Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-01976/USCOURTS-ca10-88-01976-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

SALT LAKE CITY 1 et al • , 

Plaintiffs-Appellants, 

v. 

WESTERN AREA POWER ADMINISTRATION; 

WILLIAM H. CLAGETT, in his capacity as 

Administrator of the Western Area 

Power Administration; THE UNITED STATES 

DEPARTMENT OF ENERGY; JOHN S. HERRINGTON, 

in his capacity as Secretary of Energy 

of the United States, and the UNITED 

STATES OF AMERICA, 

Defendants-Appellees, 

) 

) 

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) 

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) 

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) 

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) 

COALITION OF CONSUMER-OWNED POWER SYSTEMS, ) 

Amicus Curiae, 

COLORADO RIVER ENERGY DISTRIBUTORS 

ASSOCIATION, INC., 

) 

. ) 

) 

) 

) 

) Defendant-Intervenor/Appellee, ) 

) 

NATIONAL WILDLIFE FEDERATION, GRAND ) 

CANYON TRUST, AMERICAN RIVERS, INC., ) 

) 

Amicus Curiae. ) 

Appeal from the United States District Court 

for the District of Utah 

(D.C. No. C-86-lOOOG) 

No. 88-1976 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 1 
Donald B. Holbrook and William B. Bohling (Gregg I. Alvord, 

Elizabeth M. Haslam, and Michael Patrick O'Brien, also of Jones, 

Waldo, Holbrook & McDonough, Salt Lake City, Utah; Sidney G. 

Baucom, General Counsel, Utah Power & Light Company, Salt Lake 

City, Utah; Rogert F. Cutler and Bruce R. Baird, City Attorneys, 

Salt Lake City, Utah; Reed M. Richards, Weber County Attorney, 

Ogden, Utah; Frank Warner and Douglas J. Holmes, Ogden, Utah, with 

them on the brief) for plaintiffs-appellants. 

Rex Lee of Sidley & Austin, Washington, D.C. (Donald R. Allen, 

Cyndi Stich, and J, Barton Seitz of Duncan, Allen and Talmage, 

Washington, D.C.; Dale A. Kimball, Gary A. Dodge, and Jill A. 

Niederhauser of Kimball, Parr, Crockett & Waddoups, Salt Lake 

City, Utah, with him on the brief) for intervenor-appellee 

Colorado River Energy Distributors Association, Inc. 

C. Max Vassanelli, Attorney, Civil Division, Department of Justice 

(John R. Bolton, Assistant Attorney General, Brent D. Ward, United 

States Attorney, Dennis G. Linder, Robert s. Greenspan and Karen 

Stewart, Attorneys, Civil Division, Department of Justice; of 

counsel Susan Earley, Western Area Power Administration, with him 

on the brief) Washington, D.C., for federal appellees. 

s. Elizabeth Birnbaum of National Wildlife Federation, Washington, 

D.C., filed an amicus curiae brief on behalf of National Wildlife 

Federation, Grand Canyon Trust and American Rivers, Inc. 

Clinton A. Vince and Nancy A. Wodka of Verner, Liipfert, Bernhard, 

McPherson and Hand, Washington, D.C.; Alan H. Richardson, American 

Public Power Association, Washington, D.c.; C. Pinckney Roberts, 

Columbia, South Carolina; Wallace F. Tillman and Michael D. Oldak, 

National Rural Electric Cooperative Association, Washington, D.C.; 

Charles L. Compton, Laurens, South Carolina; L. Clifford Adams, 

Jr., of Hurt, Richardson, Garner, Todd & Cadenhead, Atlanta, 

Georgia, as counsel for Municipal Electric Authority of Georgia; 

and Carlos c. Smith of Strang, Fletcher, Carriger, Hodge & Smith, 

Chattanooga, Tennessee, as counsel for Tennessee Valley Public 

Power Association, filed an amicus curiae brief on behalf of the 

Coalition of Consumer-Owned Power Systems. 

Before LOGAN and TACHA, Circuit Judges, and THEIS, District 

Judge.* 

LOGAN, Circuit Judge. 

* The Honorable Frank G. Theis, Senior United States District 

Judge for the District of Kansas, sitting by designation. 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 2 
Plaintiffs, Utah Power & Light (UP&L) and more than one 

hundred of its subscriber cities, towns and counties in Utah and 

Wyoming, appeal the district court's grant of summary judgment in 

favor of defendants, the Western Area Power Administration (WAPA), 

the Department of Energy (DOE), and various officials of these 

agencies. The district court found that WAPA's interpretation of 

federal law governing preference in the sale of federal 

hydroelectric power was reasonable and that WAPA's decision to 

purchase nonfederal power in order to maximize sales of firm 

federal power was not ultra vire s. 1 We affirm. 

