Case Name: SEATTLE MASTER BUILDERS ASSOCIATION; Homebuilders Association of Spokane, Inc.; National Woodwork Manufacturers' Association; Fir & Hemlock Door Association; Shelter Development Corporation; Clair W. Daines, Inc.; Conner Development Co.; Donald N. McDonald; Seattle Door Co., Inc.; Homebuilders Association of Washington State, Petitioners, v. PACIFIC NORTHWEST ELECTRIC POWER AND CONSERVATION PLANNING COUNCIL (Northwest Power Planning Council), Respondent, and United States of America, Intervenor-Respondent
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1986-04-10
Citations: 786 F.2d 1359
Docket Number: No. 83-7585
Parties: SEATTLE MASTER BUILDERS ASSOCIATION; Homebuilders Association of Spokane, Inc.; National Woodwork Manufacturers’ Association; Fir & Hemlock Door Association; Shelter Development Corporation; Clair W. Daines, Inc.; Conner Development Co.; Donald N. McDonald; Seattle Door Co., Inc.; Homebuilders Association of Washington State, Petitioners, v. PACIFIC NORTHWEST ELECTRIC POWER AND CONSERVATION PLANNING COUNCIL (Northwest Power Planning Council), Respondent, and United States of America, Intervenor-Respondent.
Judges: Before GOODWIN, SCHROEDER and BEEZER, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 786
Pages: 1359–1378

Head Matter:
SEATTLE MASTER BUILDERS ASSOCIATION; Homebuilders Association of Spokane, Inc.; National Woodwork Manufacturers’ Association; Fir & Hemlock Door Association; Shelter Development Corporation; Clair W. Daines, Inc.; Conner Development Co.; Donald N. McDonald; Seattle Door Co., Inc.; Homebuilders Association of Washington State, Petitioners, v. PACIFIC NORTHWEST ELECTRIC POWER AND CONSERVATION PLANNING COUNCIL (Northwest Power Planning Council), Respondent, and United States of America, Intervenor-Respondent.
No. 83-7585.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 9, 1985.
Decided April 10, 1986.
As Amended June 11,1986.
Michael B. King, John W. Hempelmann, Paul Sikora, Diamond & Sylvester, Seattle, Wash., for Seattle Master Builders.
Ronald A. Zumbrun, Robin L. Rivett, Pacific Legal Foundation, Sacramento, Cal., Sam Kazman, Kevin J. Heron, Pacific Legal Foundation, Washington, D.C., for amicus curiae Pacific Legal Foundation.
W. Hugh O’Riordan, Roy L. Eiguren, Runft, Leroy, Stecher, Coffin & O’Riordan, Chtd., Boise, Idaho, for amicus curiae Salmon River Elec. Co-op. Idaho Cty. Power & Light Unity Light & Power.
Aaron M. Peek, Steven G. Harman, McKenna, Conner & Cuneo, Los Angeles, Cal., Frank W. Ostrander, Gen. Counsel, Janet C. Hanson, William R. Cook, Associate Counsels, Northwest Power Planning Council, Portland, Or., for Northwest Power.
. Mike Greely, Atty. Gen., Chris D. Tweet-en, Asst. Atty. Gen., State of Mont., Helena, Mont., for amicus curiae State of Mont.
Jim Jones, Atty. Gen., John J. McMahon, Chief Deputy Atty. Gen., State of Idaho, Boise, Idaho, for amicus curiae State of Idaho.
Kenneth O. Eikenberry, Atty: Gen., Philip H. Austin, Sr. Dep. Atty. Gen., Edward H. Southon, Asst. Atty. Gen., State of Wash., Olympia, Wash., for amicus curiae State of Wash.
Richard Geltman, Gen. Counsel, Jeffrey Genzer, Associate Counsel, Nat. Governor’s Ass’n, Washington, D.C., David Frohmayer, Associate Counsel, for amicus curiae Nat. Governors’ Ass’n.
William J. Barker, Chief Asst. City Atty., Mark Bubenik, Asst. City Atty., City of Tacoma, Tacoma, Wash., for amicus curiae City of Tacoma.
Terrence V. Sawyer, Spokane, Wash., for amicus curiae Northwest Conservation Act Coalition.
William M. Chamberlain, Gen. Counsel, Jonathan Blees, Deputy Gen. Counsel, California State Energy Resources Conservation & Development Comm., Sacramento, Cal., for amicus curiae California State Energy Resources Conservation & Development Comm.
