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Duke Energy Carolinas, LLC v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

March 6, 2018

Duke Energy Carolinas, LLC, Petitioner
Federal Energy Regulatory Commission, Respondent

          Argued December 8, 2017

          On Petition for Review of Orders of the Federal Energy Regulatory Commission John A. Whittaker IV argued the cause and filed the briefs for petitioner.

          Susanna Y. Chu, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were David L. Morenoff, General Counsel, and Robert H. Solomon, Solicitor.

          Before: Garland, Chief Judge, and Rogers and Srinivasan, Circuit Judges.


          Rogers, Circuit Judge

          In anticipation of expiration of the fifty-year license for the Catawba-Wateree Project, Duke Energy Carolinas, LLC ("Duke Energy") filed an application with the Federal Energy Regulatory Commission for a new fifty-year license. The Commission, upon determining that construction and environmental measures under the new license were "moderate" in nature and scope, granted a forty-year license. Duke Energy petitions for review, contending principally that the Commission failed to treat it like similarly-situated applicants that received fifty-year licenses and announced a new qualitative approach to determining license terms without prior notice or reasoned analysis, leaving applicants and courts without objective standards. According due deference to the Commission's expertise in determining whether measures under a license are moderate or extensive and to its interpretation of its precedent and policy choices, we deny the petition for review.


         The Federal Power Act authorizes the Commission to issue licenses for hydroelectric projects for terms of up to fifty years. 16 U.S.C. § 799. Upon expiration of a license, the Commission may issue a new license for a term that is in the public interest, but for not less than thirty nor more than fifty years from the date it issues. Id. § 808(a), (e). The Commission generally issues a thirty-year license term for projects with "little or no" redevelopment, new construction, new capacity, or environmental mitigation and enhancement measures; a forty-year license term for projects involving "moderate" measures; and a fifty-year license for projects involving "extensive" measures. See, e.g., PUD No. 1 of Chelan Cnty., 117 FERC ¶ 62, 129 at ¶ 128 (2006); PUD No. 1 of Pend Oreille Cnty., 112 FERC ¶ 61, 055 at ¶ 127 (2005); Portland General Electric Co., 111 FERC ¶ 61, 450 at ¶ 167 (2005); N.Y. Power Auth. (St. Lawrence), 105 FERC 61, 102 at ¶ 225 (2003).

         The Catawba-Wateree Project for which Duke Energy sought a new license for fifty years includes eleven developments along hundreds of miles of the Catawba and Wateree Rivers in North Carolina and South Carolina. The original fifty-year license was set to expire on August 31, 2008, and two years prior Duke Energy entered into a Comprehensive Relicensing Agreement with 70 entities that specified measures to be undertaken upon relicensing. It filed the agreement with its application for a new license. The Commission determined, based on staff recommendations in light of public comments, various filings, and a final environmental impact statement, that under its general licensing policy the appropriate license term was forty years. See Duke Energy Carolinas, LLC, 153 FERC ¶ 62, 134 at ¶¶ 6-10, 277 (2015) ("License Order"). It concluded the license authorizes "a moderate amount of new construction (e.g., fish passage facilities and bladder dam on the Wateree spillway) and new environmental mitigation and enhancement measures (e.g., higher minimum flow releases from [six developments]; recreation flow releases from [five developments]; diadromous fish monitoring associated with fish passage program, sturgeon monitoring, and recreation development)." Id.

         Duke Energy requested rehearing, arguing the license should be longer, claiming the Commission had failed to consider all of the license measures and their costs and including with its request a list of the measures required under the new license. In addition to the costs of these measures, Duke Energy stated it had spent about $54 million on new construction to implement measures proposed in its August 2006 application and required by the Relicensing Agreement before the new license issued, and had incurred $111 million in costs pursuing relicensing. Duke Energy pointed to instances in which the Commission had granted a fifty-year license based on a project's annual cost and the impact of costs on the total annual benefit of the project and argued, based on its estimate of total and annual costs for the Catawba-Wateree Project, that it was entitled to the same. It also claimed the signatories to the Relicensing Agreement had agreed to a fifty-year license term. The Commission denied rehearing and affirmed the forty-year license term. Duke Energy Carolinas, LLC, 156 FERC ¶ 61, 010 at ¶¶ 13-14 (2016) ("Rehearing Order"). Duke Energy petitions for review.


         The issue on appeal is whether the Commission reasonably found that the measures required by the hydroelectric license it issued to Duke Energy were "moderate, " warranting a forty-year license term under the Commission's precedents. "In a [hydroelectric] licensing decision such as this, where few explicit statutory provisions govern, [the court's] role is narrowly circumscribed." U.S. Dept. of Interior v. FERC, 952 F.2d 538, 543 (D.C. Cir. 1992). The court will "defer to the agency's expertise . . . so long as its decision is supported by substantial evidence in the record and reached by reasoned decisionmaking." Turlock Irrigation District v. FERC, 786 F.3d 18, 25 (D.C. Cir. 2015) (internal quotation marks and citations omitted). Essentially, the court must "look to whether [the Commission] 'articulated a rational explanation for its action'" and either acted "consistent with . . . or offer[ed] a reasoned basis for its departure from precedent." Williams Gas Processing v. FERC, 475 F.3d 319, 326 (D.C. Cir. 2006) (quoting AT & T Inc. v. FCC, 452 F.3d 830, 837 (D.C. Cir. 2006); ConAgra Inc. v. NLRB, 117 F.3d 1435, 1443 (D.C. Cir. 1997)).

          Duke Energy's principal challenge to the License and Rehearing Orders is that the Commission was arbitrary and capricious because it failed to treat Duke Energy like similarly-situated applicants with similar costly projects that received fifty-year license terms and offered no reasoned explanation for the disparate treatment. New York Power Authority, 120 FERC ¶ 61, 266 (2007), in its view, exemplifies the Commission policy of granting fifty-year license terms for projects based on their costs. There, the Commission re-licensed for a fifty-year term the Niagara Project that spanned the Niagara River connecting Lake Erie and Lake Ontario and that, pursuant to statute, has "the capacity to use all of the United States' share of Niagara River water available for power generation, " New York Power Authority, 118 FERC ¶ 61, 206 at ¶¶ 4, 13 (2007); New York Power Authority, 120 FERC ¶ 61, 266 at ¶ 19 (2007).

         The Commission acknowledged that it "did use cost as a significant part of its analysis [of the Niagara Project], " but stated that its precedent "does not generally treat cost as dispositive." Rehearing Order ¶ 14 n.17. For instance, in Consumers Power Co., 68 FERC ¶ 61, 077 (1994), the Commission announced its general standard, stating it issues "new licenses for [forty] years or more for projects which include substantial new construction or capacity increases, " 68 FERC ¶ 61, 077 at 61, 383-84, and observing that "licenses of longer duration . . . ease the economic impact of the new costs[, ] . . . encourage better comprehensive development of the renewable power generating resource[, ]" and ease the burden of "substantial or costly environmental mitigation and enhancement measures, " id. at 61, 384. But the Commission has not interpreted this precedent to support a ...

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