City of Oconto Falls v. Federal Energy Regulatory Commission , 204 F.3d 1154 ( 2000 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
---------
Argued January 14, 2000 Decided March 7, 2000
No. 98-1594
City of Oconto Falls, Wisconsin,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
City of Oswego, New York and N.E.W. Hydro,
Intervenors
No. 99-1065
State of Wisconsin,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
N.E.W. Hydro,
Intervenor
On Petitions for Review of Order of the
Federal Energy Regulatory Commission
Carolyn Elefant argued the cause for petitioner City of
Oconto Falls, Wisconsin.
Lorraine C. Stoltzfus, Assistant Attorney General, State of
Wisconsin, argued the cause for petitioner State of Wisconsin.
James E. Doyle, Attorney General, State of Wisconsin, was
on brief for petitioner State of Wisconsin.
Judith A. Albert, Attorney, Federal Energy Regulatory
Commission, argued the cause for the respondent. Timm L.
Abendroth, Attorney, Federal Energy Regulatory Commis-
sion, was on brief for the respondent.
Paul Vincent Nolan entered an appearance for intervenor
City of Oswego, New York in No. 98-1594.
Donald H. Clarke entered an appearance for intervenor
N.E.W. Hydro, Inc. in Nos. 98-1594 and 99-1065.
Before: Silberman, Henderson and Garland, Circuit
Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge: On November
13, 1997 the Federal Energy Regulatory Commission (Com-
mission, FERC) issued a license order awarding the Oconto
Falls (Wisconsin) hydroelectric project to N.E.W. Hydro
(NEW). See 81 FERC p 61,238 (1997). Both the City of
Oconto Falls (City) and the Wisconsin Department of Natural
Resources (WDNR) challenge the Commission's action.
WDNR argues that the Commission breached its statutory
obligation under section 10(j) of the Federal Power Act
(FPA), 16 U.S.C. s 803(j), to give "due weight" to WDNR's
recommendations to protect fish. The City argues that the
Commission improperly determined that: (1) the City's li-
cense application was "essentially equal" to NEW's applica-
tion under section 15(a)(2) of the FPA, 16 U.S.C. s 808(a)(2);
(2) the Commission's "first to file" tie-breaker procedure
applied; and (3) NEW's application need not be dismissed for
anticompetitive activity with Wisconsin Electric Power Com-
pany, allegedly resulting from the Commission's licensure of
NEW. In turn, the Commission challenges the court's juris-
diction over WDNR's petition for review because WDNR
identified only the rehearing order, 85 FERC p 61,222 (1998),
not the license order in its petition. For the reasons set forth
infra, we conclude that we have jurisdiction to review
WDNR's petition and, based on our review, the Commission
satisfied its duty under section 10(j) of the FPA to give
WDNR's recommendations "due weight." We further con-
clude that the Commission's factual determination that both
NEW's and the City's applications were "essentially equal" is
supported by substantial evidence, that the "first to file" tie-
breaker procedure did not unfairly prejudice the City and
that the Commission correctly declined to dismiss NEW's
application. Accordingly, we deny both WDNR's and the
City's petitions for review.
I.
In 1977 the Federal Power Commission issued Wisconsin
Electric Power Company (WEPCO) a license to operate a
hydroelectric project (Oconto Falls Project) located on the
Oconto River near Oconto Falls, Wisconsin, to expire Decem-
ber 31, 1993. In 1988 WEPCO filed a notice of intent to
refile an application for relicensure but it failed to file its
application before the December 31, 1991 deadline. Instead,
WEPCO initiated discussions to sell the Oconto Falls Project
to NEW. The sale was not completed by the December 31,
1991 deadline, however, and because no other party filed a
notice of intent to file an application, the Oconto Falls Project
became orphaned.1 In February 1992 the Commission issued
a public notice pursuant to Part I of the FPA, 16 U.S.C.
ss 791a-823a, to solicit license applications. At that time
NEW informed the Commission of its intent to file an applica-
tion. In May 1992 the City informed the Commission of its
intent to file a competing application. In addition the City
petitioned FERC for an order declaring that any license
application for the Oconto Falls Project was subject to a
municipal preference pursuant to section 7(a) of the FPA, 16
U.S.C. s 800(a).2 The Commission ruled instead that section
15 of the FPA, 16 U.S.C. s 808, governs an orphan proceed-
ing and therefore declared the municipal preference inappli-
cable.3 This court subsequently affirmed the Commission's
decision. See Oconto Falls v. FERC, 41 F.3d 671, 674-75
(D.C. Cir. 1994).
