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10/11/83 Friends of the River and v. Federal Energy Regulatory

October 11, 1983

FRIENDS OF THE RIVER AND DALE MEYER, PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT, NORTHERN CALIFORNIA POWER AGENCY, CALAVERAS COUNTY WATER



UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

DISTRICT, INTERVENORS 1983.CDC.265

Petition for Review of an Order of the Federal Energy Regulatory Commission.

APPELLATE PANEL:

Ginsburg and Scalia, Circuit Judges, and Bazelon, Senior Circuit Judge. Opinion for the Court filed by Circuit Judge Ginsburg.* Dissenting opinion filed by Senior Circuit Judge Bazelon.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE GINSBURG

The authority of the Federal Energy Regulatory Commission (FERC or Commission1) to license the construction of a hydroelectric plant on a body of water subject to federal jurisdiction is limited by two federal statutes: the Federal Power Act , 16 U.S.C. §§ 791a-823a (1976 & Supp. V 1981), and the National Environmental Policy Act , 42 U.S.C. §§ 4321-4361 (1976). In this petition for review, Friends of the River and Dale Meyer (FOR or petitioners) challenge as inconsonant with both statutes FERC's license to the Calaveras County Water District to operate a hydroelectric plant on the North Fork Stanislaus River in California. We find that in one respect FERC did not attend with due care to NEPA's procedural requirements. Because we conclude that the Commission's decision is in other respects unassailable, and because a remand to cure the procedural lapse would serve no sensible purpose, we affirm the Commission's action. I. BACKGROUND

In November 1978, CCWD, a California county water district, applied to FERC for a license to construct a hydroelectric plant (the project or the Calaveras project) on the North Fork Stanislaus River in Alpine, Tuolumne, and Calaveras Counties, California.2 The project, as described in CCWD's application, involves the construction of a series of dams, the enlargement of an existing reservoir, and the construction of two new powerhouses. As planned, the project will produce an average annual energy yield of over 500 gigawatt-hours (Gwh), equivalent to the energy produced by roughly one million barrels of oil, and have a total power capacity of about 200 megawatts .3

The principal ecological effect of the plant will stem from the enlargement of the Spicer River Reservoir, which at its maximum elevation will inundate approximately 1,780 acres of forest, meadow, and riparian habitat. While the reservoir will be moderate in size compared to nearby water projects, the loss of Gabbot Meadow, part of the inundated area, is likely to have a negative effect on deer and other wildlife populations. In its total dimension, the project will mean the loss of about 2,500 acres of wildlife habitat.

The power generated by the project is to be sold to the Northern California Power Agency .4 NCPA is a consortium of twelve small utilities, each responsible for the retail distribution of electrical power within its service area. At the time of the 1978 application, the NCPA utilities did not generate any of the power they supplied to their customers; instead, they relied entirely on power purchased from Pacific Gas and Electric Company , the largest electrical utility in California, and from the Central Valley Project , also located in California, of the federal Western Area Power Administration. NCPA, and a number of other utilities, including CVP, are bundled together with PG & E to compose a " PG & E area" for purposes of statewide planning by the California Energy Commission . Electricity Tomorrow 49. NCPA's relationship with PG & E, however, is purely contractual. PG & E charter does not place it under a legal obligation to supply power to NCPA or to customers within NCPA's service area. Rather, PG & E's priority charge is to supply customers within its own service area as defined by its charter, an area distinct from NCPA's.

NCPA intervened in the licensing proceedings before FERC immediately after CCWD filed the 1978 application. For NCPA, the project represents an important step towards energy self-sufficiency in the years to come. For CCWD, the project means an increase in the firm yield of water on the North Fork Stanislaus River; in addition, revenue generated by the project can be applied to the cost of the water CCWD provides, and can be used, in the future, to finance additional water projects in the district.

Litigation aimed at stopping the project began soon after CCWD filed the 1978 license application, when FOR filed suit in state court claiming that the environmental impact report filed by CCWD pursuant to the California Environmental Quality Act did not satisfy the requirements of that Act. In 1979, judgment was entered in California Superior Court rejecting all claims made by environmental plaintiffs.5

FERC commenced its investigation of the desirability of the Calaveras project in 1978. In late 1979, it issued a draft environmental impact statement setting forth the environmental impacts of the project. It received extensive comments on the draft EIS from federal and state agencies as well as private parties, and issued a revised, final EIS in 1980. That document accorded only summary attention to the concern -- raised before the agency -- whether, in lieu of the project, NCPA's power needs could be met by continued reliance on purchases from other utilities. The Commission did state in the EIS that power purchase contracts between NCPA members and PG & E "can be terminated on 6 to 24 months notice and cannot be considered as firm resources," J.A. 187; it further stated that resort to other sources of energy, including purchased power, in preference to licensing the hydroelectric Calaveras project, "would consume nonrenewable fossil-fuel resources." J.A. 328. FERC took testimony commenting on the final EIS at public hearings in Washington, D.C. and Angels Camp, California.

