Consrvtn Law Fdn v. FERC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 20, 2000 Decided June 23, 2000
No. 99-1035
Conservation Law Foundation, et al.,
Petitioners
v.
Federal Energy Regulatory Commission,
Respondent
State of Maine; Great Northern Paper, Inc.,
Intervenors
Consolidated with
Nos. 99-1159, 99-1161 & 99-1162
On Petitions for Review of Orders of the
Federal Energy Regulatory Commission
Sean H. Donahue, Attorney, U.S. Department of Justice,
argued the cause for the federal petitioners. With him on the
briefs were Lois J. Schiffer, Assistant Attorney General,
Peter Coppelman, Acting Assistant Attorney General, James
C. Kilbourne, Ellen Durkee, and M. Alice Thurston, Attor-
neys. Ellen D. Katz, Attorney, entered an appearance.
Carol A. Blasi argued the cause for petitioner Conservation
Law Foundation, et al. With her on the briefs was Alexan-
der W. Sierck. Mona M. Janopaul entered an appearance.
Kaighn Smith, Jr. argued the cause for petitioner Penob-
scot Indian Nation. With him on the briefs was Mark
Chavaree.
Beth G. Pacella, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were John H. Conway, Acting Solicitor, and Timm
L. Abendroth, Attorney.
Andrew Ketterer, Attorney General, and Paul Stern, Depu-
ty Attorney General, were on the brief for intervenor State of
Maine.
Catherine R. Connors and Matthew D. Manahan were on
the brief for intervenor Great Northern Paper, Inc.
Before: Randolph, Tatel, and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Randolph.
Randolph, Circuit Judge: The Department of the Interior
and the Environmental Protection Agency, conservation
groups,1 and the Penobscot Indian Nation petition for review
of the Federal Energy Regulatory Commission's relicensing
of a hydroelectric project in north-central Maine. The issues
presented go mainly to the adequacy of the Commission's
consideration of the various factors governing license renew-
als. Because the Commission gave sufficient attention to
these factors and carefully explained its conclusions, the
petitions are denied.
__________
1 American Rivers, American Whitewater Affiliation, Appalachian
Mountain Club, Conservation Law Foundation, and Trout Unlimit-
ed.
I
Located on the West Branch of the Penobscot River, the
Ripogenus and Penobscot Mills Hydroelectric Projects pro-
duce approximately 108 megawatts of power for Great North-
ern Paper mills in Millinocket and East Millinocket, Maine.
The projects consist of a series of reservoirs, dams, and
powerhouses. This case focuses on one of the dams--the
1262 foot long Stone Dam, which is part of the Penobscot
Mills Project.2 Constructed in 1899, Stone Dam diverts
water through a canal to a 37 megawatt powerhouse. This
diversion blocks the main channel of the Penobscot's West
Branch for a 4.5 mile stretch known as the "Back Channel."
Because of Stone Dam, the Back Channel receives only
leakage flows of 2 to 5 cfs (cubic feet per second), except for
occasional "spillage" when flows exceed power requirements.
The Penobscot Mills Project, like any project used for the
"development, transmission, and utilization of power across,
along, from, or in any of the streams or other bodies of water
over which Congress has jurisdiction," requires a license from
the Federal Energy Regulatory Commission. 16 U.S.C.
s 797(e). When the original license for Penobscot Mills
expired at the end of 1993, Great Northern applied for a new
one. The Commission issued a Final Environmental Impact
Statement analyzing three different proposals regarding the
new license: the "Applicant's Proposal," in which Great
Northern would "operate the project[ ] nearly as it has over
the past 50 years" with some new environmental and recre-
ational enhancements but no increased flows in the Back
Channel; "Alternative 1," which reflected the Interior De-
partment's recommendations for enhancements including
minimum flows of 350 to 500 cfs in the Back Channel;3 and
__________
2 Petitioners raise no specific objection to the Commission's order
relicensing the Ripogenus Project, see 77 F.E.R.C. p 61,316 (1996),
though that order was also listed in the petitions for review.
