Duke Energy Carolinas, LLC v. FERC , 883 F.3d 923 ( 2018 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 8, 2017 Decided March 6, 2018
No. 16-1296
DUKE ENERGY CAROLINAS, LLC,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
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.
Opinion for the Court filed by Circuit Judge ROGERS.
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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.
I.
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
3
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
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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.
II.
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)).
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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 cost-
determinative approach. Rehearing Order ¶ 14. Any lingering
ambiguity was clarified in Duke Energy Progress, 153 FERC
¶ 61,056, ¶¶ 38, 41-42 (2015) and in the orders now on review.
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The Commission also stated that it “agree[s] with Duke
Energy that the measures required with respect to the
substantially larger Niagara Project do not appear greater than
those required for the Catawba-Wateree Project,” but explained
it “view[s] that older case as an outlier that is not consistent
with the majority of more recent orders.” Id. ¶ 22. It cited the
project in North Carolina in Duke Energy Progress, Inc., 151
FERC ¶ 62,004 at ¶ 232, aff’d on reh’g, 153 FERC ¶ 61,056
(2015) and the project in Washington State in Public Utility
Dist. No. 1 of Douglas County, Wash., 141 FERC ¶ 62,104
at ¶ 40 (2012), aff’d on reh’g, 143 FERC ¶ 61,130 (2013). For
each, the Commission granted forty-year licenses for projects
involving new environmental and related construction
measures that were like those for the Catawba-Wateree Project.
Id. ¶ 13 & n.14. The Commission had looked at the measures
qualitatively. Id. ¶¶ 13 & n. 14, 14.
Other precedent cited by Duke Energy was also
distinguishable because for those projects the Commission had
“relied on the general extent of the measures required, rather
than . . . on a quantitative analysis of costs.” Id. ¶ 21 & n. 42
(citing Chelan Cnty., 117 FERC at ¶ 129; Pend Oreille Cnty.,
112 FERC at ¶ 127; St. Lawrence, 105 FERC at ¶ 228). Where
the Commission approved fifty-year license terms, the parties
to the relicensing agreement had specifically agreed to a fifty-
year term or the projects were significantly smaller, meaning
“the measures required there are not analogous to the measures
required . . . with respect to the much larger Catawba-Wateree
project.” Rehearing Order ¶ 21 & n. 42 (citing Chelan Cnty.,
117 FERC at ¶ 129; Pend Oreille Cnty., 112 FERC at ¶ 127;
St. Lawrence, 105 FERC at ¶ 228). Duke Energy’s position
that it “should receive a [fifty]-year license because the
signatories to the Relicensing Agreement support such a
license term overstates the language of the agreement,” id.
¶ 24; the Commission pointed out that the language “does not
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provide unequivocal support for a [fifty]-year license, but
rather . . . support” for a new license “that is not less than [forty]
years nor more than [fifty] years,” id. (internal quotation marks
and italics omitted).
Recognizing that “Duke Energy predominantly relies on
costs as the basis for supporting a longer license term,” the
Commission gave a fulsome response. Id. ¶ 14. As a general
matter, it explained, the Commission “do[es] not subject [cost]
estimates to the type of rigorous analysis that would be
necessary were [it] to treat them as matters of absolute fact.”
Id. Because “cost estimates can fluctuate widely over time,” it
concluded, “a strictly quantitative analysis is problematic.” Id.
¶ 15. More particularly, it reflected, that although “costs can
provide some indication of the extent of required measures,
costs alone are never entirely dispositive, especially where, as
here, Duke Energy’s cost data are not reliable.” Id. ¶ 14. “In
response to Commission staff’s request to simply update the
cost estimates . . . Duke Energy instead filed new estimates —
unsupported by any explanation.” Id. ¶ 15. The Commission
noted as well that in responding Duke Energy included a $40
million gate instead of the $10 million bladder dam called for
in the License Order. Id.
Because the Commission acknowledged that its policy has
shifted and explained it, see Westar Energy, Inc. v. FERC, 568
F.3d 985, 989 (D.C. Cir. 2009)(citing FCC v. Fox Television
Stations, Inc., 556 U.S. 502, 514 (2009)), the Commission
could reasonably conclude its Niagara Project precedent and
other precedent on which Duke Energy relies did not “require
[it] to extend [Duke Energy’s] license term.” Rehearing Order
¶¶ 14 n.17, 22.
Responding to Duke Energy’s objection to the
characterization of the Catawba-Wateree measures as
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“moderate,” the Commission pointed out that “[u]nder the new
license, Duke Energy will not be constructing extensive new
facilities, adding substantial capacity, or complying with
extensive new environmental measures, so as to justify a
[fifty]-year license term.” Id. ¶ 13. Listing “[t]he most costly
new measures” under the license, the Commission explained
that “[t]he nature and extent of these measures are not unusual
for a large-sized project like the . . . Catawba-Wateree Project
and are similar to those required in other recent licenses that
received [forty]-year terms.” Id. ¶ 13 & n.14 (citing Duke
Energy Progress, Inc., 151 FERC ¶ 62,004 and Public Utility
Dist. No. 1 of Douglas Cnty., Wash., 141 FERC ¶ 62,104).
