City of Dothan, Alabama v. Federal Energy Regulatory Commission, Municipal Electric Authority of Georgia, Intervenor

684 F.2d 159, 221 U.S. App. D.C. 385, 1982 U.S. App. LEXIS 16897

• Court: Court of Appeals for the D.C. Circuit
• Decided: August 3, 1982
• Docket: 81-1941
• Status: Published

Opinions

MacKINNON, Circuit Judge:

After reviewing competing applications for a preliminary permit to investigate development of a hydroelectric facility, the Federal Energy Regulatory Commission (the Commission) determined that the two proposals submitted by parties of equal statutory priority were equally well adapted to serve the public interest and in accordance with its regulations awarded the preliminary permit to the party whose application was filed first. We hold that substantial evidence supports the Commission’s decision and that it did not act arbitrarily or capriciously in granting the preliminary permit to the applicant that filed first.

I.

The George W. Andrews Lock and Dam on the Chattahoochee River that forms the boundary between Georgia and Alabama is operated by the United States Army Corps of Engineers (the Army Engineers). On March 7, 1979, Alabama Electric Cooperative, Inc. (Coop) filed an application for a preliminary permit for a proposed hydroelectric power project at the existing Andrews dam site. Nine days later on March 16, 1979, Municipal Electric Authority of Georgia (Georgia) filed a competing permit application for a project at the same dam site. On August 23, 1979, the Commission issued public notice of the two competing applications. In response to that public notice, the Army Engineers wrote to the Commission and gave its approval to the issuance of preliminary permits provided that the applicants adhered to the Corps’ “General Requirements for Non-Federal Hydroelectric Plant Construction at U.S. Army Corps of Engineers Water Resources Projects.” Those requirements necessitate that the “[djesign, construction and operation of all power facilities that will be an integral part of [a] dam” be approved by the Army Engineers. Brief of Commission at Addendum A3. The Army Engineers also recommended that applicants “closely coordinate their studies” for the projects with the Corps. Id. at A2.

On October 25, 1979, the City of Dothan, Alabama (Dothan) filed a protest against the Coop and Georgia applications and petitioned for intervention in both dockets. The following day Dothan filed a notice of its intent to file its own competing application. And on December 21, 1979, over nine months after Georgia’s application, Dothan filed a competing application for a preliminary permit at the same dam site. Under the controlling statute Dothan was entitled to the same statutory preference for a permit as Georgia because both are instrumen-talities of states. Where two municipalities or states apply for preliminary permits for the same project, the Commission favors the applicant whose plans are better adapted “to develop, conserve, and utilize in the public interest the water resources of the region ... .” 18 C.F.R. § 4.33(g)(1) (1981). If the Commission finds that the proposals of two municipalities or states are “equally well adapted” to the objectives of the Act, then it grants the preliminary permit to the applicant that filed first. 18 C.F.R. § 4.33(g)(2) (1981).¹ Coop did not actively participate in the subsequent proceedings, presumably because it was a cooperative corporation, not a state instrumentality, and therefore of a lower statutory priority than either Georgia or Dothan. See 18 C.F.R. § 4.33(g)(3) (1981).

Dothan’s application included a description of its own proposed project and, as required by 18 C.F.R. § 4.33(d)(2) (1981), contained a detailed statement of why its proposal was allegedly better adapted than Georgia’s to developing, conserving and utilizing in the public interest the water resources of the region. Dothan raised a number of points but the most important ones related to two variations from Georgia’s proposal:

(1) Georgia’s application proposed locating the powerhouse on the Georgia side of the river. Dothan proposed the Alabama bank which provides advantages in terms of cost savings, convenience of construction, efficiency of dam operations and navigational concerns;

(2) Georgia’s proposed project design was based on a mistaken assumption of the amount of available “head,” i.e., the elevation of the water behind the dam. Georgia’s plan assumed an average head of 24 feet whereas 14 to 16 feet was the more correct estimate and Dothan used that.

