Green Island Power Authority v. Federal Energy Regulatory Commission ( 2009 )

07-1737-ag(L), 07-2011-ag(Con), 07-5141-ag(Con)
Green Island Power Authority v. Federal Energy Regulatory Commission
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
______________
August Term, 2008
(Argued: December 19, 2008 Decided: August 10, 2009)
Docket Nos. 07-1737-ag(L), 07-2011-ag(Con), 07-5141-ag(Con)
______________
GREEN ISLAND POWER AUTHORITY ,
ADIRONDACK HYDRO DEVELOPMENT CORPORATION ,
Petitioners,
—v.—
FEDERAL ENERGY REGULATORY COMMISSION ,
Respondent,
ERIE BOULEVARD HYDROPOWER , L.P.,
Intervenor.
______________
B e f o r e:
SACK and KATZMANN , Circuit Judges.*
______________
*
The Honorable Sonia Sotomayor, originally a member of the panel, was elevated to the
Supreme Court on August 8, 2009. The two remaining members of the panel, who are in
agreement, have determined the matter. See 28 U.S.C. § 46(b); Local Rule 0.14(2); United States
v. Desimone, 140 F.3d 457 (2d Cir. 1998).
Petition for review of several orders and notices issued by the Federal Energy Regulatory
Commission during the proceedings to relicense the School Street Hydroelectric Project.
Adirondack Hydro Development Corporation’s petitions are denied on the ground that it lacks
standing to challenge any of the orders or notices issued in the administrative proceedings. We
grant Green Island Power Authority’s petition for review of the order denying its motion to
intervene, vacate the license order, and remand the case for further proceedings consistent with
this opinion.
______________
FRANCES E. FRANCIS (William S. Huang and Rebecca J.
Baldwin, on the brief), Spiegel & McDiarmid, LLP,
Washington, D.C., for Petitioners.
HOLLY E. CAFER (Cynthia A. Marlette, General Counsel,
and Robert H. Solomon, Solicitor, on the brief), Federal
Energy Regulatory Commission, Washington, D.C., for
Respondent.
JOHN A. WHITTAKER, Winston & Strawn, LLP,
Washington, D.C. (Mel R. Jiganti, U.S. Legal Director,
Brookfield Power, Marlborough, MA, on the brief), for
Intervenor.
Marc S. Gerstman (Jennifer M. Wilson and Jessica Backer
Brand, on the brief), Law Offices of Marc S. Gerstman,
Albany, N.Y., for Amici Curiae Scenic Hudson, Inc.,
Capital District Regional Planning Commission, Village of
Green Island, Town of Green Island, City of Watervliet,
Town of Waterford, New York Bicycling Coalition, Inc.,
New York Association of Public Power, Public Utility Law
Project of New York, Inc., and Friends of the Falls, in
support of Petitioners.
______________
KATZMANN , Circuit Judge:
This case arises out of proceedings before the Federal Energy Regulatory Commission
(“FERC”) to relicense the School Street Hydroelectric Project. It calls upon us principally to
consider the validity of the order denying Green Island Power Authority’s (“Green Island”)
2
motion to intervene, and the order granting a new license to Erie Boulevard Hydropower, L.P.
(“Erie”) to operate the School Street Hydroelectric Project for a term of forty years. For the
reasons stated below, we find that Adirondack Hydro Development Corporation (“Adirondack”)
lacks standing to challenge any of the orders issued during the administrative proceedings. We
further find that FERC acted arbitrarily and capriciously when it denied Green Island’s motion to
intervene in the relicensing proceedings. Because we cannot conclude that this error was not
prejudicial, we vacate the license order and remand the case for further proceedings consistent
with this opinion.
BACKGROUND
The School Street Hydroelectric Project (“School Street Project” or “School Street”) is
located on the Mohawk River in Albany and Saratoga Counties in New York State. It diverts
water from the river at a dam located nearly 4000 feet upstream from Cohoes Falls, New York’s
second largest waterfall. The water runs through a power canal that is 4400 feet long and 150
feet wide and ultimately flows into a powerhouse containing five generating units with a total
installed electrical capacity of 38.8 megawatts (“MW”). The water flows through the
powerhouse and is returned to the Mohawk River downstream from Cohoes Falls. In total, water
diverted from the river by the School Street Project bypasses approximately 4500 feet of the
riverbed, including the waterfall.
The School Street Project dam was constructed in 1831, and the facility began to be
utilized to generate electrical power in 1916. Niagara Mohawk Power Corporation (“Niagara
Mohawk”) filed an application for an original license to operate the School Street Project on
3
August 20, 1965.1 The Federal Power Commission2 issued such a license to Niagara Mohawk on
June 11, 1969, for a term to run from April 1, 1962 to December 31, 1993. See Niagara Mohawk
Power Corp., 41 F.P.C. 772, 773 (1969).
Niagara Mohawk held the license and operated the School Street Project for that entire
term. Two years prior to the end of the term, on December 23, 1991, Niagara Mohawk filed an
application for a new license for the School Street Project, pursuant to § 15(c)(1) of the Federal
Power Act (“FPA”). See 16 U.S.C. § 808(c)(1) (“Each application for a new license pursuant to
this section shall be filed with the Commission at least 24 months before the expiration of the
term of the existing license.”). That application proposed to add a 21-MW capacity generator to
the School Street Project, which would have increased its total electrical generating capacity to
approximately sixty megawatts. In addition, the application proposed recreational, fisheries,
historic preservation, and water quality enhancements.
Niagara Mohawk was the only entity to submit an application for the School Street
Project by the statutory deadline of December 31, 1991. In response, FERC issued public notice
1
An “original license” is the type of license that FERC issues “for an unlicensed project,
whether constructed or unconstructed.” Consol. Hydro Me., Inc., 81 F.E.R.C. ¶ 62,172,
64,372 n.17 (1997). An original license is different from a “new license,” which is “any license,
except an annual license issued under section 15 of the Federal Power Act, for a water power
project that is issued under the Federal Power Act after the initial license for that project.” 18
C.F.R. § 4.30(b)(19); see also S. Cal. Edison Co. v. FERC, 116 F.3d 507, 509 (D.C. Cir. 1997)
(“The Federal Power Act authorizes the Federal Energy Regulatory Commission to issue two
sorts of licenses for hydropower projects: ‘original licenses,’ for projects that have yet to be built,
and ‘new licenses,’ for existing projects whose original licenses have expired.”). A new license
is issued at the conclusion of a “relicensing proceeding.”
2
The Federal Power Act, 16 U.S.C. §§ 791a–828c, created the Federal Power
Commission. FERC succeeded the Federal Power Commission in 1977. See DiLaura v. Power
Auth., 982 F.2d 73, 75 n.1 (2d Cir. 1992).
4
describing in broad terms the proposal contained within that application and setting a deadline of
April 12, 1993, for the filing of comments, protests, and motions to intervene. Timely motions to
intervene were filed by American Whitewater Affiliation, American Rivers, Inc., New York
Rivers United, the Natural Heritage Institute, the National Audubon Society, R. Pisani and W.
Corrigan, the United States Department of the Interior, and Adirondack Mountain Club.
As part of the relicensing process, Niagara Mohawk was required to request a
certification from the New York State Department of Environmental Conservation (“NYS
DEC”) that the discharge from the School Street Project into the Mohawk River would comply
with applicable provisions of the Clean Water Act. See 33 U.S.C. § 1341(a)(1). Indeed, FERC
was prohibited from granting a license until this certification had been provided, unless NYS
DEC waived the requirement, which it could do by failing or refusing to act on Niagara
Mohawk’s certification request within “a reasonable period of time (which shall not exceed one
year) after receipt of such request.” Id. Niagara Mohawk requested this certification for the
School Street Project, which NYS DEC denied in November 1992 without prejudice to renewal.
