State of Iowa v. Federal Power Commission

• Decision Date: 20 January 1950
• Docket Number: No. 13882.,13882.
• Citation: 178 F.2d 421
• Parties: STATE OF IOWA et al. v. FEDERAL POWER COMMISSION (FIRST IOWA HYDRO-ELECTRIC COOP., Intervener).
• Court: U.S. Court of Appeals — Eighth Circuit

178 F.2d 421 (1949)

STATE OF IOWA et al. v. FEDERAL POWER COMMISSION (FIRST IOWA HYDRO-ELECTRIC COOP., Intervener).

No. 13882.

United States Court of Appeals Eighth Circuit.

December 28, 1949.

Rehearing Denied January 20, 1950.

Neill Garrett, Special Assistant Attorney General of Iowa (Robert L. Larson, Attorney General of Iowa, and Robert Brooke were with him on the brief), for petitioners.

Willard W. Gatchell, Assistant General Counsel, Federal Power Commission, Washington, D. C. (Bradford Ross, General Counsel, Federal Power Commission, Louis W. McKernan and John C. Mason, Washington, D. C., were with him on the brief), for respondent.

Vernon L. Wilkinson, Washington, D. C. (Andrew G. Haley, Mr. James A. McKenna, Jr., and David W. Robinson, Jr., Washington, D. C. were with him on the brief), for intervener-respondent.

Before SANBORN, JOHNSEN, and COLLET, Circuit Judges.

SANBORN, Circuit Judge.

The petitioners (who will be referred to as "the State of Iowa") have, pursuant to § 313(b) of the Federal Power Act, 49 Stat. 838, 16 U.S.C.A. § 791a et seq., asked this Court to review and set aside orders of the Federal Power Commission granting to the First Iowa Hydro-Electric Cooperative (hereinafter referred to as "the applicant") a license to construct a hydro-electric project in the Cedar River, which flows through Iowa. The applicant is a cooperative association, consisting of a group of seven individuals, organized under the laws of Iowa.

The project calls for an earth dam and dike across the Cedar River at Salisbury Bridge near Moscow, Iowa, about 21 miles above the junction of that river with the Iowa River and about 49 miles above the confluence of the Iowa River with the Mississippi River, creating a reservoir with an area of about 11,000 acres; a spillway section integral with the dam; a diversion canal approximately 8.5 miles long; a secondary dam and reservoir on Mad Creek of about 920 acres; a small reservoir or forebay of approximately 160 acres created by a dam across Geneva Creek overlooking the Mississippi River; a power plant consisting of four units with about 50,000 kilowatt capacity operating under a head of approximately 103 feet, with two units having reversible pumping features; and a tailrace 8,800 feet long parallel to the Mississippi River with a discharge into the pool below Navigation Dam No. 16 on that river. The proposed project contemplates the diversion of virtually all of the water from the Cedar River at Moscow.

Before discussing the contentions of the petitioners, it is necessary to describe the proceedings upon which the orders under review are based. The applicant, on January 29, 1940, pursuant to § 23(b) of the Federal Power Act, filed with the Federal Power Commission a declaration of intention to construct and operate a dam, reservoir, and hydro-electric power plant on the Cedar River near Moscow, Iowa, without diverting the waters of the river. On April 2, 1941, the applicant supplemented its declaration of intention by filing an application for a license, under the Federal Power Act, to construct an enlarged project substantially like the one for which a license was ultimately granted. This application was treated by the applicant and the Commission as a supplement to the original declaration of intention.

On June 3, 1941, the Commission found that the Cedar and Iowa Rivers are navigable waters of the United States; that the proposed diversion of water from the Cedar River would substantially affect the flow and navigable capacity of the Iowa River; that the operation of the proposed power project would cause fluctuations in the flow and navigable capacity of the Mississippi River at Muscutine, Iowa; that the interests of interstate commerce would be affected; and that a license for the project was required under the provisions of the Federal Power Act. 2 Fed.Power Comm.Rep. 958.