I 

The activities challenged in this case fall under the 

jurisdiction of WAPA's Salt Lake City Area office, which markets 

power generated from the Salt Lake City Area Integrated Projects 

(SLCA-IP), including the Colorado River Storage Project (CRSP) . 

The basic statute governing power marketing from the SLCA-IP is 

2 the CRSP Act, 43 U.S.C. §§ 620-620o. This Act incorporates the 

federal reclamation laws, including § 9(c} of the Reclamation 

Project Act of 1939, governing preference in the sale of federal 

hydropower. 43 u.s.c. § 620c. 

1 The district court denied summary judgment on UP&L's claim that 

WAPA violated applicable environmental laws by failing to prepare 

an environmental statement in connection with the promulgation of 

the new Power Marketing Criteria. Finding no just reason for 

delay, however, the district court certified, under Fed. R. Civ. 

P. 54(b), its rulings on the preference and ultra vires claims as 

final, and plaintiffs timely appealed. 

2 The SLCA-IP also includes the Collbran and Rio Grande projects. 

These projects, however, do not have specific statutes governing 

their operation. 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 3 
WAPA sells power under long-term marketing criteria. While 

WAPA was formulating its Post-1989 General Power Marketing and 

Allocation Criteria,~ 48 Fed. Reg. 38,289 (1983); 49 Fed. Reg. 

34,900 (1984); and 51 Fed. Reg. 4,844 (1986), UP&L applied for 

federal power on behalf of its customer municipalities that had 

authorized it to do so. The application requested an allocation 

of power for the municipalities as qualified preference entities 

under the federal reclamation laws. The application stated that, 

upon receipt of an allocation of federal power, each municipality 

would enter into a contract with UP&L under which the latter would 

provide utility services at cost. UP&L also applied for a 

preferential allocation of federal power on its own behalf, to be 

resold to its customers at -cost. Alternatively, UP&L argued that 

it should be allowed to bid for federal power. WAPA determined 

that neither UP&L nor its customers qualified as preference 

entities under applicable reclamation laws and accordingly 

rejected plaintiffs' applications. 

A 

Plaintiffs' first challenge to WAPA's refusal to allocate 

power to them is based on federal preference law. Section 9(c) of 

the Reclamation Project Act of 1939, 43 u.s.c. § 485h(c), provides 

that in the sale of federal hydroelectric power "preference shall 

be given to municipalities and other public corporations or 

agencies . . . . " WAPA, the DOE, and the Bureau of Reclamation 

before them have consistently interpreted this provision as not 

giving preference to every city or town that fits the dictionary 

definition of "municipality." Rather, they have interpreted 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 4 
§ 9(c) to give preference only to those municipalities that 

operate their own utility systems. WAPA terms this prerequisite 

for preferential status a requirement of "utility responsibility." 

Plaintiffs argue that the utility responsibility requirement 

is contrary to the plain language of§ 9(c). They argue that the 

statutory language clearly makes every municipality a preference 

entity and that WAPA's contrary interpretation is entitled to no 

deference. Rejecting this argument, the district court applied 

the analysis set forth in Chevron, U.S.A, Inc. v. Natural 

Resources Defense Council, 467 u.s. 837, 842-43 (1984). The court 

first asked whether Congress had directly spoken to the precise 

question at issue, namely, whether the statutory preference given 

to municipalities mandates equal treatment of municipalities that 

own their own distribution systems and those that do not. 

Employing traditional tools of statutory construction, the court 

found no intent on this question. We agree. 

Plaintiffs correctly point out that neither the court nor the 

defendants have controverted plaintiffs' oft-repeated assertion 

that the meaning of the word "municipalities" is clear. But 

plaintiffs' references to the Oxford English Dictionary do not 

make clear the meaning of a preference in the sales of power to 

municipalities. The question critical to this appeal, whether the 

preference applies only to sales directly to municipalities or 

also embraces indirect sales through investor-owned (i.e., forprofit) intermediaries such as UP&L, is not answered by asserting 

that "everybody knows . a 'municipality' is a town or city." 

Plaintiffs-Appellants' Principal Brief at 13. If indirect sales 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 5 
are included, then the preference clause authorizes the agency to 

confer economic benefits upon investor-owned utilities. 3 It is 

not at all clear from the text of the statute that such a result 

was intended. 

Nor do traditional tools of statutory construction yield any 

clear congressional intent on this issue. Defendants argue that 

the legislative history demonstrates that Congress intended the 

preference to extend only to entities capable of taking federal 

power directly and distributing it to consumers. Some portions of 

the legislative history arguably support this interpretation. 