Richard K. Willard, Acting Asst. Atty. Gen., Paul Blankenstein, Robert V. Zener, Attys., Dept, of Justice, Washington, D.C., Harvard P. Spigal, Gen. Counsel, James 0. Luce, Asst. Gen. Counsel, Paul S. Majkut, Stephen R. Larson, Preston D. Michie, Marybeth Van Burén, Bonneville Power Admin., Portland, Or., for the U.S.
Before GOODWIN, SCHROEDER and BEEZER, Circuit Judges.

Opinion:
GOODWIN, Circuit Judge:
A group of home builders and other industry representatives filed an original petition in this court seeking to strike down as unconstitutional both the Pacific Northwest Electric Power and Conservation Planning Council and the Council's 1983 Northwest Conservation and Electric Power Plan.
We have jurisdiction under the Pacific Northwest Electric Power Planning and Conservation Act, Pub.L. 96-501, 94 Stat. 2697, 16 U.S.C. § 839 et seq. (1982) (the Act) and we uphold both the constitutionality of the Pacific Northwest Electric Power and Conservation Planning Council, a policy-making body established by that Act, and the validity of the Council's 1983 Northwest Conservation and Electric Power Plan.
Petitioners seek relief against two entities: the first is the United States government, which has intervened on behalf of the Bonneville Power Administration (BPA), an agency of the United States Department of Energy. The second is the Council itself. BPA is statutorily charged with the production, marketing and distribution of electric power in the Pacific Northwest. See Bonneville Project Act, 16 U.S.C. § 832a. See generally BPA, Columbia River Power for the People: A History of Policies of the Bonneville Power Administration (1981). The Council's mandate is to prepare a conservation and electricity usage plan for the region served by the BPA and to develop a program for energy planning consistent with regional environmental and ecological concerns. § 839b(a)(l). Congress has consented to the establishment of the Council, § 839b(a), to be composed of members appointed by the governors of Washington, Oregon, Montana and Idaho. Each state has agreed to participate in the Council, and has enacted legislation which authorizes the governor to appoint two members to the Council. Wash.Rev.Code Ann. § 43.-52A.010; (1986); Or.Rev.Stat. § 469.800; (1985); MontCode Ann. § 90-4-401 (1985); Idaho Code § 61-1201 (1985).
The Act directs the Council to prepare a regional energy plan which is to provide
a general scheme for implementing conservation measures and developing resources . with due consideration by the Council for (A) environmental quality, (B) compatibility with the existing regional power system, (C) protection, mitigation, and enhancement of fish and wildlife . and (D) other criteria which may be set forth in the plan.
§ 839b(e)(2). The Council adopted the final 1983 plan in April 1983. 48 Fed.Reg. 24,-493 (June 1, 1983).
The Council and BPA operate independently of each other. Their functions directly overlap, however, under those portions of the Act which provide that certain BPA actions will be consistent with the Council's plan, § 839b(d)(2), 839b(h), 839e(d)(3), 839d(b), 839d(c); that the Council can request certain action of BPA, § 839b(f)(2), 839b(j); and that the Council can review BPA actions, § 839b(i). See Hemmingway, The Northwest Power Planning Council: Its Origins and Future Role, 13 Envtl.L. 673 (1983).
The petition raises several issues. First, it attacks the 1983 plan as arbitrary and capricious under the Act and the Administrative Procedure Act, 5 U.S.C. § 553 (1982). Second, petitioners attack the constitutionality of the Council itself, claiming that because the Council primarily influences federal, not state, government actions it constitutionally cannot be an interstate compact organization. Petitioners' third argument is that the Council violates the appointments clause, U.S. Const, art. II, § 2, cl. 2, because the Council exercises significant authority over the federal government but has not been appointed by the President.
I. The Council as a Compact Agency
The parties and amici disagree about whether to classify the Council as a federal agency or as an interstate compact organization. See U.S. Const, art. I, § 10, el. 3 ("compact clause"). Those attacking the Council as unconstitutional argue that it is a federal agency, despite the congressional disclaimer that it is not a federal agency. § 839b(a)(2)(A)(iv). Those who defend the constitutionality of the Council characterize it as a compact agency, outside the scope of the appointments clause. We hold that it is a compact agency and that its members are not "federal officers" within the meaning of the appointments clause.
