Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01500/USCOURTS-caDC-95-01500-0/pdf.json

Parties Involved:
Federal Energy Regulatory Commission
Respondent
Roanoke River Basin Association
Petitioner
The City of Virginia Beach, Virginia
Intervenor
United States of America
Amicus Curiae for Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 4, 1997 Decided May 9, 1997

No. 95-1494

State of North Carolina,

Petitioner

v.

Federal Energy Regulatory Commission,

Respondent

The City of Virginia Beach, Virginia,

Intervenor

Consolidated with

No. 95-1500

On Petitions for Review of an Order of the

Federal Energy Regulatory Commission

Bernard Nash and Patrick M. McSweeney argued the

causes for petitioners, with whom Frederick M. Lowther,

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David L. Engelhardt, William B. Ellis and Alan S. Hirsch,

Special Deputy Attorney General, North Carolina Department of Justice, were on the briefs.

Edward S. Geldermann, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent, with

whom Jerome M. Feit, Solicitor, was on the brief.

M. Scott Hart argued the cause for intervenor City of

Virginia Beach, with whom George A. Somerville and Samuel

M. Brock, III were on the brief. Howard E. Shapiro,

Michael A. Swiger and John F. Kay, Jr. entered appearances.

Lois J. Schiffer, Assistant Attorney General, United States

Department of Justice, John A. Bryson, Attorney, Jonathan

Z. Cannon, General Counsel, Environmental Protection

Agency, and Randolph L. Hill, Attorney, were on the brief

for the United States as amicus curiae.

John Paul Woodley, Jr., Roger L. Chaffe and John R.

Butcher were on the brief for the Commonwealth of Virginia

as amicus curiae.

Alan H. Richardson, Donald H. Clarke and Henri D.

Bartholomot were on the joint brief for the American Public

Power Association, et al., as amicus curiae.

Ronald A. Shems, Assistant Attorney General, State of

Vermont, was on the brief for the states of Vermont, et al., as

amicus curiae.

Before: Wald, Silberman and Sentelle, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Dissenting opinion filed by Circuit Judge Wald.

Sentelle, Circuit Judge: Petitioners, the state of North

Carolina and the Roanoke River Basin Association ("RRBA"),

seek review of the decision of the Federal Energy Regulatory

Commission ("FERC" or "Commission") to amend a FERC

license under which a power project is operated within Lake

Gaston on the Roanoke River. The amended license allows

the City of Virginia Beach, Virginia to build an intake strucUSCA Case #95-1500 Document #271070 Filed: 05/09/1997 Page 2 of 46
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ture within the power project's boundaries and withdraw

water for transport to Virginia Beach. Petitioners maintain

that FERC improperly issued the license amendment without

first requiring that a water quality certification be obtained

from the state of North Carolina. Petitioners further contend that the decision to issue the license amendment was

arbitrary and capricious. For the reasons detailed below, we

reject each of these arguments and deny the petitions for

review.

I. Background

This case arises from the nearly fourteen-year effort of

Virginia Beach to secure a new source of water via a 76-mile

pipeline originating at Lake Gaston and terminating in Norfolk, Virginia (the "Pipeline Project"). Lake Gaston is located on the Roanoke River, a navigable waterway traversing

the states of Virginia and North Carolina. While Lake

Gaston is primarily located in North Carolina, the intake

structure for the Pipeline Project is to be located at Pea Hill

Creek Cove in Virginia. That site is within the boundaries of

FERC Project No. 2009, a FERC-licensed power project (the

"Power Project") operated by Virginia Electric and Power

Company ("VEPCO"). Upon completion of the Pipeline Project, Virginia Beach will be able to draw up to 60 million

gallons per day ("mgd") of water from Lake Gaston, reducing

the discharge of water through the Power Project's dam

turbines in North Carolina by that same amount. The drawn

water will then be transported through a 76-mile pipeline.

This will result in a net increase of 54 mgd of water to

Virginia Beach's daily water supply, after adjustment for

amounts lost during transport.

Construction of the Pipeline Project's intake facility was to

result in sediment discharges into the waters of Lake Gaston.

As a result, Section 403(a) of the Federal Water Pollution

Control Act, 33 U.S.C. s 1251 et seq., otherwise known as the

Clean Water Act ("CWA" or "Act"), required Virginia Beach

to obtain a dredge-and-fill permit from the Secretary of the

Army, acting through the Army Corps of Engineers

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("Corps"). 33 U.S.C. s 1344(f)(2). The City filed its application for a Section 403(a) permit with the Corps on July 15,

1983.

Section 401(a)(1) of the CWA provides that "[a]ny applicant

for a Federal license or permit to conduct any activity ...

which may result in any discharge into the navigable waters,

shall provide the ... permitting agency a certification from

the State in which the discharge originates or will originate...." The certification must provide that the discharge

"will comply with the applicable" water quality standards.

Id. s 1341(a)(1). As for those states in which the discharge

does not "originate" but which may otherwise be "affected"

by the discharge, Section 401(a)(2) of the CWA provides a

separate set of procedures to ensure compliance with the

affected state's water quality standards. Id. s 1341(a)(2).

Because the Corps' dredge-and-fill permit is a "Federal

license or permit" for purposes of Section 401(a)(1), Virginia

Beach was required to obtain a water quality certification

from the state of Virginia. Accordingly, Virginia Beach filed

an application with the Virginia State Water Control Board

("VSWCB"), requesting certification of the withdrawal of up

to 60 mgd of water from Lake Gaston. No certification was

sought or received from North Carolina at this time. On

September 12, 1983, the VSWCB issued a Section 401(a)(1)

certification for the Pipeline Project, subject to certain conditions needed to preserve water quality.

Following the issuance of the water quality certification,

the Corps held public hearings on Virginia Beach's application

for a dredge-and-fill permit. Both North Carolina and RRBA

intervened in this proceeding. Upon conclusion of the hearings, the Corps found that 60 mgd would be needed in the

Virginia Beach area by the year 2030, that the Pipeline

Project would have no noticeable impact on downstream

water quality, and that the project would have no significant

impact on the environment. As a result, the Corps issued a

dredge-and-fill permit to Virginia Beach. The issuance of

this permit was ultimately upheld on appeal. North Carolina

v. Hudson, 665 F. Supp. 428 (E.D.N.C. 1987), appeal decided

after remand, 731 F. Supp. 1261 (E.D.N.C. 1990), aff'd sub

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nom. Roanoke River Basin Ass'n v. Hudson, 940 F.2d 58 (4th

Cir. 1991), cert. denied, 502 U.S. 1092 (1992).

In 1991, VEPCO filed an application with FERC, requesting that the Power Project license be amended to permit the

withdrawal of water for the Pipeline Project. The license for

the Power Project was initially issued in 1951 by the Federal

Power Commission, the predecessor of FERC. Virginia

Elec. and Power Co., Project No. 2009: Application for

License Under Federal Power Act, 10 F.P.C. 1 (1951) [hereinafter License Application Order]. The Federal Power Act

("FPA"), 16 U.S.C. s 791a et seq., governs amendments to

FERC licenses and provides that an amendment may be

granted "only upon mutual agreement between the licensee

and the Commission after thirty days' public notice." 16

U.S.C. s 799. Under VEPCO's requested amendment to the

Power Project license, Virginia Beach would be permitted to

withdraw 60 mgd of water from Lake Gaston, decreasing the

flow of water through the Power Project dams by the same

amount.

North Carolina intervened in the license amendment proceeding and requested that FERC prepare an environmental

impact statement ("EIS") pursuant to the National Environmental Policy Act, 42 U.S.C. s 4321 et seq. On July 23, 1993,

FERC issued a draft environmental assessment ("EA") tentatively concluding that the Pipeline Project would have no

unmitigable adverse environmental impacts. After receiving

numerous comments on the draft EA, FERC staff, on June

23, 1994, issued a final EA finding that the proposed Pipeline

Project "constitutes a major federal action significantly affecting the quality of the human environment." As a result,

FERC determined to prepare an EIS to "reflect updated

population and water consumptive projections." In the meantime, North Carolina had petitioned the Commission to stay

its proceeding until VEPCO obtained a Section 401(a)(1)

certification from North Carolina's water control agency.

The Commission took no action on the stay request.

On July 7, 1995, FERC issued a final EIS finding that the

five-city area in the vicinity of Virginia Beach (including

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Chesapeake, Norfolk, Portsmouth, Virginia Beach, and Suffolk) will need 54 mgd of water by the year 2030; that the

proposed water supply project will ensure Virginia Beach a

safe, reliable, and relatively inexpensive source of potable

water; that the Pipeline Project is the best source for meeting that water need; and that the project, subject to additional mitigation measures, should be approved. Final Environmental Impact Statement for Virginia Beach Water Supply

Project at xxii [hereinafter Final EIS]. On July 14, 1995,

North Carolina and RRBA filed a joint motion asking the

Commission to condition any order approving the Project on

North Carolina's issuance of a water quality certification

pursuant to CWA s 401(a)(1). The Commission took no

action on this motion.

Finally, on July 26, 1995, the Commission issued an order

approving VEPCO's application to amend the license under

which the Power Project is operated. Virginia Elec. and

Power Co., Project No. 2009-003: Order Approving NonProject Use of Project Lands and Waters and Amending

License, 72 F.E.R.C. (CCH) p 61,075 (July 26, 1995) [hereinafter License Amendment Order]. In the order, the Commission concluded that Virginia Beach's project is "best adapted

to a comprehensive plan for improving or developing the

waterway for beneficial public purposes" because Virginia

Beach will "be relieved of the serious water supply problems

that have severely constrained the lifestyle of its citizens and

clouded its economic future." Id. at 61,399. Relying on the

findings of its Final EIS, the Commission concluded that by

the year 2030 Virginia Beach and the other regional cities will

need the entire 54 mgd that the Pipeline Project is designed

to provide. Id. at 61,396. In addition, the Commission

concluded that the downstream effects of the Pipeline Project

withdrawals could be sufficiently mitigated by the release of

the water the city had stored upstream in Kerr Reservoir.