Niagara Mohawk appealed that decision, and it and NYS DEC entered into settlement
negotiations regarding the certification and licensing of School Street and nine other
hydroelectric projects operated by Niagara Mohawk. Those negotiations continued into 2005;
during that time period, FERC issued annual licenses, pursuant to 16 U.S.C. § 808(a)(1), that
allowed Niagara Mohawk to continue to operate the School Street Project. See Table of Notices
of Authorization for Continued Project Operations, 66 F.E.R.C. ¶ 61,145, 61,279 (1994).
While the negotiations between Niagara Mohawk and NYS DEC were on-going, FERC
continued to analyze the School Street license application. In November 1995, FERC issued
5
public notice that the School Street Project was ready for an environmental analysis. It stated
that Niagara Mohawk intended to add an additional generator to increase School Street’s
installed capacity to approximately sixty megawatts, which would require an expansion of the
existing powerhouse and excavation of the power canal. The notice solicited comments, reply
comments, recommendations, terms and conditions, and prescriptions. See Notice of Application
Ready for Environmental Analysis (Nov. 16, 1995).
Niagara Mohawk responded to this notice by informing FERC that it no longer viewed
the installation of the proposed 21-MW generator as economically feasible, and it advised FERC
that its environmental analysis should consider, as an alternative, relicensing School Street
without that additional generating capacity. See Letter from Jerry L. Sabattis, Niagara Mohawk
Hydro Licensing Coordinator, to John H. Clements, Director, FERC Office of Hydropower
Licensing (Dec. 13, 1995), at 2 (stating that Niagara Mohawk “no longer intend[ed] to install”
the generator). Notwithstanding Niagara Mohawk’s view that the removal of the proposed
generator would “materially affect[] Niagara Mohawk’s fish protection/enhancement plan
proposal,” id., FERC did not issue any public notice of this change. Instead, it issued a draft
environmental assessment of the School Street Project in November 1996 that analyzed the
license application both with and without the 21-MW generator, concluding that it “d[id] not
recommend [Niagara Mohawk’s] proposed new [generator] and related improvements to the
power canal.” See Draft Environmental Assessment for Hydropower License (Nov. 1996), at 53.
FERC issued public notice announcing the availability of the draft environmental assessment and
seeking comments on it. See Notice of Availability of Draft Environmental Assessment, 61 Fed.
Reg. 60,277 (Nov. 20, 1996).
6
One of the parties that filed comments was the NYSD Limited Partnership, the owner of
the New York State Dam Hydroelectric Project, which was located on the Mohawk River
approximately one mile downstream from the School Street Project. In addition, Adirondack, the
managing general partner of the NYSD Limited Partnership, filed a motion to intervene out-of-
time in the School Street relicensing proceedings on March 26, 1997; it asserted that its interest
in the proceedings derived from its ownership interest in the New York State Dam, which could
be adversely impacted by FERC’s licensing order given (1) its location relative to School Street
and (2) the fact that the School Street Project impacted downstream flows on the Mohawk River.
FERC granted Adirondack’s motion to intervene on August 19, 1997.
Following Adirondack’s intervention, time passed without much action in the relicensing
proceedings. In February 1999, Niagara Mohawk and Erie submitted a joint application seeking
approval of, inter alia, (1) the transfer of School Street’s license from Niagara Mohawk to Erie,
and (2) substitution of Erie in place of Niagara Mohawk as the applicant on the pending School
Street license application. FERC issued public notice of this application and set a deadline of
June 9, 1999, for filing comments and motions to intervene. See Notice of Transfer of Licenses
and Soliciting Comments, Motions to Intervene, and Protests (May 5, 1999). FERC
subsequently granted the application, the School Street license was transferred to Erie, and Erie
was substituted on the pending license application. See Order Approving Transfers of Licenses,
Partial Transfer of License, and Substitution of Applicants, 88 F.E.R.C. ¶ 62,082, 64,159 (1999).
The proceedings then sat idle again for almost two years until May 2001, at which time
Erie sent a letter notifying FERC that Erie had reviewed the pending license application in light
of the then-current market conditions and concluded that “the addition of a new [generator]
7
would now appear to be economically feasible.” Letter from William J. Madden, Jr., Attorney
for Erie Boulevard Hydropower, L.P., to David P. Boergers, Secretary, Fed. Energy Regulatory
Comm’n (May 30, 2001), at 1. Erie therefore requested that FERC “evaluate the merits of the
new license proposal as originally filed.” Id. FERC did not issue public notice of Erie’s change
in position, nor did it seek motions to intervene.
Instead, FERC completed its final environmental assessment (“FEA”) of the School
Street license application and issued public notice of its availability on September 28, 2001,
setting a comment deadline for forty-five days later. See Notice of Availability of Final
Environmental Assessment (Sept. 28, 2001). In the FEA, FERC compared the School Street
Project as proposed in the original license application (with the 21-MW generator) with possible
alternatives, including (1) a proposal containing changes recommended by FERC’s staff and
(2) relicensing the School Street Project without any changes. Moreover, FERC considered, but
dismissed, the options of granting a “nonpower license”3 or retiring School Street altogether,
because those options were “not reasonable in the circumstances of this case.” Final
Environmental Assessment (Sept. 2001), at 12-13.
With respect to the proposed addition of the 21-MW generator, FERC concluded that
“[w]hile [Erie’s] motivation for the proposal to construct the new unit which would produce
incremental power at cost more than one-hundred-fifty percent more than its current value in the
market is unclear, it should be given the opportunity to pursue the project expansion, since the
3
A “nonpower license” is a temporary license that can be issued by FERC whenever, in
its judgment, a licensed project “should no longer be used or adapted for use for power purposes”
and where “a State, municipality, interstate agency, or another Federal agency is authorized and
willing to assume regulatory supervision of the lands and facilities included under the nonpower
license and does so.” 16 U.S.C. § 808(f).
8
additional unit would have no significant detrimental environmental impacts and would produce
more power from a renewable resource.” Id. at 72.
In July 2004, Green Island filed an application (along with supporting comments) for a
preliminary permit to study the potential development of the Cohoes Falls Project, a proposed
100-MW capacity hydroelectric project to be located on the Mohawk River just downstream
from the School Street Project. See Green Island Power Auth., 110 F.E.R.C. ¶ 61,034,
61,108–09 (2005). It followed this up on September 7, 2004, with a motion to intervene in the
School Street relicensing proceedings, stating that it first developed an interest in the proceedings
in 2001 when it assisted the City of Cohoes in an effort to secure the School Street site from Erie.
It did not seek to intervene until 2004, however, because it was not until that time that Green
Island had developed what it considered to be a better proposal for this stretch of the Mohawk
River. Green Island moved to intervene because it recognized that the Cohoes Falls Project
could be developed only if the School Street Project dam were removed and the powerhouse
decommissioned.
FERC denied Green Island’s application for a preliminary permit, finding that because
the School Street and Cohoes Falls Projects could not co-exist, “any development application for
the Cohoes Falls Project would be a relicense application filed in competition with the School
Street application.” Green Island Power Auth., 110 F.E.R.C. ¶ 61,034, at 61,110. FERC
considered such an application barred by § 15(c)(1) of the FPA, because the “deadline for filing
relicense applications for the Cohoes Falls project fell in 1991, two years before the School
Street license expired. Thus, any development application [Green Island] might file would be
more than 13 years late.” Id. FERC found also that its own regulations barred acceptance of the
9
preliminary permit application. Id. at 61,111. It did not act on Green Island’s motion to
intervene at this time.4
In March 2005, Erie filed an offer of settlement (the “Offer of Settlement”) with FERC
pursuant to Rule 602 of FERC’s regulations. See 18 C.F.R. § 385.602. The Offer of Settlement,
which was signed by Erie, the United States Fish and Wildlife Service, the National Park
Service, NYS DEC, New York Power Authority, New York Rivers, New York State
Conservation Council, and Rensselaer County Conservation Alliance, proposed, inter alia, that
Erie would: (1) operate the School Street Project in run-of-river mode; (2) ensure certain
minimum flows of water to the bypassed stretch of the Mohawk River, including a 500 cubic feet
per second aesthetic flow over Cohoes Falls during daylight hours on weekends and federal
holidays from May 15 to October 31; (3) install certain fish protection mechanisms; and
(4) consider installing a new turbine-generator unit and powerhouse addition that would increase
the electrical generating capacity of School Street by approximately eleven megawatts. With
respect to the proposed 11-MW generator, which would replace the proposed 21-MW generator
in the license application, the Offer of Settlement provided that “within five years of license
issuance, Erie Boulevard could install and operate a new ‘fish-friendly’ turbine generator unit in
a new powerhouse or powerhouse addition . . . .” Order on Offer of Settlement and Issuing New
License, 118 F.E.R.C. ¶ 61,101, 61,514 (2007). As part of the Offer of Settlement, NYS DEC
issued a draft water quality certificate in accordance with § 401 of the Clean Water Act.