Congress' intention is clear from both the language of the statute, § 839b(b), and from the legislative history, that the Council is not to be a federal agency and is not to be controlled by the federal government. 126 Cong.Rec. 30186 (1980) (remarks of Sen. McClure). The alternative establishment of the Council as a federal agency was a rejected second choice. § 839b(b). One of the principal purposes of the Council is to represent state concerns about regional problems; Congress deemed it undesirable for a federal agency to represent state concerns to yet another federal agency. 126 Cong.Rec. 30181 (1980) (remarks of Sen. McClure) ("The Pacific Northwest does not need and candidly will not suffer lightly a federally imposed regional planning process with apparent input from Washington acting as a federal agency."). See also 126 Cong.Rec. 30181 (1980) (remarks of Sen. Hatfield); 126 Cong.Rec. 29808 (1980) (remarks of Rep. Dingell). Congress wanted to avoid conflicts with state law and to maintain accountability through the application of federal substantive and procedural law, see 126 Cong.Rec. 29808 (1980) (remarks of Rep. Dingell), but also wanted to avoid the potential constitutional problems of a federal agency composed of state appointees. H.R.Rep. No. 96-976 (Part II), 96th Cong., 2d Sess. 40-41 (majority views), 70-71 (supplemental views of Rep. Williams) (1980), U.S.Cong. & Admin.News (1980) pp. 5989 6038, 6039, 6063-6065; 126 Cong.Rec. 30186 (1980) (remarks of Sen. McClure).
The Supreme Court recently outlined some of the indicia of compacts. These are establishment of a joint organization for regulatory purposes; conditional consent by member states in which each state is not free to modify or repeal its participation unilaterally; and state enactments which require reciprocal action for their effectiveness. Northeast Bancorp, Inc. v. Board of Gov'rs of the Federal Reserve System, — U.S.-, 105 S.Ct. 2545, 2554, 86 L.Ed.2d 112 (1985). Even if all these indicia of .compacts are present, the only interstate agreements which fall within the scope of the compact clause are those "tending to the increase of political power in the states, which may encroach upon or interfere with the just supremacy of the United States." Cuyler v. Adams, 449 U.S. 433, 440, 101 S.Ct. 703, 707, 66 L.Ed.2d 641 (1981). "The relevant inquiry must be one of impact on [the] federal structure." United States Steel Corporation v. Multistate Tax Commission, 434 U.S. 452, 471, 98 S.Ct. 799, 811, 54 L.Ed.2d 682 (1978); see Virginia v. Tennessee, 148 U.S. 503, 13 S.Ct. 728, 37 L.Ed. 537 (1893). If the joint activity does not affect the federal sphere, no approval by Congress is needed. If it affects the federal sphere, then Congress must authorize the activity. Cuyler v. Adams, 449 U.S. at 440, 101 S.Ct. at 707.
The Council satisfies all these indicia. The Council is an operational body established by reciprocal legislation whose effectiveness is conditioned upon binding legislative commitments by the states.
Petitioners and amicus Pacific Legal Foundation argue that certain features of the Council are unusual and that this unusual nature militates in favor of considering the Council to be a federal rather than a compact agency. The two aspects of the Council that petitioners and amicus claim are unusual are, first, that congressional approval of the Council was accorded before the states agreed to form it, and, second, that the Council's activities directly affect a federal agency.
An unusual feature of a compact does not make it invalid. A leading article by Professors Frankfurter and Landis sets the tone for the modern use of compacts. It encourages new uses. "The combined legislative powers of Congress and of the several States permit a wide range of permutations and combinations for governmental action____ Political energy has been expended on sterile controversy over supposedly exclusive alternatives instead of utidzed for fashioning new instruments adapted to new situations." Frankfurter & Landis, The Compact Clause of the Constitution — A Study in Interstate Adjustments, 34 Yale L.J. 685, 688 (1925).
Moreover, the two features of the Council emphasized by petitioners and amicus are not unusual. Courts have considered both. "Congress may consent to an interstate compact by authorizing joint state action in advance or by giving expressed or implied approval to an agreement the States have already joined." Cuyler, 449 U.S. at 441, 101 S.Ct. at 708. See, e.g., Flood Control Act of 1936, 49 Stat. 1570 (1936), 33 U.S.C. § 701d (1982); Crime Control Consent Act of 1934, 48 Stat. 909 (1934), 4 U.S.C. § 112(a) (1982). Congress also may grant its consent conditional upon the states' compliance with specified terms. Cuyler, 449 U.S. at 439-40, 101 S.Ct. at 707-08. See James v. Dravo Contracting Co., 302 U.S. 134, 148 58 S.Ct. 208, 215, 82 L.Ed. 155 (1937).
It is also not unusual for the federal government to be involved in or to be directly affected by compact-created agencies. See, e.g., Washington Metropolitan Transit Regulation Compact, 74 Stat. 1031 (1960); Interstate Compact on the Potomac River Basin, 54 Stat. 748 (1940); Ohio River Valley Water Sanitation Compact, 54 Stat. 752 (1940); Upper Colorado River Basin Compact, 63 Stat. 31 (1949). Cf. Washington Metropolitan Area Transit Authority v. One Parcel of Land, 706 F.2d 1312, 1316 (4th Cir.), cert. denied, 464 U.S. 893, 104 S.Ct. 238, 78 L.Ed.2d 229 (1983) (federal government delegates powers to a compact organization). The federal government has even participated as a member of interstate compact agencies. See, e.g., Delaware River Basin Compact, Pub.L. No. 87-328, 75 Stat. 688 (1961).
