John Paul Stevens: The Court will hear argument in Borden Ranch against the Corps of Engineers, No. 1243. Mr. Bishop, you may proceed.
Timothy S. Bishop: Justice Stevens, and may it please the Court: The Army Corps of Engineers has a considerable number of hurdles to clear before it may regulate activity as a discharge under section 404. Congress specified in section 404 that a permit is required for an activity that is an addition of a pollutant to a navigable water. That addition... that added pollutant must be in the form of fill material or dredged material. And the addition must come from a point source. Those statutory terms, we believe, have a core of plain meaning that excludes a farmer and rancher, deep plowing in a seasonal wetland, to prepare the soil for deep-rooted crops. A deep plowing of that sort does not add fill material or dredged material, and it doesn't involve a point source. And so it--
Sandra Day O'Connor: Well, did... did the district court here find that the deep ripping tracked material into wetland areas from the adjacent uplands?
Timothy S. Bishop: --Only as to 3 of the 30-odd wetlands that are involved.
Sandra Day O'Connor: And as to those three?
Timothy S. Bishop: And that... that is not... and that was not the basis of the judgment below or of the penalty. In the summary judgment ruling, the court found, as a matter of law, that plowing that moved material that was already in the wetland... and this is page 36 of the petition appendix... was a violation. When it came to hearing evidence, for that reason the court did not focus on the question of whether material was added to the wetland, as the Government says, from... from outside. The penalty in this case was based on 358 rips, passes, of the plow across the wetlands. The court did not distinguish, in any of those cases, as between passes that brought outside material into the wetland and those that didn't. It simply was not a focus. This was not the basis of the Government's argument below. This is entirely novel. It wasn't the basis of the district court's decision in this case. It wasn't the basis of the court of appeals decision, if you look at page 6 of the court of appeals decision. Furthermore, we believe that--
Antonin Scalia: Even so, if we agreed that that's a proper basis--
Timothy S. Bishop: --That would not be a basis on which you could affirm here because that was not--
Antonin Scalia: --But we'd have to... we'd have to remand for that to be considered?
Timothy S. Bishop: --And we believe that a remand that focused on that issue would show, first of all, that there were on some occasions a minimal amount of material that was moved into the edge of the wetland, just on some occasions, a minimal amount that would be well below the amount of fill that would have fitted at that time with on the... under the nationwide permit so that no individual permit would be required in this case. It would also show that the... that the deep plow was raised on many occasions before the... it moved from upland into wetland, and there's an example of that described at page 71 of the petition appendix. And finally, on page 3 of our reply brief, we cite a California Ag Extension pamphlet which describes in great detail the nature of the soils and the plowing in this area, and what it... what it describes is that when a deep plow passes through this sort of clay soil and it then rains, that the... that the... the clay pan seals up again and that because of the... the nature of the clay pan, there really is no homogenization during the plowing process between the soils above and below the pan.
Stephen G. Breyer: What... what is the relevance of that? That is, I'm thinking of--
Timothy S. Bishop: Well, the Government is--
Stephen G. Breyer: --Let me explain how I'm thinking of this case. Suppose that you went in the middle of Lake Erie with a big punch, and you punched a hole in the bottom and all the water ran out. Would that violate this act?
Timothy S. Bishop: --No.
Stephen G. Breyer: No.
Timothy S. Bishop: That would regulated under the rivers--
Stephen G. Breyer: Okay, it wouldn't violate the act. There's nothing. All right. Now suppose you went to Lake Erie and you had about 1,000 dump trucks or great big rakes and you filled up Lake Erie. Would that violate the act?
Timothy S. Bishop: --That would fall under section 404.
Stephen G. Breyer: Absolutely, okay. So now what you have is you punch a hole in the bottom and you bring some dirt in. All right? So... so--
Timothy S. Bishop: We bring no--
Stephen G. Breyer: --you brought in some dirt and you punched the hole. Now--
Timothy S. Bishop: --We bring... we bring a little dirt in at the margin.
Stephen G. Breyer: --So your argument is because you only brought a little dirt and you were mostly interested in punching the hole, you fall outside the act.
Timothy S. Bishop: That's right. And that--
Stephen G. Breyer: That's it. Okay. Well, I don't know if we're interested in the purpose of the act and you violate it even a little bit, why don't you lose?
Timothy S. Bishop: --No, no. Well, the purpose of the... no. The purpose of the act, Justice Breyer... there are multiple purposes of this act, but the purpose to preserve the Nation's waterways is achieved through a... a dual or perhaps a tripartite process. There is a section 402 NPDES permit that is regulated by the Federal Government. There is a section 404 fill and dredge authority that is... is... that is handled by the U.S. Army Corps of Engineers. But that is only part of the picture. The Government through... the... the Congress through section 208 set up a process which is mainly administered through the States, although with considerable Federal assistance, for... for regulating nonpoint source pollution. If this activity, this plowing activity, is not regulated under section 404, it is, nevertheless, regulated by the States as nonpoint source pollution. And so the goal of the act to... to protect the Nation's waters is not one that depends on the Federal Government, and in fact, we think here that to give a broad reading to the powers of the Army Corps of Engineer under section 404 by straining these very... these... these terms, these series of terms that Congress predicated section 404 jurisdiction on, that that would contravene Congress' other goal in section 101(b) which is to preserve and protect the primary responsibilities and rights of the States.
