FPC Must License Steam Plants Using Federal "Surplus Water," Court of Appeals Rules

To citizens who perceive the government's regulatory agencies as invariably bent on a ggrandizing their power, it may come as a surprise to learn that these agencies have sometimes opposed efforts to make them assume new authority. The Federal Power Commission is one of these; for more than half a century, it has resisted attempts to expand its jurisdiction. On November 9, 1973, however, in a decision with major significance for the future of this country's water resources, the FPC lost — for the time being at least — its battle to avoid taking jurisdiction over thermal-electric power plants ("steam plants") that utilize surplus water from federal projects for their operations.

The ruling came on a suit filed by two Indian tribes, several individual residents of the Navajo reservation, the Sierra Club, and the Committee to Save Black Mesa. In a lengthy opinion reviewing the piecemeal growth of federal control over electric power, the D.C. Circuit Court of Appeals held that the FPC erred in dismissing the petitioners' complaint, and remanded the case to the agency for further proceedings.¹ Both the FPC and the plaintiffs have filed petitions for rehearing en banc. The agency continues to deny that it has any jurisdiction over steam plants, while the plaintiffs assert that the decision should apply to all steam plants, not merely those using surplus water. In addition, the plaintiffs seek clarification of the immediate effects of the decision on the six power plants at issue in the litigation.

Electric power plants fall into two major categories. Hydroelectric plants use falling water to turn turbines; thermal-electric plants, on the other hand, use fossil fuels or nuclear power to boil water. After passing through turbines, the steam is condensed, a process which requires immense amounts of water. Almost one-third of all the water used in this country, or about ten percent of the total daily runoff in the continental United States, is employed in cooling steam in thermal-electric plants. According to the authorities assembled by the court, the demand for electric power is expected to increase by 250 percent between 1970 and 1990, requiring the constrution of at least 255 thermal-electric plants of between 500,000 kilowatts and 2,000 megawatts capacity. By the year 2000, the volume of water required to cool the steam produced by these plants will be five times present levels.

Thermal-electric power plants, even at present levels, are a major source of both air and water pollution. According to the court, half of all sulfur oxides and a quarter of nitrogen oxides and particulate matter in the atmosphere are discharged by these facilities. The process of condensing the steam raises the temperature of the cooling water some ten to twenty degrees; if returned directly to the river or other water source, serious damage to aquatic ecosystems may result, while if evaporating towers are used to cool the waters first, a substantial portion is lost, especially in the arid West. According to the plaintiffs, the environmental impact statement prepared for the Four Corners power plant in northern New Mexico indicated that most of the water used for cooling would be lost in this way.

The Rivers and Harbors Act of 1899, the first important exercise of congressional power over natigable waterways, required applicants to get permission from Congress, the Secretary of the Army, and the Chief of Engineers to build dams, bridges, or similar facilities in navigable rivers or their tributaries. Two years later, a bill was passed giving authority to the Secretary of the Interior to issue permits for the construction of power plants and related facilities on public lands. Despite this law, power plants were regularly built, on sites approved by Congress, without such permits. (One striking exception to this pattern of unrestricted development was the veto by President Theodore Roosevelt, an environmentalist ahead of his time, of a bill to turn over Muscle Shoals, Alabama, to private interests.) In 1905, however, the Department of Agriculture acquired authority over the national forests, and began issuing 50-year permits for power plants and lines in forests under its jurisdiction. A year later, the General Dam Act was passed, requiring the approval of the Secretary of War and the Chief of Engineers of detailed plans of all dam projects in navigable waters. As amended in 1910, the statute authorized the imposition of fees reflecting the cost of maintaining the navigability of attected rivers. For the next ten years, conservationists in the House of Representatives and senatorial advocates of the power companies battled over whether the profits from private power plants on public lands should go to the companies or to the public.

The result of a decade of wrangling was the passage of the Federal Water Power Act of 1920, which created the Federal Power Commission and gave it authorityto license and regulate "dams, water conduits, reservoirs, power houses, transmission lines, or other project works necessary or convenient for the development and improvement of navigation and for the development, transmission, and utilization of power across, along, from, or in any of the stream or other bodies of water over which Congress has jurisdiction … or upon any part of the public lands and reservations of the United States (including the Territories), or for the purpose of utilizing the surplus water or water power from any Government dam …. [emphasis supplied]" At the time, this was supposed by the bill's proponents and by the newly formed FPC to refer to hydroelectric plants but not to steam plants. (Indeed, [4 ELR 10009] one of the sponsors' intentions was through license fees to increase the cost of producing hydroelectric power to levels comparable with the more expensive process of generating electricity in steam plants. Since hydroelectric power was always likely to be cheaper to make, equalization of costs was possible without granting the FPC licensing power over steam plants.) Congress apparently subscribed to this view, for it reemacted the legislation in 1935 without adding any clariying language to the pertinent passage.