4
Green Island sought rehearing of FERC’s decision, which FERC denied. See Green
Island Power Auth., 110 F.E.R.C. ¶ 61,331 (2005). Green Island filed a petition for review of
that decision with the D.C. Circuit, but it later filed a voluntary motion to dismiss the petition,
which was granted. See Green Island Power Auth. v. FERC, No. 05-1170, 2005 WL 3803356,
2005 U.S. App. LEXIS 27787 (D.C. Cir. Dec. 14, 2005).
10
FERC issued public notice of the Offer of Settlement on March 24, 2005, and, pursuant
to 18 C.F.R. § 385.602(f)(2), noted that the deadline for filing comments was twenty days from
that date. See Notice of Settlement Agreement Accepted for Filing and Soliciting Comments
(Mar. 24, 2005). Green Island filed extensive comments in opposition. It also renewed its
motion to intervene, which had been pending since the middle of 2004, asserting that FERC
should have solicited interventions because the Offer of Settlement constituted a material
amendment to the School Street license application.
Furthermore, on May 15, 2006, Green Island, Adirondack, and amici curiae Capital
District Regional Planning Commission, New York Association of Public Power, and Friends of
the Falls submitted what they labeled an “Alternative Offer of Settlement” for FERC’s
consideration. The Alternative Offer of Settlement proposed to resolve the School Street
relicensing proceedings by permitting Erie to choose between two options: (1) the immediate
termination of Erie’s license; or (2) the issuance of a conditional license to Erie. Once Erie had
selected one of the proposed options, Green Island planned to submit an application to license the
Cohoes Falls Project; that application was attached to the Alternative Offer of Settlement. Green
Island, however, recognized that FERC was statutorily barred from considering the application as
a competing license application for the School Street site. Consequently, it included the
application with the Alternative Offer of Settlement “for informational purposes only,” arguing
that FERC could consider the information contained in the application when deciding whether to
grant a license to the School Street Project.
On that same day, the New York Association of Public Power, the Friends of the Falls,
and the Capital District Regional Planning Commission all filed (1) motions to intervene out-of-
11
time in the School Street relicensing proceedings and (2) comments in support of the Alternative
Offer of Settlement. The New York Bicycling Coalition, the City of Watervliet, the Town of
Green Island, the Village of Green Island, the Preservation League of New York State, and the
Public Utility Law Project of New York, Inc. all filed similar motions and comments on June 2.
Additionally, the Town and Village of Green Island, the New York Bicycling Coalition, the
Preservation League of New York State, the City of Watervliet, and the Alliance for Economic
Renewal5 signed on to the Alternative Offer of Settlement.
FERC rejected the Alternative Offer of Settlement and the attached proposed license
application as simply “another attempt to place Green Island’s untimely competitive proposal
before the Commission.” Notice Rejecting Pleading (May 24, 2006). In response, Green Island
and Adirondack filed a “Joint Motion to Present Evidence or, in the Alternative, Offer of Proof”
(the “Joint Motion to Present Evidence”) on June 5, 2006, in which they explained that the
Alternative Offer of Settlement was not a competing license application but rather was submitted
to provide helpful evidence to demonstrate that Erie’s license application and Offer of Settlement
were not best adapted to a comprehensive plan for the Mohawk River.
FERC rejected this motion as well, again on the ground that the filing was an “attempt to
place Green Island’s untimely competitive proposal before the Commission.” Notice Rejecting
Motion (June 28, 2006). On that same day, FERC also denied Green Island’s motion to intervene
out-of-time. See Notice Denying Late Intervention (June 28, 2006). In doing so, FERC noted
that Green Island had developed an interest in the proceedings in 2001 but had impermissibly
5
The Alliance for Economic Renewal apparently filed a motion to intervene out-of-time
on April 13, 2005.
12
“[sat] on its rights” for three years before filing its motion to intervene in 2004. Id. at 1. Further,
FERC concluded that Green Island’s “primary interest” in the proceedings, i.e., “having its
proposed Cohoes Falls Project considered as an alternative to the School Street Project,” was not
a sufficient reason for FERC to grant intervenor status, because FERC was statutorily barred
from considering untimely license applications. Id. at 2.
In addition, FERC denied the motions to intervene filed by all of the other parties that had
expressed support for the Cohoes Falls Project proposal, because (1) no party had shown good
cause as to why it had waited so long to seek leave to intervene, and (2) each party’s primary
interest – supporting the Cohoes Falls Project as an alternative to the School Street Project – was
insufficient to warrant intervenor status at that stage of the proceedings.6
Green Island and Adirondack requested rehearing of FERC’s orders denying the
Alternative Offer of Settlement and the Joint Motion to Present Evidence, and Green Island and
all of the other parties that had sought to intervene out-of-time requested rehearing of FERC’s
denial of those motions. FERC denied all of these requests. See Order Denying Rehearing, 117
F.E.R.C. ¶ 61,189 (2006) (the “November 16 Order Denying Rehearing”). At the outset of this
order, FERC reiterated its view that Green Island could not file an application for the Cohoes
Falls Project proposal “because that project would compete with School Street and a license
application for Cohoes Falls was not filed within the statutory window for competition in the
School Street proceeding.” Id. at 61,931. Furthermore, FERC stated that it “look[ed] with
6
FERC later granted two motions to intervene out-of-time, one each filed by NYS DEC
and the National Marine Fisheries Service on May 3, 1995, and January 16, 1996, respectively.
In granting those motions, FERC noted that (1) it inadvertently had failed to grant them at the
time they were filed, and (2) granting the motions at that point would not unduly delay or disrupt
the proceedings. See Notice Granting Late Interventions (Aug. 8, 2006).
13
extreme disfavor on [Green Island’s] repeated efforts to obtain approval of that which is barred
by law, and consider[ed] its efforts to cloak its proposal in various different guises as an abuse of
process.” Id.Turning to the specific orders for which rehearing was sought, FERC first addressed its
denial of the various motions to intervene, treating each as untimely and thus evaluating them
pursuant to the factors delineated in Rule 214(d) of its regulations, 18 C.F.R. § 385.214(d). It
denied rehearing of Green Island’s motion to intervene because Green Island “ha[d] failed to
demonstrate either a cognizable interest in the proceeding or any justification for the lateness of
its attempted intervention.” November 16 Order Denying Rehearing, 117 F.E.R.C. ¶ 61,189, at
61,932. FERC similarly denied rehearing of the other motions to intervene, concluding that all
of those parties simply intended to express support for the Cohoes Falls Project. Id. at 61,933(“[T]hose entities are engaged in a campaign to convince the Commission to consider the merits
of the Cohoes Falls Project, notwithstanding our final orders clearly holding that to do so would
be contrary to the dictates of the FPA and of our regulations.”). FERC did note, however, that
the interests of Green Island and these other entities could be represented by Adirondack. Id.FERC denied rehearing of the Joint Motion to Present Evidence as well, again stating that
although it would consider comments filed in the proceedings, there was no reason for it to
“accept what purports to be a complete application for a proposal that is statutorily barred, no
matter in what guise it is presented.” Id. at 61,936. Furthermore, FERC rejected Green Island
and Adirondack’s contention that it was required to compare the School Street Project with the
“largely hypothetical Cohoes Falls Project, which is barred by the statute,” reasoning that
[t]o conclude that an entity can ignore the statutory and regulatory parameters that
14
govern hydropower licensing proceedings by making a completely new proposal
at the eleventh hour, and that the parties must then respond to it, and the
Commission must conduct an extensive new analysis, including a complete
environmental and engineering review, would be exceedingly unfair, and would
mean that anyone could delay the completion of a licensing proceeding simply by
postulating a supposed alternative at any time. This would make a mockery of the
regulatory process and we will not countenance such a notion.