3 Interior initially recommended flows of 500 cfs and later in-
creased the recommendation to 945 cfs. See 85 F.E.R.C. at 62,242
"Alternative 2," recommending "enhancement measures inter-
mediate between those proposed by GNP and those in Alter-
native 1." FEIS at xix. As a baseline for comparison, the
Commission adopted the terms and conditions of the existing
license as the "no action" option. The impact statement
recommended a modified version of Alternative 2 that did not
include flow requirements for the Back Channel. See FEIS
at xxiii.
Shortly after issuance of the final impact statement, the
Commission granted a new license for Penobscot Mills.4 See
77 F.E.R.C. p 61,068 (1996). The order conditioned the li-
cense on Great Northern's commitment to wetland enhance-
ments, project boundary expansion, and increased flows into
Millinocket Stream. See id. at 61,275-79. As to the Back
Channel, the Commission decided not to order minimum flows
"given the modest fisheries benefit likely to occur and the
significant adverse impact on the project's energy benefits,"
id. at 61,276, a decision it affirmed on rehearing, see 85
F.E.R.C. p 61,316 (1998), and reconsideration, see 86 F.E.R.C.
p 61,184 (1999).
II
"In deciding whether to issue any license [for hydroelectric
projects,] 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. s 797(e). The Federal Power Act also requires the
Commission to include conditions for the "protection, mitiga-
tion and enhancement" of fish and wildlife affected by the
__________
n.6. In its petition for rehearing before the Commission, however,
Interior only "argue[d] for a minimum flow 350 cfs." Id. at 62,242.
4 During the interim, the Commission had issued annual renewals
of the Penobscot Mills license under the same terms as the expired
license. See 16 U.S.C. s 808(a).
project, such conditions to be "based on recommendations
received pursuant to the Fish and Wildlife Coordination Act
(16 U.S.C. 661 et seq.) from the National Marine Fisheries
Service, the United States Fish and Wildlife Service, and
State fish and wildlife agencies." 16 U.S.C. s 803(j)(1). The
Commission retains authority to decide that recommended
conditions are "inconsistent with the purposes" of the FPA or
other laws, in which event it shall of course reject them. 16
U.S.C. s 803(j)(2); see United States Dep't of the Interior v.
FERC, 952 F.2d 538, 544 (D.C. Cir. 1992). While the Com-
mission must give "equal consideration" to environmental
factors, those factors do not have "preemptive force." 952
F.2d at 545. The Commission "still is charged with determin-
ing the 'public interest,' i.e., balancing power and non-power
values." Id.
The petitioners contend that the Commission's rejection of
minimum flow requirements in the Back Channel violates
these Federal Power Act provisions and the National Envi-
ronmental Policy Act, see 42 U.S.C. s 4321 et seq. Their
arguments can be grouped into two categories: that the
Commission did not fully recognize the recreational and envi-
ronmental (i.e., nonpower) benefits that would have resulted
if it had imposed minimum flow requirements; and that the
Commission inflated the economic costs Great Northern
would incur from increased Back Channel flows.
A. Nonpower Issues
The main argument of the federal petitioners is that the
Commission should not have treated existing conditions at
Stone Dam as the baseline "no action" option because this
caused "the Commission to ignore ongoing impacts directly
attributable to the new license...." Brief for the Federal
Petitioners at 29. We think there is nothing to this objection.
The statute--16 U.S.C. s 803(j)--invites a comparative inqui-
ry. It charges the Commission with the duty of protecting,
mitigating the damage to, and enhancing "fish and wildlife
(including related spawning grounds and habitat) affected by
the development, operation and management of the project."
To do this properly the Commission must compare what
might occur to fish and wildlife if the license does not include
protection for nonpower resources against what will occur
with conditions imposed. The statutory words "fish and
wildlife ... affected" by the project seems to refer to the
fish and wildlife currently existing in the vicinity of the
project, which supports the Commission's choice of existing
conditions as a baseline. The quoted language surely cannot
refer to the animals inhabiting the area in 1899, when the
project came into being. They are long gone and so cannot
be "affected" by a Commission licensing decision in the 1990s.