In February 1982, FERC issued an order and opinion granting CCWD a license to construct the Calaveras plant. It denied FOR's petition for rehearing in an opinion issued in July 1982. The July order explained more cogently why the Commission rejected prospects for further reliance on purchased power as a ground for refusing the license. FERC observed that " PG & E's [own] ability to meet load in the future is uncertain," J.A. 960, and cited studies, in Electricity Tomorrow and a later (March 1981) CEC staff report, supporting that conclusion.

Petitioning for our review of the Commission's grant of the license, FOR contends that the Commission has neglected its duties both under the FPA and under NEPA; we consider separately below FOR's challenges under each statute. II. FPA CLAIMS

Section 10(a) of the Federal Power Act provides that the Commission may issue a license for a hydroelectric plant only where

the project . . . shall be such as in the judgment of the Commission will be best adapted to a comprehensive plan for improving or developing a waterway or waterways for the use or benefit of interstate or foreign commerce, for the improvement and utilization of waterpower development, and for other beneficial public uses, including recreational purposes.

Federal Power Act, 10(a), 16 U.S.C. § 803(a) (1976). Pursuant to this provision, the Commission has a multifaceted obligation to investigate, before approving any license, whether construction of the project is in the public interest. Udall v. FPC, 387 U.S. 428, 87 S. Ct. 1712, 18 L. Ed. 2d 869 (1967). Once the Commission makes its investigation, however, its findings may be upset on judicial review only if they are not supported by substantial evidence. 16 U.S.C. § 825 l (b) (1976); see Scenic Hudson Preservation Conference v. FPC, 453 F.2d 463, 467-68 (2d Cir. 1971) (Udall did not overturn the traditional "substantial evidence" review standard), cert. denied, 407 U.S. 926, 32 L. Ed. 2d 813, 92 S. Ct. 2453 (1972).

FOR asserts the inadequacy of FERC's decisionmaking in multiple respects. Petitioners claim that need for the project has not been demonstrated; FERC, they contend, has overprojected demand for power in NCPA's service area, and underprojected supply. Moreover, petitioners charge that FERC improperly rejected reasonable alternatives, including purchase of power from other utilities, and alternate means of constructing the project. FOR further argues that FERC misconceived the overall negative environmental effects of the project, and misjudged what is in California's "public interest," by overlooking state policy that attaches a low priority to new hydroelectric projects.

Our review securely indicates that only one of FOR's claims warrants discussion -- the claim that the project is unnecessary because NCPA can continue to purchase all the power it needs. FOR's other contentions are insubstantial. The administrative record fully supports FERC's appraisal of projected NCPA demand for power,6 and the Commission's evaluation of future NCPA generating capacity.7 Substantial evidence in the record also supports FERC's rejection of the Utica-Union, Low Spicer Storage Complex alternative to building the CCWD project at its present location. Equally adequate evidence backs up FERC's conclusion that the environmental impact mitigation measures negotiated by CCWD, the California Department of Fish and Game, and the U.S. Forest Service are reasonable and attainable. California's announced policy concededly ranks large hydroelectric projects low among possible new power plant development, but ample evidence sustains FERC's independent determination, as a federal agency, that the licensed hydroelectric plant is an appropriate development.8

FOR urges most strenuously that FERC should have declared the project unnecessary because NCPA's power needs can be met reliably through continued purchases from PG & E, NCPA's traditional source of electric power. FERC responded that

PG & E's ability to meet load in the future is uncertain. Under adverse hydrological conditions, PG & E's reserve margin in 1985 could be as little as 3 percent. Moreover, . . . by 1992 the PG & E system will require, in addition to the [Calaveras] and another proposed hydroelectric project, an additional 493 MW of new capacity to be able to provide reliable electric service.

Order Denying Rehearing, J.A. 959, 960. FERC has also noted that the NCPA-PG & E purchase contracts are terminable by PG & E on six to twenty-four months notice, and that PG & E's priority responsibility is to customers within its own service area. J.A. 187, 411, 443. These findings, FERC argues, more than adequately justify its conclusion that NCPA cannot safely rely on PG & E power, and should be permitted to develop the capacity to stand on its own feet in the years to come.

