West River Electric Ass'n v. Black Hills Power & Light Co.

918 F.2d 713

• Court: Court of Appeals for the Eighth Circuit
• Decided: November 2, 1990
• Docket: Nos. 89-5443, 89-5468
• Status: Published

Opinions

ROSS, Senior Circuit Judge.

Black Hills Power and Light Company (Black Hills) appeals from a judgment of the district court¹ which held that Congress has not clearly and specifically deferred its exclusive jurisdiction over Ells-worth Air Force Base (Ellsworth), a federal enclave, sufficient to require that Ells-worth comply with South Dakota law in the procurement of its utility services. The district court concluded that Black Hills does not have the exclusive right to supply overrun electricity to Ellsworth and that instead Ellsworth may competitively purchase that electricity.

This case involves the second attempt on the part of Black Hills to secure the exclusive right, as conferred upon it by state law,² to provide electric service to Ells-worth. See Black Hills Power & Light Co. v. Weinberger, 808 F.2d 665 (8th Cir.) (“ Weinberger*’), cert. denied, 484 U.S. 818, 108 S.Ct. 73, 98 L.Ed.2d 36 (1987). The central issue presented on appeal is whether, by virtue of the Continuing Appropriations Act, Fiscal Year 1988, Pub.L. No. 100-202, § 8093, 101 Stat. 1329, 1329-79 (1987) (“section 8093”), Ellsworth Air Force Base must follow the utility franchise territories prescribed by South Dakota law in procuring its electrical service. We conclude that as a federal enclave, Congress has exclusive jurisdiction³ over Ellsworth Air Force Base and that in order to defer this exclusive jurisdiction to the State, Congress must clearly and unambiguously express as its purpose the deferral of such jurisdiction. We conclude that section 8093, as part of an appropriations bill, is insufficient to defer the exclusive grant of federal jurisdiction, nor was it intended to amend the extensive body of federal procurement law which establishes that federal agencies must use full and open competitive procedures in the procurement of their property and services.

I.

Ellsworth Air Force Base is a military installation of the United States Air Force located in parts of Meade and Pennington Counties, South Dakota. Of the 4,856.76 acres occupied by Ellsworth, approximately 88% has been ceded by South Dakota to the exclusive jurisdiction of the United States. Weinberger, supra, 808 F.2d at 666.

The dispute which gave rise to this action originated in 1984, when the United States solicited bids for supplying the overrun electric power to Ellsworth. Prior to 1984, Ellsworth’s main base electric power needs were met by an agency of the United States Department of Energy, the Western Area Power Administration (WAPA). However, in 1984, WAPA determined that it could no longer meet the needs of Ells-worth and thus the United States undertook to supply these overrun electricity needs through the solicitation of bids. Five suppliers submitted bids, including Black Hills, and Ellsworth chose the lowest bid, that of Heartland Consumers Power District. Accordingly, the United States and Heartland entered into a one-year contract in October, 1984.⁴

On November 24, 1984, Black Hills filed a complaint with the South Dakota Public Utilities Commission (“Commission”) arguing that Ellsworth is located in Black Hills’ utility service territory, as established by state law, and therefore Ellsworth is required to obtain its overrun electric power from Black Hills. Following a three-day evidentiary hearing, the Commission found that under South Dakota law, Black Hills is entitled to be the exclusive provider of electric service to Ellsworth. Following removal to federal court, the district court held that there was a conflict between state and federal law, and that the supremacy clause, U.S. Const., art. VI, cl. 2, prevented the Commission from forcing the United States to contract with a specified electric utility. Additionally, the court determined that the Commission lacked jurisdiction over Ellsworth because Ellsworth is an exclusive federal enclave.

On appeal, the Eighth Circuit affirmed the district court’s decision, finding that (1) Ellsworth is a federal enclave under exclusive federal jurisdiction; (2) nothing in federal procurement law directed Ellsworth contracting officials to follow state utility franchise law; and (3) none of the legislation enacted by Congress constituted a deferral of the exclusive federal jurisdiction. Weinberger, supra, 808 F.2d at 666.

