5 ELR 20708 | Environmental Law Reporter | copyright © 1975 | All rights reserved

Arizona Power Pooling Association v. Morton

Nos. 74-1167; 74-1168; 74-1173 (9th Cir. September 24, 1975)

Plaintiff, a group of consumer-owned utilities, brought suit to gain the right to make a preferential bid, under the 1939 federal reclamation law, for federally-owned thermal electric power produced under the Colorado River Basin Act. The court of appeals reverses the district court's grant of summary judgment to defendants. The preference clause in the reclamation law clearly extends to federal sales of thermal as well as hydroelectric power, and surplus power includes "interim power," i.e., power available only pending completion of portions of the Central Arizona Project. By passing subsequent appropriations acts, Congress cannot be deemed to have ratified the Secretary of Interior's improper sale of the power in question to non-preference customers, for Congress was never informed that plaintiff and other potential preference customers had unsuccessfully sought to bid for the power. The Secretary's decision is not "committed to agency discretion" so as to be immune from judicial review under the Administrative Procedure Act. Although concededly unbounded in many respects, the Secretary's discretion is circumscribed by the mandatory language of the preference provision. The case is remanded with instructions to the district court to determine whether the Secretary abused his discretion in deciding not to offer this interim power to plaintiff.

Counsel for Plaintiff-Appellant
C. Emerson Duncan, II
Duncan, Allen & Mitchell
1775 K Street, N.W.
Washington, D.C. 20006

Michael A. Curtis
Meyers & Curtis
3003 N. Central Ave., Suite 1901
Phoenix, Ariz. 85012

James P. Bartlett
830 North First Ave.
Phoenix, Ariz. 85003

Counsel for Intervenor City of Bountiful, Utah
George K. Fadel
170 West Fourth Street
Bountiful, Utah 84010

Counsel for Defendants-Appellees
Henry Bourguignon
Department of Justice
Washington, D.C. 20530

William C. Smitherman, U.S. Attorney
5000 Federal Building
Phoenix, Ariz. 85025

Tuttle, J. for himself, Koelsch & Browning, JJ.

[5 ELR 20708]

Tuttle,* J.:

This is an appeal from an order of the district court granting the government's motion for summary judgment and dismissing with prejudice an action which sought for the plaintiff's a preference right to bid for federally owned electric power. Appellant,1 a non-profit Arizona corporation comprised of consumer-owned utilities (the "Association"),2 brought suit in federal district court3 to compel the Secretary of the Interior to negotiate with it for the purchase and sale of certain thermal power to which the government is entitled by virtue of its participation in the construction and operation of a thermal power plant in Arizona constituting part of the Colorado River Basin Project. The Association alleged that the Secretary had violated a duty imposed on him by federal reclamation laws requiring preference to be given to entities such as itself in the sale of federally-owned electric power. Also named as defendants were those private investor-owned utility companies with which the Secretary had contracted to sell the power at issue. The district court granted summary judgment for defendants, holding that the Secretary's decision with respect to which entities were to be allowed an opportunity to purchase thermal power was not judicially reviewable, and that Congress had approved any possible violation of the preference provision by accepting the Secretary's plan for the Central Arizona Project as submitted, and appropriating funds for its implementation.

[5 ELR 20709]

We are unable to agree with the District court's decision, and consequently must reverse. First, we hold that the preference clause does apply to the sales of interim thermal power at issue, and that merely by appropriating funds for the Central Arizona Project, Congress cannot be deemed to have authorized any contravention of the preference clause so as to render the Secretary's actions unreviewable. Furthermore, we find that the Secretary's decision regarding which entities would be allowed to purchase interim power from the project was not one "committed to agency discretion" within the meaning of the Administrative Procedure Act, and was therefore judicially reviewable.