We examine in turn FOR's assertions that (1) substantial evidence does not underpin FERC's conclusion that PG & E's own resources will be insufficient to support NCPA's growing needs, and (2) even if PG & E'S resources, considered in isolation, are inadequate to support NCPA, FERC should have extended its examination to the energy resources of utilities beyond PG & E, resources that could be made available to PG & E "during emergency conditions." Brief for Environmental Petitioners at 20.

A. Extent of PG & E 's Own Resources

The most up-to-date set of energy forecasts in the agency record indicates that peak demand9 in the PG & E planning area will rise to 19,407 MW by 1992. Electricity Tomorrow 62. To meet a peak demand increase of this magnitude, PG & E will have to add 4,376 MW of capacity over and above what it now has. Id. Further, PG & E's current reserve margin is "well below the optimum," id. at 22; to bring its reserve margin up to a safe level, PG & E will have to add an additional 1,394 MW by 1992. Id. at 67. Finally, PG & E cannot securely rely on all the power it is receiving now; some of its generating plant is outmoded, and all of its long-term contracts for purchase of firm capacity from other utilities are due to expire in the 1980s. Even assuming renewal of two long-term contracts with Pacific Northwest utilities, PG & E will have to add 1,754 MW of capacity to make up for retirements and contract expirations. Id. at 67-68. In sum, based on forecasts in the record, PG & E, to stay safe, must add a minimum of 7,524 MW of capacity by 1992 -- a figure equivalent to about half of PG & E's current demand.

To meet its energy needs, PG & E has developed a comprehensive plan to build coal-fired, hydroelectric, and cogeneration plants. The plan is dominated by additions of nuclear power plants in the early 1980s and coal-fired capacity in later years. Electricity Tomorrow 328. It appears that PG & E -- and CEC -- have included the Calaveras project in their resource planning.10

Even including the Calaveras project in the estimation, however, PG & E faces a shortfall in capacity additions reasonably expected to be operating by 1992.11 Just how PG & E is to make up this shortfall is not clear. One CEC staff report asserts that additional efforts along lines such as conservation and further geothermal generation will be sufficient. J.A. 987-92. The extent of PG & E's future capacity needs, however, together with the utility's heavy reliance on nuclear power generation, may place PG & E in an uncomfortable position in the next few years. Electricity Tomorrow reports that "if Diablo Canyon [nuclear power plant] is not licensed and operated, the PG & E area may require assistance from other utilities if unscheduled very large power plant outages are experienced." Electricity Tomorrow 316. CEC studies further indicate that in a worst-case analysis, viewing the PG & E planning area as an isolated system, PG & E's reserve margin could drop as low as 2.7% by 1985, more than 10% below optimum levels. Id. at 317. While other utilities could come to PG & E's rescue in emergency conditions, the prospect remains that PG & E will end up in the next few years not as a seller of surplus energy but, to meet its own needs, as a purchaser of power from other systems with surplus supplies. See Electricity Today 331 ("The potential delay in obtaining the Diablo Canyon operating licenses has prompted PG & E to seek purchases of short-term capacity. . . ."). This state of affairs has persisted. See Power Shortage -- Or Sham?, NEWSWEEK, June 13, 1983, at 64 (" PG & E remains confident it can help fill its growing needs by purchasing power from other systems with surplus supplies.").

CEC's apparent inclusion of the Calaveras project in its resource planning indicates the vulnerability of FOR's assertions concerning the adequacy of PG & E's resources. FOR maintains that NCPA can rely on power from PG & E. FOR cites in support of its assertions, however, CEC studies that assume PG & E's reliance on power from NCPA. CEC has found, moreover, that even if Calaveras is built, PG & E, if it is to bolster its reserve margin, will still need extensive capacity additions. FOR can thus tenably argue only that, if the Calaveras project is not built, some other project somewhere else perhaps could be built to take up the slack. But this possibility hardly undercuts the substantial record support for FERC's finding that PG & E's resources do not obviate the need for power the Calaveras project will generate.

B. Purchases from Beyond PG & E

FOR next argues that even if the Commission acceptably analyzed PG & E's own resources, FERC did not go far enough. The Commission should have looked beyond California, FOR maintains; it should have extended its supply-demand analysis to the Pacific Northwest. FERC indicated that it regarded interconnections with utilities outside California as a speculative matter; it said in response to comments on the draft EIS:

An additional intertie with the Pacific Northwest would not provide the dependable capacity equivalent to the proposed project. The amount of power available from the Pacific Northwest depends on the magnitude of the power loads in the Pacific Northwest and the amount of water available for generation. At times, there is no power available for transfer from the Pacific Northwest, and, as future loads in that area increase, less power will be available to California.