See, ~' 84 Cong. Reo. 10223 (1939) (remarks of Rep. Case); 

Hearings on H.R. 6773 Before the House Comm. on Irrigation and 

Reclamation, 76th Cong., -1st Sess. 122, 130-32 (1939) (colloquy 

between Rep. Winter and J, Kennard Cheadle, Bureau of Reclamation 

Chief Counsel). Even these isolated portions, however, are far 

from clear. We agree with the district court's conclusion that 

"[r]ead critically, the history, like the text, indicates that 

Congress in considering the preference clause simply did not 

contemplate the innovative proposal that the municipalities make 

here." III R. tab 233 at 40. 

On the second prong of the Chevron analysis, 467 U.S. at 843, 

the district court found WAPA's interpretation of the preference 

clause "fully reasonable." III R. tab 233 at 40 . We agree that 

WAPA's construction of the statute must be upheld. 

3 Despite UP&L's agreement to deliver CRSP power at "cost" (a 

term not defined in the applications), access to cheap federal 

power undoubtedl y would provide significant economic benefits for 

UP&L. 

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The agency's interpretation need not be the only one it could 

have adopted, or the one that this court would have reached had 

the question initially arisen in a judicial proceeding. Chevron, 

467 U.S. at 843 n.ll. Indeed, the agency's interpretation is 

entitled to special deference when, as here, the agency is 

interpreting a statutory scheme that it is entrusted to 

administer, its interpretation has "'involved reconciling 

conflicting policies, and a full understanding of the force of the 

statutory policy in the given situation has depended upon more 

than ordinary knowledge respecting the matters subjected to agency 

regulations.'" Id. at 844 (quoting United States v. Shimer, 367 

u.s. 374, 382 (1961)). 

It is reasonable to conclude, as WAPA has, that the benefits 

of preferential access to federal hydroelectric power should be 

enjoyed by the public rather than the private sector. Plaintiffs' 

challenge to this interpretati on, "fairly conceptualized, really 

centers on the wisdom of the agency's policy, rather than whether 

it is a reasonable choice within a gap left open by 

Congress .... " Id. at 866. Therefore, their challenge must 

fail. Id. 

Plaintiffs also argue that, even if the utility 

responsibility requirement is reasonable, WAPA arbitrarily and 

capriciously refused to recognize plaintiffs' compliance with it. 

Specifically, they assert that a 1978 legal opinion of the DOE 

"suggested that power may be allocated to a city which secures 

through contract the means of delivering the power to its 

customers as well as administrative functions such as meter 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 7 
reading, billing and accounting." Plaintiffs-Appellants' 

Principal Brief at 17. The legal opinion referred to, however, 

indicates that in order to achieve utility responsibility, the 

applying city would have to own or lease utilities itself, and not 

merely contract with the investor-owned utility normally serving 

it to act as its agent in purchasing federal power. See Dep't of 

Energy General Counsel, "Request of City of Needles for 

Reinstatement of Sales of Federal Power for Benefit of Its 

Citizens" 3-5 (Nov. 21, 1978), III R. Supp. tab 216 App. K; ~ 

also id. at 5 ("As a practical matter Needles would likely be 

required to purchase, lease, or condemn [the investor-owned 

utility's) distribution system that serves the City and [the 

utility's] charter to provide utility service."). Nothing in the 

plaintiff municipalities' application suggests that they would 

take any steps to acquire UP&L's distribution system. 

UP&L argues that it should be deemed a preference customer in 

its own right. As support for this proposition, UP&L points to 

its application for power on its own behalf, arguing that its 

proposal to distribute federal power at cost to its customers is 

consonant with the preference for "municipal purposesn contained 

in § 5 of the Townsites and Power Act of 1906, 43 u.s.c. § 522. 

The district court correctly held, however, that the preference 

provision of the Townsites Act does not apply to sales of CRSP 

power. Projects authorized and constructed after passage of the 

Reclamation Project Act of 1939 are governed by that statute's 

preference clause,~ 43 u.s.c. § 485h(a), which supersedes any 

prior inconsistent law, see id. § 485j. 

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Alternatively, UP&L argues that it should be allowed to bid 

for federal power, because the preference clause creates a 

preference only as to price, and not as to right. We agree with 

the district court that the intended breadth of the preference is 

not clear from the legislative history. Compare, ~~ 84 Cong. 

Rec. 10225 (1938) (statement of Rep. Leavy) with id .. at 10223-24 

(colloquy between Reps. Case and O'Connor). WAPA's reasonable 

interpretation that the preference is as to right is entitled to 

deference and must be upheld. Chevron, 467 u.s. at 842-43. 

B 

Plaintiffs also attack the Post-1989 Criteria as inconsistent 

with § 5 of the Flood Control Act of 1944, 16 u.s.c. § 825s. 