Id. at 61,936–37. And finally, FERC denied rehearing of its decision rejecting the Alternative
Offer of Settlement, stating that (1) it was “unilateral and . . . a settlement offer in name only,”
and (2) although FERC was required to consider alternatives to the School Street Project,
“[d]isguising a late-filed competitive proposal as an environmental alternative d[id] not create an
obligation that the Commission examine it, or empower the Commission to do that which the
FPA forbids.”7 Id. at 61,937–38.
While FERC was considering these various motions for rehearing, the NYS DEC finally
issued a water quality certification for the School Street Project. Consequently, on February 15,
2007, FERC approved the Offer of Settlement and issued a forty-year license for the School
Street Project. See Order on Offer of Settlement and Issuing New License, 118 F.E.R.C. ¶ 61,101
(2007). Green Island and Adirondack requested rehearing of the license order, arguing, inter
alia, that FERC had violated its regulations, which required it to solicit motions to intervene
anytime a license applicant materially amended its application for a new license. See 18 C.F.R.
§ 16.9(b)(3), (d)(1) (requiring “notice of the application and of the dates for comment,
intervention, and protests” if an application for a new license is materially amended by the
applicant). The petitioners identified three points in time when they believed that the School
7
Green Island and Adirondack requested rehearing of the order denying rehearing, which
was denied. See Order Rejecting Request for Rehearing, Motion for Clarification, and Request
for Reconsideration, 118 F.E.R.C. ¶ 61,196 (2007).
15
Street license application had been materially amended without a corresponding opportunity to
intervene: (1) in 1995, when Niagara Mohawk notified FERC that it intended not to install the
21-MW generator; (2) in 2001, when Erie notified FERC that it planned to install the 21-MW
generator; and (3) in 2005, when Erie submitted the Offer of Settlement indicating that it was not
going to install that generator, but rather that it might install an 11-MW generator instead.
FERC rejected Green Island’s request for rehearing of the license order on the ground that
only a “party” to the relicensing proceedings – a status Green Island had not attained – could
make such a request. See Notice Rejecting Rehearing Request, 119 F.E.R.C. ¶ 61,038 (2007). It
denied Adirondack’s request for rehearing on the grounds that (1) Adirondack failed to
demonstrate how it had been aggrieved by the licensing order, and (2) Adirondack’s arguments
on rehearing lacked merit. See Order Denying Rehearing, 120 F.E.R.C. ¶ 61,267, 62,183 (2007)
(“September 21 Order Denying Rehearing”). In relevant part, FERC disagreed that any of the
changes to the license application warranted the solicitation of motions to intervene.
Specifically, it stated that Niagara Mohawk did not amend its license application in 1995 because
“it took no steps to alter the original application. By not requiring that a formal amendment
application be filed, the Commission preserved the possibility of licensing the additional capacity
if economic conditions improved.” Id. at 62,184. FERC concluded, however, that even had
Niagara Mohawk amended the application in 1995, the amendment would not have been material
because “omitting the additional generating unit would not significantly affect the project’s flow
regime.”8 Id.; see 18 C.F.R. § 4.35(f)(1)(i). FERC offered similar reasoning with respect to
8
By contrast, FERC indicated that if Niagara Mohawk “had wanted to increase the
number of proposed generating units at the site, it could not have done so without filing an
amended application to reflect the increased capacity.” Id.16
Erie’s 2001 request to reinstate the 21-MW generator. See September 21 Order Denying
Rehearing, 120 F.E.R.C. ¶ 61,267, at 62,185.
FERC provided a different reason for why the March 2005 Offer of Settlement did not
require the solicitation of motions to intervene. Adirondack had argued that by filing the Offer of
Settlement, Erie had withdrawn the 1991 license application and replaced it with a different
application. FERC rejected that argument, instead characterizing the role of a settlement
agreement as “supplement[ing] rather than supersed[ing] the license application.” Id. Further,
FERC asserted that the Offer of Settlement did not significantly affect any interests in a manner
not contemplated by the initial license application. Id. at 62,186. And finally, FERC explained
that the Offer of Settlement had been reached after consultation with resource agencies and
contained changes responsive to requests from those agencies. Id. at 62,185. In FERC’s view,
its regulations exempted such changes from the intervention requirement, even if they materially
amended the license application. Id. at 62,185–86 & n.26 (citing 18 C.F.R. § 4.35(e)(4)).
Consequently, FERC concluded that it did not have to solicit motions to intervene in response to
the filing of the Offer of Settlement.
Green Island and Adirondack filed petitions for review of the following FERC orders and
notices: (1) the March 15, 2007 Order Rejecting Request for Rehearing, Motion for Clarification,
and Request for Reconsideration, 118 F.E.R.C. ¶ 61,196; (2) the November 16, 2006 Order
Denying Rehearing, 117 F.E.R.C. ¶ 61,189; (3) the June 28, 2006 Notice Rejecting Motion;
(4) the June 28, 2006 Notice Denying Late Intervention; (5) the May 24, 2006 Notice Rejecting
Pleading; (6) the February 15, 2007 Order on Offer of Settlement and Issuing New License, 118
F.E.R.C. ¶ 61,101; (7) the April 12, 2007 Notice Rejecting Rehearing Request, 119 F.E.R.C.
17
¶ 61,038; and (8) the September 21, 2007 Order Denying Rehearing, 120 F.E.R.C. ¶ 61,267. We
have consolidated all of these petitions into this appeal.
DISCUSSION
This Court’s review of the instant petitions is governed by the judicial review provision
of the FPA, which provides that FERC’s findings of fact, “if supported by substantial evidence,
shall be conclusive.” See 16 U.S.C. § 825l(b). Section 825l(b), however, does not set forth a
separate standard of review for FERC’s actions. We therefore must evaluate FERC’s orders
under the standard established by the Administrative Procedure Act. See LaFleur v. Whitman,
300 F.3d 256, 267 (2d Cir. 2002) (citing 5 U.S.C. § 706). Those orders must be upheld if they
are not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A).
In evaluating whether an agency decision is arbitrary or capricious, we “‘must consider
whether the decision was based on a consideration of the relevant factors and whether there has
been a clear error of judgment.’ This inquiry must ‘be searching and careful,’ but ‘the ultimate
standard of review is a narrow one.’” Marsh v. Or. Natural Res. Council, 490 U.S. 360, 378
(1989) (quoting Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971)). “We
may set aside an agency determination as arbitrary and capricious if we conclude that the agency
‘relied on factors which Congress has not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its decision that runs counter to the
evidence before the agency, or is so implausible that it could not be ascribed to a difference in
view or the product of agency expertise.’” LaFleur, 300 F.3d at 267 (quoting Motor Vehicle
Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).
18
Under § 825l(b), only a “party” that has been “aggrieved” by a FERC order may file a
petition for review of that order. 16 U.S.C. § 825l(b); see Scenic Hudson Pres. Conference v.