On August 11, 1941, the applicant filed with the Commission its application for a license to construct the project. On November 4, 1941, the State of Iowa was granted leave to intervene in opposition to the granting of a license. After extended hearings, at which testimony was taken, the Commission, on January 29, 1944, rendered an opinion, in which it stated that "The present plans call for a practical and reasonably adequate development to utilize the head and water available, create a large storage reservoir, and make available for recreational purposes a considerable area now unsuitable for such use, all at a cost which does not appear to be unreasonable." 52 P.U.R., N.S., 82, 84. The Commission, however, concluded that the application should be dismissed because of the contention of the State of Iowa that § 9(b), of the Act required the applicant for a license to submit "satisfactory evidence that the applicant has complied with the requirements of the laws of the State * * *"; that provisions of Chapter 363 of the Code of Iowa 1939, I.C.A. § 469.1 et seq., required a permit from the State Executive Council of Iowa for the construction of the project, and that the applicant had produced no evidence that it had such a permit. The applicant petitioned the United States Court of Appeals for the District of Columbia for a review of the Commission's order of dismissal. That court affirmed the order. First Iowa Hydro-Electric Cooperative v. Federal Power Commission (State of Iowa, Intervener), 80 U.S.App.D.C. 211, 151 F.2d 20. The Supreme Court granted certiorari, and reversed with directions to remand the case to the Federal Power Commission for further proceedings in conformity with the opinion. 328 U.S. 152, 183, 66 S.Ct. 906, 90 L.Ed. 1143.

Following the remand, the State of Iowa, on June 28, 1946, petitioned the Commission to reopen the case for the taking of further evidence, and for the presentation and consideration of pertinent questions of law and fact. In its petition the State asserted that the Commission, under the Federal Power Act, lacked jurisdiction to license the proposed project because: (1) the Cedar River is a non-navigable river and had been so declared by Congress; (2) the ex parte findings of the Commission of June 3, 1941, were made without notice to the State of Iowa, its political subdivisions or interested citizens; (3) the assumption by the Commission of jurisdiction to conduct further proceedings would require the taking of further evidence with respect to compliance by the applicant with § 9(b) of the Federal Power Act, the Rules of Practice and Regulations of the Commission, and the laws of Iowa relative to the bed and banks of the Cedar River and the appropriation, diversion and use of the water of the river for power purposes, and with respect to the right of the applicant to engage in the business of developing, transmitting and distributing power. The State of Iowa also asserted that the Commission was required to conduct further proceedings relative to the plan of financing the cost of the project and the project's soundness, feasibility and practicability.

On August 6, 1946, the Commission entered an order reopening the record, but only for a further showing as to the design and economic feasibility of the project. The State of Iowa, on August 26, 1946, again petitioned the Commission to reconsider the issue of the Commission's jurisdiction. This petition was denied on September 24, 1946. The Trial Examiner, who had been appointed by the Commission to conduct the hearings, held the further hearing provided for in the Commission's order of August 6, 1946. The issues were confined to (1) the design of the Cedar River dam; (2) the design of the canal; (3) the design of the Geneva Creek dam and power house section; (4) the economic feasibility of the project; and (5) the applicant's plans for financing the project. At the hearing, the State of Iowa made an offer of evidence relative to the issue of jurisdiction, which the Trial Examiner rejected.

From the evidence adduced at the hearing, the Trial Examiner found that the applicant's plan of financing provides for the sale of 40-year 4% revenue bonds to finance the entire cost of the project; that the project could be financed by the issuance of such bonds, amortized over a 30-year period, if the applicant had binding contracts for the sale of electric energy for a period of about ten years, with sufficient operating revenues assured to cover the estimated cost of operation, maintenance, reserves, and 133 per cent of the debt service; but that the applicant had no firm contracts at all and no such assurance of revenues, and no firm commitments for financing. The Trial Examiner also found that:

"This Commission has heretofore held, in the matter of Gasconade River Power Company, Project No. 934, decided October 6, 1937, that a proposal to issue bonds to cover the entire cost of construction and financing of a project is not in harmony with sound principles of finance. (1 FPC 424 at 429).

* * * * * *

"The reasonably anticipated cost of the proposed project, together with necessary working capital to meet a possible deficiency of available water in the first year of operation, is now $23,000,000.

* * * * * *

"The Applicant has not, up to the present time, shown the proposed project to be economically feasible with present high construction costs. Neither has it shown any firm commitments for the financing of the project or for the sale of the energy to be generated. Furthermore, it has not shown what facilities, if any, will be used to transmit such energy to prospective consumers. Although the application states a proposal that transmission lines should be constructed by a transmission cooperative, as a separate project, no evidence of the existence of either transmission cooperative or project for transmission lines has been offered.

"The issuance of a license is not justified by the record as it now stands."

The State of Iowa excepted to the report of the Trial Examiner upon the ground...