J.A. 415. Concededly, FERC did not undertake detailed examination of resources beyond PG & E's. It did not attempt to estimate what PG & E might buy from Oregon, Washington, British Columbia, and Manitoba, and sell to NCPA. We conclude that FERC was not required to enlarge its inquiry as FOR proposed.

Regional power planning is difficult and uncertain; it becomes increasingly difficult and uncertain as its scope is extended in time and space.12 One scholar has characterized regional power planning as "a task that confronts a degree of uncertainty and risk without historical precedent."13 As to the Pacific Northwest, the same author stated: "The best one can do" in that region with current planning methods still entails "major risks" of faulty prediction.14

FERC initially analyzed projected supply and demand in NCPA's service area and found a need for new generating capacity. FOR pointed to the supply source next door, PG & E. FERC examined PG & E's projected reserve margin and found it low; PG & E, it is reasonably anticipated, will need new sources of power even on the assumption that CCWD's project is built. FOR contends FERC should have proceeded to the next door, a very large one, the Pacific Northwest.15 FERC's terse response is not surprising. No one, apparently, has made projections that would justify safe reliance on Northwest power. California itself subdivides the state into distinct "planning areas"; CEC has noted that one of the state's objectives is to meet demand while "not substantially increasing power purchases from utilities outside California." Electricity Tomorrow 354.16

We are in no position to require FERC, in the circumstances of this case, to survey power availability more broadly than it did. How far in time and space a power projection investigation ought to extend is a question involving practical considerations of feasibility and a balancing of costs against expected useful results. Resolving these issues requires technical expertise and is properly left to the informed discretion of the responsible federal agency. Cf. Kleppe v. Sierra Club, 427 U.S. 390, 412, 49 L. Ed. 2d 576, 96 S. Ct. 2718 (1976). It is impossible to say, on review of the record before us, that FERC failed to exercise its discretion intelligently.

Udall v. FPC, 387 U.S. 428, 87 S. Ct. 1712, 18 L. Ed. 2d 869 (1967), a lead decision in this area, does not counsel a different result. It involved a controversy between the Secretary of the Interior and the FPC. Interior initially took the position that a consortium of four private utilities should not be licensed to develop a hydroelectric project on the Snake River at the Idaho-Oregon border until means of protecting anadromous fish (principally salmon and steelhead) had been studied. Later, Interior added its view that the project should be constructed by the federal government, not by private utilities; further, Interior questioned the immediate need for the plant. The FPC nevertheless approved the utilities' proposal. The Court, per Justice Douglas, overturned that decision, and remanded the matter to the FPC.

The Court identified as the primary ground for remand the agency's failure to take evidence on whether development of the river basin should proceed under federal rather than private, state, or municipal auspices. Id. at 431-32. It observed that the issue of federal, as distinguished from private or municipal, control "[might] conceivably make a vast difference in the functioning of the vast river complex" in question. Id. at 435. "Since the cases [had to] be remanded to the Commission," the Court thought it appropriate to instruct the agency to consider as well the alternative of no development at all. Id. at 436.

In the wide-ranging discussion in the second part of the Udall v. FPC opinion, the Court conveyed this message: where a project may have major adverse environmental effects, the Commission should carefully consider the need for the project, in light of its multiple impacts on commerce, recreation, wilderness and wildlife preservation, before granting a license. A determination of need, the Court said, required more than affirmation that the project would be "beneficial to the licensee" combined with ascertainment that the region would "be able to use the additional power." Id. at 450.

The project proposed in Udall v. FPC risked "destroy[ing] the river as a waterway," yet the agency had not addressed "the desirability of [the river's] demise." Id. The Court declared that the Commission should have explored alternate sources of power supplies, and the regional and even national need for the recreational and commercial resources, including fish and other wildlife, threatened by the project in question. Id. at 440, 442, 444, 450.17 The public interest determination under section 10(a) of the Federal Power Act,18 in sum, should be overarching, the Court said; it should encompass the effects of the proposed project on navigation, water supply, recreation, and other public uses of a waterway, and not simply regional power demand.

In the case at hand, FERC's performance is hardly comparable to the FPC's in Udall v. FPC. The Commission did not restrict its inquiry to the benefits of the project to CCWD and NCPA. Nor did it stop at the region's demand for additional power. It took into account alternate sources of power within the region, and the interest in preserving the region's wilderness areas and wildlife. It cannot fairly be faulted, as the Court indicated the agency could in Udall v. FPC, for wholesale neglect of issues relevant to the public interest.