Section 5 provides that the Secretary of Energy shall dispose of 

excess electric power and energy generated at projects under the 

control of the Department of the Army "in such manner as to 

encourage the most widespread use thereof at the lowest possible 

rates to consumers consistent with sound business 

principles •••• " Id. It is unclear whether§ 5's directives 

apply to power and energy generated by the CRSP. We agree with 

the Ninth Circuit, see City of Santa Clara v. Andrus, 572 F.2d 

660, 667-68 (9th Cir.), cert. denied, 439 u.s. 859 (1978), that it 

is unnecessary to decide this question. 

Four circuits have considered whether § 5's widespread use 

clause provides law to apply to an agency's power marketing 

decisions. We agree with their unanimous conclusion that it does 

not. See Brazos Elec. Power Coop. v. Southwestern Power Admin., 

819 F.2d 537, 543-44, reh'g denied, 828 F.2d 1083 (5th Cir. 1987); 

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Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 9 
Electricities of North Carolina, Inc. v. Southeastern Power 

Admin., 774 F.2d 1262, 1266-67 (4th Cir. 1985); Greenwood Util. 

Comm'n v. Hodel, 764 F.2d 1459, 1464-65 (11th Cir. 1985); City of 

Santa Clara, 572 F.2d at 667-68. Thus, even if § 5 of the Flood 

Control Act applies to the sale of power generated by the CRSP, 

implementation of that section in WAPA's power marketing decisions 

is "committed to agency discretion by law" under the 

Administrative Procedure Act, 5 u.s.c. § 701(a)(2). 

II 

A 

Plaintiffs next allege that WAPA's practice of buying and 

reselling power produced at nonfederal power plants (nonfederal 

power) is ultra vires and part of a scheme to "broker" nonfederal 

power in order to maintain the agency's importance in the electric 

power industry. WAPA purchases nonfederal power in order to "firm 

up" federal power supplies. Because hydropower fluctuates with 

water levels, its availability above a certain level cannot be 

guaranteed. 4 By purchasing nonfederal power, WAPA can ensure a 

dependable supply of energy. Plaintiffs argue that WAPA is 

without statutory authority to make such purchases and that its 

actions are therefore ultra vires. We agree with the district 

court's conclusion that the CRSP Act does not prohibit WAPA from 

purchasing nonfederal power. 

4 According to WAPA's glossary of terminology, "firm energy" is 

"electric energy which is intended to have assured availability to 

the customer to meet all or any agreed portion of his load 

requirements." III R. tab 233 at 48 n.37. "Firm power" is "power 

which is guaranteed by the supplier to be available at all times • • • • u Id. 

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The CRSP Act does not mention nonfederal power. The Act does 

provide, however, that CRSP projects "shall be operated in 

conjunction with other Federal power plants, present and 

potential, so as to produce the greatest practicable amount of 

power and energy that can be sold at firm power and energy 

rates II 43 u.s.c. § 620f. WAPA consistently has 

interpreted § 620f as requiring it to purchase nonfederal power in 

order to maximize sales of federal power at firm rates. 5 In 

granting summary judgment, the district court similarly 

interpreted this section as requiring WAPA to do "what is 

reasonably necessary, which would include the acquisition and 

blending of nonfederal power, to maximize the sale of federal 

power at firm rates." III R. tab 233 at 51. 

Emphasizing § 620f's use of the word produce and its 

reference to other federal power plants, plaintiffs argue that the 

statute's language requires that all CRSP power be produced by 

5 See III R. tab 233 at 54 n.47. Plaintiffs contend that 

government officials have long questioned whether power marketing 

agencies have authority to purchase nonfederal power. See 

Hearings on the New Power Policy and Marketing Criteria of the 

Dep't of the Interior Before the Senate Judiciary Comm., 83d 

Cong., 2d Sess. 489, 500-01 (1954), III R. Supp. tab 216 App. N 

(1954 statement of Interior Solicitor, Clarence B. Davis, 

questioning authority of Department of Interior to purchase amount 

of nonfederal power resulting in greatest profit to government) 

[hereinafter 1954 Marketing Criteria Hearings]; Op. Compt. Gen. B222908 at 2 (Oct. 17, 1986), III R. Supp. tab 216 App. J (1986 

opinion of Comptrol_ler General of United States noting that 

Congress has not affirmatively authorized WAPA to purchase 

nonfederal power) [hereinafter 1986 Op. Compt. Gen.]. Even these 

isolated statements, however, are far from clear. Under further 

questioning, Solicitor Davis noted that he did not intend to 

question the Department of the Interior's authority to purchase 

nonfederal power on an average year basis. See 1954 Marketing 

Criteria Hearings at 512-13. Similarly, the Comptroller General 

recognized WAPA's inherent authority to purchase incidental 

nonfederal power. See 1986 Op. Compt. Gen. at 3. 

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federal power plants and that WAPA is therefore forbidden from 

purchasing nonfederal power. We disagree. 

