State of Wis. v. F.E.R.C., s. 96-1086

Citation104 F.3d 462
Decision Date17 January 1997
Docket NumberNos. 96-1086,96-1087,s. 96-1086
Parties, Util. L. Rep. P 14,144 STATE OF WISCONSIN, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Kimberly-Clark Corporation and N.E.W. Hydro, Inc., Intervenors.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

On Petitions for Review of an Order of the Federal Energy Regulatory Commission.

John C. Scherbarth, Assistant Attorney General, State of Michigan, Lansing, MI, argued the cause, for petitioner Kelley, with whom Thomas J. Casey, Solicitor General, State of Michigan, was on the briefs.

Frank D. Remington, Assistant Attorney General, Wisconsin Department of Justice, Madison, WI, argued the cause and filed the briefs, for petitioner State of Wisconsin.

Joel M. Cockrell, Attorney, Federal Energy Regulatory Commission, argued the cause, for respondent, with whom Jerome M. Feit, Solicitor, Washington, DC, and Joseph S. Davies, Deputy Solicitor, were on the brief. Jill L. Hall, Attorney, entered an appearance.

Before: EDWARDS, Chief Judge, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

ROGERS, Circuit Judge:

In these consolidated petitions for review of two orders of the Federal Energy Regulatory Commission ("FERC"), 1 the Department of Natural Resources of the State of Wisconsin ("Wisconsin") and the Department of Natural Resources of the State of Michigan ("Michigan") challenge FERC's approval of two license transfers for hydroelectric projects. Petitioners contend that, in order to protect the public interest, FERC should have inquired further into the financial capability of the license transferee to operate the two dams, particularly in light of the expected cost of future environmental measures likely to be required for the dams' continued operation. Petitioners are concerned that in the event the dams become economically unviable and the transferee decides to abandon the facilities at the termination of the existing licenses, the transferee may lack sufficient financial resources to cover the costs of decommissioning the dams, 2 and the burden of those costs will then fall on the taxpayers of their states. While Michigan challenges FERC's decision approving the transfer of one dam as arbitrary and capricious, and unsupported by substantial evidence in the record, Wisconsin objects both procedurally and substantively to FERC's decisions with regard to both dams. Petitioners seek a remand with instructions to FERC to investigate further the financial capability of the transferee and to provide the financial records to the petitioners for their review. We conclude that the procedural challenges are meritless and that the factual determinations challenged by petitioners are supported by substantial evidence in the record. Because petitioners have not pointed to specific factual evidence to support their challenges to the financial capability of the transferee, or adduced any evidence to raise serious concern about FERC's determinations, we further conclude that FERC could rationally decide to defer consideration of the cost of potential environmental protection measures until they become necessary at the time of relicensing, and to decline to require the transferee to submit its financial records. Accordingly, we deny the petitions.


Congress has designed in the Federal Power Act, 16 U.S.C. §§ 791a-825r, "a complete scheme of national regulation" to "promote the comprehensive development of the water resources of the Nation." First Iowa Hydro-Elec. Co-op. v. Federal Power Commission, 328 U.S. 152, 172 n. 17, 180, 66 S.Ct. 906, 915 n. 17, 919, 90 L.Ed. 1143 (1946). Vesting authority in FERC to oversee the development of water resources, the Act provides that any entity proposing to build a hydroelectric project "across, along, or in any of the navigable waters of the United States" must obtain a license from FERC. 16 U.S.C. § 817(1). Licenses are issued for terms up to fifty years, at the end of which time FERC may issue a new license to the existing or a new licensee, authorize a federal take-over of the project, or provide for the decommissioning of the project. See id. §§ 799, 808(a).

The Federal Power Act provides that during the term of a license, a licensee cannot voluntarily transfer the license or any rights granted thereunder "without the written approval of the commission." Id. § 801. Under FERC regulations, a licensee seeking to transfer its license or its rights, and a person desiring to acquire such license or rights, "shall jointly or severally file an application for approval of such transfer and acquisition." 18 C.F.R. § 9.1. Each transfer application must include "in appropriate detail the qualifications of the transferee to hold such license and to operate the property under license, which qualifications shall be the same as those required of applicants for license." Id. § 9.2. FERC's approval of a license transfer "is contingent upon the transfer of title to the properties under license, delivery of all license instruments, and a showing that such transfer is in the public interest." Id. § 9.3(a). The transferee is thereafter subject to all relevant Federal Power Act provisions as well as conditions contained in the license, to the same extent as if it were the original licensee. Id.