Ruth Bader Ginsburg: Mr. Bishop, will you explain something to me? And... and... on a most basic level, if what the concern was it was to preserve wetlands and not have them converted into dry lands, what difference should it make if the conversion comes about through redeposit, shaking all the stuff up, turning it upside down, but what you're ending up with is dry land rather than wetland, or if you take a little sludge from someplace else and put it there?
Timothy S. Bishop: We don't think it's permissible, Justice Ginsburg, to protect wetlands by ignoring the plain language of the statute because Congress, through using the terms that it did, imposed limits on Federal power that preserve and protect, as 101(b) says, the power of the States to regulate nonpoint source pollution. And so this--
Ruth Bader Ginsburg: So when you say--
Timothy S. Bishop: --so it--
Ruth Bader Ginsburg: --you say, well, nonpoint is... that's another issue, whether this is a point source, whether the--
Timothy S. Bishop: --We don't believe this is a point source. We don't believe it involves fill material--
Ruth Bader Ginsburg: --But that's... that's another issue--
Timothy S. Bishop: --or dredged material.
Ruth Bader Ginsburg: --than whether... I thought you were saying this is a redeposit of the same material. Therefore, it can't come under the act.
Timothy S. Bishop: It's... it's a redeposit of the material. Therefore it is not an addition--
Ruth Bader Ginsburg: Yes.
Timothy S. Bishop: --of material to the wetland.
Ruth Bader Ginsburg: Is there any redeposit that could be?
Timothy S. Bishop: Well, the... the... Judge Silberman in the National Mining case said that the terms addition in section 404 and also the concept that a 404 permit is for the... is for the deposit of material to a specified disposal site, that read together, those show that Congress intended that there be a geographic or temporal separation between the dredging activity or where the material comes from and where it is deposited. So, you know, if a bulldozer digs up large quantities of material from one side of a wetland and moves them to another, you know, perhaps it is reasonable for the agency in a circumstance like that to say that there has been an addition. Even in a case like Deaton, where you have dredging, the dredging takes soil out of the wetland. At that point it becomes a defined pollutant under section 404 which is dredged spoil, something that Congress said was a pollutant. And if is that is sidecast, then, you know, certainly there is far more movement of the soil and far more disturbance of the soil in a situation like that. It's lifted out of the wetland and it is moved elsewhere. But what we're dealing with here is a plow, a deep plow, that goes through the soil and that pushes it to the side and... and moves it, but it stays in contact with the soil all around it and it's simply moved in small degrees.
Sandra Day O'Connor: Is there a difference between deep ripping and deep plowing?
Timothy S. Bishop: They're the same. They're the same thing, Justice O'Connor. And... and chiseling, which is mentioned as a form of plowing in the regulations, is the same thing too. It's just... it's exactly the same implement.
Sandra Day O'Connor: Well, what... what is the effect of section 1344 which says nonprohibited discharge of dredged or fill materials, that the discharge from normal farming and activities such as plowing are not considered, I guess, as a--
Timothy S. Bishop: Well, Justice O'Connor, our... our take on this case is that we never get to 404(f), that this activity is not a discharge to begin with because it doesn't satisfy the requirements set out in 404(a). It is not... it does not involve a point source. A plow is not a point source. This is not fill material. It's not dredged material. It is not an addition. Therefore, it is not a discharge.
Sandra Day O'Connor: --So, you think we never get there.
Timothy S. Bishop: That's... that's our argument.
Sandra Day O'Connor: But if we were to disagree with you, because of this marginal shifting of soil from the uplands to the wetland, then we'd have to look at that?
Timothy S. Bishop: If... well, that would be... that would be an issue, but as I say, there's no finding as to that sort of a... that sort of an addition. And I don't believe... Justice O'Connor, let me be clear that that... the... the movement of material into the margins of the waters here would not be a discharge. Even if it is an addition, it still has to qualify as fill material and as dredged material and as a point source. And a plow simply is none of those things, and I hope I get a chance to explain why I don't think it's a point source.
Ruth Bader Ginsburg: Why... there's something called a backhoe that has been labeled a point source and a bulldozer that has been labeled.
Timothy S. Bishop: Right.
Ruth Bader Ginsburg: Why not a ripper?
Timothy S. Bishop: Well, let me explain. The language of the statute is that a point source is a confined conveyance, a confined, discrete conveyance. And we do not believe... and if you look at... and then are examples set... set out in the statute. And this is at 5a of the addendum to the Government's brief, which is a little easier to handle than our petition appendix. A point source is a discernible, confined, discrete conveyance. And then there are a series of examples. Now, the Government's regulations don't define point source. In fact, they don't even use point source. The... the 404 regulations don't include the term, point source, and they're not in the 1996 memorandum to the field in which the... the Government purported to explain why deep plowing is covered by 404. But we think that these terms and these examples show one important characteristic of a... of a point source, that it confines the material that it conveys.