Id. at 61,398.

The Commission denied petitioners' request to stay its

proceeding or to withhold its approval until North Carolina

issued a Section 401(a)(1) certification for the Project. Id. at

61,393. The Commission ruled that "even assuming, arguenUSCA Case #95-1500 Document #271070 Filed: 05/09/1997 Page 6 of 46
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do, that the proposed amendment to the [Power Project]

license to accommodate the construction and operation of

Virginia Beach's water supply project is subject to the provisions of Section 401(a)(1)," the certification requirement was

not triggered because the Commission's regulations require a

new certification only for license amendments that will cause

a " "material adverse impact on the water quality in the

discharge from the project.' " Id. at 61,393-94 (quoting from

18 C.F.R. s 4.38(f)(7)(iii)). Relying on the findings and conclusions of its Final EIS, the Commission concluded that a

one-percent reduction in flow releases into the Roanoke River

from the project dam "will not significantly affect water

quality." Id. at 61,394.

Petitioners moved for rehearing. On September 22, 1995,

the Commission denied the motion. Virginia Elec. and Power Co., Project No. 2009-008: Order Denying Rehearing and

Denying Stay, 72 F.E.R.C. (CCH) p 61,283 (Sept. 22, 1995)

[hereinafter Rehearing Order]. The Commission found that

the need for a reliable water source in the area surrounding

Virginia Beach "cannot be disputed." Id. at 62,216. Further,

the Commission reaffirmed its prior ruling that a Section

401(a)(1) certification was not required because VEPCO's

license amendment would not have a "material adverse impact on the water quality in the discharge from the project."

Id. at 62,218. Alternatively, the Commission held that North

Carolina had waived its Section 401 certification claim. Id. at

62,219.

Petitioners then sought review in this court, challenging

FERC's decision to issue the amended license. According to

petitioners, FERC violated CWA s 401(a)(1) by issuing the

amended license without receiving a water quality certification from North Carolina. In addition, petitioners asserted

that certain of FERC's findings necessary to justify issuance

of the amended permit were arbitrary and capricious.

After the first oral argument in this case, we issued an

order remanding the record and directing the Commission to

determine whether the license amendment would involve

"activities ... which may result in any discharge into the

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navigable waters" that "originate" in North Carolina within

the meaning of CWA s 401(a)(1). See North Carolina v.

FERC, No. 95-1494 (D.C. Cir. Sept. 11, 1996) (order remanding record to the Commission). On remand, the Environmental Protection Agency ("EPA" or Agency") filed a letter with

FERC stating that, in its view, the license amendment authorizing the Pipeline Project would result in such a discharge,

thus necessitating a Section 401(a)(1) certification from North

Carolina. Letter from Jonathan Z. Cannon, General Counsel,

EPA, to Lois D. Cashell, Secretary, FERC 1 (October 24,

1996) [hereinafter EPA Letter].1

On November 7, 1996, FERC issued an order in which it

concluded that "the activity that the Commission approved in

this proceeding (the construction and operation of facilities

and withdrawal of water from the Virginia Beach water

supply project) is not an activity that results in a discharge

originating in the State of North Carolina within the meaning

of Section 401(a)(1) of the CWA." Virginia Elec. and Power

Co., Project No. 2009-010: Order on Remand, 77 F.E.R.C.

(CCH) p 61,138 (Nov. 7, 1996) [hereinafter Order on Remand]. More specifically, the Commission found that the

construction and operational activities (and any resulting

discharges originating therefrom) would occur entirely in

Virginia. Id. at 61,518. Because Virginia Beach obtained a

Section 401(a)(1) certification from the state of Virginia, the

Commission determined that the requirements of CWA

s 401(a)(1) were satisfied. Id. at 61,521. We now review the

Commission's orders.

II. Analysis

A. Section 401(a)(1) Certification Claim.

Petitioners first challenge the Commission's conclusion that

Section 401(a)(1) does not require that VEPCO obtain a water

________

1Because we conclude, under the first step of Chevron, that

congressional intent underlying Section 401(a)(1) is clear, infra, we

find it unnecessary to resolve the thorny question as to whether

EPA is entitled to deference as the arguably primary administrator

of the CWA.

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quality certification from the state of North Carolina before

issuing an amendment to VEPCO's license. When reviewing

"an agency's construction of the statute which it administers,"

we apply the two-part test developed by the Supreme Court

in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The first step of the Chevron

test is to ask "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." Id. at 842. If, however, the

congressional intent is not clear, we must then ask "whether

the agency's answer is based on a permissible construction of

the statute." Id. at 843. As discussed in more detail below,

we conclude that the congressional intent underlying Section

401(a)(1) of the CWA is clear and unambiguous.

1. Waiver

Before turning to the merits of petitioners' Section

401(a)(1) claim, we first address FERC's argument that

North Carolina waived its certification right by failing to

assert such during the Corps' dredge-and-fill permit proceeding. The Commission's waiver argument is premised on the

view that, under Section 401(a)(1), it is a state's duty to

request that a license applicant obtain a water quality certification. See FERC's Brief at 40 (referring to North Carolina's failure "to assert a timely request for [a water quality]

certification" (emphasis added)). The Commission plainly

misconstrues Section 401 in this respect.

Section 401(a)(1) provides that "[n]o license or permit shall

be granted until the certification required by this section has

been obtained or waived as provided in the preceding sentence." 33 U.S.C. s 1341(a)(1) (emphasis added). The referenced preceding sentence states that a waiver occurs when a

"State ... fails or refuses to act on a request for certification,

within a reasonable period of time (which shall not exceed one

year) after receipt of such request." Id. (emphasis added).

This language clearly expresses a congressional intent to

place the burden of requesting a state water quality certification on the license applicant. Only after a request has been

made can a state waive its certification right, and then only

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by refusing to respond to the request within a reasonable

period of time. VEPCO, the license applicant in this case,

never requested that North Carolina provide a water quality

certification for the proposed Pipeline Project. Therefore,

under the plain language of Section 401(a)(1), North Carolina

could not have waived its certification right.

Despite the clarity of Section 401(a)(1), FERC proposes

two theories--one statutory and one common law--on which

to base a finding of waiver. First, the Commission argues

that CWA s 401(a)(3) creates an alternative means by which

a state can waive its certification right. Section 401(a)(3)

provides that "[t]he certification obtained pursuant to [CWA

s 401(a)(1)] with respect to the construction of any facility

shall fulfill the requirements of this subsection with respect to

certification in connection with any other federal license or

permit required for the operation of such facility." 33 U.S.C.

s 1341(a)(3). As the Commission reads Section 401(a)(3), any

state having certification rights as to the operation of a

licensed activity must intervene and assert those rights at the

time a license is granted to construct the facilities. Failure to

intervene at the time a construction license is granted will,

according to FERC, result in a waiver of the right to certify

the operation of the project. In support of this argument, the

Commission cites Keating v. FERC, 927 F.2d 616, 620 (D.C.

Cir. 1991), in which we stated that "under section 401(a)(3) of

the Clean Water Act, ..., FERC was obliged to accept the

certification underlying the Corps permit as satisfying the

state certification with respect to ... [the FERC] license

application."

To be sure, Section 401(a)(3) does provide that a certification obtained during a facility's construction stage will satisfy

the Section 401(a)(1) certification requirement at the project's

operational stage. Section 401(a)(3) does not, however, require a state with certification rights pertaining only to the

operation of a project to assert those rights at the time a

construction permit is issued for the project. By its terms,

Section 401(a)(3) provides only that a construction certification actually "obtained" from a state will satisfy the certification requirement as to the operation of the project. As

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discussed above, no water quality certification was obtained

from North Carolina at the construction stage of the Pipeline

Project. Only the state of Virginia certified the Project's

construction.

The Commission responds that it is irrelevant for purposes

of Section 401(a)(3) that only Virginia certified the construction of the Pipeline Project. As the Commission reads Section 401(a)(3), a certification obtained at a project's construction stage from the state in which construction discharge will

originate obviates the need to obtain a certification from

those other states in which a discharge will originate as a

result of the project's operation. To the extent a state in

which an operational discharge will originate wishes to exercise its right to certify the operation of a project, that state

must intervene and assert its certification rights during the

construction permit proceeding. We disagree.

Section 401(a)(3) provides that obtaining a constructionstage certification satisfies the need to obtain an operational

certification from "the certifying State." See 33 U.S.C.

s 1341(a)(3). Not one word of Section 401(a)(3) in any way

indicates that the construction-stage certification satisfies the

need to obtain an operational certification from another state

in which only an operational discharge will originate. Nor

does the section require that such other state intervene in the

construction permit proceeding and assert its right to certify

the operation of the project. Indeed, to so hold would place

the burden of requesting a certification on the certifying state

directly contrary to Section 401(a)(1)'s express requirement

that the license applicant initiate the "request for certification." Id. s 1341(a)(1).

The Keating case upon which FERC relies in attempting to

avoid this interpretation of Section 401(a)(3) is easily distinguishable. In Keating, the state of California issued a blanket certification in connection with an applicant's request for

a Corps' dredge-and-fill permit. 927 F.2d at 619-20. When a

party subsequently attempted to use the blanket certification

to obtain a FERC license, the state purported to revoke its

earlier certification. Id. at 620. On petition for review, we

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held that once a state grants certification in a dredge-and-fill

permit proceeding, "section 401(a)(3) permits state revocation

of the prior certification only if certain conditions are met."

Id. at 624. Absent such conditions, "FERC was obliged to

accept the certification underlying the Corps permit as satisfying the state certification requirement with respect to Keating's [FERC] license application." Id. at 620. In this case,

as there was no "prior certification" by the state of North

Carolina but only by the state of Virginia, the Keating case is

inapposite.