There is no bar against federal agencies following policies set by nonfederal agencies. The federal government has in fact agreed to be bound by state law in several areas. See California v. United States, 438 U.S. 645, 656-57, 98 S.Ct. 2985, 2991-92, 57 L.Ed.2d 1018 (1978) (federal reclamation projects must follow state water laws); Hancock v. Train, 426 U.S. 167, 178-80, 96 S.Ct. 2006, 2012-13, 48 L.Ed.2d 555 (1976) (federal government must comply with state air pollution standards); see also Columbia Basin Land Protection Association v. Schlesinger, 643 F.2d 585, 604-06 (9th Cir. 1981) (federal government must comply with state environmental standards); California v. EPA, 511 F.2d 963, 968-69 (9th Cir.1975) (federal agencies must comply with state water pollution standards), rev'd on other grounds, 426 U.S. 200, 211-13, 96 S.Ct. 2022, 2027-29, 48 L.Ed.2d 578 (1976). The federal government can be subject to state law where there is a clear congressional mandate and specific legislation which makes the authorization of state control clear and unambiguous. Hancock, 426 U.S. at 179, 96 S.Ct. at 2012.
II. Appointment of Council Members
Petitioners argue that, even if the Council is a valid compact organization, the appointments clause of the United States Constitution requires that Council members be appointed not by the state governors, § 839b(a)(3), but by the President because the Council exercises significant authority over the federal government. See U.S. Const, art. II, § 2, cl. 2. The appointments clause is addressed to the separation of powers between the President and Congress. See Buckley v. Valeo, 424 U.S. 1, 126, 96 S.Ct. 612, 685, 46 L.Ed.2d 659 (1976). No court has yet held that the appointments clause prohibits the creation of an interstate planning council with members appointed by the states.
The Supreeme Court in Buckley said that "any appointee exercising significant authority pursuant to the laws of the United States is an 'Officer of the United States' and must, therefore, be appointed" by the President. Id. Petitioners claim that appointment of Council members by the state governors violates Buckley.
Petitioners' theory, however, would outlaw virtually all compacts because all or most of them impact federal activities and all or most of them have members appointed by the participating states. See, e.g., Washington Metropolitan Area Transit Authority, 706 F.2d at 1314.
The appointments clause applies to (1) all executive or administrative officers, 424 U.S. at 123-26, 96 S.Ct. at 684-86; (2) who serve pursuant to federal law, 424 U.S. at 126, 96 S.Ct. at 685; and, (3) who exercise significant authority over federal government actions. 424 U.S. at 126-27 & n. 162, 96 S.Ct. at 685 & n. 162. Unless all three prongs of the Buckley test are met, there is no violation of the appointments clause.
The council members clear the second Buckley element. The Council members do not perform their duties "pursuant to laws of the United States." See Buckley, 424 U.S. at 126, 96 S.Ct. at 685. Rather, the Council members perform their duties pursuant to a compact which requires both state legislation and congressional approval. Without substantive state legislation, there would be no Council and no Council members to appoint. While congressional consent gives an interstate compact some attributes of federal law, the Council members' appointment, salaries and administrative operations are pursuant to the laws of the four individual states, within parameters set by the Act. § 839b(a)(3), 839b(a)(4). More important, the states ultimately empower the Council members to carry out their duties. Federal law provides congressional consent for formation of the Council as it does for the creation of all compacts and compact agencies. Federal law also affects the substance of Council policy decisions because the Act constrains Council policy-making, see § 839b(c), (d), (e), and subjects some Council operations to federal law. As with any compact, congressional consent did not result in the creation but only authorized the creation of the compact organization and the appointment of its officials. The appointment, salaries and direction of the Council members are state-derived.
We need not reach the first and third Buckley elements. The question, thus narrowed, because Council members do not serve pursuant to federal law, makes immaterial whether they exercise some significant executive or administrative authority over federal activity. It is likewise immaterial how their duties are classified: executive or administrative, because they perform these duties under a compact, rather than "federal law" within the meaning of Buckley.