Granted, it is possible to treat the words "fish and wildlife"
generically, so that it is not just the animals currently resid-
ing in the region that get protected or enhanced, but different
species that might be introduced or reintroduced. But this
view of s 803(j) does not help petitioners because it says
nothing about whether the baseline for the Commission's
comparative inquiry should be today or sometime other than
today. In other words, even if the statute refers generally to
all "fish and wildlife" it hardly follows that the Commission
must imagine the Back Channel as it existed before 1899 and
assess the effect of relicensing by pretending that Stone Dam
does not exist--at least when no one advocates decommission-
ing the Penobscot Mills Project and tearing down the dam.
Given the language of s 803(j), the Commission certainly
had the leeway to conduct its comparative assessments using
existing conditions as a baseline. To the reasons just men-
tioned, we incorporate by reference those given in American
Rivers v. FERC, 201 F.3d 1186, 1195-99 (9th Cir. 2000),
which sustained the Commission's use of an existing condi-
tions baseline as a reasonable construction of s 803(j).
In any event, the baseline business has the whiff of a red
herring. Baseline or no baseline, the question is whether the
Commission has fully examined options calling for greater or
lesser environmental protection. Here the Commission spoke
of environmental "benefits" and the economic "costs" to Great
Northern of options calling for stronger environmental pro-
tection. It could just as easily spoken of economic "benefits"
to Great Northern from licensing the project and environ-
mental "costs." So long as the Commission adequately exam-
ines both the power and nonpower impacts of recommended
licensing conditions, we do not see why it matters on which
side of the equation environmental concerns are placed. In
issuing the new licenses in these proceedings, the Commission
adopted twelve of Interior's fourteen recommended environ-
mental enhancements while using an existing conditions base-
line. See FEIS tbls.5-8 to 5-9, at 5-20 to 5-21, adopted at 77
F.E.R.C. at 61,275. This in itself proves that the federal
petitioners are mistaken in thinking that an existing condi-
tions baseline preordains the rejection of any new conditions
for the protection of fish and wildlife. So long as the Com-
mission examines options that include recommended environ-
mental enhancements, its choice of a baseline will not prevent
it from giving "equal consideration" to nonpower values.5
Petitioners also argue that the Commission did not give
"equal consideration" to nonpower values because it refused
to assess in economic terms the nonpower benefits that would
result from restoring significant flows to the Back Channel.
Restored flows, petitioners believe, would attract anglers and
whitewater rafting enthusiasts to this 4.5 mile stretch of river.
In the rehearing order, the Commission explained its refusal
to quantify these nonpower benefits: "[T]he public-interest
balancing of environmental and economic impacts cannot be
done with mathematical precision, nor do we think our statu-
tory obligation to weigh and balance all public interest consid-
erations is served by trying to reduce it to a mere mathemati-
cal exercise.... [F]or non-power resources such as aquatic
habitat, fish and wildlife, recreations, and cultural and aesth-
etic values, to name just a few, the public interest cannot be
evaluated adequately only by dollars and cents." 85 F.E.R.C.
at 62,244-45. Certainly nothing in the statute requires the
Commission to place a dollar value on nonpower benefits.
Nor does the fact that the Commission assigned dollar figures
to Great Northern's economic costs require that the Commis-
sion do the same for nonpower benefits: " 'Equal consider-
__________
5 We also agree with the American Rivers court, see 201 F.3d at
1199-2001, that the Commission's thorough examination of a range
of licensing alternatives satisfies NEPA's procedural requirements,
see 42 U.S.C. s 4332(2)(C)(iii).
ation' is not the same as 'equal treatment.' " State of Califor-
nia v. FERC, 966 F.2d 1541, 1550 (9th Cir. 1992). The
refusal to quantify nonpower benefits did not "stack the deck"
against those concerns. The Commission approved "a variety
of enhancements related to instream flows for fisheries and
recreation, stabilization of impoundment levels, wetlands, re-
creational facilities, shoreline protection, and cultural re-
sources." 85 F.E.R.C. at 62,245; see also id. at 62,245 n.31.
A critical factor in the Commission's refusal to impose mini-
mum flows was the increased power expenses that would
result, not the Commission's failure to appreciate nonpower
values. Minimum flows of 350 cfs in the Back Channel would,
the Commission concluded, increase annual power expenses
by $916,300; the total increase in annual power costs of the
enhancements the Commission approved for Penobscot Mills
was $262,600. See FEIS tbl.5-3, at 5-13.