The Commission's second theory of waiver is based on the

common law doctrine of claim preclusion. The Commission

would have us read that doctrine into Section 401(a)(1).

During the dredge-and-fill permit proceeding, the Corps specifically considered the environmental impacts not only of the

project construction, but also of its operation and resultant

discharges in North Carolina. Further, the Corps proceedings involved the same issues, parties, and discharge as are

involved in the proceeding before FERC. As a result, the

Commission argues, North Carolina's failure to raise its

Section 401(a)(1) certification claim before the Corps should

bar it from raising the claim in this proceeding.

In response, North Carolina argues that the common law

defense of claim preclusion cannot now be raised because it

did not form the actual basis for FERC's order. While it is

true that "a reviewing court, in dealing with a determination

or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely

on the grounds invoked by the agency," Securities & Exch.

Comm'n v. Chenery Corp., 332 U.S. 194, 196 (1947), it appears

that the Commission's order was based in part on the doctrine of claim preclusion. The Commission's Rehearing Order states that North Carolina's certification right was

"waived" and also refers to the fact that consideration of the

certification claim "would reopen an issue that has already

been put to rest by the ... Corps ... and the courts in the

Hudson litigation." 72 F.E.R.C. at 61,218-19. These statements indicate that FERC did rely, at least in part, on the

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doctrine of claim preclusion in rejecting North Carolina's

certification claim.

Nevertheless, we believe that the Commission erred in

reading the doctrine of claim preclusion into Section 401(a)(1).

As discussed above, that section clearly provides that a

Federal license or permit may not be granted "until the

certification required by [Section 401(a)(1)] has been obtained

or has been waived" as a result of a state's "refus[al] to act on

a request" for such in a timely manner. 33 U.S.C.

s 1341(a)(1). We see no room for the doctrine of claim

preclusion in such a precisely worded provision. To hold

otherwise would, in our view, require us to usurp the legislative function. This we cannot do.

In sum, we do not believe that North Carolina waived its

certification right. We therefore turn to the merits of the

certification claim.

2. Merits

Petitioners maintain that the Commission improperly interpreted Section 401 of the CWA and, as a result, erroneously

issued an amended license to VEPCO without first requiring

that a water quality certification be obtained from the state of

North Carolina. As quoted above, Section 401(a)(1) of the

CWA provides that "[a]ny applicant for a Federal license or

permit to conduct any activity ... which may result in any

discharge into the navigable waters, shall provide the licensing or permitting agency a certification from the State in

which the discharge originates or will originate...." 33

U.S.C. s 1341(a)(1). In the case of a license amendment, a

Commission regulation interpreting this section requires the

applicant to obtain a new water quality certification only "if

the amendment would have a material adverse impact on the

water quality in the discharge from the project." 18 C.F.R.

s 4.38(f)(7)(iii) (1995).

In the initial order granting an amendment to the Power

Project license, the Commission assumed arguendo that the

activity licensed by the amendment would result in a "discharge." However, relying on its regulation, the Commission

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concluded that a water quality certification from North Carolina was unnecessary given that "the amendment to the

license [would] not have a "material adverse impact on the

water quality in the discharge from the project.' " License

Amendment Order, 72 F.E.R.C. at 61,393-94 (quoting 18

C.F.R. s 4.38(f)(7)(iii)).

After the first oral argument in this case, we remanded the

record to the Commission to answer the "logically antecedent" question whether the proposed amendment to the Power

Project license to accommodate the construction and operation of the Pipeline Project is subject to the provisions of

Section 401(a)(1). See North Carolina v. FERC, No. 95-1494,

at 1-2 (D.C. Cir. Sept. 11, 1996) (order remanding record to

Commission). On remand, the Commission altered its reasoning on the Section 401(a)(1) issue, concluding that a water

quality certification was unnecessary because the license

amendment would not result in a "discharge" as that term is

used in Section 401(a)(1). See Order on Remand, 77

F.E.R.C. at 61,517. Alternatively, the Commission found that

"even if the word "discharge' is ultimately determined to be

broad enough to include the removal of water," the license

amendment would still not be subject to the requirements of

Section 401(a)(1) as "the activity involved in enabling such

removal occurs entirely (i.e., for CWA purposes "originates'

in) Virginia, and not in North Carolina." Id. at 61,518.

As an initial matter, we note that on remand the Commission discarded 18 C.F.R. s 4.38(f)(7)(iii) as an alternative

basis for upholding the decision not to require that a water

quality certification be obtained from North Carolina. As a

result, we need not address the legality of that regulation

despite our serious reservations concerning FERC's attempt

to redefine the statutory phrase "any discharge," 33 U.S.C.

s 1341(a)(1), to mean only those discharges that are "material," 18 C.F.R. s 4.38(f)(7)(iii). We need only review the

Commission's interpretation of Section 401(a)(1) itself.

Petitioners argue that the Commission's orders misinterpret the requirements of Section 401(a)(1). According to

petitioners, the relevant statutory "activity" is VEPCO's

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"substantially altered operation" of the Power Project under

which less water will flow through the dam turbines thus

generating less electricity. These alterations in the operation

of the Power Project will, petitioner argues, "result in an

altered discharge."2 Alternatively, petitioners argue that the

relevant "activity" is the operation of the Pipeline Project,

which will result in "a new and different discharge." In

either case, petitioners contend, a discharge "originates" at

the point where water exits the dam turbines in North

Carolina under the Supreme Court's holding in PUD No. 1 of

Jefferson County v. Washington Dep't of Ecology, 511 U.S.

700 (1994). As a result, they conclude that a Section 401(a)(1)

certification from North Carolina was required.

The Commission responds that the "activities" licensed in

this case are the construction and operation of the Pipeline

Project. The construction of the Pipeline Project resulted in

a discharge of dredged material only in Virginia. The operation of the Pipeline Project, by contrast, will result in no

"discharge" at all as the Project will only withdraw water

from and add nothing to Lake Gaston. The fact that the

amended license will result in an "altered discharge" at the

North Carolina dam cannot, FERC argues, constitute a basis

for granting certification rights to North Carolina. To hold

otherwise would render superfluous Section 401(a)(2) governing the rights of those states affected by license amendments.

We agree with the Commission that the "activities" licensed

by the amendment are the construction and operation of the

________

2Our dissenting colleague suggests that "[l]ogically, if a State

must consent before a new discharge is introduced into its waters,

then a change in that discharge must require a new consent."

Dissent at 3. The logic escapes us. The statute provides that the

right of certification arises from an "activity ... which may result

in any discharge...." The triggering event is the causation of the

discharge. Under our colleague's reasoning, a statute referring to

"conduct resulting in injury" would include conduct which reduced

injury. A transaction "resulting in financial loss" would include a

transaction which prevented financial loss. Neither in those hypotheticals nor in this actual case does either logic or language lead us

to our colleague's conclusion.

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Pipeline Project. As no party contends that the construction

of the Pipeline Project resulted in a discharge "originat[ing]

in North Carolina, only the operation of the Project is

relevant for our purposes. Even assuming arguendo that the

flow of water through the Power Project dam turbines is a

"discharge" as that term is defined in the CWA,3 we fail to

see how operation of the Pipeline will "result in any discharge."

The Lake Gaston Power Project has operated under a

FERC license for many years. See License Application

Order, 10 F.P.C. at 18-19. Under that license, water has

been passing through the dam turbines. Had the license

amendment not been granted, water would have continued

passing through the dam turbines. The amendment does not

permit VEPCO to release additional water through the turbines. It simply permits VEPCO "to authorize the City of

Virginia Beach, Virginia to withdraw up to 60[mgd] of water

from the Project No. 2009 Lake Gaston reservoir." License

Amendment Order, 72 F.E.R.C. at 61,400. These facts lead

us to agree with FERC that the "activity" authorized by the

license amendment is the operation of the Pipeline Project

and its resultant withdrawal of water from Lake Gaston.

We recognize that the withdrawal of water from Lake

Gaston will reduce the volume of water passing through the

dam turbines. But neither the withdrawal of water from the

Lake nor the reduction in the volume of water passing

through the dam turbines "results in a discharge" for purposes of Section 401(a)(1). 33 U.S.C. s 1362 is the definitional section for chapter 26 of Title 33, the chapter that includes

________

3Our dissenting colleague suggests that PUD No. 1, supra, and

Nat'l Wildlife Fed'n v. FERC, 912 F.2d 1471 (D.C. Cir. 1990) (per

curiam), compel the conclusion that we assume. While we do not

interpret either of those opinions as compelling such a conclusion,

since we are willing to assume so for purposes of this case, there is

no point in our pursuing the distinctions at any length. Suffice it to

say that we are satisfied for the reasons set forth at pp. 18-19,

infra, that a construction of the statutory language herein is in no

way inconsistent with PUD No. 1 or National Wildlife.

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the CWA. That section does not provide an express definition of the term "discharge" but rather provides a statement

of inclusion: "The term "discharge' when used without qualification includes a discharge of a pollutant, and a discharge of

pollutants." 33 U.S.C. s 1362(16). Thus, we find useful in

our analysis 33 U.S.C. s 1362(12), which defines the terms

"discharge of a pollutant" and "discharge of pollutants" as

"mean[ing] (A) any addition of any pollutant of navigable

water from any point source, and (B) any addition of any

pollutant to the waters to the contiguous zone ... from any

point source other than a vessel or other floating craft."

Thus, although the focus of the definitional section is on the

regulation of pollutants rather than the general regulation of

project discharges, the nearest evidence we have of definitional intent by Congress reflects, as might be expected, that the

word "discharge" contemplates the addition, not the withdrawal, of a substance or substances.4

On the evidence of record, the operation of the Pipeline

Project will not result in the "addition" of anything to the

waters of Lake Gaston. Obviously, the withdrawal of water

from Lake Gaston will add nothing; nor will the withdrawal

of water from Lake Gaston increase the volume of water

flowing through the turbines of the Project dams. Indeed,

________

4Our dissenting colleague "reject[s] the majority's "substanceadding' threshold condition on the exercise of State certification

rights." Dissent at 4. The threshold is not ours, but Congress's.