Buckley is about maintaining the separation of powers within the federal government. This concern is not implicated here. In this case, unlike Buckley, Congress has not arrogated to itself a power that would otherwise be exercised by the President. See also Synar v. United States, 626 F.Supp. 1374 (D.D.C.1986) (per curiam) which holds the exercise of executive power by an officer who could be removed by Congress unconstitutional. The court in Synar stressed the "founders' often expressed fear 'that the Legislative Branch of the National Government will aggrandize itself at the expense of the other two branches.' " Synar, 626 F.Supp. at 1401, quoting Buckley v. Valeo, 424 U.S. at 129, 96 S.Ct. at 687. Because Congress neither appoints nor removes the members of this Council, the balance of powers between Congress and the President is unaffected.
The Council violates neither the compact nor appointments clauses of the United States Constitution. The Act establishes an innovative system of cooperative federalism under which the states, within limits provided in the Act, can represent their shared interests in the maintenance and development of a power supply in the Pacific Northwest and in related environmental concerns.
III. Validity of Council's Plan
Having concluded that the Council is constitutional, we examine the substance of the 1983 plan. In this action petitioners challenge only that portion of the 1983 plan which establishes model energy conservation standards for new residential construction. Consequently, we so limit the following discussion.
A. Standard of Review
Congress directed that the Administrative Procedure Act, 5 U.S.C. § 701-06, govern our review of Council actions. Adoption of the plan is a final action subject to judicial review for the purposes of the Administrative Procedure Act. 16 U.S.C. § 839f(e)(l)(A); see 5 U.S.C. § 553.
While Congress intended that this court's scope of review of Council actions be consistent with 5 U.S.C. § 706, the Act specifically declines to require that the Council follow the hearing provisions of 5 U.S.C. § 554, 556, and 557, which govern formal rulemakings. § 839f(e)(2). Consequently, this court will use neither the substantial evidence standard, 5 U.S.C. § 706(2)(E), nor the de novo standard, 5 U.S.C. § 706(2)(F). The remaining subsection of 5 U.S.C. § 706 provides that an agency's factual findings may be set aside if arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A). We adopt this standard of review.
Although this court generally reviews legal questions de novo, United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.), cert. denied, — U.S.-, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984), amici have urged that we review the Council's interpretations of the Act under a more deferential standard. Amici argue the general rule that where a statutory interpretation is "a contemporary construction of a statute by [those] charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly, while they are yet untried and new," a court should review a statutory construction deferentially. Amer. Paper Inst., Inc. v. Amer. Elec. Power Service Corp., 461 U.S. 402, 422, 103 S.Ct. 1921, 1932, 76 L.Ed.2d 22 (1983), quoting Udall v. Tollman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). Under this deferential review, a court examines only the reasonableness of the interpretation, and "need not find that [the agency's] construction [of its enabling act] is the only reasonable one, or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings." Amer. Paper Inst., 461 U.S. at 422-23, 103 S.Ct. at 1932-33; quoting Unemployment Compensation Commission v. Aragon, 329 U.S. 143, 153, 67 S.Ct. 245, 250, 91 L.Ed. 136 (1946). See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984).
The Supreme Court has deferred to BPA interpretations of the Act. ALCOA v. Central Lincoln Peoples' Util. Dist. 467 U.S. 380, 104 S.Ct. 2472, 2479-80, 81 L.Ed.2d 301 (1984). This court has done likewise. See Department of Water and Power v. BPA, 759 F.2d 684, 690-91 (9th Cir.1985); Central Lincoln Peoples' Util. Dist. v. Johnson, 673 F.2d 1076, 1078, as amended, 686 F.2d 708, 710-11 (9th Cir. 1982), rev'd on other grounds, 467 U.S. 380, 104 S.Ct. 2472, 81 L.Ed.2d 301 (1984); Columbia Basin Land Protection Ass'n, 643 F.2d at 599-600 (and eases cited therein).
The preparation and consideration of the plan is a matter within Council authority over which the Act accords the Council considerable flexibility. For the same reasons that we defer to BPA expertise in construing other sections of the Act, therefore, we will defer to the Council's interpretations of § 839b if reasonable.
B. Model Conservation Standards
The Act requires that the Council's plan afford priority to certain resources:
The plan shall . give priority to resources which the Council determines to be cost-effective. Priority shall be given: first, to conservation; second, to renewable resources; third, to generating resources utilizing waste heat or generating resources of high fuel conversion efficiency; and fourth, to all other resources.
§ 839b(e)(l).
The Act further requires that the plan include model conservation standards, § 839b(f)(l), § 839b(e)(3)(A). The Council is directed to adopt model conservation standards applicable to new and existing structures which reflect "geographic and climatic differences within the region" and which "produce all power savings that are cost-effective for the region and economically feasible for consumers." § 839b(f)(l) (emphasis added). The Act defines "cost effective" resources as those which are forecast "to be reliable and available . to meet or reduce the electric power demand . of the consumers . at an estimated incremental system cost no greater than that of the least-cost similarly reliable and available alternative measure or resource, or combination thereof." § 839a(4)(A). The Act defines the term "system cost" as an "estimate of all direct costs of a measure or resource over its effective life including [direct and quantifiable environmental costs and benefits]." § 839a(4)(B). Because the term "economically feasible" is not defined in the Act, the Council's definition is a major point of contention in this action.