Subsequent to the Supreme Court’s denial of the petition for writ of certiorari in Weinberger, Congress passed an Act which contained a prohibition on the use of appropriated funds by any federal department, agency, or instrumentality in the procurement of electricity in a manner inconsistent with state law. Section 8093, supra.5

Nine months after the passage of section 8093, Black Hills filed a motion with the South Dakota Public Utilities Commission, seeking reinstatement of its 1985 order, which required Ellsworth to purchase its overrun power from Black Hills in accordance with state law. Four days later, West River Association, Inc. filed a complaint with the Commission alleging that, because of a service territory boundary dispute, West River was entitled to be the sole supplier of overrun electric power to Ells-worth. These cases were consolidated and a hearing was held on September 29, 1988. On October 31, 1988, the Commission reinstated its 1985 order, requiring Ellsworth to acquire its excess power from Black Hills and to terminate the service contract between Ellsworth and Heartland. On August 14, 1989, the federal district court entered a memorandum opinion and order which held that, because Ellsworth is a federal enclave, the dictates of section 8093 do not apply. The court concluded that Weinberger continues to accurately state the law. This appeal followed.

II.

The Supreme Court has explicitly held that “the grant of ‘exclusive’ legislative power to Congress over enclaves that meet the requirements of Art. I, § 8, cl. 17, by its own weight, bars state regulation without specific congressional action.” Paul v. United States, 371 U.S. 245, 263, 83 S.Ct. 426, 437, 9 L.Ed.2d 292 (1963). With regard to the Supremacy Clause of the Constitution,⁶ the Supreme Court has stated: “Because of the fundamental importance of the principles shielding federal installations and activities from regulation by the States, an authorization of state regulation is found only when and to the extent there is ‘a clear congressional mandate,’ ‘specific congressional action’ that makes this authorization of state regulation ‘clear and unambiguous.’ ” Hancock v. Train, 426 U.S. 167, 179, 96 S.Ct. 2006, 2013, 48 L.Ed.2d 555 (1976) (citations omitted); see also Citizens & Landowners v. Secretary, 683 F.2d 1171, 1178 (8th Cir.1982). “Particular deference should be accorded ... where, as here, the rights and privileges of the Federal Government at stake not only find their origin in the Constitution, but are to be divested in favor of and subjected to regulation by a subordinate sovereign.” Hancock, supra, 426 U.S. at 179, 96 S.Ct. at 2012-13.

Here, the fact that Ellsworth is a federal enclave is without question. Weinberger, supra, 808 F.2d at 668. Unless section 8093 constitutes a specific grant of jurisdiction to the South Dakota State Public Commission, it is incontrovertible that the Commission does not have the authority to require Ellsworth to follow state utility service territories in purchasing electricity.

Black Hills argues that section 8093 constitutes a sufficiently “clear and unambiguous” congressional mandate which defers to state regulation the exclusive jurisdiction of the federal government over federal enclaves and prohibits Ellsworth from procuring utility services through competitive bidding. The district court rejected Black Hills’ position, noting that section 8093 does not specifically include a “federal enclave” as an entity which must defer to state law in the procurement of its electric services. The district court found that because “federal enclaves” are not clearly included in the scope of section 8093, that section is ambiguous as applied to the facts of this case. The court concluded that section 8093 does not confer upon Black Hills the exclusive right to supply electric service to Ellsworth.

The district court then looked to the legislative history of the Act and found that it was congressional concern to protect utilities against abandonment by their federal customers. “Section 8093 was intended to protect remaining customers of utility systems from having to pay higher rates by reason of a loss of an existing customer.” West River Elec. Assn. v. Black Hills Power & Light Co., 719 F.Supp. 1489, 1499 (D.S.D.1989) (citing S.Rep. No. 235, 100th Cong., 1st Sess. 70 (1987); H.R.Rep. No. 410, 100th Cong., 1st Sess. 277 (1987)). The district court found that Ellsworth was not already a Black Hills’ customer, and concluded that section 8093 was not intended to apply to Ellsworth.

Because we have previously discussed in detail the provisions of federal law which require the pursuit of active competition in the procurement of property and services by agencies of the federal government, see Weinberger, supra, 808 F.2d at 671-72, we will not repeat that discussion here. Suffice it to say that federal procurement law is specifically designed to ensure “active competition so that the United States may receive the most advantageous contract.” Paul, supra, 371 U.S. at 253, 83 S.Ct. at 432. The general rule is the promotion of “full and open competition in soliciting offers and awarding Government contracts.” 48 C.F.R. § 6.101 (1985) (citing 10 U.S.C. § 2304.)