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1 An orphaned project is a facility "for which the licensee files a
notice of intent to apply for a relicense but neither the licensee nor
any other applicant files a timely relicense application." Oconto
Falls v. FERC, 41 F.3d 671, 672 (D.C. Cir. 1994); see also 18 C.F.R.
s 16.25.
2 In issuing a preliminary permit or original license, "the Com-
mission shall give preference to applications therefor by States and
municipalities" so long as the competing applications are "equally
well adapted ... to conserve and utilize in the public interest the
water resources of the region." 16 U.S.C. s 800(a).
3 Section 15, as amended, "makes the municipal preference inap-
plicable in relicensing proceedings even when the licensee is not
seeking to renew the license." Oconto Falls, 41 F.3d at 675.
Instead, the license is issued to "the applicant having the final
proposal which the Commission determines is best adapted to serve
the public interest." 18 U.S.C. s 808(a)(2) (Supp. 1999).
In the meantime WEPCO accepted NEW's offer to acquire
the Oconto Falls Project conditioned on NEW's licensure by
the Commission. See License Order, 81 FERC at 61,982.
On August 21, 1992 NEW requested the Commission to
waive the "first stage" pre-filing consultation requirement to
provide "the relevant Federal, State and interstate resource
agencies" detailed studies, data and documentation on the
Oconto Falls Project, see 18 C.F.R. s 16.8(a)(1), (b), inas-
much as WEPCO had already completed the consultation re-
quirement and had transferred all of the relevant materials
to NEW. On September 1, 1992 the Commission Director
granted NEW's request. In November 1992 the City re-
quested a copy of WEPCO's Initial Consultation Package
(ICP), which contained not only WEPCO's detailed studies
and data but also the resource agencies' comments detailing
the studies and methodologies they recommended WEPCO
to use. NEW planned to use WEPCO's ICP to prepare its
license application but WEPCO refused to make it available.
The City subsequently petitioned the Commission for a copy
of WEPCO's ICP to obtain the data it needed to prepare its
application. In August 1993 NEW filed an application for a
license with the Commission. Two months later the Com-
mission ordered WEPCO to make its ICP publicly available
and it did so in November 1993. Finally, in August 1994 the
City filed a competing application for licensure with the
Commission. Several months later, while the applications
were pending, the City filed a complaint with FERC alleging
anticompetitive activity by NEW and WEPCO, asking the
Commission both to order them to cease the activity and to
dismiss NEW's application.
Pursuant to section 10(j) of the FPA, the Commission must
include as license conditions any recommendations from
"State fish and wildlife agencies" unless the Commission
determines that the recommended conditions are "inconsis-
tent with the purposes and requirements" of the FPA or
other laws. 16 U.S.C. s 803(j)(1), (2). During the licensing
process, WDNR recommended that the Oconto Falls Project
licensee be required to reduce fish entrainment, i.e., their
passage into and through the turbines of the hydroelectric
project. On November 13, 1997 the Commission issued an
order granting NEW the Oconto Falls Project license. See
81 FERC p 61,238 (1997) (License Order). The Commission
concluded that both NEW's and the City's license applications
were essentially equal, that the "first to file" tie-breaker
procedure was appropriate under the circumstances and that
NEW and WEPCO had not engaged in anticompetitive activi-
ty. After finding no evidence that entrainment significantly
adversely affected the fish populations, the Commission also
declined to impose WDNR's proposed conditions to reduce
fish entrainment. On November 13, 1998 the Commission
denied both WDNR's and the City's petitions for rehearing.
See 85 FERC p 61,222 (1998) (Rehearing Order). The City
then petitioned for review of the Commission's License Order
and Rehearing Order while WDNR petitioned the Seventh
Circuit for review of the Commission's Rehearing Order.