The plain language of § 620f does not prohibit WAPA from 

purchasing nonfederal power; the words of the statute simply are 

not clear on this point. Further, the statute's legislative 

history does not demonstrate a congressional intent to prohibit 

nonfederal power purchases. See H.R. Rep. No. 1087, 84th Cong., 

2d Sess., reprinted in 1956 u.s. Code Cong. & Admin. News 2346, 

2362 (reiterating that hydroelectric powerplants should be 

operated to produce greatest amount of energy that can be sold at 

firm power rates). Nor can we accept plaintiffs' argument that 

WAPA cannot interact with nonfederal entities absent specific 

congressional approval. Although Congress occasionally has 

expressly authorized nonfederal power purchases, 6 courts "have 

long recognized the inherent power of the Secretary to purchase 

power on 'credit' from other sources when conditions prevent 

hydro-electric facilities from functioning at capacity." United 

States v. Sacramento Municipal Util. Dist., 652 F.2d 1341, 1345 

(9th Cir. 1981) (citing Kansas City Power & Light Co. v. McKay, 

115 F. Supp. 402 (D.D.C. 1953), vacated on other grounds, 225 F.2d 

924 (D.C. Cir.), cert. denied, 350 U.S. 884 (1955)) (emphasis 

added). See also Ashwander v. Tennessee Valley Auth., 297 u.s. 

288, 338-39 (1936) (recognizing authority of power marketing 

agency to interchange energy with private power company). 

6 See, ~, 43 u.s.c. § 1523(b) (Secretary of Energy may 

purchase such nonfederal power as he deems necessary in connection 

with operation of Central Arizona Project). 

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At the same time, however, § 620£ does not expressly direct 

WAPA to purchase nonfederal power. Rather, the plain language and 

legislative history of § 620£ merely direct WAPA to maximize the 

sale of federally produced power at firm rates. The statute and 

its legislative history are silent regarding how WAPA should 

accomplish this objective. As we discussed in Part IA, when an 

administering agency's interpretation of a statute is challenged, 

and traditional tools of statutory construction yield no relevant 

congressional intent, the reviewing court must determine if the 

agency's construction is a permissible one. See Chevron, 467 u.s. 

at 842-43. 

WAPA's interpretation of § 620£--that it requires WAPA to 

purchase nonfederal power in order to maximize sales of federal 

power at firm rates--is permissible. The availability of 

hydroelectric power fluctuates with water levels. Thus, if a 

federal project's hydroelectric power is sold by itself, "the 

amount of firm power available is reduced, and in some cases, firm 

power cannot be offered at all for some periods of time." 49 Fed. 

Reg. 34,900, 34,915 (1984). It therefore seems reasonable that 

WAPA interprets § 620£ as requiring it to purchase nonfederal 

power to ensure maximum sales of federally produced power at firm 

rates. 

WAPA's interpretation of § 620£ is supported by several other 

factors. Federal power marketing agencies commonly employ firming 

arrangements. See, ~'Brazos Elec. Power Coop., 819 F.2d at 

540-41 (Southwestern Power Administration engaged in firming 

arrangement with private utilities company); Greenwood Util. 

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Comm'n v. Mississippi Power Co., 751 F.2d 1484, 1490 {5th Cir. 

1985) (private utility company provides Southeastern Power 

Administration with thermal resources to enhance dependable 

capacity of its hydro resources). Moreover, courts interpreting 

general reclamation statutes have held that federal power 

marketing agencies have inherent authority to purchase some 

nonfederal power. See Sacramento Municipal Util. Dist., 652 F.2d 

at 1345; Kansas City Power & Light, 115 F. Supp. at 417-18. 

Finally, § 14 of the Reclamation Project Act of 1939, 43 u.s.c. 

§ 389, clearly authorizes exchanges of federal for nonfederal 

power. Although WAPA's purchases of nonfederal power cannot be 

classified as exchanges of power, the Reclamation Act nonetheless 

demonstrates that Congress ordinarily does not intend to forbid 

federal power agencies from interacting with nonfederal power 

sources. 

B 

Alternatively, plaintiffs challenge the scope of WAPA's 

nonfederal power purchases. According to its Post-1989 Criteria, 

WAPA is planning to purchase nonfederal power on a new scale. In 

the past, WAPA's purchases of nonfederal power were based on an 

average water year basis; purchase of power in drought years was 

balanced by excess federal power in wet years. 49 Fed. Reg. 

34,900, 34,923 (1984). Under the Post-1989 Criteria, however, 

WAPA plans to purchase 400 gigawatt hours of nonfederal power to 

meet its firm commitments in an average water year. 51 Fed. Reg. 