One portion of Justice Douglas' opinion in Udall v. FPC, it is true, broadly discusses the entire world's future supplies of power, and suggests that hydroelectric projects should be evaluated in light of the fact that "by the end of the century ' nuclear energy may account for about one-third of our total energy consumption. ' " Id. at 446-47 (quoting BROWN, THE NEXT HUNDRED YEARS 109 (1957)). But this part of the decision does not instruct the Commission on how far afield it should go in considering alternate power sources. The opinion quotes a long passage from Interior's petition to intervene in the FPC proceedings, in which Interior included a list of Northwest power resources inside and outside the utilities' service areas. 387 U.S. at 444-46. As far as one can tell from the opinion, however, the only alternate sources of power the Court noted as immediately relevant to the FPC's decision were projects physically located within the service area of the utilities the FPC had licensed. Id. at 448. All one can conclude from this less than crystalline part of Udall v. FPC is that the Commission must look beyond any single utility's or consortium of utilities' independent resources. FERC did that in this case.

We hold that the Commission did not abuse its discretion in declining to pursue an investigation into the amount of power PG & E might be able to purchase from Pacific Northwest utilities. FERC's decision to limit close consideration of demand and resources to mee t the demand to the NCPA and PG & E areas, and to avoid an excursion into more distant regions, was reasonable and comfortably within the Commission's authority.19 III. NEPA CLAIMS

FOR reasserts under a NEPA heading several of the contentions we found insubstantial when raised under an FPC rubric. See supra pp. 97-99. We find them no more worthy of discussion when presented under a different label.20 We can deal summarily as well with FOR's contention that the EIS should have examined "water supply" aspects. CCWD's plans in this regard were not sufficiently concrete to warrant evaluation in conjunction with the Calaveras power project. See Kleppe v. Sierra Club, 427 U.S. 390, 401-402, 49 L. Ed. 2d 576, 96 S. Ct. 2718 (1976).21

FOR's claim concerning the prospect of purchasing power in lieu of constructing a hydroelectric plant, however, bears separate discussion in the NEPA context. To the extent that FOR challenges the size of the region considered by FERC -- the dimensions of the Commission's investigation -- our discussion relating to the FPA largely answers FOR's criticism and we need not write many more words here. FOR raises a graver concern with respect to the timing of the investigation the Commission did undertake; FOR's final contention concerning the need for a supplemental EIS on the other hand, does not require extended discussion.

A. The Dimensions of FERC's Investigation

Section 102(2) of NEPA calls upon each federal agency to "study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources." 42 U.S.C. § 4332(2) (1976). This provision parallels the general EIS requirement of discussion of "alternatives to the proposed action." Id. § 4332 (2) (iii). FOR contended that the Commission was obliged to look to PG & E and beyond to satisfy the command in Udall v. FPC (supra) that the agency, in carrying out its mission under the FPA, explore "alternative sources of power." We have explained above why the examination FERC conducted satisfied the FPA requirement and was consistent with the Court's instructions in Udall. See supra pp. 100-103. FOR makes the same arguments in contending that purchasing power was an "alternative" the Commission should have considered expansively to carry out its obligations under NEPA.22

We note initially that it is not altogether apparent why power purchasing should rank as a course "alternative" to power generation. Purchasing prospects are perhaps more appropriately considered a component of need. Power purchasing is feasible and desirable only if a producer in the relevant region has excess supplies to sell, supplies adequate to obviate the need for new production in the area. FOR's dominant claim is not that FERC failed to consider "alternative" courses for production of power, but that there was no need for additional power generation.23 However, this court has once before accepted categorization of purchased power as an "alternative" within the meaning of NEPA,24 and we will adhere to that view.

Just as we ruled in considering FPA strictures that FERC was not obliged to survey power availability more broadly than it did, so we conclude here that the Commission properly confined its consideration of demand and available power supplies to the NCPA and PG & E areas. And for the same reasons. We add only the Supreme Court's admonition in Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 55 L. Ed. 2d 460, 98 S. Ct. 1197 (1978), that "the concept of alternatives [under NEPA] must be bounded by some notion of feasibility." Id. at 551.25 FERC's decision as to the space dimensions of its demand and supply exploration in this case was properly bounded by reasonable considerations of what could be forecast with a fair degree of reliability and with the energy, research, and time resources available to the agency. See NRDC v. Morton, 148 U.S.App.D.C. 5, 458 F.2d 827, 837 (D.C. Cir. 1972).26

B. The Timing of FERC's Investigation

We are secure in the conclusion that the Commission's investigation of power purchasing as a means to satisfy NCPA's need, or as an "alternative" course, was substantively unassailable. However, an important question remains whether the license should be set aside and the matter returned to FERC because the agency did not present its analysis adequately in the EIS itself; instead, the ...


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