Half a century's technological development has made the formula of the 1920 Act less than completely satisfactory. In 1965, in the Taum Sauk case,² the Supreme Court considered the applicability of the statute to "pumpedstorage" plants, which in periods of low demand for electricity use power (usually from steam plants) to pump water uphill into reservoirs. At times of high demand, the water is released to turn turbines and produce hydroelectric power. The facility in question, which transmitted electricity across state lines, was located on a non-navigable tributary of a navigable river and its operations did not affect the river's navigability. A 6-3 majority of the Court ruled that the Federal Power Act was not grounded solely on Congress' authority over navigable rivers, but also on its authority to regulate interstate commerce under the Commerce Clause; the plant therefore came within the statute, and a license was required. The Court rejected the respondent power company's contention that it was illogical for the Act to apply to hydroelectric plants on non-navigable waters but not to steam plants on navigable waters. The answer, said the majority, lay in Congress' concern, central to the meaning of the Act, that plants generating electricity by water power should be regulated. The dissenting Justices were not convinced that a valid distinction could be drawn between steam plants and pumped-storage plants, and would accordingly have exempted both types of facility from the reach of the Act. Justice Goldberg wrote that the result of the majority's decision was an anomalous situation unjustifiable in terms of the Act's legislative history, which indicated Congress' intent to require licensing only of hydroelectric plants affecting the navigability of navigable rivers. All nine Justices were therefore in agreement that steam plants were not subject to FPC regulation.

The petitioners in Chemahuevi were accordingly entering perilous waters, of dubious navigability, when in September, 1971, they filed a complaint and petition requesting the FPC to compel ten utility companies to obtain licenses for six coal-fired steam plants in operation or under construction along the Colorado River and its tributaries. Even before the deadline for the utilities to reply, the FPC dismissed the suit sua sponte for lack of jurisdiction.³ An application for rehearing was denied, and the petitioners sought review in the U.S. Court of Appeals for the D.C. Circuit.

The petitioners' first argument, that steam plants were "other project works" within the meaning of § 4(e), was rejected by the court, which found the legislative history dispositive of the issue. Although the petitioners argued that the Supreme Court's references to the question in Taum Sauk were obiter dicta, enunciated in a non-adversary context, the court was clearly impressed by the unanimity of the nine justices on the question.

The court found more appealing, though ultimately unpersuasive, the contention that technological development had so altered the power industry that jurisdiction over steam plants had become "necessary and proper" to the FPC's administration of the Federal Power Act. It noted that unlike the Federal Communications Commission, which is given broad authority over the entire field of television broadcasting, the FPC's jurisdiction is much more specifically defined. The original title of the Federal Power Act was, the court pointed out, the Federal Water Power Act, and although at the time it was passed most of the electric power generated in the nation came from steam plants, such plants had deliberately not been included in the Act's coverage. It could not therefore be contended that the steam plant was an unanticipated innovation, now to be brought under the Act by judicial construction. The court recognized that the different treatment of the two types of plants was "somewhat anomalous", but it could not rewrite the statute against the clear intent of Congress.