Petitioners' final complaint under this heading is that the
Commission did not focus on the possibility of a brook trout6
fishery in the Back Channel. In its original order, the
Commission observed that "fish species such as brook trout,
eels, minnows and suckers would benefit slightly from the
recommended flows, [but] the Back Channel would at best
only produce several hundred adult land-locked salmon." 77
F.E.R.C. at 61,275. The order then explained why the Back
Channel would not be a desirable habitat for land-locked
salmon, but did not mention brook trout again. See id. On
rehearing, the Commission stated that there was "a low
likelihood of re-establishing limited habitat" for brook trout.
85 F.E.R.C. at 62,243. It relied, at least in part, on "a Maine
Department of Inland Fish and Wildlife priority to maintain
and protect fishery resources elsewhere in the project area."
Id. "During dry years, requiring minimum flows above leak-
age in the Back Channel could affect the ability to maintain
__________
6 A "brook trout" (Salvelinus fontinalis) is actually a char.
"Chars are distinguished from trout by their mouth structure; the
vomerine bone in the center of a trout's mouth has teeth all along it,
while the vomer of the char has only a few teeth on the front end of
the bone." A.J. McClane, ed., McClane's New Standard Fishing
Encyclopedia and International Angling Guide 207 (1998 ed.).
constant flows in the West Branch and Millinocket Stream,
and lake level in the North Twin reservoir, which could cause
stress and potential damage to salmon and trout populations
in those areas." Id. Given the plentiful brook trout fisheries
in the Penobscot Mills-Ripogenus area, the Commission can-
not be faulted for believing that adding another 4.5 mile
stretch would have little benefit. See id.
The Federal Power Act requires the Commission to consid-
er the recommendations of the United States Fish and Wild-
life Service and State fish and wildlife agencies.7 See 16
U.S.C. s 803(j)(1). Even when the recommendations of fed-
eral and state agencies are in concert, those agencies do not
have "veto power" over Commission licensing decisions. De-
partment of Interior, 952 F.2d at 545 (citing National Wild-
life Fed'n v. FERC, 912 F.2d 1471, 1480 (D.C. Cir. 1990)). In
this case the federal and State agencies disagreed about the
desirability of promoting a brook trout fishery in the Back
Channel. The Commission adequately explained why Interi-
or's recommendation was inconsistent with the purposes of
the FPA. See 16 U.S.C. s 803(j)(2). Not only would Interi-
or's proposal curtail power production from the Penobscot
Mills Project, but the Commission had reason to believe a
Back Channel brook trout fishery would actually do more
harm than good to the region's fish habitats.
B. Power Issues
The Commission stated that the "reduction in the project's
... annual energy benefits for the Back Channel flows out-
weighs the enhancement in aquatic resources that the flows
would produce." 77 F.E.R.C. at 61,276. The Commission
calculated this annual reduction as $916,0008 (6% of the
__________
7 The same provision requires the Commission to "attempt to
resolve any inconsistency" between its proposed license and other
agency recommendations. See 16 U.S.C. s 803(j)(2). The Commis-
sion did so in a "dispute-resolution meeting with representatives
from Interior on February 8, 1996." 77 F.E.R.C. at 61,274.
8 The Commission concluded that the annual cost of Interior's
request for 950 cfs would be $2.5 million, or 16% of the project's
power production. See 77 F.E.R.C. at 61,274-75.
project's total benefits), see id., based on the price of purchas-
ing replacement power from the least-cost alternative
source--Bangor Hydro & Electric Company,9 see FEIS
s 2.4.4, at 2-33 to 2-34.
Petitioners complain that the Commission failed to consider
the alternative of Great Northern conserving energy, some-
thing the statute requires the Commission to consider. See
16 U.S.C. ss 797(e), 808(a)(2)(C); see also 42 U.S.C.
s 4322(2)(E); 40 C.F.R. s 1502.14. They put it this way:
"By considering conserved power as the least cost alternative
to hydropower, rather than the more expensive purchased
power used by the Commission, the cost of environmental
enhancements, such as Back Channel flows, are much lower."