Granted, the congressional instruction of "discharge" in 33 U.S.C.

s 1362(16) does not define discharge, but rather describes it as

including "discharge of a pollutant" which Congress has heretofore

defined in s 1362(12) as "mean[ing] ... any addition of any pollutant ...." (emphasis added). It would seem to us apparent that

since Congress meant "discharge" to include "discharge of a pollutant" then Congress intended the word "discharge" to be defined in

the inclusive use consistently with the included use. Therefore, if

"discharge of a pollutant" requires addition, then the inclusive

understanding of "discharge" also requires an addition. Indeed, we

have seen no definition of "discharge" in any source, including the

dissent, which suggests that that term includes withdrawal or

reduction.

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that is petitioners' very point; the volume of water flowing

through the turbines will decrease as a result of the project.

Order on Remand, 77 F.E.R.C. at 61,519-20. A decrease in

the volume of water passing through the dam turbines cannot

be considered a "discharge" as that term is defined in the

CWA. Save Our Community v. United States EPA, 971

F.2d 1155, 1165 (5th Cir. 1992) (holding that removal of water

from wetlands is not a "discharge" for purposes of Section

404 of the CWA).

We are not persuaded by petitioners' argument that Section 401(a)(1) confers certification rights upon North Carolina

merely because operation of the Pipeline Project will "result

in an altered discharge" through the dam turbines. Stating

that operation of the Pipeline Project will "result in an altered

discharge" is simply a way of saying in legalese that operation

of the Pipeline Project will alter the discharge. However, the

existence of certification rights under Section 401(a)(1) does

not depend on whether a discharge is "altered." Section

401(a)(1) certification rights vest only if an activity "may

result in" a discharge. This distinction is of no small moment. The word "alter" means to change something from its

previous state, Webster's New Int'l Dictionary 63 (3rd ed.

1961) ("to cause to become different"), implying that the thing

changed was already in existence. By contrast, the word

"result" implies causation. See id. at 1937 ("arise as a

consequence"). Obviously, a subsequent event cannot be the

cause of something that is already in existence. Given the

disparity between petitioners' proposed test and the words of

the Act, we elect to remain faithful to the language chosen by

Congress and require that an activity "result in" a discharge

in order to trigger the certification requirements of Section

401(a)(1).

Our conclusion that the operation of the Pipeline Project

will not result in a "discharge" is in no way inconsistent with

the Supreme Court's opinion in PUD No. 1, supra. In that

case, the state of Washington had issued a water quality

certification under Section 401(a)(1) imposing a variety of

conditions on the proposed project, including a minimum

stream flow requirement. 511 U.S. at 709. The license

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applicants argued that the minimum stream flow requirement

was unlawful in that it was "unrelated to the[ ] specific

discharges" at issue. Id. at 711. The Supreme Court rejected this argument, stating that:

If s 401 consisted only of subsection (a), which refers to

a state certification that a "discharge" will comply with

certain provisions of the Act, petitioners' assessment of

the scope of the State's certification would have considerable force. Section 401, however, also contains subsection (d), which expands the State's authority to impose

conditions on the certification of a project.

Id. at 711. As the Court read Section 401, subsection (a)

"identifies the category of activities subject to certification--

namely those with discharges"--while subsection (d) authorizes a state to place "additional conditions on the activity as

a whole once the threshold condition, the existence of a

discharge, is satisfied." Id. at 711-12. But the Court never

attempted to define a discharge and in no way indicated that

an alteration of a discharge was sufficient to invoke the

certification requirement of Section 401(a)(1). PUD No. 1

therefore is inapposite.

Nor is our conclusion that the operation of the Pipeline

Project will not result in a "discharge" in conflict with our

holding in National Wildlife Fed'n, supra. In National

Wildlife, we held that the Commission did not abuse its

discretion in concluding that the discharge resulting from the

construction and operation of a new dam "originate[d] by the

dam" where the flow of water was blocked resulting in a

water backup. 912 F.2d at 1484. This holding is distinguishable in two respects from the case at hand. First, the parties

in National Wildlife did not dispute whether the construction

and operation of the dam would create a discharge. The

issue there was where that discharge would "originate." See

id. at 1483-84. In addition, the National Wildlife case

involved the creation of a discharge as a result of the construction and operation of a new dam. Id. at 1473. That

case did not involve an alteration (much less a volume reduction) of a preexisting discharge.

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Because we conclude that the withdrawal of water from

Lake Gaston resulting in a decrease in the volume of a

preexisting discharge is not an activity that "results in any

discharge" for purposes of the Section 401 of the CWA, we

must reject petitioners' claim that the Commission erred

when it granted VEPCO's request for a license amendment

without requiring that a water quality certification first be

obtained from the state of North Carolina.

B. Arbitrary and Capricious Claims.

Petitioners also assert that the findings underlying the

Commission's decision to grant the amendment to VEPCO's

license were not supported by substantial evidence and that

the decision itself was arbitrary and capricious. Under the

FPA, we review a Commission licensing decision to determine

whether the factual findings underlying the decision were

"supported by substantial evidence." 16 U.S.C. s 825l(b).

We also review Commission licensing decisions to determine

whether they were "arbitrary and capricious." Bangor v.

Hydro-Electric Co. v. FERC, 78 F.3d 659, 663 & n.3 (D.C.

Cir. 1996). In both cases, the review is quite deferential. So

long as the Commission has examined the relevant data and

provided a "reasoned explanation supported by a stated connection between the facts found and the choice made," we will

defer to the agency's expertise. United States Dep't of

Interior v. FERC, 952 F.2d 538, 543 (D.C. Cir. 1992). Applying these principles of review, we consider each of petitioners'

claims.

1. Need for 54 mgd of water.

Petitioners first challenge the Commission's conclusion that

there is a "need" for the Pipeline Project. Section 10(a) of

the FPA provides that the project for which a Commission

license is issued must

be such as in the judgment of the Commission will be

best adapted to a comprehensive plan of improving or

developing a waterway or waterways for the use or

benefit of interstate or foreign commerce, for the improvement and utilization of water-power development,

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for the adequate protection, mitigation, and enhancement

of fish and wildlife ..., and for other beneficial public

uses, including irrigation, flood control, water supply,

and recreational and other purposes....

16 U.S.C. s 803(a)(1) (emphasis added). The parties all agree

that, under this provision, the Commission could only issue

the license amendment authorizing the Pipeline Project if the

Commission, in its judgment, determined that there is a need

for 54 mgd of water in Virginia Beach. The only issue here is

whether the Commission's conclusion that there is such a

need was supported by substantial evidence.

The Commission relied on the findings of its Final EIS in

concluding that the five-city Virginia Beach region would

need 54 mgd of water by the year 2030. Rehearing Order, 72

F.E.R.C. at 62,216. The Final EIS calculation of water need

was derived from three figures: (1) projected water demand

in the five-city region by the year 2030, (2) projected supply

in that region by 2030, and (3) a drought margin. Final EIS

at 1-6 to 1-22. The demand projection was a function of the

five-city region's projected population and per capita water

use in the year 2030. Id. at 1-9 to 1-13. Projected supply

was based on the "safe yield" of available water sources in the

five-city region. Id. at 1-16 to 1-20. The difference between

the projected supply and the projected demand equaled the

water supply deficit for the five-city region. Id. at 1-20.

Then, in order to ensure "sound water supply planning," a

drought margin was added to the water supply deficit to

reach the 54 mgd of water need. Id. at 1-21. Petitioners

challenge each step of this water need calculation. We

consider these challenges in turn.

a. Population Projection.

Petitioners first contest the Commission's population projection for the year 2030. In formulating its population

projection, the Commission had before it six different population projections, only four of which attempted to project the

five-city region's population through the year 2030. The

Commission elected not to use any of the 2030 projections.

Instead, the Commission selected the population projection

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prepared by the Hampton Roads Planning District Commission ("HRPDC") which projected the population of the fivecity region through the year 2015. That projection, according

to the Commission, was "the most reasonable in that [it]

considered local economic factors ... and the recent decrease

in the region's growth rate." Final EIS at 1-12. The

Commission then extrapolated the HRPDC projection

through 2030 using the average annual growth rates underlying two of the four 2030 projections. The result was a

population projection of 1,306,000 for the five-city region.

Petitioners argue that this projection was arbitrary and

capricious in that extrapolation of the HRPDC estimate was

based on growth rates from projections the Commission had

"rejected as too high." North Carolina's Brief at 32. We

disagree. The Commission explained that the HRPDC estimate was chosen as "the most reasonable" because it considered "local economic factors." While the Commission's calculation of an extrapolation rate was based on the average

growth rates from population projections rejected by the

Commission as less "reasonable" than the HRPDC projection,

the fact that these estimates were less "reasonable" does not

necessarily make them unreasonable or arbitrary. Projections of any kind--especially those extending 40 years into

the future--are necessarily speculative, inexact, and riddled

with uncertainty. But at times, such as here, projections

must be made. The mere fact that the Commission relied on

necessarily imperfect information in calculating an extrapolation rate for the years 2015 to 2030 does not render the

projection arbitrary. An agency need not "have perfect

information before it takes any action." United States Dep't

of the Interior v. FERC, 952 F.2d 538, 546 (D.C. Cir. 1992).

In the face of "serious uncertainties," an agency need only

"explain the evidence which is available, and ... offer a

"rational connection between the facts found and the choice

made.' " Motor Vehicle Mftrs. Ass'n of the United States v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983)

(quoting Burlington Truck Lines, Inc. v. United States, 371

U.S. 156, 168 (1962)). The Commission has done so.

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b. Per Capita Use Projection.