Stephen G. Breyer: Why? It doesn't... I mean, why is a truck? Does a truck fall within it? I mean--
Timothy S. Bishop: A dump... a dump--
Stephen G. Breyer: --what I do is I have my truck. I fill it up with guck and I move the guck over to the lake and I dump it in.
Timothy S. Bishop: --A dump truck--
Stephen G. Breyer: Now, is the truck a point source?
Timothy S. Bishop: --A dump truck confines the material and it conveys it.
Stephen G. Breyer: Well, it doesn't say confined anywhere in the statute.
Timothy S. Bishop: Yes, it does.
Stephen G. Breyer: Which word--
Timothy S. Bishop: It says a discernible, confined, and discrete--
Antonin Scalia: --Not confining. Not confining.
David H. Souter: It's the conveyance that is confined, not the material.
Timothy S. Bishop: --Well, that's the Government's theory, but--
David H. Souter: Well, but isn't that what the plain language says?
Timothy S. Bishop: --No, no.
David H. Souter: It says confined conveyance, not confining conveyance.
Timothy S. Bishop: Well, I don't think that's right. I mean, first of all, the Government has never adopted that... it's just come up with that... that argument for the purposes of this litigation. It's not in any regulation.
David H. Souter: Well, we're coming up with it now.
Speaker: [Laughter]
Antonin Scalia: And it's a pretty darned good one too.
Speaker: [Laughter]
Timothy S. Bishop: Well, I... I don't think it is, Justice Scalia, if you look at the examples that are... are given because the characteristic of all of these things is that they confine the material--
Stephen G. Breyer: Well, what is rolling stock?
Timothy S. Bishop: --It's defined in Webster's as... as the... the trucks of a trucking company or--
Stephen G. Breyer: Fine. So... and it doesn't, however... suppose I have a brilliant idea. Instead of a truck, I will take a giant rake, 17 feet across, and rake the mountain into Lake Superior. All right. Now, is... is... that doesn't fall within this just because I thought of this brain storm of using this giant rake instead of a truck?
Timothy S. Bishop: --No. I think the... the common sense question is, does this vehicle confine material. There are some--
Stephen G. Breyer: I would say the common sense question is whether or not it's exactly the same for all intents and purposes of this statute as a truck.
Timothy S. Bishop: --Well, but... the... there is a list of examples--
Antonin Scalia: Well, isn't... isn't your point whether it's a conveyance?
Timothy S. Bishop: --Well, that is another point.
Antonin Scalia: The rake is a conveyance. It is meant to move the dirt down, and I suppose your point is that the... the plow is not intended to convey the dirt anywhere except up and down. Some of it may accidentally go sideways, but that's not what the plow is for.
Timothy S. Bishop: Well, I think that that is a very useful term for us, conveyance. Conveyance certainly gives the idea of something that is intended to move material from one place to another. And a plow is not. A plow is intended--
David H. Souter: Well, why... why will not up and down satisfy?
Timothy S. Bishop: --The... because we're not... I mean, we're not in this business to convey a material anywhere. We're in this business--
David H. Souter: No. That's not your purpose.
Stephen G. Breyer: Isn't a plow a--
David H. Souter: --That's not your purpose. But that is necessarily what you are doing by the activity that you engage in, isn't it?
Timothy S. Bishop: --Justice... Justice Souter, I don't think that in any normal use of the term conveyance that you would include a rake or a plow that just pushes material a short distance, perhaps a matter of inches or feet.
David H. Souter: Well, let's... let's assume that I... I'm accepting Justice Breyer's suggestion and the rake would be a... would... would be a point source here because it conveyed. If that is so, why should there be, in effect, a... a... an excluding analysis for the... for the ripper that moves the stuff up and down?
Timothy S. Bishop: Well, I mean, that's my argument, Justice Souter. I believe that the terms confined and conveyance in the statute in their plain meaning and as they are elucidated through all of these examples that are given, that they all have characteristics in common. One is that they confine the material. The other is that they convey it. And I don't believe that that is an apt description of a plow shank, a 5-inch wide plow shank, pulled through the soil and... and the movement that--
Antonin Scalia: Well, you... you could say that it does convey. It... it conveys mostly, almost entirely, up and down and maybe a little bit sideways. But to the extent that it does convey a lot up and down, which is its purpose, it hasn't made any addition. That would be your point for the up and down.
Timothy S. Bishop: --Well--
Antonin Scalia: But you're still stuck with the sideways, it seems to me.
Speaker: [Laughter]
Timothy S. Bishop: --Well, and we don't... we don't think that the... the plowing here satisfies any of these terms. So we don't think that it's a point source, but even if it is a point source, we certainly don't think that it's an addition because there is no addition to the wetland unless something is added. And all we are doing is moving soil, be it up or down or sideways, small... to small degrees. And that doesn't... nothing is coming into the wetland from the outside.