Under the Competition in Contracting Act of 1984, 10 U.S.C. §§ 2301-2316 (1988), the procurement of electric service at Ells-worth must be conducted on a competitive basis if competition is present, and the determination of whether competition is present is left to the discretion of the Air Force:

[I]t is in the interest of the United States that property and services be acquired for the Department of Defense in the most timely, economic, and efficient manner. It is therefore the policy of Congress that— (1) full and open competitive procedures shall be used by the Department of Defense in accordance with the requirements of this chapter;

* * * * * *

(5) the head of an agency use advance procurement planning and market research and prepare contract specifications in such a manner as is necessary to obtain full and open competition with due regard to the nature of the property or services to be acquired.

Id. at § 2301(a). Furthermore, the “procurement policies and procedures,” for the military department in particular, shall “promote full and open competition.” Id. at § 2301(b).

Congress further provided that:

[T]he head of an agency in conducting a procurement for property or services—

(A) shall obtain full and open competition through the use of competitive procedures ...; and

(B) shall use the competitive procedure or combination of competitive procedures that is best suited under the circumstances of the procurement.

Id. at § 2304(a)(1). In determining the appropriate “competitive procedure,” the agency may solicit sealed bids or request competitive proposals. Id. at § 2304(a)(2). Significantly, the exceptions to this mandatory requirement to seek competition are discretionary. See, e.g., id. at § 2304(c) (Under specified circumstances, “[t]he head of an agency may use procedures other than competitive procedures.”) (emphasis added).

Within this basic framework of the enclave clause and federal procurement law, we now turn to the specific arguments of the parties.

III.

Black Hills contends that Congress need not specifically defer its exclusive jurisdiction over a federal enclave to state regulation. As an example, Black Hills contends that in Offutt Hous. Co. v. County of Sarpy, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151 (1956), the Supreme Court determined that a federal enclave was subject to regulation by the state, notwithstanding the fact that the federal legislation did not specifically permit state regulation of property subject to the exclusive legislation by Congress. Id. at 259, 76 S.Ct. at 818.

Black Hills’ reliance on Offutt, however, is misplaced. In Offutt, the state regulation, in the form of state property taxes, was directed against a private party who leased land on an Air Force base from the federal government in order to establish military and civilian housing. The Court held that through legislation, Congress had consented to the state taxation of the lessee, even though the property involved was subject to the exclusive jurisdiction of the federal government.

In its reasoning, the Court relied on cases which had established an exception to the federal enclave clause where a state tax was levied against a private party who had taken over the beneficial use of federal property, even though legal title might remain in the United States. Id. at 257, 76 S.Ct. at 817 (citing S.R.A., Inc. v. Minnesota, 327 U.S. 558, 564, 66 S.Ct. 749, 753, 90 L.Ed. 851 (1946), (“We shall treat this case as though the Government’s unrestricted transfer of property to nonfederal hands is a relinquishment of the exclusive legislative power.”), and Baltimore Shipbuilding Co. v. Baltimore, 195 U.S. 375, 382, 25 S.Ct. 50, 51, 49 L.Ed. 242 (1904), (“[I]t seems to us extravagant to say that an independent private corporation for gain ... is exempt from state taxation ... because it is employed by the United States ... ”)). In contrast, while Offutt involved the state regulation of a private party who leased land from the government, the state regulation in the instant case is directed against the federal government itself.⁷

Similarly, Black Hills’ reliance on United States v. State Corp. Comm’n, 345 F.Supp. 843 (E.D. Va.1972), aff'd, 409 U.S. 1094, 93 S.Ct. 912, 34 L.Ed.2d 682 (1973), to support its argument that the Commission can regulate a federal enclave without specific congressional approval is also unfounded. The district court in State Corp. Comm’n did not even address the federal enclave issue and the Supreme Court affirmed without opinion. The State Corporation Commission’s assertion of the enclave issue in its Jurisdictional Statement to the Supreme Court is insufficient to create a binding holding that a state can regulate a federal enclave without specific congressional approval. See Mandel v. Bradley, 432 U.S. 173, 176, 97 S.Ct. 2238, 2240, 53 L.Ed.2d 199 (1977) (“a summary affirmance is an affirmance of the judgment only” and “[sjummary actions ... should not be understood as breaking new ground but as applying principles established by prior decisions to the particular facts involved.”)