WDNR's petition was transferred to this court and the two
cases were consolidated.
II.
The court upholds FERC's factual findings "if supported by
substantial evidence" and upholds its order so long as it uses
reasoned decision making. Texaco, Inc. v. FERC, 148 F.3d
1091, 1095 (D.C. Cir. 1999). The Commission's decision to
award NEW the license is entitled to deference so long as the
decision is supported by substantial evidence. See Bangor
Hydro-Elec. Co. v. FERC, 78 F.3d 659, 663 (D.C. Cir. 1996).
The court grants "considerable" deference to the Commis-
sion's interpretation of a statute it administers so long as its
"interpretation is permissible." Oconto Falls, 41 F.3d at 674(citations omitted).
A. Jurisdiction
The Commission challenges the court's jurisdiction to re-
view WDNR's petition because it petitioned for review of the
Rehearing Order instead of the License Order. Under sec-
tion 313(b) of the FPA:
Any party to a proceeding under this chapter aggrieved
by an order issued by the Commission in such proceeding
may obtain a review of such order in the United States
court of appeals ... by filing in such court, within sixty
days after the order of the Commission upon the applica-
tion for rehearing, a written petition praying that the
order of the Commission be modified....
16 U.S.C. s 825l(b). Section 313(b)'s plain language indicates
that "the order of the Commission upon the application for
rehearing" (rehearing order) which begins the sixty-day limi-
tations period is different from the "order of the Commission"
("aggrieving" order) which the petitioner is to identify in its
petition. Section 313(b) provides review of the "aggrieving"
order but the rehearing order simply determines the accrual
date of the sixty-day limitations period. It would make little
sense to provide for relief from the "aggrieving" order but at
the same time require the petitioner to specify the rehearing
order in its petition.4 Thus, in order to properly petition for
review of a Commission order, section 313(b) requires a
petitioner to identify the "aggrieving" order which in this case
is the License Order. In its petition for review, however,
WDNR specified only the Rehearing Order. See WDNR's
Petition for Review 1 (Jan. 11, 1999). Federal Rule of
Appellate Procedure 15(a) requires that a petition for review
of an agency order must "specify the order or part thereof to
be reviewed." See also Entravision Holdings LLC v. FCC,
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4 Section 313(b) of the FPA also requires a party to petition for
rehearing before it seeks judicial review. WDNR argues that to
interpret section 313(b) to require a party to petition for review of
the "aggrieving" order effectively makes the required rehearing
order nonreviewable. This court has previously determined that a
rehearing order does not constitute a new order unless it signifi-
cantly modifies the original order. See Southern Natural Gas Co.
v. FERC, 877 F.2d 1066, 1072-73 (D.C. Cir. 1989). Although a
rehearing order can be challenged together with an "aggrieving"
order, as was the case in Southern Natural, a rehearing order
cannot be challenged on its own unless it is a separate order and
rehearing has been held pursuant to that order. See 16 U.S.C.
s 825l.
2000 WL 2667, at *1 (D.C. Cir. Feb. 11, 2000); Martin v.
FERC, 199 F.3d 1370, 1372 (D.C. Cir. 2000); City of Benton
v. NRC, 136 F.3d 824, 826 (D.C. Cir. 1998). Nevertheless,
"[a] mistaken or inexact specification of the order to be
reviewed will not be fatal to the petition ... if the petitioner's
intent to seek review of a specific order can be fairly inferred
from the petition for review or from other contemporaneous
filings, and the respondent is not misled by the mistake."
Entravision, 2000 WL 2667, at *1 (citing Martin, 199 F.3d at
1371-73; Southwestern Bell Tel. Co. v. FCC, 180 F.3d 307,
313 (D.C. Cir. 1999)). Although WDNR identified the Re-
hearing Order in its petition for review, it described the order
as "[t]he final FERC order ... granting subsequent license
to N.E.W. Hydro, Inc., and denying the City of Oconto Falls'
competing application." WDNR's Petition for Review at 1
(emphasis added). Furthermore, WDNR's brief identified
the License Order in its certificate of rulings under review
and addressed the License Order in its briefs. In light of
WDNR's contemporaneous filings, we believe it intended to
challenge the License Order notwithstanding its denomination
of the Rehearing Order. The Commission can hardly claim
prejudice or lack of notice from WDNR's petition for review
and in fact acknowledged as much at oral argument. Accord-
ingly, we have jurisdiction to consider WDNR's petition for
review.