David H. Souter: Well, isn't--
Ruth Bader Ginsburg: --the argument that... that it's a... it's not adding material. No new material is added, but as I take the Government's argument, it's converting something that wasn't a pollutant into a pollutant when this deep ripper churns up the earth and deposits the rocks and the soil and the biological material on the top.
Timothy S. Bishop: Justice Ginsburg, the... the statute, section 404, applies to two types of pollutant only, and that's fill material and dredged material. Dredged material is material that is dredged out of the soil, the sort of thing that a backhoe does, dredging a hole and lifting it up out of the soil. The agency's regulations define dredged material as material that is excavated or dredged from the wetland. The district court didn't find that there was any dredged material involved here, and we don't believe that any reasonable reading of the term, dredged material, or of the regulation that talks about excavating and dredging from the wetland could describe the activity of deep plowing. That leaves fill material. Fill material in its plain meaning is material that is... is used, is moved in to fill a gap or a cavity. It was defined in the regulations at the time as material that was used for the primary purpose of replacing an aquatic area with dry land or changing the bottom elevation. As Justice Breyer has pointed out, if anything took water out of this wetland, it is the activity of punching the hole in the clay pan so that it drains out. We are not interested in filling this wetland and there was no purpose here to... to use the material to replace wet areas. And in fact, it's quite irrelevant to a farmer and rancher if the topsoil remains wet, and in this area it does, as a matter of fact, remain wet because the clay pan seals up and during the rainy season, there's... there's water on the surface. It's just not our purpose to do that.
Antonin Scalia: You... you were quoting the... the regulations as to the... the definition of... of dredged material, but the definition in the statute of pollutant includes rock and sand.
Timothy S. Bishop: It does, but the... but the pollutants... the pollutants have to be in a particular form in order to be covered by 404, and that form is fill material or dredged material. So it's not enough to say that there is rock or sand involved here. It has to be in the form of fill material or dredged material which is why you have these regulatory definitions of those two concepts.
Antonin Scalia: Where do I get that from?
Timothy S. Bishop: In... in section 404(a) on page 2a of the Government's addendum. The permits are issued for the discharge of dredged or fill material into the navigable waters at specified disposal sites. The... the regulations then define on page 6a and 7a fill material, discharge of fill material, and dredged material and discharge of dredged material.
Antonin Scalia: So the definition... for present purposes the definition of pollutant is irrelevant.
Timothy S. Bishop: It is... I'm not sure whether it's irrelevant because under section 301, if you don't get a permit, then what you're charged with violating is section 301(a), which is on page 1a. And that talks about the discharge of any pollutant. But the basis on which this case has been litigated is that we needed a 404(a) permit not a 402 permit, and that is a permit for the addition of fill material or dredged material.
Stephen G. Breyer: Is... is... what is your definition? Because I think that's actually not a bad point. You said it's a conveyance. This is not a conveyance. The dictionary, I guess, defines conveyance as a... as a means of conveying, and it says conveying is cause to pass from one place to another. So the Government says, well, we'll accept that. And of course, if you take that literally from the dictionary, then this is a conveyance because it is a means of conveying. You say it couldn't be that broad. I have a better definition, more consistent with what the paragraph means, and that better definition is what?
Timothy S. Bishop: It's the... well, clearly the Government has some room here, but what we do say is that a conveyance does not describe that no one... no one looking at a deep plow would say that's a conveyance. It is not an object--
Stephen G. Breyer: Well, except Webster would seem to say that it is a conveyance because it fits the definition. And now, so you don't like that definition. I understand. I... I see where... in general terms, I see where you're going, but I... I'm asking you if you have a definition that would help you short of Webster's definition.
Timothy S. Bishop: --Well, I'm not sure that Webster's covers this situation. A conveyance in common parlance is something that will move material that is intended to convey, to transport. I'll have to find the page of our brief.
Ruth Bader Ginsburg: Is it--
Antonin Scalia: --I must say I never thought a plow was a conveyance either.
Timothy S. Bishop: A means... I mean, this is what I have from Webster's Third. This is on page 4 of our reply brief. A means or way of conveying, carrying, transporting, serving as a means of transportation. I mean, there's the idea in there that it's a purposeful activity--
Stephen G. Breyer: You... you want to read it as--
Timothy S. Bishop: --to convey the material to another place. And... and that's not just want a plow does. A plow just moves through the soil pushing it to the side and turning it over and cutting through the soil. I... I just don't think any common sense or reasonable meaning--
Ruth Bader Ginsburg: --Is that different from--
Timothy S. Bishop: --would treat that as a--
Ruth Bader Ginsburg: --the propeller that was involved in the Florida case?
Timothy S. Bishop: --In... in MCC?
Ruth Bader Ginsburg: Yes.
