126 F.3d 1158, 1164 (9th Cir.1997).
Over the following decades, Congress responded to increasing demand for BPA's low-cost federal power within and outside the Pacific Northwest with four additional pieces of legislation relevant to this case:
First, in 1964, Congress passed the Regional Preference Act, 16 U.S.C. §§ 837-837h ("RPA"), which provides that the sale of electric energy from "Federal hydroelectric plants in the Pacific Northwest" to customers outside the region must be limited to "surplus energy," § 837a, defined as "energy ... which would otherwise be wasted because of the lack of a market therefor in the Pacific Northwest at any established rate." § 837(c).6
Second, the Transmission Act, 16 U.S.C. §§ 838-838h, enacted in 1974, established the basic principles that rates for BPA power must
be fixed and established (1) with a view to encouraging the widest possible diversified use of electric power...
To continue reading
Request your trial
-
Xilinx, Inc. v. C.I.R.
... ... See Pac. Nw. Generating Coop. v. Dep't of Labor, 550 F.3d 846, 860-61 (9th ... ...