Rather than making a single forecast of the need for energy resources, the plan makes four separate, 20-year forecasts of electricity demand, each with separate resource needs. Under the lowest-growth forecast, conservation is the only new energy resource needed to satisfy regional energy demand. Plan Vol. 1 at'5-2 (figure 5-1). Under the medium-low, medium-high and high-growth forecasts, demand is satisfied by a mixture of conservation, hydroelectric, cogeneration, coal and combustion turbine energy sources in accord with statutory priorities. Id. (figures 5-2, 5-3, 5-4).
The Council has predicted the probability that each of these growth forecasts will be realized. It has predicted that it is "very unlikely" that growth will be slower than the low-growth forecast or faster than the high-growth forecast. The plan predicts a 33 per cent chance that growth will be more than the low forecast but less than the medium-low forecast; a 45 per cent chance of growth falling between the medium-low and medium-high forecasts; and a 22 per cent chance that growth will exceed the medium-high forecast but be less than the high forecast. Plan Vol. 1 at 5-17 (and figures 5-13, 5-14).
The 1983 plan predicts that the last resource to be acquired under the high- growth forecast will be a coal generating plant capable of producing electricity at a cost of slightly over four cents per kilowatt hour (4e/kwh). The plan considers that conservation measures which "could displace this coal plant would be considered cost-effective." Plan Vol. 1 at 7-1. It defines as cost effective, therefore, any conservation measure with a marginal cost less than 4$/kwh in current dollars. Id.
The Council concluded that its conservation standards are both cost effective for the region and economically feasible for consumers under § 839b(f)(l) and recommended that BPA impose a surcharge for nonconforming electricity usage beginning January 1, 1986 as authorized by § 839b(f)(2). Plan Vol. 1 at 1-3, 11, Vol. 2 Appendix J at Preface 4.
Petitioners argue that it is unreasonable for the Council to interpret cost effectiveness based upon a forecast which the Council itself concedes is "very unlikely." Petitioners argue that the Council cannot adopt a cutoff for cost effectiveness unless it is "more likely than not" that the predictions upon which it is based will be realized. See Industrial Union Department v. American Petroleum Inst., 448 U.S. 607, 653,100 S.Ct. 2844, 2869, 65 L.Ed.2d 1010 (1980) (OSHA must show that it is more likely than not that health hazard would exist but for its regulations); Bunker Hill Co. v. EPA, 572 F.2d 1286, 1301 (9th Cir.1977) (EPA cannot establish standards which demand technology which is experimental or only theoretically feasible).
Unlike the occupational health statute in Industrial Union Department or the environmental protection statute in Bunker Hill, however, the Act allows the Council the flexibility to define cost effectiveness not in terms of current energy needs but by reference to whether a resource is "'forecast . to be . available within the time it is needed." § 839a(4)(A) (emphasis added). See 126 Cong.Rec. H-9514 (daily ed. Sept. 23, 1980). The Council is given the statutory mandate to make a forecast and to base its conservation plan on this forecast. Petitioners also argue that the Council is basing its plan upon projected energy costs and demands that the Council itself is unable to predict with accuracy. The Act does not require the Council to follow any particular method or timetable for forecasting the amount or cost of future energy demand; we do not find the 20-year forecast or the 4<t/kwh cutoff to be unreasonable in light of the inherent indefiniteness of long-term energy forecasting.
The Act requires the plan to define cost effectiveness in terms of "incremental system cost," which the Council has interpreted to be an estimate of all direct and environmental costs of all the measures required-by the conservation standards as a whole. See § 839a(4)(B). Consequently, the Council's measure of cost effectiveness is based on the average cost of a package of conservation measures, none of which has a marginal cost exceeding 4<j/kwh. Although it selected 4<f/kwh as the outer limit for cost effective conservation components, the Council estimates that the average system cost of its conservation standards is only 1.8<f/kwh, Plan Vol. 1 at 10-4, considerably less than the cost of other energy resources. See Plan Vol. 1 at 4-3, 4-6 (figure 4-4, table 4-3).
