Port of Astoria, Or. v. Hodel
| Decision Date | 05 March 1979 |
| Docket Number | 75-3621,75-3699 and 76-1049,Nos. 75-3465,s. 75-3465 |
| Parties | , 9 Envtl. L. Rep. 20,252 PORT OF ASTORIA, OREGON, an Oregon Municipal Corporation, Concerned Citizens of Clatsop County, an Unincorporated Association, Dorothy Reikkola and Robert A. Fackler, Plaintiffs-Appellants-Cross Appellees, v. Donald Paul HODEL, Administrator of the Bonneville Power Administration, and Alumax Pacific Corporation, a Delaware Corporation, Defendants-Appellees-Cross Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Diarmuid F. O'Scannlain (argued), Portland, Or., Larry Gutteridge (argued), Portland, Or., for plaintiffs-appellants-cross appellees.
James P. Rogers (argued), of Davies, Biggs, Strayer, Steol & Boley, Portland, Or., for defendants-appellees-cross appellants.
Appeal from the United States District Court for the District of oregon.
Before KENNEDY and TANG, Circuit Judges, and JAMESON, * District Judge.
This case consists of appeals and cross appeals from a judgment that held a power supply contract between the defendants valid, but unenforceable, until the contract's implications had been assessed in environmental impact statements (EIS's) pursuant to section 102 of the National Environmental Policy Act (NEPA), 42 U.S.C. § 4332. The contract (referred to herein as the "Umatilla contract") obligates the Bonneville Power Administration (BPA) to supply electrical power to an aluminum reduction plant that Alumax Pacific Corporation (Alumax) plans to build and operate in Umatilla County, Oregon. The plaintiffs claimed that the execution of the contract was major federal action under § 102(2)(C) of NEPA, 42 U.S.C. § 4332(2)(C), for more reasons than BPA's commitment to supply power to one large industrial site. Their contentions covered a broad area that runs from the contract's ultimate consequences in Umatilla County and Clatsop County, Oregon to the effect on power allocation and availability caused by new "industrial firm power contracts" and their relation to a long term power policy known as "Phase 2 of the Hydro Thermal Power Program." The plaintiffs requested the district court to avoid the contract in its entirety. But, although the court ordered compliance with NEPA, it did not declare the contract void. For the reasons that follow, we affirm the judgment of the district court.
BPA, a federal agency established in 1937 pursuant to the Bonneville Dam Act, 16 U.S.C. §§ 832-832L, markets the electrical power generated by the federal dams on the Columbia River. Its service territory extends over Oregon, Washington, Idaho, and that part of Montana west of the continental divide. BPA sells approximately 50 percent of the electrical power used in this region and provides approximately 80 percent of the region's high voltage transmission.
BPA sells its power in various grades through formal contracts with its different customers. As relevant here, these customers include industrial users and publicly and cooperatively owned nonfederal utilities. Under 16 U.S.C. § 832c(a), the utilities are preference customers. The grade of power sold reflects BPA's contractual ability to restrict under defined circumstances the amount of power supplied to a customer. The highest grade of power is "firm power." This is a preference power that, apart from unavoidable circumstances, must be continuously supplied. At the opposite end of the power scale is "interruptible power," generated at times of high water flow or lower power demands and subject to restriction at BPA's discretion. Between these two extremes are other grades of power that vary according to BPA's right to restrict supply. All restrictable grades of power play an important role in the scheme of power distribution because the contractual right to restrict delivery provides a source of reserve power that can be applied to fulfillment of firm power needs.