Pertinent to these appeals, FERC issued two thirty-year licenses that it subsequently allowed to be transferred to a new party. First, in 1985 FERC issued a thirty-year license to the Menominee Company ("Menominee"), a subsidiary of Scott Paper Company ("Scott"), for the Menominee/Park Mill Hydroelectric Project, a 4.615 megawatt project on the Menominee River in Marinette County, Wisconsin, and Menominee County, Michigan. Menominee Co., 30 FERC p 62,264 (1985). Second, in 1994 FERC issued a thirty-year license to Scott for the Oconto Falls Hydroelectric Project, a 1.8 megawatt project on the Oconto River, Oconto County, Wisconsin. Scott Paper Co., 67 FERC p 72,118 (1994). Sometime prior to March 1995, Menominee and N.E.W. Hydro, Inc. ("NEW") negotiated the sale of the two hydroelectric dams crossing the Menominee and Oconto Rivers. To facilitate the sale, on March 7, 1995, Scott and NEW filed a joint application pursuant to § 8 of the Federal Power Act, 16 U.S.C. § 801, requesting FERC's approval of the transfer of both licenses to NEW as part of the sale of the assets of the projects. In the application, Scott and NEW represented that they had executed an agreement on January 20, 1995, that provided that Menominee and Scott would purchase net electrical energy from NEW for a period of ten years. They also stated that NEW was qualified to hold the license and was ready, willing, and able to operate and maintain the projects.

FERC gave public notice of the applications on March 20, 1995, and set a comment deadline of April 6, 1995. 60 Fed.Reg. 15,556 (1995); 60 Fed.Reg. 15,556-01 (1995). Wisconsin intervened in opposition to the proposed transfer of the licenses for both projects, and Michigan intervened in opposition to the Menominee transfer. Expressing concern about the financial capability of NEW, particularly because, under a fisheries plan developed for the Menominee River, it was expected that by 2015 costly fish passage facilities would need to be installed at the Menominee/Park Mill Project, Wisconsin argued that before the license was transferred, NEW should be required "to provide proof of financial responsibility thus ensuring the continued maintenance, or possible removal, of the dam in the event the licensee is unable to provide the necessary financial resources." Michigan, citing unresolved recreational access and fish protection issues, stated, without elaboration, that its concerns were heightened by the financial status of NEW and by NEW's compliance history in Michigan.

The Director of FERC's Division of Project Compliance and Administration approved the license transfers, recounting the concerns expressed by Michigan and Wisconsin but noting that NEW was "bound by all terms and conditions of the license as though it were the original licensee." Acknowledging that it was FERC's policy to scrutinize applications seeking to transfer licenses for economically marginal projects to prevent transfers to licensees lacking sufficient financial resources to maintain the projects, the Division Director found this policy to be inapplicable to the transfer applications of the Menominee/Park Mill and Oconto Projects because they were economically viable and decommissioning was not reasonably anticipated within the remaining term of the licenses. The Division Director noted FERC's independent determinations, at the time of the issuance of the initial licenses, of the projects' economic viability as well as NEW's ten-year power purchase agreements with Menominee and Scott. Wisconsin and Michigan filed for rehearing on the grounds that the Division Director's orders did not adequately address their concerns, including the need for environmental protection measures and for an assessment of the financial capabilities of NEW. FERC denied rehearing, emphasizing the Division Director's two grounds for approving the transfer and rejecting Michigan's projections with respect to NEW's financing costs and revenues for the two projects.


This court's review of FERC's approval of license transfers is deferential. See U.S. Dept. of the Interior v. FERC, 952 F.2d 538, 543 (D.C.Cir.1992); see also Mine Reclamation Corp. v. FERC, 30 F.3d 1519, 1524 (D.C.Cir.1994). "In a licensing decision such as this, where few explicit statutory provisions govern, our role is narrowly circumscribed." Mine Reclamation, 30 F.3d at 1524. The court will deny a petition for review " 'so long as [FERC's] decision is supported by substantial evidence in the record and reached by reasoned decisionmaking.' " Id. at 1524 (quoting ...

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