B. WDNR's Petition
Section 10(j)(1) of the FPA requires the Commission to
place a condition on a license "based on recommendations
received pursuant to the Fish and Wildlife Coordination Act
(16 U.S.C. s 661 et seq.) from ... State fish and wildlife
agencies." 6 U.S.C. s 803(j)(1) (Supp. 1999). Section 10(j)(2)
of the FPA further requires that:
Whenever the Commission believes that any recommen-
dation referred to in paragraph (1) may be inconsistent
with the purposes and requirements of this subchapter or
other applicable law, the Commission and the agencies
referred to in paragraph (1) shall attempt to resolve any
such inconsistency, giving due weight to the recommen-
dations, expertise, and statutory responsibilities of such
agencies.
Id. s 803(j)(2). We have held that section 10(j) "requires the
Commission to afford significant deference to fish protection
recommendations of state and federal fish and wildlife agen-
cies." Granholm ex rel. Michigan Dep't of Natural Re-
sources v. FERC, 180 F.3d 278, 280 (D.C. Cir. 1999). Never-
theless, the Commission "still is charged with determining the
'public interest,' i.e., balancing power and non-power values.
Even where the fish and wildlife agencies make formal sec-
tion 10(j) recommendations, those agencies have no veto
power." United States Dep't of Interior v. FERC, 952 F.2d
538, 545 (D.C. Cir. 1992) (citation omitted). WDNR argues
specifically that the Commission failed to support, as is
required under section 10(j)(2), its determinations that: (1) a
six per cent entrainment rate would likely occur; (2) less
entrainment would occur at the powerhouse intake; (3) most
of the fish leaving the reservoir were excess fish; and (4)
small fish (comprising the majority of those entrained) have a
higher natural mortality rate. We review to ensure the
Commission's factual findings are supported by substantial
evidence. See Texaco, 148 F.3d at 1095.
The Commission derived its assumptions from WDNR's
studies of the fish populations of the Oconto Falls reservoir
conducted in 1984 and 1989. See, e.g., License Order, 81
FERC at 62,014; Memorandum Regarding Oconto Falls 1989
Pond Survey (Feb. 28, 1990). The studies found that the
reservoir had a diverse fish community structure and stability
with healthy and abundant fish populations. See License
Order, 81 FERC at 61,911. Moreover, pike and bass existed
in large numbers and with better than average growth rates.
See id. at 62,014. WDNR's studies also found that any
difficulties experienced by the largemouth bass and spawning
walleye populations resulted from a lack of appropriate habi-
tat in the reservoir, not from entrainment. See Pond Survey
at 2. While section 10(j)(2) requires the Commission to give
WDNR's recommendations "due weight," WDNR's own stud-
ies belie its request. Furthermore, the Commission's deter-
mination that the entrainment and mortality rate was approx-
imately six per cent is consistent with WDNR's studies and
with the best available evidence of the potential range of fish
entrainment mortality. See Electric Power Research Insti-
tute, Fish Entrainment and Turbine Mortality Review and
Guidelines (1992). Moreover, WDNR produced no evidence
to contradict the Commission's assumptions based, as noted,
on WDNR's own studies. The Commission met its statutory
duty under section 10(j) to give WDNR's recommendations
"due weight" and its factual findings easily meet the substan-
tial evidence standard.