Petitioners also contest FERC's projected per capita water

use figure of 118 gallons per capita per day ("gpcd") as

arbitrarily inflated. First, RRBA contends that the Commission reached its projected water use rate simply by taking the

1990 actual use rate for the five-city region of 121 gpcd and

subtracting 3 gpcd to account for future improvements in

water use efficiency. Reliance on a single year's data to

develop a long-term projection is, according to RRBA, arbitrary and capricious.

RRBA's depiction of the process by which the Commission

developed its water use projection is without basis in the

record. The Commission clearly explained that its projected

use figure was the product of a long-term "trend analysis."

Rehearing Order, 72 F.E.R.C. at 62,217. In reaching its

projection, the Commission began by noting that the use

projections for Virginia Beach alone "cluster[ed] around 100

gpcd" with actual use in 1990 for the entire five-city region

equaling 121 gpcd. Final EIS at 1-12. The Commission

went on to explain that it expected these figures to rise as

Virginia Beach and its surrounding areas became more urbanized. Id. at 1-12 to 1-13. However, the Commission also

recognized that water conservation measures required by the

Federal Energy Policy Act of 1992 were likely to result in a

demand reduction of approximately 3.7 mgd. Id. at 1-13 to

1-15. Taking all of these factors into account, the Commission concluded that a projected per capita use rate of 118

gpcd was "reasonable for planning purposes." Id. at 1-15.

North Carolina asserts that the Commission's water use

projection is arbitrary as demonstrated by Virginia Beach's

concession that water use in the five-city region is declining.

North Carolina too misstates the record. Virginia Beach did

not concede that water use in the five-city region is declining,

but only that it had "decline[d] slightly between 1990 and

1994." The Commission recognized and explained this decline as an expected year-to-year variation in demand.

North Carolina also asserts that Virginia Beach conceded

that the water use data in the Commission's Final EIS was

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erroneous. Again, North Carolina misinterprets the record.

What the city actually conceded was that one of the many

figures relied upon by the Commission in developing a 40-

year water use projection contained some minor computational errors. North Carolina, however, has not demonstrated

that the erroneous figure was integral to the Commission's

water use projection or that revision of the figure would

result in an altered projection. As a result, the error was

harmless. See Chemical Waste Mgmt., Inc. v. United States

EPA, 976 F.2d 2, 32 (D.C. Cir. 1992), cert. denied, 507 U.S.

1057 (1993).

North Carolina further argues that the Commission's water

use projection of 118 gpcd is grossly excessive in light of the

actual per capita water use in Virginia Beach during 1990 of

89 gpcd. This argument too is not persuasive. The Commission elected to project a water use rate for the entire five-city

region, rather than for Virginia Beach alone "because of the

existing interconnectedness of the system and the growing

trend toward regional water sharing." Rehearing Order, 72

F.E.R.C. at 62,216. While the Commission's projected use

figure for the five-city region exceeds the actual use figure for

Virginia Beach, it is significantly less than the actual use

rates of the more urbanized municipalities in the region such

as Norfolk (166 gpcd) and Portsmouth (160 gpcd). Moreover,

the Commission expected that per capita use rates in Virginia

Beach and the other municipalities would likely increase as

those areas became more urbanized. Final EIS at 1-12 to

1-13. These considerations led the Commission reasonably

to conclude that a projected use rate of 118 gpcd was most

appropriate.

Still further, petitioners together argue that the Commission's use rate projection is arbitrary in that it was developed

without reference to more recent use rate data. According to

petitioners, the Commission relied solely on 1990 use rate

data in developing its projection despite the fact that more

recent data indicated that use rates are declining. Petitioners contend that the Commission's failure to utilize this more

recent data was arbitrary and capricious. We must again

disagree with petitioners.

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As discussed above, the assertion that the Commission

relied solely on 1990 use rate data in developing its use rate

projection is without merit. Moreover, the Commission clearly explained its decision not to rely on the more recent water

use data. According to the Commission, the more recent

data was "somewhat misleading" in that it considered "finished water only" and was "not corrected to account for water

from municipal wells of the portion of the population not

served by public water." When the data was adjusted to

account for these deficiencies, the Commission concluded that

it showed only a small decline in per capita water use which

was easily explained as an expected year-to-year variation in

a long-term demand projection. Rehearing Order, 72

F.E.R.C. at 62,217. RRBA challenges the accuracy of this

explanation on several grounds. However, the Commission

refused to consider each of these arguments on the ground

that they were not raised in a timely motion for reconsideration. Id. at 62,217 n.11. The review provisions of the FPA

provide that a party "aggrieved by an order issued by the

Commission ... may apply for a rehearing within thirty days

after the issuance of such order." 16 U.S.C. s 825l(a). An

objection not raised before the Commission in a timely request for rehearing may not be considered by this court. Id.

s 825l(b). There is no dispute that petitioners did not contest the Commission's explanation within the thirty-day time

period. As a result, we are precluded from considering the

issue on appeal.

c. Water Demand Projection.

Relying on its population and water use projections, the

Commission derived a water demand figure for the five-city

region for the year 2030. The Commission first adjusted its

population projection of 1,306,000 to reflect the fact that only

approximately 93.8 percent of the population will be served by

public water in 2030. Multiplying this adjusted population

figure by the projected per capita water use figure of 118

gpcd, the Commission reached a projected water demand for

the five-city region of 144.6 mgd. Final EIS at 1-15 to 1-16.

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RRBA argues that the Commission erred in concluding

that 93.8 percent of the five-city region's population would be

served by public water in 2030. However, this claim was not

raised in petitioners request for rehearing. We are therefore

barred from considering the issue on appeal. 16 U.S.C.

s 825l(b).

d. Water Supply Projection.

Petitioners next challenge as arbitrary the Commission's

projected water supply "safe yield" of 112.8 mgd. "Safe

yield" is defined as the quantity of raw water that could be

withdrawn from a water source during the worst dry period

of record since 1930 without depleting the source. Final EIS

at 1-16 to 1-17. Petitioners first argue that FERC's calculation of water supply arbitrarily excluded 3 mgd of water

available from aquifer storage and recovery ("ASR") systems.

In its Rehearing Order, the Commission explained that the

ASR system was not relevant to the calculation of water

supply in that it "is not a new source of water." An ASR

system "merely stores water from the existing supply for

retrieval at a later date," and thus is not relevant to a

calculation of long-term water supply. Rehearing Order, 72

F.E.R.C. at 62,217. The Commission further explains the

relevance of its grounds for rejecting the ASR system data by

noting that "an ASR system can accommodate only short

term (seasonal) supply and demand; it does not resolve the

significant long term regional water deficit described in the

FEIS." Id. North Carolina's position that the ASR is

relevant to the water available to a portion of the five-city

area may be a reasonable one. However, FERC has considered and rejected that position in the language quoted above.

It is not our role under an arbitrary and capricious review to

reweigh the evidence, and we cannot say that the Commission's response to this comment was so unreasonable as to fail

the deferential standard we must apply.

Petitioners make much of the fact that the Commission's

draft EIS erroneously concluded that the Chesapeake ASR

system had been abandoned due to cost. However, this error

was not repeated in the Commission's Rehearing Order. See

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72 F.E.R.C. at 4006. A final agency order is not rendered

arbitrary and capricious simply because preliminary agency

decisions contained errors. "Indeed, the very purpose of

issuing tentative decisions is to afford the Commission an

opportunity to correct any errors." Freeman Eng'g Assocs.,

Inc. v. FCC, 103 F.3d 169, 179 (D.C. Cir. 1997).

Finally, petitioners assert that the Commission, without

explanation, excluded from its calculation of water supply 2

mgd of water available through reservoir modifications. As

we read the Rehearing Order, the Commission's discussion of

ASR systems was also meant to apply to the reservoir

modification issue. Neither ASR systems nor reservoirs are

new sources of water; both simply store water from existing

supplies for use at a later time. Thus, under the Commission's reasoning, neither was relevant to a calculation of longterm water supplies. We recognize that the Commission's

discussion of this issue was far from a model of clarity. But

petitioners' discussion of the issue in their request for rehearing was tucked away in a footnote in a paragraph primarily

devoted to a discussion of ASR systems. Under these circumstances, the Commission "cannot be asked to make silk

purse responses to sow's ear arguments." City of Vernon v.

FERC, 845 F.2d 1042, 1047 (D.C. Cir. 1988).

e. Drought Margin.

Having projected water supply and demand for the five-city

region, the Commission subtracted the former from the latter

to reach a regional water supply deficit of 31.8 mgd. To this

figure the Commission added a drought margin of 22.2 mgd

to reach the projected water need of 54 mgd. Final EIS at

1-20 to 1-21. Petitioners raise several objections to this

drought margin.

Petitioners first contend that a drought margin of any size

is unnecessary given that the Commission's calculation of

water supply was based on the "safe yield" which is defined

as the quantity of raw water that could be withdrawn from a

water source during the worst dry period of record since 1930

without depleting the source. We reject this argument.

While the Commission's calculation of water supply was based

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on the quantity of water available during drought conditions,

the calculation also assumed "complete interconnection and

optimization of the five-city water systems ..., the imposition

of mandatory water use restrictions or rationing during

droughts, and depletion of water storage during a drought of

equal or greater severity than that on which the safe yield

estimates are based." Final EIS at 1-20 to 1-21. But as the

Commission explained, these assumptions are not consistent

with "sound water supply planning" given that: (1) especially

severe droughts might occur, (2) water sharing within the

five-city region was not guaranteed, (3) water restrictions

create public health and safety risks, and (4) future water

demand might exceed projections. Id. at 1-21. It was to

protect against these eventualities that an additional drought

margin was included. We cannot say that such precautions

are arbitrary or capricious.