FPC, 354 F.2d 608, 617 (2d Cir. 1965) (“Scenic Hudson”). FERC has the authority to control
who may become a “party” to proceedings before it. See 16 U.S.C. § 825g(a) (“In any
proceeding before it, the Commission, in accordance with such rules and regulations as it may
prescribe, may admit as a party any interested State, State commission, municipality, or any
representative of interested consumers or security holders, or any competitor of a party to such
proceeding, or any other person whose participation in the proceeding may be in the public
interest.”); Scenic Hudson, 354 F.2d at 617 (recognizing that the ability to petition for review is
predicated on party status, and that FERC has the authority “to limit those eligible to intervene or
to seek review” by denying party status). A party is “aggrieved” if it can establish that it has both
constitutional and prudential standing to challenge FERC’s orders. See City of Orrville v. FERC,
147 F.3d 979, 985 (D.C. Cir. 1998); Scenic Hudson, 354 F.2d at 615-16. Consequently, we must
determine as a threshold matter whether either Adirondack or Green Island was a party to the
proceedings below and, if so, whether either has standing to challenge the resulting orders.
A. Party Status of the Petitioners
Adirondack became a party to the relicensing proceedings when FERC granted its motion
to intervene in 1997 and thus satisfies this element of § 825l(b). See November 16 Order
Denying Rehearing, 117 F.E.R.C. ¶ 61,189, at 61,935 n.42.
It is undisputed that Green Island never was permitted to intervene in the proceedings
below. Consequently, Green Island was not a party to the relicensing proceedings and therefore
lacks the statutory authority to petition for review of orders resulting directly from those
19
proceedings. See Scenic Hudson, 354 F.2d at 617. Green Island, however, was a party to the
order denying its motion to intervene out-of-time and the order denying rehearing of that order, a
point conceded by FERC. It therefore satisfies the first element of § 825l(b) with respect to those
two orders. See N. Colo. Water Conservancy Dist. v. FERC, 730 F.2d 1509, 1515 (D.C. Cir.
1984) (“It would be grossly unfair to deny judicial review to a petitioner objecting to an agency’s
refusal to grant party status on the basis that the petitioner lacks party status. Such a petitioner
must obviously be considered a party for the limited purpose of reviewing the agency’s basis for
denying party status.”); see also City of Orrville, 147 F.3d at 989–90 n.12; Covelo Indian Cmty.
v. FERC, 895 F.2d 581, 585–86 (9th Cir. 1990).
B. Standing of the Petitioners
As discussed above, the requirement that a party be “aggrieved” by a FERC order is
coextensive with the requirement that it be able to establish both constitutional and prudential
standing to challenge that order.
“Three elements comprise the ‘irreducible constitutional minimum of standing.’”
LaFleur, 300 F.3d at 269 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). To
satisfy Article III’s standing requirements, a party must demonstrate that “‘(1) it has suffered an
“injury in fact” that is (a) concrete and particularized and (b) actual or imminent, not conjectural
or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and
(3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable
decision.’” Pac. Capital Bank, N.A. v. Connecticut, 542 F.3d 341, 350 (2d Cir. 2008) (quoting
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000)).
The “injury in fact” requirement has been characterized as “an invasion of a legally protected
20
interest.” Lujan, 504 U.S. at 560. The party seeking judicial review “bear[s] the burden of
alleging facts that demonstrate [its] standing.” LaFleur, 300 F.3d at 268.
Prudential standing is not a constitutional consideration but rather “embodies ‘judicially
self-imposed limits on the exercise of federal jurisdiction.’” Elk Grove Unified Sch. Dist. v.
Newdow, 542 U.S. 1, 11 (2004) (quoting Allen v. Wright, 468 U.S. 737, 751 (1984)). Prudential
standing considerations include, inter alia, “‘the rule barring adjudication of generalized
grievances more appropriately addressed in the representative branches, and the requirement that
a plaintiff’s complaint fall within the zone of interests protected by the law invoked.’” Devlin v.
Scardelletti, 536 U.S. 1, 7 (2002) (quoting Allen, 468 U.S. at 751).
1. Adirondack
FERC contends that the only interest Adirondack has ever identified to justify its
presence as a party in the relicensing proceedings – its interest in the New York State Dam
Hydroelectric Project resulting from its position as the managing partner of that project – is
insufficient to serve as the current basis for an injury-in-fact given that Adirondack no longer is
involved with that project. It therefore argues that Adirondack lacks standing to challenge any of
FERC’s orders. Adirondack concedes that it no longer owns or operates any hydroelectric
projects on the Mohawk River, but it contends that it can establish an injury-in-fact resulting
from FERC’s orders in three ways.
First, Adirondack points to the fact that various parties moved to intervene out-of-time in
the relicensing proceedings. Those parties had a broad range of interests, including
environmental, cultural, aesthetic, public health, historic preservation, and restoration interests.
FERC denied those motions, in part, on the ground that Adirondack, which was already a party to
21
the proceedings, “appear[ed] aligned” with the potential intervenors and thus could represent
their interests. See November 16 Order Denying Rehearing, 117 F.E.R.C. ¶ 61,189, at 61,933.
Adirondack contends that this constituted a concession by FERC that Adirondack shared those
interests and therefore would have standing to challenge FERC’s orders, such that it would be
unfair to let FERC argue now that Adirondack lacks standing because it has suffered no injury.
Assuming arguendo that FERC conceded Adirondack’s interest in the proceedings, a
point on which we express no view, we nonetheless have “an independent obligation” to conduct
our own standing inquiry. Kendall v. Employees Ret. Plan of Avon Prods., 561 F.3d 112, 117
n.11 (2d Cir. 2009). And although we recognize that a party’s standing can be predicated on an
injury to aesthetic, environmental, or recreational interests, see, e.g., Friends of the Earth, Inc.,
528 U.S. at 183-84; LaFleur, 300 F.3d at 270–71, Adirondack offers no support for its assertion
that it has suffered any such injury as a result of any of FERC’s orders.
Second, Adirondack asserts that it has an interest, in its capacity as the development
subsidiary of Albany Engineering (“Albany”), in the general development of hydroelectric
projects on the Mohawk and Hudson Rivers in the vicinity of the School Street Project. But this
argument is to no avail. As an initial matter, although Adirondack states that Albany has
initiated licensing proceedings for a project on the Mohawk River upstream from the School
Street Project, it makes no argument that this project would be impacted in any way by the
relicensing of School Street. Furthermore, any potential injury that might result from
Adirondack’s purported interest in developing future hydroelectric projects on the Mohawk River
is far too hypothetical to establish standing, because that injury would be dependent upon
(1) Adirondack actually pursuing those projects, and (2) the School Street Project affecting their
22
development. See Baur v. Veneman, 352 F.3d 625, 632 (2d Cir. 2003) (“[T]o support standing,
the plaintiff’s injury must be actual or imminent to ensure that the court avoids deciding a purely
hypothetical case in which the projected harm may ultimately fail to occur.”).
Third, Adirondack asserts that it has an interest that derives from the development of the
Cohoes Falls Project. Its argument proceeds as follows: Albany is Green Island’s agent and
primary consultant with respect to the Cohoes Falls Project and thus stands to profit by doing
work for Green Island on that project. As a subsidiary of Albany, Adirondack stands to earn
profits as a result of the work that Albany will perform. If FERC relicenses the School Street
Project, however, Green Island cannot develop the Cohoes Falls Project. This will have a
financial impact on Albany, which, in turn, will cause economic harm to Adirondack.
Adirondack’s argument, however, suffers from two flaws. The first is that Adirondack’s
purported injury derives from Albany’s financial injury. Although it is settled law that a party
can establish standing even if it has suffered only an indirect injury, see Warth v. Seldin, 422 U.S.
490, 504-05 (1975), that does not relieve that party from establishing that it actually will suffer a
concrete injury. In this case, Albany’s injury is purely speculative. If School Street were not
licensed, then Albany would stand to profit from its relationship with Green Island only if
(1) Green Island carried through with its stated intention of filing a license application for the
Cohoes Falls Project, (2) Green Island continued to use Albany as a consultant on that project,
and (3) work needed to be performed by Albany as Green Island competed for that license.
Because Albany’s injury is speculative, Adirondack’s purported injury necessarily is speculative
as well.