4,844, 4,845 (1986) . Plaintiffs argue that this proposal violates 

case law limiting the amount of nonfederal power that WAPA may 

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purchase. The district court rejected this argument and held that 

WAPA may purchase such nonfederal power as is "reasonably 

necessary" to maximize the sale of federal power at firm rates. 

III R. tab 233 at 51. 

We agree with plaintiffs' contention that WAPA does not have 

unlimited authority to purchase nonfederal power. Interpreting 

general reclamation statutes, courts have held that power 

marketing agencies may purchase such nonfederal power and energy 

as is reasonably incidental to the integration of federally 

produced hydroelectric power. See Kansas City Power & Light, 115 

F. Supp. at 417. See also Sacramento Municipal Util. Dist., 652 

F.2d at 1345-46 (Secretary of Energy has inherent authority to 

purchase nonfederal power necessary to compensate for adverse 

weather conditions). In the instant case, Congress has directed 

WAPA to maximize the sale of federally produced power at fir.m 

rates. We therefore believe that WAPA may purchase only such 

nonfederal power as is reasonably incidental to meeting this 

objective. 

We apply the arbitrary and capricious standard of review to 

WAPA's nonfederal power purchasing decisions. 5 u.s.c. 

§ 706(2)(A); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 

U.S. 402, 416 (1971); Phillips Petroleum Co. v. Environmental 

Protection Agency, 803 F.2d 545, 558 (lOth Cir. 1986). In 

Citizens to Preserve Overton Park, the Supreme Court explained 

that a court applying the arbitrary and capricious standard: 

"must consider whether the decision was based on a 

consideration of the relevant factors and whether there 

has been a clear error of judgment. Although this 

inquiry into the facts is to be searching and careful, 

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the ultimate standard of review is a narrow one. The 

court is not empowered to substitute its judgment for 

that of the agency. " 

401 u.s at 416 (citations ommitted) . 

Applying this standard, we conclude that the proposed 

nonfederal power purchases found in WAPA's Post-1989 Critieria are 

not arbitrary and capricious. WAPA examined the relevant factors 

in concluding that the scope of its nonfederal power purchases was 

reasonably incidental to maximizing sales of federally produced 

power at firm rates. See 51 Fed. Reg. 4,844, 4,856-58 (1986); 49 

Fed. Reg. 34,900, 34,923-24 (1984). We cannot say that WAPA made 

a clear error of judgment in reaching this conclusion. We 

therefore affirm the district court's decision that, as a matter 

of law, such purchases are ·not ultra vires. 

In a closely related argument, plaintiffs challenge WAPA's 

determination of expected CRSP firm marketable resources for the 

post-1989 period. Plaintiffs contend that WAPA arbitrarily and 

unreasonably overestimated CRSP hydro resources in deriving the 

Post-1989 Criteria, thereby "creat[ing] new paper resources that 

will require WAPA to purchase even more nonfederal power to enable 

it to meet its contractual obligations when" these resources fail 

to materialize. Plaintiffs-Appellants' Principal Brief at 41. We 

disagree. Our review of the record convinces us that WAPA's 

estimation of future CRSP firm marketable resources was not 

arbitrary and capricious. See 51 Fed. Reg. 4,844, 4,856-58 (1986); 

49 Fed. Reg. 34,900, 34,920-24 (1984); III R. tab 233 at 48-49 

n.38. We therefore reject this argument. 

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c 

Finally, plaintiffs allege that WAPA's decision to 

participate with private utilities in the construction and 

financing of the Craig-Bonanza transmission line is ultra vires 

and that the transmission line is being built to promote WAPA's 

"brokering activities." As plaintiffs point out, § 1 of the CRSP 

Act, 43 u.s.c. § 620, expressly authorizes the construction of 

only specified "initial units" of the Colorado Storage River 

Project. Nowhere in the CRSP Act, however, does Congress prohibit 

the construction of future transmission lines in connection with 

the project. In fact, by § 302 of the Department of Energy Act, 

Congress grants the Secretary of Energy broad authority to build, 

operate, and maintain transmission lines. See Department of 

Energy Organization Act, § 302, 42 u.s.c. § 7152(a)(1)(E) 

(transferring to Secretary of Energy "the power marketing 

functions of the Bureau of Reclamation, including the 

construction, operation, and maintenance of transmission lines and 

attendant facilities"). We therefore conclude that Congress has 

authorized WAPA, as an agency within the Department of Energy, to 

engage in the construction of the Craig-Bonanza transmission line. 

We are not persuaded that § 5 of the Flood Control Act of 

1944, 16 u.s.c. § 825s, mandates a different result. Congress has 

never expressed an intent to make § S's restrictions on the 

construction of transmission lines applicable to any projects 

except those delivering energy generated at projects under the 

control of the Department of the Army. To the contrary, Congress 

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has granted WAPA broad authority to construct transmission lines. 

See 42 u.s.c. § 7152(a)(l)(E). 