Commission regulations allowed Georgia 30 days from the date of submission of Dothan’s application in which to file, if it so desired, a rebuttal showing that its plans were at least as well adapted as Dothan’s. 18 C.F.R. § 4.33(e) (1981). Georgia elected not to file such rebuttal. On May 29, 1980, however, Georgia filed a “Protest in Opposition to and Motion to Deny Application for Preliminary Permit Filed by City of Do-than, Alabama” (App. 18-27.) In its protest statement, Georgia agreed with Dothan that the powerhouse would be best located on the Alabama side of the river and revised downward its calculation of the available head. (App. 22-23.) Georgia did not make any other changes in its project design. It did argue, however, that its proposal was at least equal to, if not better than Dothan’s because (1) its preliminary engineering study was substantially completed and (2) had produced six alternative proposals incorporating varying sized generating units. Georgia also argued that (3) its proposal would serve many more customers than Dothan’s (App. 21.), (4) that it would be better able to integrate the power produced by the Andrews project into an existing power transmission system (App. 22), and (5) that it was in a stronger financial position than Dothan and therefore could assure that the project would be developed (App. 23-24.) and at an earlier date (App. 28-29). Several days later Georgia filed an “Amendment to Protest and Motion” in which it recognized the reduced energy production capability of its proposed project. Id. We find the dissent’s contention that this amendment should justify a remand to be without merit and to involve a misconstruction of a post hoc regulation, 18 C.F.R. § 4.35.²

On March 27, 1981, the Director of the Commission’s Office of Electric Power Regulation (the Director), acting pursuant to authority delegated him by the Commission, issued a preliminary permit to Georgia and denied the competing applications. (App. 44-53.) The Director determined that the proposals of Georgia and Dothan were both equally well adapted to achieving the public interest purposes of the Federal Power Act, and therefore awarded the preliminary permit to Georgia because its application was filed prior to that of Dothan. Article 11 of the preliminary permit specifically directed that Georgia coordinate the studies for the proposed project with the Army Engineers. (App. 49.)

On May 27, 1981, the Commission issued an Order Denying Dothan’s Appeal and affirming the decision of the Director. (App. 72-76.) The Commission explained that because applications for preliminary permits deal with flexible and speculative plans it did not strictly hold applicants to their initial plans. The Commission considered the applications of Georgia and Dothan together as competing applications and concluded that the differences between Georgia’s and Dothan’s proposals reflected “not a different scheme of development but rather a different level of refinement and specificity.” (App. 73.) The Commission concluded that Georgia was not required to file a statement rebutting Dothan’s asserted claims of having a superior proposal.³ Finally, the Commission held that it had fully complied with the rationale of Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945), which requires that the Commission consider competing applications together, because the applications of Dothan and Georgia were consolidated and considered together. (App. 75.)⁴

II.

The rule is clear that judicial review of agency action is narrow. The provisions of the Administrative Procedures Act, 5 U.S.C. § 706(2)(A), (E), require a reviewing court to set aside agency action found to be arbitrary, capricious, an abuse of discretion or unsupported by substantial evidence. Accordingly, the role of this court is not to make its own independent assessment as to whether one of the two competing applications is superior, rather our role is to consider whether the Commission’s determination that the plans of Georgia and Dothan are equally well adapted to the public interest objectives of the Act is supported by substantial evidence. If substantial evidence supports the determination that the two competing applications are equally well adapted, then our inquiry ceases.

The record shows that Georgia did alter its proposal in two respects: the site of the powerhouse and the available head estimate. Both Georgia and Dothan attach wholly different significance to those changes. The Commission and Georgia assert that Georgia’s changed plans represent only a modification of its original application — an expected and acceptable occurrence in the initial planning stages. Georgia further claims that once those changes were made no significant differences remained to distinguish the two proposals; therefore, as the first applicant to file it was properly awarded the preliminary permit.

Dothan, on the other hand, contends that Georgia’s change in position represents an abandonment of its original proposal. Brief of Petitioner at 9, 18. Dothan also implies that Georgia used information disclosed by the competing applicant, Dothan, to cure the deficiencies in its proposal so as to make the two applications equally well adapted. Brief of Petitioner at 18.

The Commission applied the wealth of its experience in hydroelectric projects and found that the differences in the two applications reflected “not a different scheme of development but rather a different level of refinement and specificity.” (App. 73.) Both parties planned to build powerhouses on the same already constructed dam, using basically the same kind of generators. In the initial application the location of the powerhouse and the estimate of the available head — although important considerations — were not deemed by the Commission to be controlling factors in determining the relative superiority of the two proposals. In view of the Commission’s very considerable expertise in hydroelectric matters, including handling applications for permits, and in view of the statutory discretion with which it is vested, we cannot conclude on the record before us that the Commission acted arbitrarily, capriciously or abused its discretion.