Contrary to Black Hills’ argument, it is well established that in order for Congress to subject a federal enclave to state jurisdiction, there must be a specific congressional deferral to state authority over federal property. For example, in Howard v. Commissioners, 344 U.S. 624, 627-28, 73 S.Ct. 465, 467, 97 L.Ed. 617 (1953), the statute in question specifically permitted a state income tax on persons residing or working in a “Federal area.” Similarly, in Evans v. Cornman, 398 U.S. 419, 424, 90 S.Ct. 1752, 1756, 26 L.Ed.2d 370 (1970), the Court referred to 26 U.S.C. § 3305(d), which permits state unemployment compensation law to be applied to services performed on “land or premises owned, held, or possessed by the United States.” In Evans, the Court also referred to 40 U.S.C. § 290, which permits states to apply workmen’s compensation laws to “lands and premises owned or held by the United States.” Evans, supra, 398 U.S. at 424, 90 S.Ct. at 1756. See also 4 U.S.C. § 104 (gasoline and fuel taxes on military reservations); 4 U.S.C. § 105 (sales tax on “Federal area”).

Section 8093 contains no such specific reference to federal land or area, but instead is a general directive that federal agencies and installations follow state law in the procurement of their electric service. Hence, we conclude that Congress, through section 8093, has not provided the necessary clear authorization to defer its exclusive jurisdiction over Ellsworth and to apply in its stead the South Dakota utility service territories as established under South Dakota law.

Nor are we able to find in section 8093, on its face or in relation to the Appropriations Act as a whole, or from the legislative history, any clear and unambiguous declaration by Congress to amend the extensive and carefully-crafted body of federal procurement law. In fact, nowhere in section 8093 or its legislative history is the Competition in Contracting Act mentioned. Furthermore, as previously noted, the legislative history clearly states that this legislation was intended to protect against utility abandonment by their federal customers. It is undisputed that no abandonment is occurring here.

Finally, we note as significant the fact that section 8093 is only one small provision contained within an extensive appropriations law. While Congress can amend substantive legislation through a provision in an appropriations act, it is well established that “indefinite congressional expressions cannot negate plain statutory language and cannot work a repeal or amendment by implication.” St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772, 788, 101 S.Ct. 2142, 2151, 68 L.Ed.2d 612 (1981). “The doctrine disfavoring repeals by implication ‘applies with full vigor when ... the subsequent legislation is an appropriations measure.’ ” Tennessee Valley Auth. v. Hill, 437 U.S. 153, 190, 98 S.Ct. 2279, 2300, 57 L.Ed.2d 117 (1978) (quoting Committee for Nuclear Responsibility v. Seaborg, Inc., 463 F.2d 783, 785 (D.C.Cir.1971) (emphasis in original)).

In view of the obvious congressional awareness of the requirement of clear and specific language to bind the United States, see United States v. United Mine Workers, 330 U.S. 258, 272-73, 67 S.Ct. 677, 685-86, 91 L.Ed. 884 (1947), we conclude that with respect to subjecting federal enclaves to state utility territories, section 8093 does not satisfy the traditional requirement that such intention be expressed with sufficient clarity. Should this be the objective of Congress, it need only amend the Act to make its intention apparent. Absent such amendment, we can only conclude that in enacting section 8093, Congress sought to submit federal installations and other federal agencies to state regulation in the procurement of utility service, while refraining from subjecting a federal enclave, a constitutionally-created entity, to such state control.

The court concludes that Ellsworth Air Force Base is a federal enclave over which Congress has exclusive jurisdiction as provided by the Constitution. Section 8093 does not clearly evince the necessary congressional intent to defer this jurisdiction to state law.⁸ The judgment of the district court is affirmed.

1 . The Honorable Richard H. Battey, United States District Judge for the District of South Dakota.

2 . S.D.Codified Laws Ann. § 49-34A-42 provides in part:

Each electric utility shall have the exclusive right to provide electric service at retail at each and every location where it is serving a customer as of March 21, 1975.

3 .Art. I, § 8, cl. 17 provides:

"[The Congress shall have Power to] exercise exclusive Legislative] ... Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings.”

4 . The United States renewed its contract with Heartland until 1986, when the contract was awarded to a North Dakota entity. Basin Electric Power Cooperative. In 1987, the contract went back to Heartland, and was then extended for a one-year period on October 15, 1988. During the pendency of this appeal, the United States has again solicited the lowest bid for the supply of its overrun electricity, and on March 22, 1990, the contract was again awarded to Basin Electric Power Cooperative. Basin Electric is currently supplying Ellsworth with its overrun electricity.