Timothy S. Bishop: The propeller in MCC... this is a huge propeller on a barge in a very shallow navigable stream. The propeller cut through the... the material at the bottom of this stream, picked up large quantities of it with every... with every... at each stroke, and propelled it out of the... out of the waters. Whether or not that is--
Antonin Scalia: Is that what it was designed to do?
Timothy S. Bishop: --No, that's not what it was designed to do. And I think--
Antonin Scalia: It wouldn't meet your definition.
John Paul Stevens: But isn't that exactly what happens here, that the deep... deep rigging or whatever you call it... the... it breaks up the clay. There's a... a body of clay, and then the... the broken-up clay finds its way into the water.
Timothy S. Bishop: --Well, yes, it gets pushed. It does get pushed to the side within the... within the waters.
John Paul Stevens: So it's the exact parallel to the other case.
Timothy S. Bishop: MCC... no. MCC is a suspect decision, and I'm not sure that it fits the definition of the point source or dredged or fill material. I mean, it is more like dredging. But, you know, if a point source is a confined conveyance, our... our contention is that it must transport... purposefully transport material from one place to another and it must confine it--
John Paul Stevens: The key to your argument, if I understand it, is the purposeful thing. They didn't really intend to do this. It's just a byproduct of what they're doing, and therefore there's--
Timothy S. Bishop: --No. That's... that's not the key, Justice Stevens. The key... the key is equally that this is to pick up and move material to another place. We don't want it here. Let's move it. And it's just not an apt description of what plowing does. But I don't want--
David H. Souter: --Would give us... would you give us a... your best comprehensive description of what this kind of so-called plowing does? Does it leave the clay down at the clay layer and simply break it up? Does some of the clay find its way up in the course of this ripping? I'm not sure that I know how it works.
Timothy S. Bishop: --Well, I think primarily what happens is this is a very dense clay layer that the... they have 5-inch shank cutting through it. And I think the most apt description is that it cuts through the clay. This clay is heavy. It is not... there's not a lot of homogenization, as the... as the Ag Extension pamphlet that I cite in the reply brief says. There's not a lot of homogenization at the lower levels from below the clay to above or from the clay above because of the nature of the soil and because of the nature of the piece of equipment. This is not like a moldboard plow that has a curved shank that pushes the soil up. It's a cutting device that is intended to allow water to hydrate the roots and to allow the roots room to grow. If I could reserve the balance of my time.
John Paul Stevens: Mr. Minear.
Jeffrey P. Minear: Thank you, Justice Stevens, and may it please the Court: The Clean Water Act placed no regulatory restrictions on the vast majority of acreage that petitioners sought to subdivide and sell in this case. The act required only that petitioners obtain a Federal permit for those few acres of... of wetlands that are protected under the Clean Water Act. And those wetlands are concededly protected. The question of whether or not these are waters of the United States is not in this case. Petitioners who are--
Antonin Scalia: And the... the legislation doesn't require that these wetlands be... be left fallow. You... you could use them agriculturally and... and they would still be wetlands and you wouldn't be violating the act.
Jeffrey P. Minear: --That is correct. That is correct. Rather, the focus here is on the activities--
Sandra Day O'Connor: Could be used for normal farming and plowing presumably without a permit.
Jeffrey P. Minear: --They could be under the normal farming exemption. And we have three questions here, so I'd like to try and proceed logically from the question of whether there was a discharge of a pollutant, the first question on which we spent most of the time discussing this so far; the question of whether that discharge would be covered by the normal farming exemption; and then finally, the question of civil penalties. On the question of whether there was a discharge of pollutant... pollutants, the Clean Water Act makes clear that a discharge is defined as any unauthorized addition of any pollutant from any point source. If you make such a discharge, under 301 you have violated the law. You have two... 301 provides... there are two exceptions to 301. You can obtain a permit for normal pollutants under 402 or you could obtain a dredge and fill permit for fill and dredged material under 404.
Sandra Day O'Connor: So is a... is a point source a defined, discrete conveyance? Is that how the statute deals with it?
Jeffrey P. Minear: The... the statute states that a point source is a discernible, confined, discrete conveyance.
Sandra Day O'Connor: And is a plow of this type such a conveyance?
Jeffrey P. Minear: Yes, it is, and let me describe.
Sandra Day O'Connor: Why?
Jeffrey P. Minear: Let me describe.
Sandra Day O'Connor: Because that's a point of disagreement between you and your opponent here.
Jeffrey P. Minear: That is correct, Your... Your Honor. The equipment we're talking about here is a bulldozer, a Caterpillar D10 bulldozer, that is about 20 feet tall and about 25 feet long and typically carries a 16-foot blade on the front of it. It weighs about 100,000 pounds. In this particular application, this earth-moving application, it carries what's called a deep ripper or shank behind it. Mr. Bishop says it's 5 inches wide. The understanding from my experts is that it's actually more like a foot wide. But the shank is about 5 to 7 feet long. The shank penetrates deeply into the ground and pulls up the material behind it. The idea here is to disgorge the clay material that lies beneath the surface of the soil so that the--
Sandra Day O'Connor: It doesn't just go in and come out. It--
Jeffrey P. Minear: --It pulls--
Sandra Day O'Connor: --in your view moves the material?