The court turned next to the portion of § 4(e) that authorized the FPC to issue licenses "for the purpose of utilizing the surplus water or waters from any Government dam." According to the petitioners, two of the six plants in question were designed to draw colling water from waters impounded by Government dams, while the other four, located downstream from Government dams, were dependent for their operations on the flow allowed to pass through the sluice gates upstream. The petitioners pointed to the FPC's own definition of "surplus water" in an earlier case: "stored water … over and above that needed for irrigation, … which would otherwise flow unused down the main channel of the stream … It … appears immaterial to the Commission's licensing authority under the 'surplus water' clause of section 4(e), whether hydroelectric developments utilizing the surplus water from a Government dam are constructed at, or in the immediate vicinity, or several miles downstream from the Government dam." The FPC maintained that the exemption of steam plants was absolute; as the Act applied only to hydroelectric plants, the "surplus water" provision could only refer to water power projects. The court rejected [4 ELR 10010] this view, noting that in the language of the act, the "project works" and "surplus water" clauses were separate and unrelated: "what little extrinsic assistance we have been able to piece together, however, tends to show that the language of the "surplus water" clause does indeed mean what it says." The "little extrinsic assistance" was found in a series of cases beginning in 1891 with Kaukauna Water Power Co. v. Green Bay and Mississippi Canal Co.,⁴ in which the Supreme Court ruled that a state could reserve for its own disposition water power from a dam built by the state to improve navigation. Subsequent cases confirmed the right of a grantee of the United States to sell surplus water power from a government dam without compensation to riparian owners; condemnation of land for purposes including the sale of surplus water power from a projected dam was held to be a "taking for public purposes." Several early statutes authorizing construction of reclamation works, including an amended Reclamation Act in 1906, permitted the government to lease surplus power. By the time of the 1920 Federal Water Power Act, therefore, the concept of surplus water power, as a resource to be leased by the government for the maximum public benefit, was familiar. The court nated that only three months before the Act was passed, Congress amended the Reclamation Act to allow the Secretary of the Interior to sell water from irrigation projects for purposes other than irrigation; the inference arises, accordingly, that the power over "surplus water" conferred on the FPC was designed to provide it with authority over power from federal waters comparable to that given the Secretary of the Interior over power from reclamation projects. The court concluded that the FPC has jurisdiction to license the utilization of surplus water by steam plants, and remanded the case to the Commission for a determination of whether the plants involved in the instant case did in fact, as the petitioners alleged, use surplus water from government dams.

The decision created some consternation at the FPC, which promptly filed a petition for rehearing en banc. The petition included a letter from the Solicitor of the Department of the Interior strongly supporting the FPC's position. The FPC and Interior argue that with respect to the six plants at issue in the case there is, in the first place, no "surplus water", and that the Secretary of the Interior has, moreover, exclusive authorization from Congress to dispose of water from these and all other reclamation projects for non-irrigation purposes. The agencies argue further that each of the projects is governed by a specific statute providing that water is to be made available for commercial use only pursuant to a contract with the Secretary of the Interior. This extensive grant of authority to Interior, they argue, precludes the FPC from having jurisdiction as well. The FPC also points out that some 193 power plants, one-sixth of the nation's total, will be added to its jurisdiction if the decision is upheld, thereby adding greatly to its administrative burdens. The FPC considers itself already heavily burdened by its impact statement preparation duties.⁵

Environmental lawyers, on the other hand, were understandably elated. The note that the FPC has in the past been recalcitrant in meeting the requirements of NEPA, but that its obstinacy has led to court cases — notably Greene County and Scenic Hudson⁷ — which now clearly demarcate the agency's NEPA responsibilities. Many of these plants use strip-mined coal, while others use nuclear power. Thus the FPC is likely to be the target of suit by opponents of strip mining and nuclear power plant construction, as well as by residents of attected downstream areas. Lastly, the decision underscores the necessity of reexamining the fragmented governmental jurisdiction over power plants, to determine whether consolidating authority in a single agency, responsible in court for its actions, would improve decision-making in this critically important area.

1. Chemehuevi Tribe of Indians v. Federal Power Commission, 4 ELR 20011 (D.C. Cir. Nov. 9, 1973).

2. Federal Power Commission v. Union Electric Co., 381 U.S. 90 (1965).

3. Chemehuevi Tribe of Indians v. Arizona Public Service Co., 1 ELR 30049 (FPC Docket No. E-7664, Nov. 4, 1971).

4. 142 U.S. 254 (1891).

5. The Supreme Court heard oral argument in December, 1973, in New England Power v. FPC. At issue is the legality of the FPC's attempt to recover the full cost of running the agency through "user fees." If the FPC is upheld, the full expense of preparing impact statements can be passed on to the applicant. The agency could therefore hire whatever staff was necessary to prepare impactstatements, knowing that the applicants, not the Treasury, would be bearing the expense. See Comments, The Independent Offices Appropriations Act of 1952: Who Should Pay for Preparing the Impact Statement?, 3 ELR 10059 (June, 1973); Who Should Pay for the Impact Statement: More on the Independent Offices Appropriations Act of 1952, 3 ELR 10086 (July, 1973).

7. Scenic Hudson Preservation Conference v. Federal Power Commission, 1 ELR 20496 (2d Cir. 1971).