Final Brief for Petitioners Conservation Law Foundation, et
al. and Trout Unlimited at 12. But the Commission did
consider the alternative of energy conservation. After exam-
ining Great Northern's plant data, the Commission concluded
that the mills had recently increased energy efficiency as the
result of plant modernization efforts and the use of steam
generation and that no reliable evidence supported petition-
ers' view that "enormous conserved power potential" still
existed at the mills. See FEIS E-3, cited in 77 F.E.R.C. at
61,269 n.16; id. at E-24. The final impact statement also
noted that Great Northern, "operating as a private for-profit
enterprise, would have a strong economic incentive to maxim-
ize savings from conservation and not waste electric power,
particularly as it manufactures an energy-intensive product."
Id. at E-23, cited in 85 F.E.R.C. at 62,243 n.14. Any
conservation that did occur would be "used to displace higher-
cost fossil fuel power ... [s]ince the entire output from the
two projects supplies only a portion of GNP's total annual
power needs...." Id., cited in 85 F.E.R.C. at 62,243 n.14.
We see no ground for disagreeing with this reasoning. The
Penobscot Mills (31% of energy needs) and Ripogenus (19%
of energy needs) Projects supply only half of the energy
__________
9 The Commission (as well as the parties) assume that Great
Northern would purchase fossil fuel power--not hydro power--from
Bangor.
needed for Great Northern's paper manufacturing. See 77
F.E.R.C. at 61,242, 61,270. Until the company's conservation
measures achieved a 50% reduction in its energy needs
(something no one contends is likely), the consequence of
increased energy efficiency would be a decrease in the compa-
ny's purchase of other, more expensive, sources of power.
Thus, the "replacement cost" of reduced hydroelectric power
would still be the price of power from Bangor, namely
$916,000.10
Petitioners' other cost-side argument is that the Commis-
sion relied on unsupported claims that the increased cost of
Back Channel flows would result in job losses at the Great
Northern mills. This misinterprets the Commission decision.
In the original order, the Commission recognized "Great
Northern's need for inexpensive power to remain competitive
in its paper making operations." 77 F.E.R.C. at 61,275.
Then, in a footnote, the Commission stated that it could not
verify the company's claim that flows in the Back Channel
"would result in the loss of approximately 238 jobs," so the
Commission was just relying on what it did know--that
"Great Northern's operating costs are high compared to other
paper manufacturers, and cost increases could reduce the
company's competitiveness." Id. at 61,275 n.31 (italics add-
ed). On rehearing, the Commission once again indicated that
it was only relying on the risk of economic harm: "A 350-cfs
minimum flow would reduce the annual energy benefit of
Penobscot Mills substantially, with the possibility of causing
Great Northern to further curtail operations at, or close, its
paper mills...." 85 F.E.R.C. at 62,242 (italics added) (foot-
notes omitted). There is ample evidence in the record to
support the Commission's findings. Papermaking is a highly
competitive industry, see FEIS s 5.3.5, at 5-14, cited in 77
F.E.R.C. at 61,275 n.31; Great Northern is a high cost
__________
10 Although conservation would not change the $916,000 replace-
ment cost of increased Back Channel flows, it would reduce Great
Northern's total energy costs. But it was the magnitude of the
replacement cost, not the impact it would have on the company's
overall economic condition, that led the Commission to reject the
proposal for increased Back Channel flows. See infra note 11.
producer compared to other paper manufacturers, see id.,
cited in 77 F.E.R.C. at 61,275 n.31, and Great Northern
recently closed some Millinocket facilities, resulting in the
elimination of about 350 jobs, see 85 F.E.R.C. at 62,242 n.9.11
III
The Penobscot River Basin is "home to the Penobscot
Indian Nation (PIN), much of whose cultural heritage is
closely associated with the river and the resources it pro-
vides." FEIS s 3-1, at 3-1. Under the Maine Indian Claims
Settlement Act, the " 'Penobscot Indian Reservation' " is de-
fined as "the islands in the Penobscot River reserved to the
Penobscot Nation by agreement with the States of Massachu-
setts and Maine consisting solely of Indian Island, also known
as Old Town Island, and all islands in that river northward
thereof that existed on June 29, 1818...." 25 U.S.C.
s 1722(i) (incorporating 30 Me. Rev. Stat. Ann. s 6203(8)).