Petitioners allege that this interpretation of cost effectiveness is contrary to the Act. They contend that the plan must examine the cost effectiveness of. each individual conservation measure because the Act uses the singular in referring to cost effectiveness of "any measure or resource." § 839a(4)(A). The Council's approach is correct. The Act does not require that each individual component of the model conservation standards be cost effective. The purpose of the conservation standards is to require the Council to examine cost effectiveness of standards which, when adopted in their entirety, result in cost effective energy savings. All that is required is that the model conservation standards be cost effective, when viewed as a whole. See § 839b(f)(l).
Petitioners also allege that the Council's definition of cost effectiveness is unreasonable because the 1983 plan does not adequately consider potential conservation in the government, commercial and industrial sectors. The plan does include operational conservation programs applicable to government, Plan Vol. 1 at 10-17, 10-18, commerce, Plan Vol. 1 at 10-14, 10-15, and industry, Plan Vol. 1 at 10-15, 10-16, and sets conservation requirements for all sectors. Plan Vol. 1 at 7-7 — 7-12, 10-12 — 10-17; see Plan Vol. II Appendix J. The model energy conservation standards for new buildings apply equally to residential and nonresidential structures. See Plan Vol. II Appendix J. Whether the plan provides similar or dissimilar conservation standards for different sectors is a matter within Council discretion under the Act. See § 839a(4)(A), 839b(f)(l). We find the Council's interpretation of the term "cost effective" to be reasonable.
In addition to requiring cost effectiveness for the region as a whole, the Act requires the model conservation standards to be economically feasible for consumers. § 839b(f)(l). The Act does not define the term but the plan contains a functional definition:
Although a house built to the Council's model standard will have a slightly higher initial cost, over the life of the house the consumer will be economically better off than if living in a house built to current codes.
Plan Vol. 1 at 7-3.
In measuring economic feasibility, the plan considers the cost and efficiency of the conservation standards as a whole. Petitioners argue that economic efficiency, like cost effectiveness, should properly be measured on a component-by-component basis. Petitioners assert that a particular conservation component is economically feasible only if that particular component pays for itself: each individual component must save the homeowner more in electricity than it adds to the cost of the house. Instead of reflecting the marginal (or avoided) cost of energy resources, the petitioners insist, economic efficiency should be a function of the average market cost for electricity, which is not predicted to exceed 3.6$/kwh. Plan Vol. 1 at 4-6 (table 4-3). Because the plan relies on marginal cost to measure economic efficiency, petitioners argue, the standards for economic feasibility are only theoretically feasible and therefore unreasonable. See Bunker Hill, 572 F.2d at 1301.
The Council believes that marginal cost is a more accurate measure of energy cost than is average cost because of differences in market price for different consumers. See Plan Vol. 1 at 4-6. Furthermore, economic efficiency should be based upon avoided cost which is measured by marginal, not average, cost. See 126 Cong.Rec. 30181 (1980) (report of the Office of Technology Assessment). Cf. H.R.Rep. No. 96-976 (Part I), 96th Cong., 2d Sess. 50 (1980), U.S.Code Cong. & Admin.News 1980 p. 5989 ("cost comparison is done on the basis of incremental, or marginal, costs").
The plan's definition is consistent with congressional intent. See S.Rep. No. 96-272, 96th Cong., 1st Sess. 25 (1979) (the cost to consumers must be such that "the cost of complying with the standards . should not exceed, for the individual or entity to which the standards apply, the direct financial savings produced by compliance"). Petitioners have not shown the Council's definition of economic feasibility to be unreasonable.
Finally, the conservation standards cannot be economically feasible for owners of rental housing, petitioners argue, because the market will not support additional rents necessary to compensate for an increase in construction costs. Not only have petitioners not presented any support for their assertion, but the Council notes that homes which meet the conservation standards may command higher rents because of the savings tenants can enjoy in energy costs. Petitioners have not provided us with sufficient evidence upon which to disturb the Council's conclusion that the standards are economically feasible for owners of rental housing. Application of the model standards to rental housing is not arbitrary or capricious.
C. Methodology for determining conservation value
Petitioners challenge the technical, analytic process by which the Council arrived at its model conservation standards. The dispute centers on whether it was acceptable for the Council to arrive at its standards using industry engineering standards and computer simulations of energy usage, conservation and efficiency of various conservation measures.
Petitioners argue that the Council's failure to conduct component field testing to determine the value of various conservation measures was an abuse of discretion, and that such component testing is statuto- - rily mandated. See, e.g. § 839a(4)(A), 839b(f)(l). They assert that component testing was feasible, would have yielded valuable data and could have been done in the two-year period the Act allows for preparation of the 1983 plan. See § 839b(d).