5 . Continuing Appropriations Act, Fiscal Year 1988, Pub.L. No. 100-202, § 8093, 101 Stat. 1329-79 (1987) ("section 8093”), provides:

None of the funds appropriated or made available by this or any other Act with respect to any fiscal year may be used by any Department, agency, or instrumentality of the United States to purchase electricity in a manner inconsistent with State law governing the provision of electric utility service, including State utility commission rulings and electric utility franchises or service territories established pursuant to State statute, State regulation, or State-approved territorial agreements: provided, That nothing in this section shall preclude the head of a Federal agency from entering into a contract pursuant to 42 U.S.C. 8287; nor shall it preclude the Secretary of a military department from entering into a contract pursuant to 10 U.S.C. 2394 or from purchasing electricity from any provider when the utility or utilities having applicable State-approved franchise or other service authorizations are found by the Secretary to be unwilling or unable to meet unusual standards for service reliability that are necessary for purposes of national defense.

6 . We have already noted the similarity in the analysis between the enclave clause and the supremacy clause. "They [both] illustrate that a state cannot diminish the constitutional authority of the United States government by regulating the parties with whom it may contract.” Black Hills Power & Light Co. v. Weinberger, 808 F.2d 665, 669 n. 4 (8th Cir.), cert. denied, 484 U.S. 818, 108 S.Ct. 73, 98 L.Ed.2d 36 (1987).

7 . The dissent misconstrues the scope of Offutt Hous. Co. v. County of Sarpy, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151 (1956), by broadly characterizing the issue decided as whether the words "federal lands” or "federal enclaves" need to be included in a statute in order to waive jurisdiction over a federal enclave. The Offutt opinion, however, is replete with language specifically limiting the decision to the facts of that case. For example, the Court states that the case "raises serious questions of state-federal relations with respect to taxation of private housing developments on Government-owned land." Id. at 256, 76 S.Ct. at 817. The Court noted that its function is to apply the general language of the challenged statute to "a specific problem." Id. at 260, 76 S.Ct. at 819. Furthermore, the Court determined that “the more persuasive construction of the statute, ... is that the States were to be permitted to tax private interests, like those of this petitioner, in housing projects located on areas subject to the federal power of ‘exclusive Legislation.”' Id. Finally, the Court concluded that "[w]e hold only that Congress, in the exercise of this power, has permitted such state taxation as is involved in the present case." Id. at 260-61, 76 S.Ct. at 819 (emphasis supplied).

Following this narrow holding, the Court considered the lessee’s alternate argument that, in fact, the tax is actually borne by the Government, not the private lessee, or, in the alternative, that the Government has a substantial interest in the property and is thereby tangentially the object of the state regulation. After a lengthy discussion, the Court rejected the lessee’s contention and concluded that the value of the buildings and improvements is attributable to the lessee's interest. If, as the dissent contends, the Court had made the broad pronouncement that Congress need not specifically and unambiguously defer its exclusive jurisdiction over a federal enclave, then the Offutt Court's careful examination of the real party subject to the tax is mere surplusage. We do not believe this to be the case, and instead view the Court’s discussion as a clear demonstration of the important distinction between state regulation of a private interest on government land, as opposed to state regulation of the Government itself.

To conclude, as does the dissent, that the Offutt holding broadly negates the requirement of specific and clear congressional deferral of its exclusive jurisdiction over federal enclaves, ignores prior precedential authority, as well as the plain language of the Offutt opinion.

8 . Our decision herein is not affected by the Supreme Court’s recent decision in North Dakota v. United States, — U.S. -, 110 S.Ct. 1986, 109 L.Ed.2d 420 (1990). In North Dakota, the federal government challenged North Dakota laws regulating liquor sold to military bases within the state. The regulations required that out-of-state suppliers who transfer liquor into the state affix a label to each bottle of liquor destined for delivery to a federal enclave and to file monthly reports documenting the volume of liquor imported into the state. See N.D.Admin. Code §§ 84-02-01-05(1), 84-02-01-05(7).

The two military bases at issue were federal enclaves, over which the United States and North Dakota exercise concurrent jurisdiction. The Supreme Court held that these state regulations were not invalid under the Supremacy Clause, notwithstanding a federal law directing that distilled spirits be "procured from the most competitive source, price and other factors considered.” Pub.L. No. 99-661 § 313, 100 Stat. 3853, 10 U.S.C. § 2488(a).

This decision is distinguishable from the instant case in at least two respects: (1) Although the regulations indirectly affect the federal government’s liquor costs, they do not regulate the federal government directly, since they operate only against suppliers; (2) The United States and the State of North Dakota share concurrent jurisdiction over the military bases, in contrast to Ellsworth, which is under the exclusive jurisdiction of the United States.