__________
11 Petitioners' pre-argument motion to remand the case to the
Commission for the taking of additional evidence, see 16 U.S.C.
s 825l(b), is denied. In November 1999, Great Northern Paper
submitted an application to the Commission seeking the transfer of
the Penobscot Mills license to a new subsidiary, Great Northern
Energy. A subsidiary of Duke Energy Corporation has a minority
interest in Great Northern Energy. Petitioners believe these de-
velopments affect two of the Commission findings: that Back
Channel flows could threaten the mills' economic viability and that
expanded conservation efforts are not plausible. We do not see,
however, how these developments could alter the two dominant
factors in the Commission's decision: the replacement energy cost
of $916,000 and the minimal (perhaps even detrimental) effect on
fisheries. See 77 F.E.R.C. at 61,275 ("Interior's recommendations
... would entail a significant reduction in energy benefits on behalf
of only marginal improvements to aquatic habitat...."); id. at
61,276 ("Given the modest fisheries benefit likely to occur and the
significant adverse impact on the project's energy benefits, we are
not requiring minimum flows for the Back Channel."). It does not
"clearly appear that the new evidence would compel or persuade to
a contrary result," so we deny the motion. Friends of the River v.
FERC, 720 F.2d 93, 99 n.6 (D.C. Cir. 1983) (quoting Rocky Moun-
tain Power Co. v. FERC, 409 F.2d 1122, 1128 n.21 (D.C. Cir. 1969)).
The Penobscot Nation claims that its reservation includes the
islands in the West Branch of the Penobscot. The State of
Maine disagrees, contending that nothing "even remotely
suggests that any land or islands in any branches or tributar-
ies of the Penobscot River were being reserved" to the Tribe.
FEIS s 4.11.1.2, at 4-69.
The land issue is of some consequence to this case. The
Tribe believes it should have been a consulting party to the
"programmatic agreement" the Commission adopted in fulfill-
ing its duty to take "into account the effect of [the licenses on
any site] that is included in or eligible for inclusion in the
National Register" of Historic Places. 16 U.S.C. s 470f; see
also 36 C.F.R. s 800.13 (authorizing agencies to delegate this
responsibility to "programmatic agreements"). An Indian
Tribe must be named a concurring party to a programmatic
agreement when the agency "undertaking will affect Indian
lands." 36 C.F.R. s 800.1(c)(2)(iii). But the Penobscot Nation
had not established legal title to the islands in the West
Branch, and so the Commission did not confer consulting
party status on it. See 85 F.E.R.C. at 62,245. The Commis-
sion made clear on rehearing that it was not determining the
merits of the Tribe's land claims and that, should the Tribe
establish legal title to the lands, it would be added as a
consulting party. See id. at 62,245 & n.35. We agree that
the Commission was under no obligation to make the Penob-
scot Nation a consulting party; nor was its failure to do so an
abuse of discretion.
The Tribe also contends that increased flows in the Back
Channel would provide its members with canoe access to
religious sites, which means that the Commission violated the
American Indian Religious Freedom Act. This statute re-
quires the "United States to protect and preserve for Ameri-
can Indians their inherent right of freedom to believe, ex-
press, and exercise the traditional religions of the American
Indian ... including but not limited to access to sites...."
42 U.S.C. s 1996. The Commission's response is conclusive:
even with flows of 350 cfs, canoe navigation of the Back
Channel would not be possible. See 77 F.E.R.C. at 61,275
n.39. The Commission also noted that "there is a nearby
canoe route on the Penobscot that permits canoe passage to
the same sites"--presumably the route the Tribe has used
since 1899. See 85 F.E.R.C. at 62,243. Federal agencies are
to consider, "but not necessarily to defer to, Indian religious
values." Wilson v. Block, 708 F.2d 735, 747 (D.C. Cir. 1983).
The Commission has performed its duty under this legisla-
tion. 12
The petitions for review are denied.
__________
12 The Tribe raises several other arguments that do not warrant
written exposition. These have been considered and rejected.