The Commission’s decision is supported by substantial evidence. First, the Commission stressed that the preliminary permit stage is an exploratory period, often characterized by modifications resulting from the acquisition of fuller information:

The purpose of a preliminary permit is to study the feasibility of the project and to crystalize those factors which at the permit application stage may have been uncertain. Project features are subject to modifications based upon information developed during the preliminary permit studies. Therefore, at the preliminary permit stage, the plans of the applicants must be considered both flexible and speculative.

(Footnotes omitted) (App. 73.).

Second, this is not a case in which Georgia “pirated” ideas from Dothan to cure deficiencies in its proposal. Dothan’s proposal was based in large measure on studies of the Army Engineers. “Application of City of Dothan, Alabama for Preliminary Permit” (App. 114, 119.); see Brief of Petitioner at 14. The information about optimal powerhouse site and the available head originated with the Army. (App. 119.) Because it was anticipated from the outset that whichever applicant was successful in obtaining the preliminary permit would work closely and “coordinate their studies” with the Army Engineers,⁵ and because this implicit expectation was made an express condition of the preliminary permit (App. 49.), we believe that it was reasonable for the Commission to conclude that both applicants proposed “essentially the same scheme of development.” (App. 73). Questions about powerhouse location and available head were found to be but refinements that would be resolved satisfactorily in essentially the same manner in conjunction with the Army Engineers by either party. The record confirms that the refinements about the powerhouse site and available head were made prior to the issuance of the preliminary permit. For these reasons, the Commission’s order is affirmed.

Judgment accordingly.

1 . 18 C.F.R. § 4.33(g)(2) (1981) provides:

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 resources of the region, taking into consideration the ability of each applicant to carry out its plans, the Commission will favor the applicant whose application was first accepted for filing.

2 . The dissent contends that the Commission should now retroactively apply the new regulation on material amendments to Georgia’s application for a preliminary permit; see 18 C.F.R. § 4.35; 46 Fed.Reg. 55,245 (Nov. 9, 1981); i.e., that the case should be remanded to the Commission to explain, inter alia, “why the new regulations governing ‘material amendments’ to permit applications should not be given retroactive effect.” Dis. Op. at 168-169.

A remand for such explanation would be pointless since prospective application of the regulations is directed by statute, the record does not reflect that any material change in Georgia’s application has taken place under the regulations and the elevation of the water is controlled by preexisting factors.

The decision in this case was issued on May 27, 1981. The new regulations were published as final rules in the Federal Register on November 9, 1981 as the result of formal rulemaking. The Administrative Procedure Act, 5 U.S.C. § 551(4) (1976), expressly provides that a “ ‘rule’ means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy . . . . ” (emphasis added). With specific reference to this provision, this court in the past has noted that “[r]ules so adopted [i.e., through formal rule-making proceedings] are prospective in application only. 5 U.S.C. § 551(4) (1970).” Retail, Wholesale and Department Store Union, AFL-CIO v. N. L. R. B., 466 F.2d 380, 388 (D.C.Cir. 1972) (emphasis added).

The Supreme Court has pointedly hinted that an administrative agency, as much as possible, should exercise its “ability to make new law prospectively through the exercise of its rule-making powers” and be less prone “to rely upon ad hoc adjudication to formulate new standards of conduct.” Securities & Exchange Comm’n v. Chenery Corp., 332 U.S. 194, 202, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947). Both this court in Retail, Wholesale and Department Store Union, supra, and the Second Circuit in N. L. R. B. v. Majestic Weaving Co., 355 F.2d 854, 860 (2d Cir. 1966), have taken occasion to remind administrative agencies of the Supreme Court’s admonition.

We find neither a legal basis nor an equitable justification under these circumstances — where final Commission action on the preliminary permit in question was taken well in advance of the Commission’s adoption of its new regulations, and where the new regulations were promulgated in formal rulemaking proceedings pursuant to statute — to warrant a remand to explain why the subsequent regulations should not be retroactively applied.

Moreover, even if the Commission had retroactively applied the new regulations, it does not appear that a different result would have eventuated. The dissent asserts that retroactive application probably would have resulted in Dothan receiving the “first-in-time” preference. Dis. Op. at 166. However, it later retreats from that position by claiming that the Commission “has been utterly silent” about whether the outcome would have been different under the new regulations. Dis. Op. at 166 n.4. Without attempting to decide an issue not expressly addressed by the Commission, we simply look to the plain language of the new regulation, 18 C.F.R. § 4.35, and the accompanying Commission comments, see 46 Fed.Reg. 55249 (Nov. 9, 1981), for authoritative guidance.