Jeffrey P. Minear: --Yes, and in fact the district court--
Sandra Day O'Connor: To the side or forward or something?
Jeffrey P. Minear: --Yes. The district court opinion states on page 70 that material is moved both horizontally and vertically.
Antonin Scalia: Yes, but if... so long as the material that... that moved a couple of inches or even a couple of feet horizontally is moved from within the wetlands to within the wetlands, you haven't added anything to the wetlands, have you?
Jeffrey P. Minear: No. I disagree with this, Your Honor, and let me make a point here that I think is very important to the entire dredge and fill permit program. Dredged material by its very nature is typically moved from one area of a wetland and placed elsewhere. Think of it when we talk about dredging a river and we're dredging a channel. We are taking the material out of one portion of the waterway and putting it into another. So that's... this idea of redeposition has been a part--
Sandra Day O'Connor: Well, that's easy to see, a dredge that takes a quantity of material and physically moves it to another place. Here your opponent says this goes in but it comes up and down. It doesn't, in fact, move the material to a different spot.
Jeffrey P. Minear: --No. I think that Mr. Bishop would agree that once the... what happens is once the plow penetrates into the... the earth, it stays beneath the earth and it's pulled up. And what happens is that clay... that clay pan that is beneath the surface is raised to the top, together with other material.
Antonin Scalia: He says that's not the purpose. He says the purpose is... it doesn't do that. It just breaks it up. I mean, maybe some of it come, but that the operation is not intended to mingle the clay with the... with the topsoil. Just to break up the clay. I mean, this is apparently a dispute between the two of you.
Jeffrey P. Minear: And it was one that was resolved, with respect, Your Honor, by the district court which made clear that the purpose here is to break up the clay pan. And in the process of doing that, it moves the earth both horizontally and vertically.
Antonin Scalia: Well, he doesn't deny that.
Jeffrey P. Minear: Yes. And that's sufficient.
Antonin Scalia: But... but you're... you're describing the moving it... of it... of it at least vertically as being the whole purpose of the operation. And... and he says that's not the case, that what they want to do is break up the clay and a little bit may... may, indeed, come higher in the course of that. But that's not what it's designed to do unlike the kind of plow you... I'm used to seeing, you know, that you carry behind a horse and it's... it's shaped in such a way that indeed the soil comes up. This is not that kind of a plow.
Jeffrey P. Minear: But, Your Honor, the purpose here is not what matters. It's what happens in the wetland. Is there an addition? And as I said, there's an addition from three different perspectives.
Antonin Scalia: Well, I suppose there's an addition if I'm walking through a wetland that... you know, that... that happens to be dry at this time a year and I kick... I kick a dirt ball and it moves to another part of the wetland. I guess... I suppose that's an addition too, isn't it?
Jeffrey P. Minear: The regulations make clear... EPA has made clear that those types of--
Antonin Scalia: Lucky for me my foot is not a conveyance. Maybe it is a conveyance. I don't know.
Speaker: [Laughter]
Jeffrey P. Minear: --The regulations make clear that de minimis movements of this type are not of concern to the agency. Rather--
Stephen G. Breyer: Suppose a person has boots that... and he regularly... regularly... people on this farm regularly walk through some poison and it's on their boots. And they walk further on and, lo and behold, they walk into the place and poison all the fish. And they do that on a regular basis. Are the boots considered a conveyance?
Jeffrey P. Minear: --EPA has indicated that walking, bicycling, driving a vehicle through a wetland is normally... has... has de minimis effects and--
Stephen G. Breyer: No, no. I'm trying to ask--
Jeffrey P. Minear: --Can it be? Can it be in the abstract sense?
Stephen G. Breyer: --I'm interested in the question of conveyance. Are the boots a conveyance where the effects are not minimal where, for example, it happens regularly, seriously, destroys the fish because they're walking through poisons? Now, the boots are not normally considered a conveyance, but they do, in fact, convey the poison. A plow is not normally considered a conveyance. A ditch that you dig to plant roses in is not a conveyance. But any of those things could in a subsidiary way convey something as part of their primary nonconveying objective. Now, I want to know if you consider those subsidiary things where it is serious to be conveyances.
Jeffrey P. Minear: Yes. They meet the statutory definition--
Antonin Scalia: Gee whiz, Congress should have said, you know, by conveyance or otherwise then. Why did it say, you know, it has to be... it has to be a conveyance?
Jeffrey P. Minear: --Because although as Justice Breyer explained--
Antonin Scalia: And if a boot is not a conveyance, it's not a conveyance.
Jeffrey P. Minear: --It is a... it is a conveyance. I think you... you need to understand the logic that Congress applied in enacting the statute, and that was to define all of these terms quite broadly, understanding that there would be enforcement discretion. Now, we're not talking about de minimis activities in this case. We're talking about filling two acres of wetlands in this case. And we're talking about activities that were found to have adverse environmental effects.