Finally, WDNR argues that the Commission improperly
failed to impose a barrier net requirement. According to
WDNR, because the barrier net at a nearby project (Pine
Project) cost only $50,000, the Commission erred in estimat-
ing the cost of a barrier net at the Oconto Falls Project at
$540,000. The Commission, however, distinguished the Pine
Project barrier net on several grounds: the Pine Project was
located in a more sheltered area of the reservoir and in much
shallower water; the type of net used at the Pine Project was
unsuitable for the Oconto Falls Project; WEPCO's analysis
projected $540,000 for a barrier net for the Oconto Falls
Project; and the Commission concluded that a fish protection
device at the Oconto Falls Project would not have a signifi-
cant beneficial effect on fishery resources. The Commission
gave WDNR's recommendation to construct a net barrier
similar to the Pine Project's barrier "due weight" but ade-
quately distinguished the Oconto Falls Project's needs based
upon substantial evidence.
C. The City's Petition
The City first contends that the Commission should have
concluded that the City's ability to comply with a license was
superior to NEW's ability under section 15(a)(2) of the FPA.
Under section 15(a)(2), the Commission is required to
consider (and explain such consideration in writing) each
of the following:
(A) The plans and abilities of the applicant to comply
with (i) the articles and conditions of any license issued
to it and (ii) other applicable provisions of this subchap-
ter.
(B) The plans of the applicant to manage, operate and
maintain the project safely.
(C) The plans and abilities of the applicant to operate
and maintain the project in a manner most likely to
provide efficient and reliable electric service.
(D) The need of the applicant over the short and long
term for the electricity generated by the project or
projects to serve its customers....
(E) The existing and planned transmission services of
the applicant, taking into consideration system reliability,
costs, and other applicable economic and technical fac-
tors.
(F) Whether the plans of the applicant will be
achieved, to the greatest extent possible, in a cost effec-
tive manner.
(G) Such other factors as the Commission may deem
relevant....
16 U.S.C. s 808(a)(2). Applying these factors, the Commis-
sion determined that there were no environmental or econom-
ic differences between NEW's and the City's applications.
The City contends that its license application was superior
to NEW's because of the City's relationship to local agencies;
its increased cost effectiveness; its ability to finance the
Oconto Falls Project at a lower interest rate; its technical
experience in operating public water and sewer operations;
and its closer headquarters.5 The Commission, however,
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5 The Commission responds that the City waived its arguments
regarding cost effectiveness, inclusion of campground costs and
lower financing rate because the City failed to preserve them on
rehearing. Although the City did not make these specific cost
effectiveness challenges, it did challenge the Commission's determi-
nation of the two applicants' relative cost effectiveness. See City's
Rehearing Request 4-8. In making the cost effectiveness argu-
considered the City's arguments. It determined that: prox-
imity was not significant because many licensees are head-
quartered far from their projects with no bad effect; the
Congress intended that municipal preference not apply in
relicensing proceedings; NEW had experience with hydro-
power projects which the City lacked, including operating the
Oconto Falls Project since 1992; both applicants had emer-
gency plans; and although the City's projected cost effective-
ness was 8.4 per cent greater than NEW's, forecasts of
economic benefits are considered comparable unless the dif-
ference is more than 20 per cent, see City of Augusta et al.,
72 FERC p 61,114, at n.58 (1995). The Commission's deter-
mination that the City's application was "essentially equal" to
NEW's is supported by substantial evidence.
Also unconvincing is the City's argument that the Commis-
sion erroneously applied a "first to file" tie-breaker to grant
NEW the license. First, the City asserts that section 4.37(b)
of the Commission's regulations, 18 C.F.R. s 4.37(b), prohib-
its the Commission from using the "first to file" tie-breaker.6
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ment, the City preserved its specific arguments related to that
challenge. See City of Vernon v. FERC, 845 F.2d 1042, 1047 (D.C.
Cir. 1988). In addition, not until its Rehearing Order did the
Commission weigh the City's increased recreation costs while alleg-
edly failing to consider the City's lower financing costs. Therefore,
the City had no opportunity to raise these points before its petition
for judicial review.
6 18 C.F.R. s 4.37(b) provides:
If two or more applications for ... licenses (not including
applications for a new license under section 15 of the Federal
Power Act) are filed ... the Commission will select between or
among the applicants on the following bases:
....