But even assuming arguendo that Albany would suffer a non-hypothetical injury as a
23
result of the licensing order, Adirondack fails to explain the mechanism by which injury would
flow to it. Indeed, although Adirondack asserts that it stands to profit from the Cohoes Falls
Project because it is a subsidiary of Albany, it cites no authority to support the proposition that a
subsidiary necessarily suffers financial injury whenever its parent suffers economic harm.9 Nor
does Adirondack identify any facts or characteristics unique to this particular parent-subsidiary
relationship that could lead us to the conclusion that Adirondack will suffer an injury if Albany
suffers an injury.
In sum, none of the injuries identified by Adirondack are sufficient to satisfy the injury-
in-fact requirement of the standing analysis. Consequently, Adirondack lacks standing to
challenge any of FERC’s orders.
2. Green Island
Green Island was not permitted to intervene as a party in the relicensing proceedings. As
discussed above, however, it is a party for the limited purpose of challenging FERC’s denial of
its motion to intervene. Furthermore, Green Island has standing to challenge FERC’s order
denying its motion to intervene and its order denying rehearing of that order. See City of
Orrville, 147 F.3d at 989–90 n.12; Covelo Indian Cmty., 895 F.2d at 585-86. Accordingly, we
now consider Green Island’s petition for review of FERC’s denial of its motion to intervene, and
FERC’s denial of Green Island’s request for rehearing of that decision.
9
Adirondack’s reliance on Consolidated Gold Fields PLC v. Minorco, S.A., 871 F.2d
252, 258 (2d Cir. 1989), here is misplaced. In Consolidated Gold Fields, a case arising in the
antitrust context, we held that a subsidiary of a hostile takeover target had standing to seek an
injunction against the tender offer because the takeover bid would cause the subsidiary itself to
suffer “curtailment of its production,” which in turn would lead to reduction in its profits and in
its ability to compete. Id. Thus, the subsidiary had standing not because it was a subsidiary of a
parent that suffered an injury, but rather because it suffered an injury itself.
24
C. Green Island’s Motion to Intervene
As it did before the agency, Green Island argues here that FERC disregarded its
obligation to solicit motions to intervene at three points during the relicensing proceedings: (1) in
December 1995, when Niagara Mohawk informed FERC that it no longer intended to install the
proposed 21-MW generator; (2) in May 2001, when Erie reversed course and informed FERC
that it intended to install the proposed 21-MW generator; and (3) in March 2005, when Erie
submitted the Offer of Settlement. Green Island contends that because FERC failed to solicit
interventions at any of these three points, its treatment of Green Island’s motion to intervene as
untimely was arbitrary and capricious.
Under the regulations governing relicensing proceedings, upon the filing of a material
amendment to a new license application, FERC must reissue public notice of that application,
along with dates for comments, intervention, and protests. See 18 C.F.R. § 16.9(b)(3), (d)(1). A
“material amendment to plans of development proposed in an application for a license . . . means
any fundamental and significant change, including but not limited to . . . [a] change in the
installed capacity, or the number or location of any generating units of the proposed project if the
change would significantly modify the flow regime associated with the project.” 18 C.F.R.
§ 4.35(f)(1)(i).
FERC did not view any of the events identified by Green Island as warranting the
solicitation of motions to intervene. Specifically, it determined that the 1995 and 2001 events
did not constitute materials amendments to the license application because they did not
“significantly affect the project’s flow regime.” September 21 Order Denying Rehearing, 120
F.E.R.C. ¶ 61,267, at 62,184–85. It determined that the 2005 Offer of Settlement did not warrant
25
intervention for three reasons: (1) it “supplement[ed] rather than supersede[d] the license
application”; (2) it did not “significantly affect interests in a manner not contemplated by the
original application”; and (3) it fell under one of the exceptions to the intervention requirements
contained in 18 C.F.R. § 4.35(e). See id. at 62,185–86 & n.26. Consequently, FERC analyzed
Green Island’s motion pursuant to the factors governing its consideration of late motions to
intervene. See 18 C.F.R. § 385.214(d).
FERC’s factual findings underlying its conclusion that the 1995 and 2001 events did not
constitute material amendments to the license application because they did not “significantly
modify the project’s flow regime” are supported by substantial evidence. See Friends of the
Ompompanoosuc v. FERC, 968 F.2d 1549, 1554 (2d Cir. 1992) (“‘Substantial evidence’ has
been defined to mean such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” (internal quotation marks omitted)). With respect to the removal of the
generator from consideration in 1995, FERC recognized that this “would result in a change in
flows, because more water would spill over the dam whenever flows available for generation
exceeded the capacity of the existing turbines.” September 21 Order Denying Rehearing, 120
F.E.R.C. ¶ 61,267, at 62,184. It concluded, however, that this would not significantly affect the
project’s flow regime because “the project would still be required to operate in a run-of[-]river
mode, and to provide the same minimum flows in the bypassed reach.” Id. FERC referenced
this same reasoning when it concluded that the 2001 reinstatement of the 21-MW generator did
not constitute a material amendment. Although Green Island criticizes FERC’s reasoning as
“illogical” and “nonsense,” it offers no actual evidence to demonstrate that FERC’s conclusion
was flawed. Consequently, FERC’s decisions not to solicit motions to intervene in 1995 or 2001
26
were not arbitrary and capricious.10
FERC’s decision not to solicit motions to intervene following the March 2005 Offer of
Settlement, however, was arbitrary and capricious. See LaFleur, 300 F.3d at 267. Section
16.9(b)(3) of its regulations requires FERC to reissue public notice and seek comments,
interventions, and protests, if an applicant for a new license “materially amends” its application
as that term is defined in 18 C.F.R. § 4.35(f)(1). Thus, the analysis that FERC should have
performed at that time required it to consider solely whether the Offer of Settlement constituted a
“fundamental and significant change” to the School Street license application. See 18 C.F.R.
§ 4.35(f)(1). FERC did not address this question. Rather, it relied on two grounds – that
(1) settlement agreements generally supplement rather than supersede license applications, and
(2) the Offer of Settlement did not “significantly affect interests in a manner not contemplated by
the original application” – that have no bearing on the analysis.
FERC’s third reason for not soliciting motions to intervene in 2005 – that the Offer of
Settlement fell under one of the exceptions in 18 C.F.R. § 4.35(e) – similarly was improper. On
the surface, § 4.35(e) would appear to be applicable. As a general matter, § 4.35 governs how to
determine the date of acceptance of a license application when that application has been
amended. See 18 C.F.R. § 4.35(a) (“[I]f an applicant amends its filed application as described in
paragraph (b) of this section, the date of acceptance of the application under § 4.32(f) is the date
10
In any event, even if FERC’s decisions not to solicit motions to intervene in 1995 or
2001 were arbitrary and capricious, any resulting error would have been harmless vis-à-vis Green
Island, because (1) the 1995 events occurred prior to the time when Green Island developed an
interest in the proceedings, and (2) Green Island has not alleged that it would have filed a motion
to intervene in 2001, as opposed to waiting until 2004, had FERC solicited interventions at that
time.
27
on which the amendment to the applica[tion] was filed.”). The regulation applies when, for
example, the applicant “[a]mends its filed license . . . application . . . to materially amend the
proposed plans of development.”11 Id. § 4.35(b)(1). In that event, the application is considered
“a new filing for . . . [t]he purpose of determining its timeliness under § 4.36 of this part . . . and
. . . [r]eissuing public notice of the application under § 4.32(d)(2).” Id. § 4.35(c).
Section 4.35(e) creates exceptions to the operation of § 4.35(a) where, inter alia, the
amendment is “made by a license . . . applicant to its proposed plans of development to satisfy
requests of resource agencies.” Id. § 4.35(e)(4). Thus, when an applicant amends a license
application in response to a request from a resource agency, that amendment has no impact on
the date on which the application is deemed to have been filed. Moreover, § 4.35(e) appears to
indicate that FERC does not have to reissue public notice of the application, even if the
amendment to that application is material.