The Colorado River Basin Project Act, 43 U.S.C. §§ 1501 et seq., was passed by Congress in 1968 to develop the water resources of the Colorado River Basin. One of the Act's central components was the Central Arizona Project (CAP), 43 U.S.C. §§ 1521-28, which was designed to furnish irrigation and municipal water to water-deficient areas of Arizona and western New Mexico. To accomplish the objective of obtaining energy to lift water from the Colorado River to the level needed for irrigation, § 1523(a) authorized and directed the Secretary of the Interior:

"to continue to a conclusion appropriate engineering and economic studies and to recommend the most feasible plan for the construction and operation of hydroelectric generating and transmission facilities, the purchase of electrical energy, the purchase of entitlement to electrical plant capacity, or any combination thereof, including participation, operation, or construction by non-federal entities, for the purpose of supplying the power requirements of the Central Arizona Project and augmenting the Lower Colorado River Basin Development Fund: Provided, That nothing in this section or in this Act contained shall be construed to authorize the study or construction of any dams on the main stream of the Colorado River between Hoover Dam and Glen Canyon Dam." 43 U.S.C. § 1523(a).

The final proviso in this section was a result of conservationist opposition to additional dam sites along the river, and its inclusion virtunally precluded the possibility of obtaining the needed energy from hydroelectric sources. Section 1523(b) was consequently added to permit the Secretary to obtain energy through agreements pertaining to thermal power sources, and to dispose of such energy when it was not needed for the CAP:

"(b) If included as a part of the recommended plan, the Secretary may enter into agreements with non-federal interests proposing to construct thermal generating powerplants whereby the United States shall acquire the right to such portions of their capacity, including delivery of power and energy over appurtenant transmission facilities to mutually agreed upon delivery points, as he determines is required in connection with the operation of the Central Arizona Project. When not required for the Central Arizona Project, the power and energy acquired by such agreements may be disposed of intermittently by the Secretary for other purposes at such prices as he may determine, including its marketing in conjunction with the sale of power and energy from Federal powerplants in the Colorado River system so as to produce the greates practicable amount of power and energy that can be sold at firm power and energy rates . . . ." 43 U.S.C. § 1523(b).

Pursuant to this statutory authorization, the Secretary entered into an agreement with certain public and private interests which were building a thermal generating power plant near Page, Arizona, known as the Navajo plant. The non-federal participants were the Salt River Project, the Los Angeles Department of Water and Power, the Arizona Public Service Company, Nevada Power Company, and Tucson Gas & Electric Company. By virtue of its participation in the construction of the Navajo project, the Bureau of Reclamation was to obtain an entitlement of 24.3% (561 megawatts) of the plant's power output, which would eventually be utilized for CAP purposes.

The Navajo plant, however, was scheduled to begin operation around 1974, whereas the CAP would not be operational, and hence would have no need of any of the Navajo power, until nearly 1980. Consequently, there existed a considerable amount of "interim power" available from the Navajo project which the Secretary was authorized to market under § 1523(b).

In seeking to dispose of this interim power, it is undisputed that the Secretary refused to offer the Association the opportunity to become a purchaser, and contracted instead will those public and private interests involved in the construction of the thermal plant, together with Southern California Edison, another private investor-owned utility company.4 The Secretary's choice of entities to which he offered the opportunity to purchase power was made despite a general provision in the Colorado River Basin Project Act, 43 U.S.C. § 1554, which states that "[e]xcept as otherwise provided in this Act, in constructing, operating, and maintaining the units of the projects herein and hereafter authorized, the Secretary shall be governed by the Federal reclamation laws [citations omitted] to which laws this Act shall be deemed a supplement." The Federal Reclamation Project Act of 1939 contains a preference clause applying to any sale of electric power or lease of power privileges by the United States:

"Provided further, That in said sales or leases preference shall be given to municipalities and other public corporations or agencies; and also to cooperatives and other nonprofit organizations financed in whole or in part by loans made pursuant to the Rural Electrification Act of 1936 . . . . No contract relating to municipal water supply or miscellaneous purposes or to electric power or power privileges shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes." 43 U.S.C. § 485h(c).

It is upon this provision and its incorporation into the Colorado River Basin Project Act by virtue of 43 U.S.C. § 1554 that appellant and intervenors, all of whom qualify as preference customers, base their claim that the Secretary violated his statutory duty by contracting to sell the interim power to the privately-owned utility companies without first offering the Association the opportunity to purchase it.