In addition to objecting to the drought margin per se,

North Carolina also objects to the Commission's calculation of

the margin. North Carolina contends that it was arbitrary

for the Commission to calculate the drought margin without

taking into account the 50 mgd of water available from

emergency wells during droughts. We disagree. The emergency wells in the five-city area are all owned by the jurisdictions surrounding Virginia Beach. While the wells are presently being leased back to Virginia Beach, these leases all

expire by 1998 and the surrounding jurisdictions have indicated that they do not intend to renew the leases. Rehearing

Order, 72 F.E.R.C. at 62,217. Therefore, it was entirely

appropriate for FERC to exclude emergency well supplies

when calculating the quantity of water that will be available

for drought emergencies in the year 2030.

In a similar vein, North Carolina also argues that, in

calculating the drought margin, the Commission arbitrarily

failed to consider demand management techniques that could

be employed during times of drought. This argument is

without merit. The Commission clearly explained that it

considered demand management techniques such as water

rationing and use restrictions to be a threat to public safety

and health. Final EIS at 1-21. For this reason, such

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measures were rejected as a solution to the five-city region's

long-term water supply deficit.

Finally, RRBA argues that the Commission erred in simply

adopting a Corps calculation of the necessary drought margin

without independently verifying the Corps calculation. See

40 C.F.R. s 1506.5. The Commission contends that we

should not reach this argument because it was not advanced

before the Commission. In their rehearing motion, petitioners objected to the Commission's reliance on population and

water use projections supplied "by the cities to be served by

the project and the [HRPDC]." Rehearing Motion at 8.

Petitioners did not object to the Commission's reliance on the

Corps' drought margin calculation. We therefore agree with

the Commission that petitioners waived this objection. 16

U.S.C. s 825l(b).

In sum, we hold that the Commission's calculation of water

need for the five-city region was supported by substantial

evidence and was neither arbitrary nor capricious.

2. Kerr Reservoir

Petitioners also maintain that the Commission failed to

respond to significant comments concerning the availability of

Kerr Reservoir water for purposes of mitigating the Pipeline

Project's environmental effects on the Roanoke River. As

mentioned above, the Commission prepared an EIS for the

Pipeline Project analyzing the effects of the Project on the

Roanoke River Basin. Final EIS at 3-1, 5-2. The EIS

concluded that the Project withdrawals will "not have any

significant adverse effects" on the Basin. Id. at 6-4. This

conclusion was premised on the Commission's belief that the

water Virginia Beach had stored in Kerr Reservoir would be

available for release to mitigate the Project's downstream

effects. Id. at 4-31. Petitioners contend, however, that

evidence before the Commission demonstrated that Virginia

Beach was not legally entitled to order releases from Kerr

Reservoir.

Petitioners' argument is without merit. The Commission

concluded in its License Amendment Order that "Virginia

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Beach would be able to use its stored water to replace

withdrawals on a gallon-for-gallon basis" to meet the striped

bass target flows. 72 F.E.R.C. at 61,398. This conclusion

appears consistent with the provisions of Virginia Beach's

contract with the Corps for the storage of water in Kerr

Reservoir which provides that Virginia Beach has the "right

to order releases to be made" subject only to the government's rights to maintain downstream releases to meet established water requirements, to preserve life and/or property,

and to maintain the project facilities. See Contract Between

the United States of America and the City of Virginia Beach

for Water Storage in Kerr Reservoir at 3. To the extent that

evidence presented by petitioners contradicted the express

language of this contract, it was rejected by the Commission.

3. Other Claims.

Petitioners claim that the Commission's decision was arbitrary and capricious in numerous other respects. Having

considered each of these arguments carefully, we find them

unworthy of separate discussion. Suffice it to say that we

reject each of the additional claims.

III. Conclusion

For the foregoing reasons, we conclude that the Commission was not required to obtain a water quality certification

from the state of North Carolina prior to granting the

amendment to VEPCO's license for FERC Project No. 2009.

We further conclude that the Commission's order granting

the license amendment was neither arbitrary nor capricious.

We therefore deny the petition for review.

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Wald, Circuit Judge, dissenting: The majority holds (1)

that the Federal Energy Regulatory Commission ("FERC")

did not err in granting the Virginia Electric and Power

Company ("VEPCO") an amendment to its license for the

Lake Gaston power project authorizing the withdrawal of

sixty million gallons per day of project water without requiring VEPCO to obtain a water quality certification from the

State in which the power project's "discharge" originates, and

(2) that FERC's decision to issue this license amendment was

not arbitrary and capricious. I disagree with both of these

propositions.

A. North Carolina's Clean Water Act s 401(a)(1) Certification Rights

The first paragraph of the Federal Water Pollution Control

Act, popularly known as the Clean Water Act ("the Act"),

declares that its goal is to "restore and maintain the chemical,

physical, and biological integrity of the Nation's waters." 33

U.S.C. s 1251(a). The second subsection sets forth Congress'

overarching policy in the Act, of "recogniz[ing], preserv[ing],

and protect[ing] the primary responsibilities and rights of

States to prevent, reduce, and eliminate pollution...." Id. at

s 1251(b). The Act charges each State with the duty of

instituting comprehensive standards establishing quality goals

for all intrastate waters. See 33 U.S.C. ss 1311(b)(1)(C),

1313.

Section 401(a)(1) of the Act, 33 U.S.C. s 1341(a)(1), implements the policy of empowering States to protect their water

quality programs by authorizing them to veto federal licenses

or permits that threaten to undermine the quality of their

waters. Specifically, s 401(a)(1) requires "[a]ny applicant for

a Federal license or permit to conduct any activity ... which

may result in any discharge into the navigable waters" to

provide the licensing or permitting agency with "a certification from the State in which the discharge originates or will

originate" that the discharge does not threaten the water

quality standards that the State has implemented pursuant to

other provisions of the Act. Id. I disagree with the majority's conclusion that North Carolina had no such certification

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right with regard to this license amendment, because I believe it ignores the language, structure, and purpose of the

Act, and wrests away from North Carolina the very power to

make water quality judgments about its own waterways that

Congress expressly meant for that State alone to have.

The s 401 certification right is an essential component of

the Act's state-oriented regulatory scheme. See Keating v.

FERC, 927 F.2d 616, 622 (D.C. Cir. 1991) ("The States

remain, under the Clean Water Act, the prime bulwark in the

effort to abate water pollution ... Congress intended that the

States would retain the power to block, for environmental

reasons, local water projects that might otherwise win federal

approval.") (citation and internal quotation marks omitted).

Obviously, how courts construe the Act's language specifying

those situations in which States may wield this powerful

weapon can critically affect their ability to protect the integrity of their waters in the way Congress intended. Too stingy

an interpretation of s 401(a)(1) will severely burden each

State's ability to implement the water quality program mandated by the Act, and will frustrate Congress' clear intent to

institute a system under which States carry both the responsibility of setting their own water quality standards

and a corresponding power to protect those standards from

federally-licensed activities that threaten to undermine them.

It is precisely because the s 401(a)(1) certification right is so

vital to each State's ability to maintain its water quality that

thirty-nine States signed an amicus brief strongly opposing

FERC's assertion that North Carolina has no certification

rights over this license amendment. See Brief of Amici

Curiae States of Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois,

Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New

York, North Dakota, Ohio, Oklahoma, Pennsylvania, South

Dakota, Texas, Utah, Vermont, Washington, West Virginia,

and Wyoming.

The majority assumes arguendo that the flow of water

through the power project's turbines in North Carolina is a

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s 401(a)(1) "discharge" implicating that State's certification

rights, and this assumption is in fact required under the

precedents set by the Supreme Court,1 this court,2 and

FERC.3 Furthermore, it appears that North Carolina will

wield a s 401(a)(1) certification right in 2001, when the project's license will expire and VEPCO will request a new

license. See Brief for Appellant Roanoke River Basin Association at 18-22. Yet the majority reaches the paradoxical

conclusion that FERC may approve this license amendment,

which all parties concede will alter the North Carolina "discharge," without requiring any certification from North Carolina. It is candidly difficult for me to get past this conundrum: Logically, if a State must consent before a new

discharge is introduced into its waters, then a change in that

discharge must require a new consent.4 A question might, of

________

1See PUD No. 1 of Jefferson County v. Washington Dep't of

Ecology, 114 S. Ct. 1900, 1908 (1994) ("There is no dispute that

petitioners were required to obtain a certification from the State

pursuant to s 401. Petitioners concede that, at a minimum, the

project will result in two possible discharges--the release of

dredged and fill material during the construction of the project, and

the discharge of water at the end of the tailrace after the water has

been used to generate electricity.").

2See National Wildlife Federation v. FERC, 912 F.2d 1471, 1484

(D.C. Cir. 1990) ("Common sense supports FERC's conclusion that

the discharge in this case would occur at the dam, where the flow of

water would be blocked and consequently the water would be

backed up....").

3See City of Fort Smith, 42 F.E.R.C. p 61,362 at 62,047 (1988)

("In the case of the Lee Creek project, the discharge will occur over

the dam and from the powerhouse tailrace ...."), on reh'g, 44

F.E.R.C. p 61,160 at 61,513 (1988), aff'd, 912 F.2d 1471 (D.C. Cir.

1990).

4The majority questions the logic of this assertion by arguing

that it would be irrational as applied to statutes that refer to

"conduct resulting in injury" and "transactions resulting in financial

loss." See majority opinion at 15 n.2. But these analogies are

clearly inapt. The more appropriate analogy would be to an

argument that a statute referring explicitly to conduct that threatens to cause one type of injury or loss might be construed also to

cover closely related types of injury or loss, rather than to an

argument that a statute referring to conduct that causes some

injury or loss should be construed also to cover conduct that causes

the reduction of these ills. After all, the record before us involves a

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situation in which a reduction in a discharge may increase the very

sort of "injury" to a State's water quality that the Act seeks to

empower States to prevent. See infra.