Antonin Scalia: Now, you... you say filling as though, you know, they're not going to be wetlands anymore, but that's perfectly okay. He can make them not wetlands anymore so long as he's doing it by normal farming. Right?
Jeffrey P. Minear: He can--
Antonin Scalia: I mean, the evil here is not that this is taken out of our national deposit of wetlands. That isn't the evil, is it?
Jeffrey P. Minear: --That was the concern that motivated these provisions. Congress understood when it enacted the Clean Water Act--
Sandra Day O'Connor: Well, but Congress exempted normal farming and... and activities such as plowing, did it not--
Jeffrey P. Minear: --Yes.
Sandra Day O'Connor: --from a permit?
Jeffrey P. Minear: Your Honor, it did. And I think what--
Sandra Day O'Connor: Yes.
Jeffrey P. Minear: --that indicates is that Congress was aware that plowing was a point source of addition of pollutants. It could have that effect. And for that reason it created an exemption, the normal farming exemption. But that exemption itself is limited and the regulations that EPA and the Corps have issued under this... under this normal farming exemption make clear that the activities we're talking about here would not be covered.
Sandra Day O'Connor: How so?
Jeffrey P. Minear: To be sure--
Sandra Day O'Connor: How so?
Jeffrey P. Minear: --The activities that are covered under the normal farming exemption are ongoing agricultural activities, part of a regular farming activity, and also activities that ultimately under the recapture provision, first, do not change the use of the land and do not result in converting a wetland to dry land. Now, the agency was charged with responsibility for... for fleshing out the scope of the normal farming exemption, and it made clear that a farmer who continues to engage in practices that he's always engaged in, including normal... normal plowing--
Sandra Day O'Connor: And you say here there was a change in the use.
Jeffrey P. Minear: --Yes. This land--
Sandra Day O'Connor: Well, your opponent doesn't want us to reach that exception because he says he wants to rest on the fact that, A, it wasn't a point source, that the plow is not a point source, and B, there was no addition. There was simply a redeposit of material in the same place. Have you dealt with that yet?
Jeffrey P. Minear: --Yes. I would like to go back to that point. We're now back to question 1 and talking about the question of addition which is fundamental to the idea of a discharge. Our view is that there were additions from three sources here. First, there was addition by material being moved from the upland into the wetland. Counsel states that that occurred in only three cases. The record actually shows that it occurred in at least 33 of the 40 wetlands that are involved here. The district court made reference to it only in those three cases where it was the only movement of that material. But it's easy to see that the three cases that are cited in the district court's opinion refer to those cases where the ripper passed next to a wetland but didn't go in and pushed... nevertheless, pushed soil into the wetland. The same thing would happen in those areas where the ripper actually intruded through the wetland as well. So in the case of all of the... the areas, the 29 areas that were filled, all of them had movement of material from upland into the wetlands.
Sandra Day O'Connor: Well, excuse me. I thought your opponent said it isn't an addition because it's a redeposit of material. Have you dealt with that?
Jeffrey P. Minear: Yes. The... in talking about... before when I spoke about the dredged material, about how material is moved from one place to the wetland to another place, that is a regulable redeposit that is covered by the act. And we believe the Fourth Circuit's reasoning in Deaton is quite persuasive on this.
Antonin Scalia: I think that's already a stretch. I mean, you know, with that you'll say, well, literally you're not adding anything to the wetlands just to move the... the mud from one portion to another. But you have this big dredging operation and it does disturb everything and you move it. So, yes, I'll go along with you on that. But... but then, you know, that's not enough for you. Now we have to generalize from that and say that any movement of anything within the wetlands is also an addition to the wetlands. And... and that brings you to this case. And I think it is fanciful to think that anything has been added to the wetlands here.
Jeffrey P. Minear: As I said before, Your Honor, not only do we have redeposits. We also have the material that moved from the upland into the wetland.
Antonin Scalia: Fine.
Jeffrey P. Minear: And we also have material, if I may finish--
Antonin Scalia: I see that, but... but not all of the penalties... we're going to get to the penalty part. Right?
Jeffrey P. Minear: --Yes, Your Honor.
Antonin Scalia: They were $25,000 for each pass, and it hasn't been established that every one of these passes had that effect. And... and he says most of them didn't.
Jeffrey P. Minear: Before we get to the penalty part, if I could, Your Honor, I'd like to point to one area... other area in which material is moved into the wetland, and that is material that's beneath the clay pan that was segregated and separated by this impermeable clay pan and instead was pulled up and put into the wetland as well.
David H. Souter: Okay. Would you be explicit about what is implicit in that is, and that is, the definition of wetland, I take it, is the... the land area between the surface and the hard pan, and the area beneath that is not part of wetland so that if you take material from beneath and bring it up, you are moving into the wetland. Is that your definition and what you're saying?
Jeffrey P. Minear: Yes, that's correct.