Subsection (b)(2) of 18 C.F.R. § 4.35, is the pertinent provision here. It limits the definition of a “material amendment to a plan of development proposed in an application for preliminary permit" (emphasis added), that changes the location or size of the dam, the location of the powerhouse or the size and elevation of the reservoir, only if such “changes would enlarge, reduce or relocate the area of the body of water between the farthest reach of the proposed impoundment and the point of discharge from the powerhouse to be affected by the proposed project.” (Emphasis added). Georgia’s pending application does not embody such “changes.”

This record indicates that the applications of both Dothan and Georgia sought to use the existing Andrews Lock and Dam on the Chattahoochee River and the existing impoundment. The “Description of the Proposed Project” that accompanies Dothan’s “Application for Preliminary Permit,” for example, contains a section listing measurements of the “Existing Reservoir," such as its length, normal full pool elevation, and total volume at static full pool. (App. 119-120.) The Army Engineers also stated in their comments to the Commission, analyzing Georgia’s and Coop’s competing applications for the Andrews Lock and Dam Project, that the “[p]rimary purposes of the [existing] Andrews project [are] to provide navigable depths to W. F. George Lock and Dam located upstream and to regulate power waves caused by peaking operations at the W. F. George powerhouse.” Brief of Commission at Addendum Al. Accordingly, the Army Engineers reserved the right to “execute special operations ... to prevent exceeding the static-head limitations at either Andrews or W. F. George.” Id. at A2 (emphasis added). These statements indicate that the hydroelectric power facility that both proposed to engraft on the Andrews Dam would not alter the existing lock and dam or the dimensions of the “existing reservoir.” Do-than’s application was to be limited by the “existing reservoir” and Georgia’s was interpreted to be limited to the existing “static-head limitations.” We have found nothing in this record to suggest that any change in the location of the powerhouse or the estimate of available head would “enlarge, reduce or relocate the area of the body of water between the farthest reach” of the existing impoundment and the point of discharge at the powerhouse. See 18 C.F.R. § 4.35(b)(2). Since Georgia’s application always has been limited by the existing dam, the change in the location of the powerhouse and the correction of the estimate of the available head did not constitute a change in the expected elevation of the impounded water or the resulting energy output. Under such circumstances, even if the new regulation were applied retroactively — which for reasons set forth above it should not be— there is no indication in this record that Georgia’s application would lose its priority.

It is thus clear that under the new regulation Dothan’s proposal would not be a “clearly better adapted plan of development” and that Georgia’s modification of its application did not constitute a material amendment thereof that would cause it to lose priority. The Georgia changes would not be “considered a material amendment” under the new regulation because they did not amount to “changes ... of such a fundamental nature as to constitute the proposal of a different project.” Id. (emphasis added). It is obvious that the Georgia changes did not implicate changes of the character that would constitute a “different project” under the later regulations. And since the changes would not require a shift in priority under the new regulation there is no reason to rule that a different result would be required under the regulations in existence when the Commission ruled. In matters involving the exercise of judgment as to what is material in an application for license or permit, and what is not, the Commission’s judgment is entitled to a very considerable deference.

3 . Dothan had argued that Georgia was required to submit a rebuttal responding to Dothan’s competing application and its statement attacking the adequacy of Georgia’s proposal. That contention is incorrect. The Commission’s regulations permit, but do not require a rebuttal.

18 C.F.R. § 4.33(e) (1981) provides:

(e) No later than 30 days from the date of service of a copy of a competing application, the applicant that filed the initial application for the site in question may file a response that:

(1) Rebuts the competing applicant’s statement that it has equally well adapted or better adapted plans; and

(2) Provides a detailed and complete coun-terstatement of how the plans reflected in the initial application are equally well adapted or better adapted to develop, conserve, and utilize in the public interest the water resources of the region.

(Emphasis added).

4 . The Commission noted that although the Ashbacker rationale was applicable here, it was not required thereby to hold a joint hearing on the applications since the applicants in Ashbacker had a statutory right to a hearing whereas Part I of the Federal Power Act does not provide the same right in this case. (App. 75 n.io.)

5 . See Brief of Commission at Addendum Al-A4.