Accordingly, we AFFIRM the district court's decision granting 

WAPA's motion for summary judgment. 7 

7 We have not reviewed the district court's ruling that an issue 

of fact exists concerning whether WAPA was cloaking illegal 

marketing activities through its participation in the Rocky 

Mountain Generation Cooperative ("RMGC"). III R. tab 233 at 59-

60. Although plaintiffs contend that this ruling is inconsistent 

with the remainder of the district court's opinion, the parties 

have agreed to hold this issue in abeyance pending the outcome of 

this appeal. See Brief of Appellants at 30 n.lS, 43. 

-18-

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 18 
No. 88-1976, Salt Lake City v. Western Area Power Administration 

TACHA, Circuit Judge, dissenting 

I respectfully dissent from the majority on whether this 

court must defer to the determination of Western Area Power 

Administration (WAPA) that the approximately 155 Utah and Wyoming 

cities, counties, and towns represented by Utah Power and Light 

(UP&L) are not preferred entities under the Colorado River Storage 

Project Act (CRSP Act), 43 u.s.c. S§ 620-20a, and section 9(c) of 

the Reclamation Project Act of 1939 (Reclamation Act), 43 u.s.c. § 

620(c). Deferential review of an agency's statutory construction 

under Chevron, USA, Inc. ~Natural Resources Defense Council, 467 

U.S. 837 (1984), does not apply to this case because Congress 

expressed in section 9(c) a clear intent about whether 

municipalities are preferred entities in the distribution of power 

from federal sources. I find Congress's intent about a preference 

for municipalities clearly expressed in the words of the statute 

and am convinced we must reject WAPA's requirement that 

municipalities have utility responsibility in order to receive 

preference under the statute. Although I agree with the 

majority's holding in Part II that the CRSP Act does not prohibit 

WAPA from purchasing nonfederal power, I would reverse the 

district court's finding that the Utah and Wyoming cities, 

counties, and towns represented by UP&L are not preferred entities 

under the Reclamation Act. 

The Supreme Court in Chevron explained the approach federal 

courts must follow in construing statutory language: 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 19 
When a court reviews an agency's construction of 

the statute which it administers, it is confronted with 

two questions. First, always, is the question whether 

Congress has directly spoken to the precise question at 

issue. If the intent of Congress is clear, that is the 

end of the matter; for the court, as well as the agency 

must give effect to the unambiguously expressed intent 

of Congress. 

Id. at 842-43. Based on Chevron, a reviewing court defers to a 

reasonable agency interpretation only on issues Congress did not 

address-- "gap[s] left, implicitly or explicitly, by Congress." 

Id. at 843. As the Court pointed out, gaps may indicate 

Congress's implicit or explicit delegation of authority to the 

agency to regulate that specific issue. Id. 

In a series of cases following Chevron, the Court has 

reiterated that deferential review does not replace the federal 

courts' continuing duty to interpret statutes using the 

traditional tools of statutory construction. See Dole ~ United 

Steelworkers, 110 S.Ct. 929, 934 (1990); NLRB ~United Food~ 

Commercial Workers Union, 484 U.S. 112, 123 (1987); ~also INS 

~Cardoza-Fonseca, 480 U.S. 421, 430-46 (1987) (applying 

traditional tools of statutory construction to statutory 

requirements to determine whether two standards are identical). 

Deferential review is only appropriate when a court is unable to 

discern congressional intent. See Chevron, 467 u.s. at 842-43; 

National Grain~ Feed Ass'n ~OSHA, 866 F.2d 717, 733 (5th Cir. 

1989). A court does not defer to an agency interpretation-- even 

a longstanding interpretation -- that is clearly at odds with the 

plain language of the statute. See Public Employees Retirement 

~~Betts, 109 s. Ct. 2854, 2863 (1989). 

2 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 20 
We review de novo a district court's finding about statutory 

intent. Stissi ~Interstate~ Ocean Transp. Co., 765 F.2d 370, 

374 (2d Cir. 1985); United States~ Horowitz, 756 F.2d 1400, 1403 

(9th Cir.), cert. denied, 474 U.S. 822 (1985). In determining 

whether Congress expressed an intent regarding the preferred 

status of municipalities, we begin with the statute's language. 

Mead Corp. ~Tilley, 109 S. Ct. 2156, 2162 (1989); see Glenpool 

Util. Servs. Auth. ~Creek County Rural Water Dist. No. 1, 861 

F.2d 1211, 1214 (lOth Cir. 1988), cert. denied, 109 S. Ct. 2068 

(1989). As the Supreme Court has noted, the legislative purpose 

generally is expressed in the ordinary meaning of the words 

Congress has used. United States ~ Locke, 471 U.S. 84, 95 

(1985); ~Burlington~ R.R. ~Oklahoma Tax Comm'n, 481 u.s. 