On September 30, 1969, pursuant to statutory requirement,5 the Secretary submitted his recommended plan for obtaining energy for the CAP to Congress in a letter which outlined in detail the contractual arrangements involved in actually securing the thermal power necessary for the CAP. The only reference made to the existence and disposition of interim power, however, was a statement that Southern California Edison Company would be involved "as a purchaser of a major portion of United States entitlement to generation and transmission prior to need for Central Arizona Project pumping."6 Congress approved the Secretary's plan as submitted, and has since continued to appropriate funds for the development of the CAP.7

In moving for summary judgment, defendants below made three arguments: first, that it was clear from the legislative history of the Colorado River Basin Project Act, as well as from the history of federal preference policy, the Congress never intended the preference clause to apply to the government's entitlement to thermal energy from the Navajo project; second, that even if the preference clause were found to be applicable, the development by the Secretary of the most feasible plan for securing and disposing of the power at issue was a decision "committed to agency discretion" and not judicially reviewable under the Administrative [5 ELR 20710] Procedure Act, 5 U.S.C. §§ 500 et seq.; and finally, that congressional approval of the plan as submitted had the force of law, thereby rendering judicial review unavailable. On the basis of defendants' second and third arguments, the district court granted their motion for summary judgment, holding that "Congress clearly committed the determination of the most feasible plan to the Secretary's discretion subject to congressional approval which was given repeatedly."

Upon careful consideration of each of the issues involved, however, it appears that the district court erred in its decision, and for the reasons stated below we hereby reverse and remand the case for further proceedings.


Both of the grounds upon which the district court granted summary judgment for the defendants were based upon an assumption, but not upon an actual finding, that the preference clause applied to governmental sales of thermally-generated electrict power. This threshold issue of the preference provision's applicability, while argued by both sides below, was never expressly decided by the district court. However, it presents only an issue of law which, for the sake of judicial economy, we dispose of on this appeal.

Defendants below made two main arguments aaginst the applicability of the preference clause to the sales of interim power at issue here: first, that the legislative history of the Colorado River Basin Project Act clearly showed that Congress never intended for the preference provision to apply to sales of federally-owned thermal electric power, since the preference clause had never before been applied to sales of anything other than hydroelectric power. Second, defendants below argued that the phrase "surplus power" as used in the Act meant power in excess of the government's needs for the Central Arizona Project, once the CAP plant commenced operations around 1980, but did not include in its definition power to which the government was entitled in the interim between completion of the thermal power plant and the time such power would be needed for irrigation purposes. Both of these arguments seem somewhat contrived in light of the clear language of the Act, and consequently we reject them. The preference clause has previously been applicable only in the context of sales of federally-owned hydroelectric power because prior to the Colorado River Basin Project Act the government had never been authorized to obtain rights to thermally-generated electric power. In drafting the CAP portion of the Act, however, Congress authorized federal participation in thermal electric projects, and clearly made all sales of any excess (including interim) power from such a project subject to federal reclamation laws, including the preference clause. To read the statute otherwise would be to do violence to its plain meaning.


In its opinion, the district court relied heavily on the argument advanced by defendants below that by virtue of its annual appropriations for the Central Arizona Project Congress effectively "approved" the disposition of interim power to non-preference customers and thus sanctioned any possible violation of the preference clause, rendering the issue unreviewable by the courts. Cf. Environmental Defense Fund v. Corps of Engineers, 492 F.2d 1123, 1145 (5 Cir. 1974). We cannot agree with this conclusion. Although it is undisputed that in passing the appropriation acts, Congress had before it various committee reports listing the six public and private entities which were to be involved as purchasers of interim power from the Navajo project, this fact in and of itself does not justify the inference of congressional approval of purchase negotiations that were allegedly conducted in violation of the preference clause. It is not the ultimate sale of the interim power to private interests which is alleged to be a violation of the preference clause, but rather the undisputed refusal of the federal appellees to offer appellant the opportunity to purchase the power prior to offering it to the private utility companies named as defendants below. There is nothing in the record to indicate that Congress was ever informed during any of the appropriation hearings, or by any of the reports submitted to it,8 that the Association and other potential preference customers had sought, and had been refused, the chance to participate in the purchase of the government's entitlement to interim thermal power from the Navajo project.