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course, be raised as to whether some license amendments are

so clearly outside of the scope of s 401(a)(1) as to create no

certification rights; license amendments that propose to alter

a project in a way that will have no effect on an existing

discharge, or that will have at most a de minimis effect on

the discharge, may perhaps be granted without requiring a

new certification from the State in which the discharge originates.5 But the majority imposes a far more sweeping and

arbitrary limitation on State certification rights, by declaring

that no alteration of a discharge triggers a certification right

unless it represents an "addition ... of a substance or

substances" to the discharge. Majority opinion at 17.

I reject the majority's "substance-adding" threshold condition on the exercise of State certification rights. It badly

distorts the definitions section of the Act, and improperly

usurps crucial judgments on water quality that Congress

reserved for the States into which the discharges flow. The

initial flaw is the majority's characterization of the Act's

________

5Additionally, there is in all cases the threshold requirement that

a discharge covered by the license in question must "originate"

within the State claiming a s 401(a)(1) certification right. The

rights of "affected" States that cannot satisfy this threshold condition are defined in s 401(a)(2). See 33 U.S.C. s 1341(a)(2). Since

there is no question that a discharge covered by the license that

FERC amended originates in North Carolina, my interpretation

would not by any means make s 401(a)(2) superfluous, cf. majority

opinion at 15 (summarizing FERC's arguments); if North Carolina

were not the locus of a discharge covered by the license to be

amended, its rights would be defined by s 401(a)(2), as are the

rights of downstream "affected" States in regard to this license

amendment.

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definition of "discharge of a pollutant" as "the nearest evidence we have of definitional intent by Congress" as to when

States have certification rights under s 401(a)(1). Id. The

Act's legislative history says otherwise. The language creating certification rights in States in which a "discharge" may

"originate" as a result of federally-licensed activities first

appeared as part of the Water Quality Improvement Act of

1970, Pub. L. No. 91-224, 84 Stat. 91 (1970). The phrase

"discharge of a pollutant," on which the majority leans so

heavily, was nowhere to be found in that early version of the

Act. It was only added with the passage, two years later, of

the Federal Water Pollution Control Act Amendments of

1972, Pub. L. No. 92-500, 86 Stat. 816 (1972), which introduced it in conjunction with a set of provisions requiring

permits for the "discharge of pollutants." 33 U.S.C. s 1342.

Because the bare-bones term "discharge" was part of the Act

before the 1972 amendments, and because it wasn't until two

years later that Congress organized its new permit program

around the separately coined and defined phrase "discharge

of a pollutant," the notion that the latter phrase provides

compelling evidence of the meaning of the former term is

totally unpersuasive.

An even stranger facet of the majority's statutory analysis

is its insistence that "near[er]" evidence of Congress' "definitional intent" as to what constitutes a discharge can be found

by looking at the Act's definition of the phrase "discharge of a

pollutant" than by relying on the Act's own definition of the

very term under discussion--"discharge." The Act expressly

states that the term " "discharge' when used without qualification includes a discharge of a pollutant, and a discharge of

pollutants." 33 U.S.C. s 1362(16) (emphasis added). The

only inference I can discern from this clear expression of nonexclusivity in the definition of "discharge" is that it was meant

to encompass a wider array of interferences with the navigable waters than would qualify as "discharges of pollutants."

See National Wildlife Federation v. Gorsuch, 693 F.2d 156,

171-72 (D.C. Cir. 1982) (distinguishing between statutory

definitions that specify what a term "means" and those that

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offer a non-exclusive listing of what a term "includes").6 How

the majority manages to limit the scope of the unqualified

term "discharge" to one subset that is "include[d]" in the

broader term is beyond my ken.

Further evidence that Congress intended for States to have

the power to protect their waters from interferences created

by changes to a "discharge" that do not comprise the "addition" of any "substance or substances" is observable in the

Act's treatment of the term "pollution." Section 304 of the

Act "expressly recognizes that water "pollution' may result

from "changes in the movement, flow, or circulation of any

navigable waters....' " PUD No. 1, 114 S. Ct. at 1913

(quoting 33 U.S.C. s 1314(f)). The Environmental Protection

Agency's regulations implementing the Act likewise express a

concern with interferences that have "flowage effects." Id. I

had thought it beyond dispute that even alterations of existing discharges that do not "add" any "substance or substances" to the water may yet affect the water's "movement,

________

6I cannot fathom the majority's reasoning that, since the phrase

"discharge of a pollutant" describes the addition of substances to

the water, Congress meant for the term "discharge" also to refer

only to the addition of substances to the water. See majority

opinion at 17 n.4. I find the majority's reasoning untenable--it

seems far more reasonable that, by retaining the term "discharge"

unmodified by the words "of a pollutant," Congress must have

intended that the term would have a broader meaning when used

without these restrictive modifying words than it does when used

with these restrictive modifying words. And this broader meaning

should encompass the subtraction of part of an existing discharge

because, as I explain infra, the subtraction of water from a discharge may be just as harmful to a waterway as the addition of

substances to the water. Under the majority's reasoning, even the

initial construction of this power project--which created a new

discharge in North Carolina--would not have triggered any certification rights in North Carolina if s 401(a)(1) had then been in

effect, provided that the project did not add any substance to the

water that passed through the dam turbines. Such a result, of

course, would be at odds with the majority's assumption arguendo

that the flow of water through a power project's turbines is a

discharge. See majority opinion at 16.

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flow, or circulation," that this effect may constitute "pollution," and that "[i]t is the policy of the Congress to recognize,

preserve, and protect the primary responsibilities and rights

of States to prevent, reduce, and eliminate pollution." 33

U.S.C. s 1251(b) (emphasis added).7 Yet the majority is

comfortable in wrenching away from a State this very power

to protect its water quality from the "pollution" threatened by

the alteration of an existing discharge.

The majority's niggardly construction of the term "discharge" threatens a congressional policy permeating the gen-

________

7Employing the currently popular "dictionary jurisprudence," the

majority reasons that the "activity" here--the diversion of water to

Virginia Beach--will not "result in" a discharge, as required by

s 401(a)(1), see majority opinion at 18, because the activity authorized by the license amendment gives rise only to an "altered"

discharge, rather than a brand new one. I fail to see how this

dictionary exercise provides any compelling reason to ignore the

implications of the Act's State-enforcement policy and central concern with preventing and eliminating "pollution." To the contrary,

it would block a State's certification rights even in the case of a

license amendment authorizing the "addition" of a "substance or

substances" to an existing discharge, since the "addition" of substances merely "alters" a discharge, and does not cause the discharge to "arise as a consequence" of the addition. Id. I find the

majority's use of the dictionary to support its assertion that there is

no hint of ambiguity in s 401(a)(1), see id. at 8 n.1, unacceptable; to

my mind, there is certainly enough ambiguity to justify consideration of the purpose and structure of the Act in determining the

scope of States' certification rights. After all, the Act defines the

term "discharge" in a purposely open-ended fashion, see 33 U.S.C.

s 1362(16), and s 401(a)(1) doesn't even require concrete certainty

that a discharge will "result" from the activity to be licensed--it

requires State certification for any activity that "may result in" a

discharge. 33 U.S.C. s 1341(a)(1) (emphasis added). Imposing

dictionary-derived limitations on the Act is particularly dangerous

in this context and invites egregious abuses--for example, a licensee

could obtain a State's certification of a minor, non-threatening

discharge and then transform the discharge into a pollution-causing

nightmare, evading the State's power to prevent the change by

characterizing it as merely as merely an "alteration" of an existing

discharge.

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eral structure of the Act, a policy specifically declared in the

Act's second subsection: States were to be put in charge of

making and enforcing the crucial judgments surrounding

water quality within their borders. See 33 U.S.C. s 1251(b).

When a federally-licensed activity would "result in" a "discharge" into the State's waters, the decision whether that

interference with the State's waters would be tolerated was to

belong solely to the State in which that discharge originated,

not to a federal agency or to a federal court. Given the

relative competency of State water quality agencies and federal courts, this policy seems quite sound. The waterways

that we judges see only as lines on a diagram are in reality

extraordinarily complex and sensitive systems in which water,

oxygen, dissolved minerals, sediment, and other materials

intermingle and interact. Interferences with the integrity of

a waterway need not take the archetypal form of sludge

spewing from an outfall; other changes can be just as deadly

to fish and other wildlife as are toxic chemicals. For example, alterations that cause the temperature of the water in a

discharge to rise, or that rearrange the spatial distribution of

oxygen, sediment, or minerals in the downstream water, could

be catastrophic from the perspective of water quality, see

Gorsuch, 693 F.2d at 163-64.8 Yet the effect of this court's

decision will be to bar States in which altered discharges

originate from acting to protect their waters from such

pernicious effects, whenever the alteration does not "add" any

"substance or substances" to the water. I do not believe

Congress intended to give this court's essentially ad hoc and

inevitably inexpert judgments precedence over the expert

judgments of the States' water quality authorities, in the

making of such crucial determinations.

________

8In Gorsuch, this court observed that the term "pollutant" might

reasonably include such "Dam-Induced Water Quality Changes" as

low dissolved oxygen, dissolved minerals, heat, sediment, and oxygen "supersaturation," id. at 161, 166, though we deferred to the

EPA's interpretation of the term "pollutant," in a different section

of the Act, as not including these effects. See id. at 183.