The Act does not, however, mandate any particular method of forecasting under either the definition of cost effectiveness, § 839a(4)(A), or the section requiring the preparation of model conservation standards, § 839b(f)(l). The Council is given the discretion under the statute to develop a forecast which provides model conservation standards that are cost effective, economically efficient and reflect regional geographic and climatic differences. § 839b(f)(l). See S.Rep. No. 96-272, 96th Cong., 1st Sess. 2 (1979) (value of conservation is to be determined "on the basis of a methodology developed by the Council as part of the plan"). As we have concluded above, the Council's use of four, 24-year forecasts was reasonable in light of its statutory mandate.
To test the value of particular conservation measures, the Council used a computer simulation model, Plan Vol. 1 at 10-4, Glossary-3, combined with standardized coefficients for building materials, components and assemblies. See generally Plan Vol. II Appendix K. The choice of methodology is a highly technical question which falls within the unique expertise of the Council. Unless an abuse of discretion is demonstrated, this court will not substitute its judgment on particular testing methodology. See Department of Water & Power v. BPA, 759 F.2d at 691 (and cases cited therein). While petitioners may be correct in asserting that the Council could have done component testing in lieu of simulations, the Act does not require the Council to do so. The methodology used in the 1983 plan employed accepted industry standards and principles of analysis. See American Society of Heating, Refrigerating and Air Conditioning Engineers, Inc., Ashrae Handbook 1981 Fundamentals (1981). We express no opinion on the methodology and definitions proposed by the petitioners. Petitioners have not presented evidence before this court to raise serious doubt about the accuracy or reliability of the Council's computer simulation program or the Handbook of Fundamentals, upon which the Council relied. We conclude that the Council did not abuse its discretion when it chose to rely upon industry standards and computer simulations in its calculations of the value of various conservation components.
In our evaluation of the validity of the Council's technical methodology and of the conservation standards, two factors are crucial. First is the technical nature of the Council's decisions which even Congress recognized should be the result of technical, scientific choices. See § 839b(c)(ll)-(13), 839b(g). Second is the deferential standard for our review of the Council's action which we have already recognized above. The Council's interpretations of the Act are reasonable and its model conservation standards are not arbitrary or capricious. See Chevron, U.S.A., 104 S.Ct. at 2782-83 (and cases cited therein); see generally 5 K.C. Davis, Administrative Law Treatise § 29.20 (2d ed. 1984).
IV. Application of State Environmental Laws
Petitioners claim that the 1983 plan violates state environmental protection laws because the Council did not prepare an environmental impact assessment on the model conservation standards. See Wash. Rev.Code Ann. § 43.21C.010, 43.21C.030 (Washington environmental protection statute); Mont.Code Ann. § 75-1-101, 75-1-201 (Montana Environmental Policy Act).
To the extent that the Council functions as a compact, it is considered the state-created agency of each state. Jacobson v. Tahoe Regional Planning Agency, 566 F.2d 1353, 1358 (9th Cir.1977), aff'd, 440 U.S. 391, 99 S.Ct. 1171, 59 L.Ed.2d 401 (1979). A state can impose state law on a compact organization only if the compact specifically reserves its right to do so. See People v. City of South Lake Tahoe, 466 F.Supp. 527, 537 (E.D.Cal.1978) (compact specifically reserved the right to impose regulations which were more stringent than those imposed by the compact organization itself). Neither Washington nor Montana reserved such rights in their statutes agreeing to establishment of the Council. See Wash.Rev.Code § 43.52A.010; Mont.Code Ann. § 90-4-401.
We need not decide whether or to what extent federal environmental laws, e.g. 42 U.S.C. § 4321 et seq., would apply. Neither BPA nor the Council has taken a substantial federal action affecting the human environment which might trigger application of federal environmental laws. See 42 U.S.C. § 4332(C)(ii).
PETITION DENIED.
. Amicus briefs have been filed by the States of California, Oregon, Idaho, Montana and Washington, the City of Tacoma, Washington, the National Governors' Association and two public interest organizations.
. For a thorough analysis and history of the constitutional position of such experiments in cooperative federalism, see Grad, Federal-State Compact: A New Experiment in Co-Operative Federalism, 63 Colum.L.Rev. 825 (1963) (discussing the federal role in the Delaware River Basin Commission).
. The model conservation standards incorporated in the 1983 plan specify an energy performance budget for space heating. The energy performance budget does not require any particular building practice or components but instead mandates minimum overall energy efficiency and specifies several different approaches which builders can use to satisfy the performance standards. The energy budget is divided into three climatic regions depending upon the number of heating or cooling degree-days in the region.
. The Act treats conservation as an energy resource just as any other energy resource. Conservation is unusual, however, because it is not constructed by a utility with predictable costs and output. Determining the value of conservation as an energy resource is one of the complex theoretical problems which the plan confronts.