Knowledge of the precise course of action alleged to have been acquiesced in is an essential prerequisite to a finding of ratification, cf. United States v. Beebe, 180 U.S. 343, 354 (1901); United States v. Georgia-Pacific Company, 421 F.2d 92, 102 n.8 (9 Cir. 1970), and the record before us does not support a finding of congressional knowledge of the course of sales negotiations for the interim Navajo project power sufficient to equate passage of the appropriations acts with ratification of the Secretary's actions in conducting those negotiations. It is thus clear that the district court erred in holding that by appropriating funds for the CAP Congress ratified any possible violation of the preference clause committed by the Secretary in the power sales negotiations and barred judicial review of his decision.


Appellees also advanced the argument, which was accepted by the district court, that, even assuming the applicability of the preference clause, in devising the "most feasible plan" for obtaining electric power for the Central Arizona Project the Secretary had discretion so wide-ranging as to be free from judicial scrutiny under the Administrative Procedure Act, 5 U.S.C. § 701. The government sales of Navajo power, contended the appellees, were an integral part of this "most feasible plan" and hence governed only the Secretary's judgment. For support they point to 43 U.S.C. § 1523(a) instructing the Secretary to devise the "most feasible plan" and to the language of the preference clause itself, which states:

". . . in said sales or leases preference shall be given to municipalities and other public corporations or agencies. . . . No contract relating to . . . electric power or power privileges shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes." 43 U.S.C. § 485h(c) (emphasis added).

This language, appellees contend, makes the availability of the preference dependent upon a discretionary determination by the Secretary as to the effect on project efficiency — a judgment so discretionary, they argue, as not to be subject to judicial review under the Administrative Procedure Act.

Careful examination of the statutes at issue and the case law in this area compels us to disagree with this argument.

The Administrative Procedure Act grants a right of judicial review to any person adversely affected or injured by agency action, 5 U.S.C. § 702, and provided that the judicial review provisions are applicable except in two particular situations: where a statute itself expressly precludes judicial review, or where "agency action is committed to agency discretion by law." 5 U.S.C. § 701(a).Since none of the statutes involved here expressly prohibits judicial review of the agency action at issue, the crucial question becomes whether the Secretary's decision with respect to the interim power sale negotiations was "committed to agency discretion by law" within the meaning of § 701(a)(2). In undertaking this inquiry was must bear in mind that judicial reviewability of administrative action is the rule, and nonreviewability an exception which must be demonstrated, and which should result only from a showing of "clear and convincing evidence" of a legislative intent to restrict judicial review. Barlow v. Collins, 397 U.S. 159, 166 (1969); Abbott Laboratories v. Gardner, 387 U.S. 136, 141 (1967). As stated by the Supreme Court in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971), the "committed [5 ELR 20711] to agency discretion" exception is a very narrow one9 which is applicable only in "those rare instances where statutes are drawn in such broad terms that in a given case there is no law to apply." 401 U.S. at 410.

The language of 43 U.S.C. §§ 1523(a) and (b) authorizing the Secretary to devise "the most feasible plan" for obtaining pumping power for the Central Arizona Project would seem to endow him with almost unlimited authority in orchestrating all phases of the project. By inserting § 1554 into the text of the Colorado River Basin Project Act, however, Congress circumscribed that discretion in at least one area by making his actions subject to the federal reclamation laws. Since we have determined (see Part II supra) that the preference clause is applicable to the power sales at issue here, we must examine its language to determine what degree of freedom the Secretary has in any given situation in deciding whether it must be applied.