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The majority itself recognizes, in expressing "serious reservations" about FERC's ability to limit by regulation States'

certification rights to license amendments that might have a

"material adverse impact" on the water quality in a discharge,

that judgments intrinsically related to water quality in the

context of the alteration of existing discharges are the sole

province of the States in which the discharges originate. See

majority opinion at 14 (quoting 18 C.F.R. s 4.38(f)(7)(iii)

(1995)). By empowering itself to make a threshold determination regarding whether an alteration in a discharge threatens a "material adverse impact" on the State's water quality,

FERC is taking from the State a power that Congress

intended for the State alone to have. Section 401(a)(1) enables States to raise an absolute bar to federal licenses that

threaten their waters; Congress completely stripped federal

agencies of the power to issue covered licenses without the

State's certification. Indeed, FERC is assigning itself a

function which makes no sense in light of the structure of the

Act, which puts each State in charge of authoritatively defining the term "water quality" within its borders--why, in this

one context, should a federal agency be able to stand in a

State's shoes and make the State's "water quality" determinations for it? Thus, I share the majority's concerns about

FERC's regulation, but I can't help but wonder why the

majority doesn't feel the same discomfort about its own

arrogation of a similar power to preempt a State's water

quality determinations. Congress did not intend for this

court to usurp North Carolina's power to manage its water

quality program any more than it intended to give FERC

such a role, and surely we are as ignorant as FERC on the

subject of what "water quality" is optimal for the citizens of

North Carolina.

The Supreme Court and our own court have previously

exercised appropriate reluctance to read the Clean Water Act

in the arbitrary and artificial fashion proffered today. When

a city and a utility district urged the Supreme Court in PUD

No. 1 to adopt a formalistic approach very much like the

majority's, the Court categorically refused. The PUD No. 1

petitioners asserted that the Clean Water Act is concerned

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tity." See PUD No. 1, 116 S. Ct. at 1912. The Supreme

Court rejected this "artificial distinction," id., noting that

water quantity is closely related to water quality, and that

both the definitions section and s 304 of the Act set forth a

"broad conception of pollution" which "expressly evinces Congress' concern with the physical and biological integrity of

water." Id. at 1913. And in National Wildlife Federation

this court likewise recognized that the Clean Water Act is not

to be constrained by artificial limitations such as the majority's "substance-adding" standard. In that case, we found

that the "backing up" of water by a dam constituted a

s 401(a)(1) "discharge," see National Wildlife Federation,

912 F.2d at 1483-84; in so doing, we apparently recognized

that an interference with a river that results in the alteration

of the "movement, flow, or circulation" of water (and thus

causes "pollution") is cause for the recognition of a certification right in the State where this discharge originates.9 Since

the "backing up" of water does not satisfy the majority's

"substance-adding" standard, it is clear that today's holding is

in tension with our own precedent.10

________

9In that case, we declined to recognize a certification right in the

upstream State, however, because we found that the discharge

"originate[d]" at the dam, which was located downstream in another

state. See id. at 1484.

10The majority disclaims tension between this case and National

Wildlife Federation on the grounds that the parties in that case did

not dispute the question of whether the construction and operation

of the dam would create a discharge, and that the discharge at issue

related to a new dam, rather than to the altered operations of an

existing dam. See majority opinion at 19. But the National

Wildlife opinion refers to the expulsion of water through the dam's

turbines as a s 401 "discharge," and describes the "discharge" as

follows: "[T]he discharge in this case would occur at the dam, where

the flow of water would be blocked and consequently the water

would be backed up ...." National Wildlife Federation, 912 F.2d

at 1484 (emphasis added). The fact that the "backing up" of water

resulted from the construction of a new dam, rather than from the

alteration of an existing dam, played no part in the National

Wildlife Federation court's analysis.

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Instead of crafting an arbitrary and exceedingly formalistic

new standard governing the scope of State certification rights

under s 401(a)(1), we should be traversing the main channel

charted by the Act, the Supreme Court, and our own precedent. These authorities require us to find that the license

amendment at issue in this case is one that triggers a

certification right in North Carolina, the State in which the

project's discharge originates. Thus I would suspend consideration of the other challenges to these orders, and require

FERC to await a s 401(a)(1) certification from North Carolina before considering whether to grant the amendment.

B. FERC's Finding of a Need to Withdraw Sixty Million

Gallons of Water per Day

Even if North Carolina's failure to certify the license

amendment were not contrary to the Act, however, I would

vacate the challenged orders and remand this matter to

FERC on the ground that FERC's estimate of the "need" for

the fifty-four million gallons per day to be supplied by the

pipeline project was arbitrary and capricious.

FERC had already reached the conclusion that Virginia

Beach needed to withdraw sixty million gallons of the Roanoke River per day by October of 1994, when it declared that

"[n]o new analysis" of this estimate was necessary. Scoping

Document 2, FERC No. 2009-003; Deferred Appendix "D.A."

at 2547, 2551. It is hardly surprising, therefore, that FERC's

July, 1995 Final Environmental Impact Statement arrived at

this precise estimate of Virginia Beach's "need." Nor is it

surprising that FERC's attempt to disguise the fact that it

was "backing into" this number fails rather badly.

I agree with my colleagues that the first few steps in

FERC's analysis were tolerably reasonable. FERC organized its analysis into separate projections of the demand for

water in the year 2030 and of regional supply in that year.

The basic structure of the inquiry was sound, as was the

projection of the region's 2030 demand for water. But when

FERC turned to the supply side of the equation, its logic

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became curiouser and curiouser. On the apparent assumption that the water supply from existing sources would remain constant through 2030, FERC's projection of 2030 supply was based on the water available from existing sources.

Specifically, FERC's supply estimate was based on the

amount the residents of the region could withdraw from the

existing water sources during the worst drought of record

since 1930; this drought occurred in 1930, and the U.S.

Geological Survey estimates that such droughts may recur at

intervals of between thirty and eighty or more years. The

estimated "Water Supply Deficit" for 2030, based on this

drought-adjusted supply, came out to 31.8 million gallons per

day.

Common sense would seem to indicate that the obvious way

to prepare for short-term periods of special water need is to

create water storage systems that can be filled during nondrought periods, exhausted to meet these short-term needs

when they arise, and refilled when the droughts recede. But

FERC rejected all of the storage options pressed by participants in the proceedings below, arguing that storage techniques were irrelevant to its "need" calculation because storage systems do not constitute "sources" of water, and because

they serve only short-term need. See majority opinion at 26.

Of course, the fact that storage systems aren't new "sources"

of water in the sense of meeting long-term, continuous demand hardly justifies FERC's refusal to consider the availability of these systems, because they just as clearly are

precisely suited to serve short-term periods of special demand

that occur at intervals more than long enough to permit the

storage systems to be replenished, and thus could be used to

obviate any increment in the quantity of water to be constantly supplied to the region to protect it from droughts of

extraordinary severity.

A similar illogic permeates FERC's attempt to explain its

refusal to take account of the water available from the

region's wells. FERC specifically refused to factor in the

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water available from two Norfolk wells on the ground that

these wells were meant to be used only during droughts that

threaten military readiness, and FERC likewise thought it

unnecessary to consider the water available from unspecified

"emergency wells" in the region on the ground that their use

was restricted to municipally-declared emergencies.11 The

Corps, FERC noted, "considers these wells as protection

against extreme droughts." D.A. at 3166. I can only speculate as to what the terms "municipal emergency" and "extreme drought" are meant to cover, if not droughts more

severe than the worst since 1930. FERC's reasoning falls far

short of providing any rational or even vaguely comprehensible explanation for its refusal to integrate into its need

calculation the water available from "emergency" wells and

water storage systems--the most intuitively obvious strategies for dealing with infrequent, short-term, emergency water

needs.

Having rejected the commonplace strategies that would

enable the region to weather droughts, but would not enable

FERC to claim that a pipeline continuously withdrawing sixty

million gallons of water per day was needed, FERC's next

step was to ratchet its "need" estimate up to that amount.

For this final adjustment, FERC set out five reasons for its

conclusion that a second "drought adjustment" was necessary,

explaining that merely covering the 31.8 million gallon per

day "deficit" was insufficient because:

* it provides no protection against droughts of greater

severity than those that occurred in the past;

________

11The majority asserts that FERC's refusal to consider the water

in these wells in its estimate of the regional supply was appropriate

because these wells may not be available for use by Virginia Beach

after next year. See majority opinion at 28. But this portion of

FERC's analysis was based on the supply of water available to the

region, rather than to Virginia Beach alone, and therefore it is

irrelevant that this emergency supply may become unavailable to

one of the cities in the region.

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* there is no guarantee that water sharing would occur

among the cities;

* severe water use restrictions would continue to place

local users at a public health and safety risk;

* future water demands may exceed projections; and

* loss of a water supply in this large metropolitan area

would be catastrophic.

D.A. at 3167, see also majority opinion at 28. For these

"reasons," FERC concluded that it was necessary to jack up

the "need" estimate to include another thirteen to sixty-eight

million gallons per day of continuous supply. But these

"reasons" simply amount to FERC's generalized worry that

its entire analysis leading up the 31.8 million gallon per day

"deficit" might be flawed in such a way as to make its need

estimate too low. If water were an unlimited, free resource,

it might seem appropriate to double the estimate of water

"need" in case actual need were to exceed all expectations,

but if water were an unlimited, free resource, nothing much

would turn on whether FERC's "need" estimate satisfied any

baseline standard of rationality. FERC itself recognizes that

the amount of water to be removed from the river must

correspond to a rational calculation of actual "need," and thus

makes a show of reaching this estimate by using the available

data and reasonable assumptions; it cannot at the end of the

game simply knock the pieces off the chessboard in the name

of unforeseen contingencies and unprecedented emergencies,

and still claim that it did not act arbitrarily or capriciously

because it played by the rules almost to the end.

Because, finally, I believe that the license amendment

FERC approved by its challenged order may not be granted

consistently with s 401(a)(1) of the Clean Water Act unless

and until North Carolina has certified that the activity to be

conducted pursuant to the amendment does not threaten that

State's water quality standards, I would vacate FERC's order

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and rehearing order, and remand the matter to FERC with

the instruction that it withhold the amendment pending

North Carolina's certification. Even if I did not believe that

FERC's failure to require VEPCO to obtain North Carolina's

certification was illegal, I would still vacate these orders on

the ground that they were arbitrary and capricious, and

would remand the matter to FERC for an estimate of Virginia Beach's "need" for water that gives due consideration to

storage options and "emergency" sources. On both of these

grounds, I respectfully dissent from the majority opinion.

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