454, 461 (1987) . The most fundamental guide to statutory 

construction is common sense. First Methodist Church ~ United 

States Gypsum Co., 882 F.2d 862, 869 (4th Cir. 1989), cert. 

denied, 110 s. Ct. 1113 (1990) . 

Section 9(c) of the Reclamation Act, incorporated into the 

CRSP Act, states that in "sales (of power] preference shall be 

given to municipalities." 43 u.s.c. § 485h(c). In my view, there 

is no inherent ambiguity in this provision. Congress used the 

word "shall" not "may" in the statute, thereby clearly indicating 

its intent that municipalities receive preference. See United 

States~ Rogers, 461 U.S. 177, 705-06 (1983); Unit ed States~ 

White, 887 F.2d 705, 710 (6th Cir. 1989). Further, I fail to 

perceive any ambiguity in Congress's use of the term 

"municipalities." When Congress enacts legislation using other 

3 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 21 
common terms for political or administrative subdivisions such as 

"state" or "circuit", we simply interpret the plain language of 

the statute without concluding these terms are ambiguous and 

require extraneous definition. Likewise, I am convinced we do not 

need to refer to extraneous definitions to understand what 

Congress meant by using the common term "municipalities" in 

section 9(c). 

WAPA's position -- that "municipalities" must mean "entities 

with utility responsibility" when read in the context of the 

legislative history and administrative interpretation leaves me 

baffled. According to traditional rules of statutory 

construction, we look first to the statutory language and then, if 

necessary, to the legislative history and statutory construction 

by an administering agency. See Brock~ Writer's Guild, West, 

Inc., 762 F.2d 1349, 1353 (9th Cir. 1985); Baltimore Gas~ Elec. 

Co.~ Heintz, 760 F.2d 1408, 1413 (4th Cir. 1985). It is settled 

law that when statutory language is unambiguous and free from 

irrational result, the plain language of the statute controls. 

See,~' Glenpool Util. Servs., 861 F.2d at 1214 (citing Edwards 

~Valdes, 789 F.2d 1477, 1481 (lOth Cir. 1986)). 

WAPA's argument subverts these well-established rules by 

relying on an agency construction to introduce ambiguity into the 

statutory language. I agree with the district court that the 

legislative history of section 9(c) is not "particularly helpful 

or conclusive" regarding a municipality's utility responsibility. 

See Reclamation Proiect Act of 1939: Hearings on H.R. 6773 and 

H.R. 6984 Before the House Comm. on Irrigation and Reclamation, 

4 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 22 
76th Cong., 1st Sess. (1939). Further, I am convinced the 

reference to municipalities in the statute is unambiguous apart 

from the controversy created by the agency's extraneous 

requirement of utility responsibility. See Request of City of 

Needles for Reinstatement of Sales of Federal Power for Benefit of 

its Citizens, De partment of Energy General Counsel Opinion 

{November 1978); see also Disposition of Surplus Power Generated 

at Clark Hill Reservoir Project, 41 Op. Att'y Gen. 236 (1955). In 

my view, bootstrapping a regulation dealing with a statute to 

justify an agency construction of that statute is improper 

especially when the compatibility of the regulation with 

legislative intent i s at issue . 

The majority assumes a principle distinction Congress may 

have intended to make in enacting section 9(c) was between 

municipalities purchasing power directly and those receiving it 

indirectly. This assumption is not supported by either the 

language of the statute or its legislative history. For purposes 

of interpreting the statut e to ascertain Congress's intent, I can 

see no difference between the power request of a single 

municipality and the request of a group of municipalities 

represented by another entity that distri butes power to them at 

cost. In my view, the congressional intent expressed in the plain 

language of sect ion 9(c) is to provide preference to 

municipalities simply based on their status as political 

subdivisions, not on their capacity to distribute power. 

In asking if Congress addressed the "precise issue" whether 

municipalities with utility responsibility and those without 

5 

Appellate Case: 88-1976 Document: 01019728833 Date Filed: 02/22/1991 Page: 23 
should receive equal treatment, the majority overlooks the real 

issue in this case: Whether section 9(c} requires WAPA to give 

preference to municipalities. On this question, the statute is 

clear-- "preference shall be given to municipalities." 43 U.S.C. 

S 485h(c). The WAPA regulations at issue here prevent 

municipalities from receiving preference when they do not satisfy 

an agency prerequisite of utility responsibility. Because I find 

Congress's language in section 9(c) unambiguous about a preference 

for municipalities, I conclude we cannot defer to a contrary 

agency construction. I would hold as a matter of law the agency 

requirement of utility responsibility, which precludes some 

municipalities from receiving preference, contradicts the clear 

congressional mandate that WAPA give municipalities preference. 

6 

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