In the present context, however, that of a relicensing proceeding, § 4.35 is not the
appropriate regulation upon which to rely. Rather, FERC should have conducted its analysis
pursuant to the requirements of § 16.9, which “applies to an applica[tion] for a new license or
nonpower license for a project subject to sections 14 and 15 of the Federal Power Act.” 18
C.F.R. § 16.9(a). Indeed, § 16.9(b)(3) explicitly provides that “[t]he requirements of § 4.35 of
this chapter do not apply to an application under this section, except that the Commission will
reissue a public notice of the application in accordance with the provisions of § 16.9(d)(1) if an
amendment described in § 4.35(f) of this chapter is filed.” In other words, in relicensing
proceedings FERC may look to § 4.35 only for its definition of “material amendment”; FERC
11As discussed above, the term “material amendment” is defined in § 4.35(f).
28
must reissue public notice and set a date for comments, intervention, and protests any time an
applicant for a new license materially amends its license application.
The administrative history of § 16.9(b)(3) supports our understanding of the role § 4.35
plays in relicensing proceedings and demonstrates that FERC’s interpretation of that regulation is
unreasonable. In setting forth its final rule with respect to hydroelectric relicensing regulations
under the FPA, FERC explained that § 4.35 was not relevant to the filing of amendments to new
license applications, except insofar as that section is to be used to determine whether such
amendments are material.
Under § 4.35, when amendments to applications that are considered as “material”
are filed, the filing date of the initial application is deemed to be the date the
material amendment is filed for a variety of purposes, including the determination
of whether the initial application was timely filed vis-a-vis competition deadlines.
On its face, § 4.35 applies to relicensing proceedings. However, application of
§ 4.35 to relicensing proceedings would mean that an application for new license
timely filed by an applicant prior to the 24-month new license filing deadline
would be rejected if the applicant were to file a material amendment to the
application after the 24-month deadline, even if the amendment were filed prior to
the final amendment deadline established for the proceeding.
The Commission believes it is appropriate to waive § 4.35 as to relicensing
proceedings to avoid this situation. . . . However . . . , the § 16.9(d)(1) notice will
be reissued to obtain the views of the public and others should an amendment
considered material under § 4.35(f) be filed.
Hydroelectric Relicensing Regulations Under the Federal Power Act, 54 Fed. Reg. 23,756,
23,787 (June 2, 1989) (footnotes omitted).
It is plain, therefore, that FERC’s decision not to solicit motions to intervene following
the submission of the Offer of Settlement was predicated on three reasons not contemplated by
29
its regulations.12 Furthermore, its failure to conduct the proper analysis may have affected its
treatment of Green Island’s motion to intervene. Had FERC determined that the Offer of
Settlement was a material amendment, then it would have been required to solicit interventions,
Green Island’s renewed motion to intervene would have been timely, and FERC could not have
analyzed that motion pursuant to the factors applicable to untimely motions to intervene.
Consequently, FERC’s denial of Green Island’s motion to intervene, without first conducting the
proper analysis to determine whether it was required to solicit such motions, was arbitrary and
capricious.
D. Prejudicial Error Analysis
Although we find that FERC acted arbitrarily and capriciously by denying Green Island’s
motion to intervene without first considering whether the Offer of Settlement materially amended
the School Street license application, we are mindful of the Administrative Procedure Act’s
admonition that “due account shall be taken of the rule of prejudicial error.” 5 U.S.C. § 706; see
Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 659 (2007). “The rule of
prejudicial error typically eliminates the necessity of remand following judicial review when the
error that the agency has made was not prejudicial and did not impinge on fundamental rights.”
N.Y. Pub. Interest Research Group v. Whitman, 321 F.3d 316, 333 (2d Cir. 2003) (emphasis
omitted). Thus, we will not disturb FERC’s orders if we can determine that the outcome of the
administrative proceedings will be the same absent FERC’s error. See PDK Labs. Inc. v. U.S.
12
As discussed above, those three reasons were that the Offer of Settlement
(1) “supplement[ed] rather than supersede[d] the license application,” (2) did not “significantly
affect interests in a manner not contemplated by the original application,” and (3) fell under one
of the exceptions to the intervention requirements contained in 18 C.F.R. § 4.35(e). September
21 Order Denying Rehearing, 120 F.E.R.C. ¶ 61,267, at 62,185–86 & n.26.
30
Drug Enforcement Admin., 362 F.3d 786, 799 (D.C. Cir. 2004) (“If the agency’s mistake did not
affect the outcome, if it did not prejudice the petitioner, it would be senseless to vacate and
remand for reconsideration.”); see also Kerner v. Celebrezze, 340 F.2d 736, 740 (2d Cir. 1965)
(“It would be fatuous to suppose that if the hearing officer had recommended a decision in
[petitioner’s] favor, the ultimate result would have been different, or that a remand to obtain a
recommendation from him now would accomplish anything save further expense and delay.”
(citation omitted)). If, however, we can determine that the outcome will be different, or if there
is uncertainty with respect to what the outcome will be, when FERC properly applies its
regulations, then we will find that FERC’s error was prejudicial and remand the case for further
proceedings. See Sprint Corp. v. FCC, 315 F.3d 369, 376 (D.C. Cir. 2003); cf. Sugar Cane
Growers Coop. v. Veneman, 289 F.3d 89, 96 (D.C. Cir. 2002) (“[A]n utter failure to comply with
notice and comment cannot be considered harmless if there is any uncertainty at all as to the
effect of that failure.”).
Our prejudicial error analysis first must address whether we can determine that FERC
will deny Green Island’s motion to intervene upon remand, even after conducting the proper
analysis. If so, there can be no prejudicial error. If not, however, then we must address whether
we can determine that FERC will license the School Street Project again, even if it grants Green
Island’s motion to intervene.
Turning to the first part of the analysis, we cannot be certain that FERC will deny Green
Island’s motion to intervene after applying its regulations properly, because FERC has never
addressed whether the extensive proposals contained in the Offer of Settlement materially
amended the School Street license application, and we lack the expertise to make this
31
determination in the first instance. Furthermore, FERC has never given any indication that it
would have denied Green Island’s motion to intervene even if it had considered that motion to be
timely. We therefore must consider the second prong of our prejudicial error analysis – i.e.,
whether the outcome of the administrative proceedings will be the same even if Green Island is
permitted to intervene.
We are unable to conclude that the outcome of the proceedings will be the same upon
remand if Green Island is permitted to intervene. During the proceedings below, FERC
steadfastly refused to consider the evidence that Adirondack and Green Island submitted
regarding the Cohoes Falls Project proposal. As we explain below, however, FERC has a
statutory duty when conducting relicensing proceedings to consider feasible alternatives to the
project under consideration, even if it ultimately cannot license those alternatives. Consequently,
if Green Island is permitted to intervene upon remand, then FERC is statutorily obligated to
consider its evidence regarding the Cohoes Falls Project.
This statutory duty arises principally from three sections of the FPA. As an initial matter,
§ 4(e) grants FERC the authority to issue licenses for hydroelectric projects, but it demands that
FERC consider a broad spectrum of concerns:
In deciding whether to issue any license under this subchapter for any project, the
Commission, in addition to the power and development purposes for which
licenses are issued, shall give equal consideration to the purposes of energy
conservation, the protection, mitigation of damage to, and enhancement of, fish
and wildlife (including related spawning grounds and habitat), the protection of
recreational opportunities, and the preservation of other aspects of environmental
quality.
16 U.S.C. § 797(e).
Section 10(a)(1) of the FPA, which covers the issuances of licenses generally, provides
32
that
the project adopted, including the maps, plans, and specifications, shall be such as
in the judgment of the Commission will be best adapted to a comprehensive plan
for improving or developing a waterway or waterways for the use or benefit of
interstate or foreign commerce, for the improvement and utilization of
water-power development, for the adequate protection, mitigation, and
enhancement of fish and wildlife (including related spawning grounds and
habitat), and for other beneficial public uses.
16 U.S.C. § 803(a)(1) (emphasis added). When the FPA was amended in 1986, Congress
recognized that “[FERC] and the courts have held the Section 10(a) standard to be [a] broad
public interest standard, requiring consideration of all factors affecting the public interest.” H.R.