(b) If both of two applicants are either a municipality or a
state, or neither of them is a municipality or a state, and the
plans of the applicants are equally well adapted to develop,
conserve, and utilize in the public interest the water re-
sources of the region, taking into consideration the ability of
each applicant to carry out its plans, the Commission will
The Commission's interpretation of its regulations is entitled
to substantial deference. See Associated Builders & Contrac-
tors, Inc. v. Herman, 166 F.3d 1248, 1254 (D.C. Cir. 1999).
The City correctly notes that the Commission ruled, and this
court affirmed, that an "orphan" proceeding is governed by
section 15 of the FPA, see Oconto Falls, 141 F.3d at 674-75,
and that section 4.37(b) is not applicable to a section 15 new
license proceeding.7 From there, however, the City argues
that no provision of section 4.37(b) may be applied in any
proceeding governed by section 15 of the FPA. But section
4.37(b) is inapplicable only to proceedings for a "new license
under section 15 of the Federal Power Act." 18 C.F.R.
s 4.37 (emphasis added). Although an orphan proceeding is
governed by section 15 of the FPA, it is not a new license
proceeding under that section.
Next, the City argues that the "first to file" tie-breaker is
an impermissible retroactive policy change. According to the
City, the Commission is bound by its prior decision "to deny
any applicant or class of applicants a preference" because
"the purpose of Congress was to place all applicants in a
relicensing on an equal footing." Order No. 513, FERC
Stats. and Regs., p 30,854, at 31,443-445 (1989) (finding rules
of preference inappropriate in subsequent license proceed-
ings). Order No. 513, however, does not address orphaned
projects and does not dispense with tie-breakers in all section
15 proceedings. As we earlier determined, "Congress never
envisioned the problem of orphaned projects. The statute is
simply silent on the subject...." Oconto Falls, 41 F.3d at
677. Similarly, Commission precedent is silent on orphaned
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favor the applicant with the earliest application acceptance
date.
The Commission has held that section 4.37(b) applies where, as
here, one applicant is a non-municipality and the other applicant is a
municipality ineligible for the section 7(a) municipal preference.
See Idaho Water Resource Bd., 84 FERC p 61,146, at n.14 (1998).
7 18 C.F.R. s 4.37 is inapplicable to "new license [applications]
under section 15 of the Federal Power Act."
projects. Its action here, therefore, does not constitute a
retroactive policy change.
More plausible, but still unconvincing, the City argues that
the "first to file" tie-breaker is unfairly prejudicial because
the Commission's delay in granting the City's petition to
obtain WEPCO's ICP prevented it from filing its application
before NEW filed. The City's argument, however, assumes
that it had the same right to WEPCO's ICP as did NEW. In
fact the City's rights significantly differed from NEW's.
When NEW's offer to buy the Oconto Falls Project fell
through, WEPCO hired NEW to operate the project.
NEW's access to WEPCO's ICP arose from its contractual
relationship with WEPCO, a relationship which the City had
every right to seek but failed to pursue. As the Commission
recognized, "the City was free to bid on the project, when
[WEPCO] solicited offers." License Order, 81 FERC at
61,984. The City will not be heard to complain now.
Not to be deterred, the City also attacks NEW's agency
relationship with WEPCO, arguing that WEPCO improperly
acted as a co-applicant in violation of 18 C.F.R. s 16.25.
While section 16.25 precludes a previous license holder such
as WEPCO from filing a license application in response to the
Commission's notice soliciting applications, it does not ad-
dress "co-applicant" status.8 The Commission appropriately
determined that neither the FPA nor its own regulations
prohibited WEPCO from conditionally selling the Oconto
Falls Project to NEW, from hiring NEW as its operating
agent or from initially refusing to provide the City with the
ICP. While an agency relationship may provide some advan-
tages in filing a license application, it does not constitute a co-
applicant relationship in violation of section 16.25. See Li-
cense Order, 81 FERC at 61,984.
For the foregoing reasons, we conclude that the Commis-
sion did not err in granting NEW a license to operate the
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8 When a project becomes orphaned, the Commission is required
to publish a notice "soliciting applications from potential applicants
other than the existing licensee." 18 C.F.R. s 16.25.
Oconto Falls Project and, accordingly, both WDNR's and the
City's petitions for review are
Denied.