BPA is required to meet its preference customers' electrical load growth until 1983. However, in 1968 BPA and the region's nonfederal utilities predicted that BPA's existing hydroelectric generating facilities would be insufficient to meet projected growth because the Columbia River's generating capabilities have been almost fully exploited. Accordingly, they embarked upon a cooperative enterprise now known as "Phase 1" of the Hydro Thermal Power Program. Under Phase 1, the nonfederal utilities would create new power sources by In response to Phase 1's problems, "Phase 2" of the Hydro Thermal Power Program was formulated between BPA, its industrial customers, and nonfederal public, cooperative, and investor-owned utilities. The program was then announced in a press release of December 1973. Broadly, Phase 2 is a cooperative effort that contemplates the construction of thermal generating plants in addition to those initiated under Phase 1. Two of Phase 2's principal problems are how the thermal facilities are to be financed and how power reserves are to be maintained to meet firm power commitments. The resolution of these problems entails a change in BPA's role from purchaser of the nonfederal utilities' thermal output to sales agent for this output among BPA's industrial customers. 2 It also entails the alteration of BPA's relationship with its industrial customers through the introduction of "industrial firm power contracts" that provide for delivery of "industrial firm power." This latter term does not define one particular grade of power. Rather, it denotes a new method or structure for distributing power to industry.
building thermal generating plants. The output of these plants would then be purchased by BPA, melded with its hydroelectric power, and sold to its customers at a pool rate. This arrangement would provide a market for the utilities' new power. Seven Phase 1 thermal generating plants are under construction. However, much of the mechanism of Phase 1 became unfeasible largely because, under a new Treasury regulation, the bonds issued for construction of thermal plants lost their tax exempt status. 1
In the past, it has been BPA's policy to obtain from industry a portion of the reserve power used as backup for its firm power commitments by providing industrial customers with restrictable grades of power. The reliance on industry increased under Phase 1 in order to protect firm power commitments in the event that construction of thermal plants fell behind schedule or the plants initially operated below capacity. In 1971 BPA adopted an industrial sales policy that eventually came to fruition in December 1974 with the introduction of the proposed industrial firm power contracts. Under these contracts, BPA divides an industrial customer's contractual power demand into four "quartiles" of power of varying grades that, on the whole, constitute a lower or more restrictable grade of power than that which BPA provides under existing industrial contracts due to expire in 1981-86. In addition, the third quartile of these contracts embodies a specific Phase 2 element in that it allows BPA at a future date to require the industrial customer either to shift the source of power provided under the third quartile from BPA to a nonfederal Phase 2 thermal generating plant or to accept from BPA a lower grade of power for that quartile. Although the industrial firm power contracts provide a more restrictable grade of power, BPA seeks to make them attractive by offering to extend their term to 1994.
Industrial firm power contracts have several functions. The generally more restrictable grade of power provided in the quartiles other than the third quartile allows BPA to expand its reliance on industry for BPA's own reserve power necessary to meet possible difficulties in fulfilling BPA's contractual firm power commitments through 1983. On the other hand, the third quartile aims at the independence of thermal generating plants by obtaining from industry an advance market for the plants' output. This market helps to finance the plants and allows the nonfederal utilities to build thermal plants larger than those dictated by present demands. Further, if an
industry elects not to shift the source of the power provided in the third quartile, BPA's right to restrict the power in that quartile aids in creating a regional reserve of power that can be distributed to nonfederal utilities whose thermal plants may be behind schedule or operating below capacity.
In 1966, BPA and Northwest Aluminum Company entered into a contract for the supply of power to an aluminum reduction plant to be built on Guemes Island in the State of Washington. An amendment to the contract provided for delivery of power to a new proposed plant site at Warrenton in Clatsop County, Oregon. In September 1970 the contract was assigned to Alumax, then known as Amax Pacific Corporation. In its final form, the contract (referred to herein as the "Warrenton contract") provided the proposed plant with a contract demand of 240 megawatts. 3 BPA also planned on the delivery of an additional 80 megawatts of interruptible power. 4 Thus, the proposed plant's capacity would have been 320 megawatts.
Plans for building the Warrenton plant proceeded and Alumax filed applications for permits with the Oregon Department of Environmental Quality. However, in late 1974 the Oregon Environmental Quality Commission began to consider a proposal to declare the area of the Warrenton site (the Youngs Bay Estuary) a special problem area in which fluoride emissions would be forbidden. Alumax cannot build an aluminum reduction plant that does not emit fluorides. Alumax, therefore, decided to relocate the proposed plant to another site. Its decision was facilitated by BPA's willingness to deliver power to a plant to be built in Umatilla County. Consequently, in March 1975 BPA and Alumax...
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