Rep. No. 99-507, at 12 (1986), as reprinted in 1986 U.S.C.C.A.N. 2496, 2499. Further,
Congress explained that it intended § 10(a) to provide FERC with the flexibility to weight
different public-interest factors differently on a case-by-case basis, so that “[a]s the public
interest changes over time, [FERC’s] considerations under the section 10(a) standard likewise
change, encompassing new criteria or reevaluating the weight given established criteria.” Id.
Section 10(a) does not present “an exclusive list of values FERC must evaluate and address,” but
rather “highlights the steps the Commission must take to inform itself regarding the needs and
uses of the river in question.” H.R. Rep. No. 99-934, at 22 (1986) (Conf. Rep.), as reprinted in
1986 U.S.C.C.A.N. 2537, 2539.
Section 15(a)(2) of the FPA mandates a similar analysis with respect to applications for
new licenses. It provides that
[a]ny new license issued under this section shall be issued to the applicant having
the final proposal which the Commission determines is best adapted to serve the
public interest, except that in making this determination the Commission shall
ensure that insignificant differences with regard to subparagraphs (A) through (G)
of this paragraph between competing applications are not determinative and shall
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not result in the transfer of a project. In making a determination under this section
(whether or not more than one application is submitted for the project), the
Commission shall, in addition to the requirements of section 803 of this title,
consider (and explain such consideration in writing) each of the following . . . .
16 U.S.C. § 808(a)(2) (emphasis added). The statute then enumerates seven factors that FERC
“shall . . . consider” when determining whether the project is “best adapted to serve the public
interest.” See 16 U.S.C. § 808(a)(2)(A)-(G); see also 18 C.F.R. § 16.13(a) (“In determining
whether a final proposal for a new license under section 15 of the Federal Power Act is best
adapted to serve the public interest, the Commission will consider the factors enumerated in
sections 15(a)(2) and (a)(3) of the Federal Power Act.”).
The purpose of § 15(a)(2) is to ensure that FERC rigorously scrutinizes any application
for a new license for an existing hydroelectric project, so that it can determine that the existing
project is “best adapted to serve the public interest.” This is so even where there is only one
applicant and that applicant is the current license holder of the existing project. Indeed, the
legislative history noted explicitly that a relicensing proceeding “does not include an incumbent
preference,” H.R. Rep. No. 99-934, at 26, and that the “existing licensee will not be ‘rubber
stamped,’ but must again prove that its project qualifies as ‘best adapted’ on power and
non-power grounds.” H.R. Rep. 99-507, at 15; see also id. at 33-35 (discussing the importance
of a rigorous evaluation of all license applications to ensure that each is best adapted to serve the
public interest).
Sections 10 and 15 of the FPA place great emphasis on the requirement that FERC
license the hydroelectric project “best adapted” to accomplish the goals of the statute. We
explained what FERC must do to comply with the “best adapted” standard under § 10(a) when
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we decided Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608 (2d Cir. 1965).13 In
Scenic Hudson, we reviewed, inter alia, an order issued by the FPC granting a license to
Consolidated Edison (“Con Ed”) to construct a hydroelectric project near the Hudson River. Id.
at 611. We stated that the project could be licensed only if it met the statutory requirement that it
be “‘best adapted to a comprehensive plan for improving or developing a waterway,’” id. at 612(quoting 16 U.S.C. § 803(a)), and that the FPC was “under a statutory duty to give full
consideration to alternative plans,” even where it “‘ha[d] no authority to command the
alternative.’” Id. at 617 (quoting City of Pittsburgh v. FPC, 237 F.2d 741, 751 n.28 (D.C. Cir.
1956)).
We found that the FPC had violated this duty when it refused to receive testimony
concerning the feasibility of an alternative to the Con Ed project, on the ground that the
testimony was not timely. We remanded the case for the agency to supplement its record,
concluding that “[e]specially in a case of this type, where public interest and concern is so great,
the Commission’s refusal to receive the . . . testimony, as well as proffered information on fish
protection devices and underground transmission facilities, exhibits a disregard of the statute and
of judicial mandates instructing the Commission to probe all feasible alternatives.” Id. at 620
(footnote omitted). Finally, we admonished the agency that
13
Because Scenic Hudson was decided before Congress amended the FPA in 1986, and
before it passed the National Environmental Policy Act of 1969 (“NEPA”), FERC questions the
extent to which our decision in that case continues to apply to licensing proceedings today. At
oral argument, FERC softened its position vis-à-vis NEPA, and the legislative history of the 1986
amendments to the FPA makes plain that Congress intended those amendments to reflect how
courts had interpreted the “best adapted” standard in the past. See H.R. Rep. No. 99-934, at 21
(“There is no intention in any way to change the holdings in relevant cases, . . . which the
conferees intend will continue to apply to FERC’s hydroelectric program.”). Thus, Scenic
Hudson continues to apply to licensing proceedings today.
35
the Commission has claimed to be the representative of the public interest. This
role does not permit it to act as an umpire blandly calling balls and strikes for
adversaries appearing before it; the right of the public must receive active and
affirmative protection at the hands of the Commission. . . . The Commission must
see to it that the record is complete. The Commission has an affirmative duty to
inquire into and consider all relevant facts.
Id.
Scenic Hudson makes plain that FERC is statutorily obligated, pursuant to the “best
adapted” standard set forth in sections 10 and 15 of the FPA, to give full consideration to all
feasible alternatives, even where it ultimately cannot license those alternatives. We recognize
that FERC must strike a balance between complying with this obligation and ensuring the timely
resolution of licensing proceedings. Given the unique circumstances of this case, however,
where more than fifteen years passed between when Niagara Mohawk first submitted its
application for a new license for the School Street Project in December 1991 and when FERC
issued its licensing order in February 2007, and where nearly two years passed between the filing
of the Offer of Settlement and the licensing order, FERC’s compliance with its statutory
obligation bears particular importance.
Thus, if Green Island is permitted to intervene upon remand, FERC must consider Green
Island’s evidence regarding the Cohoes Falls Project so that it may determine whether the
Cohoes Falls Project is a feasible alternative. If FERC determines that the Cohoes Falls Project
is a feasible alternative, then it must give it full consideration when determining whether the
School Street Project satisfies the “best adapted” standard of the Federal Power Act,
notwithstanding the fact that FERC cannot license the Cohoes Falls Project instead of School
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Street.14 Because FERC has never considered the Cohoes Falls Project proposal in any detail
and, indeed, has conceded that it has no way of knowing whether that proposal has any merit, see
September 21 Order Denying Rehearing, 120 F.E.R.C. ¶ 61,267, at 62,190, we are unable to
determine what the outcome of this analysis might be. Therefore, we cannot be certain that
FERC’s error in denying Green Island’s motion to intervene was harmless.
In sum, FERC abused its discretion when it denied Green Island’s motion to intervene
without first considering whether the Offer of Settlement materially amended the School Street
license application. Furthermore, we are unable to conclude that this error was not prejudicial.
Accordingly, we remand this case for FERC to consider in the first instance whether the Offer of
Settlement was a material amendment to the license application. If it was, then FERC must
consider Green Island’s motion to intervene in the relicensing proceedings as timely filed and
analyze it accordingly. In the event that it grants Green Island’s motion to intervene, FERC is
statutorily obligated to consider Green Island’s evidence regarding the Cohoes Falls Project
proposal.
CONCLUSION
For the foregoing reasons, we DENY Adirondack Hydro Development Corporation’s
petitions for review. We GRANT Green Island Power Authority’s petitions for review of the
orders denying its motion to intervene and denying its request for rehearing of that decision. We
VACATE the Federal Energy Regulatory Commission’s February 15, 2007 order issuing a new
license for the School Street Hydroelectric Project and REMAND this case for further
proceedings consistent with this opinion.
14
We leave it for FERC to determine in the first instance whether, in the event it
determines that the Cohoes Falls Project does present a feasible alternative, it is required to
conduct further analysis to comply with its statutory obligations under NEPA.
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