The text of the preference provision is couched in mandatory terms, stating that "preference shall be given" (emphasis added) to certain public entities in governmental sales or leases of electric power or power privileges. The section, however, concludes with a proviso that no sales contracts shall be made unless, "in the judgment of the Secretary", they will not impair the efficiency of the project for irrigation purposes. Reading these two sentences together, it is clear that in marketing the interim power at issue the Secretary does not have unfettered discretion as argued by defendants below. The preference clause clearly calls for the Secretary to defer to the stated congressional objective of offering the government's excess power allotment to public entities first, subject only to considerations of overall project efficiency with respect to the ultimate goals of irrigation. The Secretary is thus given a very specific directive and a prohibition against making any contract, regardless of the public or private status of the other contracting entity, which would "impair project efficiency". Clearly he is not given total and absolute discretion as to whether or not to apply the preference clause in any given situation, regardless of the circumstances. Thus, given the preference clause's applicability to these interim power sales, there is "law to apply" clearly evident on the face of the statute itself, and hence the exception appellees seek to invoke is unavailable.Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410 (1972); East Oakland-Fruitvale Planning Council v. Rumsfeld, 471 F.2d 524, 533-36 (9th Cir. 1972). By considering the complaint on the grounds discussed it is clear that the trial court did not review the legality and propriety of the Secretary's decision not to offer appellant the opportunity to purchase the interim power, under the guidelines and directives of congressional preference for "public" purchases as limited by considerations of possible impairment of project efficiency as set out in § 485h(c). Overton Park, supra, at 415-417. For example, defendants-appellees contend that as part of the "most feasible plan" the Secretary determined that interim power should be sold only to those with an adequate back-up generating capacity and with an alternative means of transmitting energy. They argue that these requirements were necessary to avoid the possibility of cascading outages and equipment damage. On remand the district court will be required determine whether the Secretary abused the limitations on his discretion by deciding that, because of these considerations, a disposition of the interim power to appellate and other excluded preference customers would have impaired the efficiency of the Central Arizona Project for irrigation purposes.

For the reasons stated above, the judgment of the district court is reversed and the case remanded for further proceedings not inconsistent with this opinion.

* Senior Circuit Judge Fifth Circuit Court of Appeals, sitting by designation.

1. The district court granted leave to intervene as plaintiffs to the Arizona Power Authority, a state agency, Intermountain Consumer Power Association, a Utah corporation, and Bountiful, Utah, a municipal corporation. In addition, amici curiae briefs have been filed on appellant's and intervenors' behalf by Anaheim, Riverside, and Banning, California, municipalities which are currently involved in similar litigation in district court in the District of Columbia.

2. Appellant's members are the Arizona Electric Power Cooperative; Electrical District Number Two, Pinal County, Arizona; and the City of Mesa, Arizona.

3. The suit was originally filed in the District of Columbia but was later transferred to federal district court in Arizona.

4. The Secretary contracted for disposition of its entitlement of 561 megawatts of interim power as follows:

Salt River Project110 megawatts
City of Los Angeles75 megawatts
Arizona Public Service Company17 megawatts
Tucson Gas & Electric9 megawatts
Nevada Power Company14 megawatts
Southern California Edison336 megawatts
561 megawatts
The last four entities do not qualify as preference customers under federal reclamation laws.

5. 43 U.S.C. § 1523(c).

6. Letter from James R. Smith, Assistant Secretary of the Interior, to the President of the Senate, September 30, 1969.

7. Act of December 11, 1969, P.L. 91-144, 83 Stat. 330; Act of October 7, 1970, P.L. 91-439, 84 Stat. 897.

8. Two sentences in the Secretary's 1969 report to Congress mentioned that "other parties" and the City of Anaheim, California and the Arizona Power Authority had an interest, but the report failed to specify the nature of that interest or that preference customers had been denied the right to bid. Letter from James R. Smith, Assistant Secretary of the Interior, supra note 6.

9. The scope of this exception has been the subject of wide-ranging commentary and dispute. See, e.g., Berger, Administrative Arbitrariness: A Synthesis, 78 Yale L.J. 965 (1969); Safestein, Nonreviewability: A Functional Analysis of "Committed to Agency Discretion", 82 Harv. L. Rev. 367 (1968); Davis, Administrative Arbitrariness is Not Always Reviewable, 51 Minn.L.Rev. 643 (1967).

5 ELR 20708 | Environmental Law Reporter | copyright © 1975 | All rights reserved