Duke Energy’s objection to the Commission’s reliance on
its recent precedent is not persuasive. See Reply Br. 16. It is
true that the license in one case was issued after Duke Energy
filed its application for re-licensing, and that the other case
involved a project that was significantly less costly than the
Catawba-Wateree Project going forward. Duke Energy
concludes these circumstances reinforce the conclusion that the
Commission failed to treat it like similarly situated applicants.
For instance, it suggests that the Duke Energy Progress
decision was rendered over eleven years after Duke Energy had
relied on the Commission’s cost-based approach in Consumers
Power and New York Power Authority to engage in settlement
talks with stakeholders and agree to submit measures it
concluded would warrant a fifty-year license, and over nine
years after Duke Energy submitted its re-license application.
The Commission acknowledges that its license term
determinations are fact intensive as each project is unique,
Rehearing Order ¶ 23, and on rehearing offered, as discussed,
a sufficient comparative analysis, id. ¶¶ 13 & n. 14, 21-22.
Moreover, the Commission observed that Duke Energy “does
not suggest that it cannot recoup its costs within [forty] years
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or that the license term in any other way causes hardship to it.”
Id. ¶ 25. To the extent Duke Energy objects generally that the
Commission’s qualitative approach amounts to a “‘we-know-
it-when-we-see-it’ approach,” Pet’r’s Br. 47-48, the court notes
that the Commission has adopted a license policy going
forward using a forty-year term as the default, with variations
for other terms in response to a number of factors. See Policy
Statement on Establishing License Terms for Hydroelectric
Projects, 161 FERC ¶ 61,078 (Oct. 19, 2017). This would
suggest that remanding for greater clarity by the Commission
would have no practical utility as the policy on which the
Commission would rely is clear.
Determining the scope and nature of measures required
under a hydroelectric power license invoke the technical
expertise of the Commission to which the court generally
defers. Turlock Irrigation District, 786 F.3d at 25-26. Whether
the requirements of a hydroelectric license issued by the
Commission constitute “moderate” as opposed to “extensive”
measures under Commission precedent seems “a classic
example of a factual dispute the resolution of which implicates
substantial agency expertise.” Marsh v. Oregon Nat. Res.
Council, 490 U.S. 360, 376-77 (1989). Likewise, the court will
generally “defer to the Commission’s interpretations of its own
precedents.” Columbia Gas Transmission Corp. v. FERC, 477
F.3d 739, 743 (D.C. Cir. 2007). Duke Energy makes little
effort to distinguish the type of measures under the new license
from those that merited forty-year terms, and the
Commission’s response in the challenged orders fully met
Duke Energy’s objection that the Commission failed to
consider all of the measures required under the new license and
reasonably explained the basis for its “moderate”
determination. The Commission stated that it was unclear
whether all of Duke Energy’s listed license measures were new
10
and that not all of Duke Energy’s cost estimates were
supported. Rehearing Order ¶¶ 15, 23 n.45.
Finally, Duke Energy contends that the Commission failed
to address legitimate arguments against applying its long-
standing policies not to consider pre-license and license
preparation costs in determining the appropriate license term.
The Commission explained that Duke Energy’s reliance on
“expenditures [of $54 million] it incurred prior to license
issuance to implement certain measures proposed in its August
2006 application,” and on expenses for preparation of the re-
license application were misplaced in view of the
Commission’s long-standing policies: In determining an
appropriate license term, the Commission will “only consider
measures required for the first time in the new license.” Id.
¶¶ 18-19 & n.30. In determining a project’s economic benefits,
the Commission will consider the “costs of the relicensing
process,” which it considers “are not relevant in considering
the appropriate license term.” Id. ¶ 19. Invocation of its policy
against counting such expenditures is insufficient, Duke
Energy maintains, because it “never explained why such costs
were not relevant” or addressed the argument that “not
considering such costs was contrary to the public interest goals
of Consumers Power.” Pet’r’s Br. 55.
But reliance on long-standing policies generally requires
no elaborate explanation. See Michigan Consolidated Gas Co.
v. FERC, 883 F.2d 117, 122-23 (D.C. Cir. 1989). Duke Energy
has not shown either policy is unlawful on its face, much less
that a policy against double counting the same measure under
multiple licenses is unreasonable. Here, the Commission
pointed out that Duke Energy “subsequently made the decision
to seek the license amendments required to complete the
measures sooner, rather than wait until its new license was
issued,” Rehearing Order ¶ 19. Further, the Commission noted
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that some of Duke Energy’s cost estimates were not fully
supported, id. ¶ 22, or were inconsistent with the new license
because it was unclear that all the enhancement and mitigation
measures are new measures, id. ¶ 23 n.45. Duke Energy’s
effort to avoid the plain meaning of the staff request to update
the cost estimates is unpersuasive; as license applicant it had
every incentive to explain the basis for its cost estimates and it
cannot prevail by shifting the burden of clarification to the
Commission. See Pet’r’s Br. 42-44. Nor could overreading of
the signatories’ agreement support a fifty-year term.
Rehearing Order ¶ 24.
Accordingly, we deny the petition for review.