Antonin Scalia: So I can mine under a wetland, and... and I'm not disturbing the wetland.
Jeffrey P. Minear: You would not be regulated by section--
Antonin Scalia: Is that... is that the position the Government... the Government wants to take, that you... anything that's under the wetland, you know, go... go for it? It... it doesn't... doesn't involve the wetland.
Jeffrey P. Minear: --Your Honor, we're paying attention to the... the strict language of the statute. The statute is concerned with additions.
Antonin Scalia: How far down does a wetland go?
Jeffrey P. Minear: We think in this case it's fair to describe it as going to the bottom of the clay pan because that's what's actually holding the water in the area. In other cases, it might be different. There's vast hydrological variation. In some places wetlands are sustained by the groundwater that comes up from beneath, and so it's very difficult to talk about where the bottom of the wetland would be--
Antonin Scalia: You're willing to have us say that in this case, that wetlands only go down as far as whatever... whatever stratum holds the water in the wetland, and everything else is not included. Below that is okay.
Jeffrey P. Minear: --Well, Your Honor, respectfully what we're asking you to do in this case is to recognize that the wetland does go to that clay pan. In other cases it might well be different. But we need to deal with the facts--
Antonin Scalia: I thought so.
Jeffrey P. Minear: --Yes, Your Honor--
David H. Souter: But I... I think... I thought you were saying it does not go below the clay level because I thought you were making the argument that when you bring material from below the clay level into the wet area, you are moving it into the wetland from outside the wetland. So I thought you were making the further proposition that the wetland stops at the... at the clay.
Jeffrey P. Minear: --In this case that's correct. But in other cases such as in Riverside Bayview, the case that this Court previously addressed wetlands, there the wetland was actually... was... received water from beneath, and it did not have a sustaining clay pan. There's simply variations in the types of--
Antonin Scalia: No.
Stephen G. Breyer: How do we view-- --Never mind.
Antonin Scalia: The sustaining clay pad is not part of the wetland you're now... you're now saying.
Jeffrey P. Minear: --We're saying that the clay pan is a part--
Antonin Scalia: Is part of the wetland.
Jeffrey P. Minear: --But the area beneath it is not.
Antonin Scalia: Well, but he--
Jeffrey P. Minear: There's... there's soil beneath the clay pan that he pulled up.
Antonin Scalia: --Was he... was he pulling up soil from beneath the clay pan?
Jeffrey P. Minear: Yes. I think it's clear from the record that he must have.
Stephen G. Breyer: What... what about the question I think Justice O'Connor asked? And I think Justice Scalia did too. At least I'm waiting with bated breath. That is, what... what... suppose we agree with you that, well, at least the material from the side, at least the material from the bottom was an addition to the wetland, brought about by, let's say, this conveyance. All right. Now, what do we have to do with this case? Do we then have to send it back for a reassessment of penalties or what?
Jeffrey P. Minear: No. I think you can affirm on that basis because those two sources were present with regard to all of the... all of the... the wetlands that were--
Stephen G. Breyer: All of the passes?
Jeffrey P. Minear: --All of the... all of the wetlands that were at issue in this case.
Stephen G. Breyer: Well, he... he... I think your opponent said that the penalties rested upon 17 passes or something, and I guess they conceded that each one was a separate violation, which they may regret, if this is the rationale anyway. Do we have to have a reassessment of the penalty or not?
Jeffrey P. Minear: We don't think that a reassessment of the penalty would be necessary even if you took this alternative position. And let me say, first of all, the penalty here was based... what's in contention is how one calculates the maximum penalty that can be imposed on a party in one of these cases. And there's a fair amount of flexibility in determining how that might be done. In this case, the parties had agreed below that each pass of the ripper was, in fact, a violation. The... the district court then determined the maximum penalty by taking the number of passes of the ripper and multiplying it times the maximum penalty. But it did not impose that penalty. Instead, it looked to the specific statutory criteria that govern the application of the penalty provision.
Stephen G. Breyer: I... I see that, but I'm still... I'm writing the opinion let's imagine. I say, all right, they brought some guck from the side. That violates the statute. They got some from underneath the bottom. Now I'm at the point where the lower court wrote most of its opinion. What about the stuff that's just sort of muck down at the bottom and it simply turns it over? Now, do I have to answer the question of whether that does or does not violate this statute? Do I have to answer that? Because, after all, it turns... the penalty turns on it.
Jeffrey P. Minear: I'm not sure the penalty turns on it. We would say that if... obviously this Court has discretion to determine this... the types of... the type of remand it wants to send back. We do think--
Stephen G. Breyer: All right. If I do have to answer it, what do you say to their argument that, yes, if you churn up a lot and move it, for example, over to the point where the river is running in and dam up the river, that's one thing. But here all it does is turn it around in place. And indeed, it doesn't really cause any harm. It's the hole that causes the harm. That's their argument I think as to that bit. And what do you say as to that?
Jeffrey P. Minear: --I would say, first, the district court found that there was environmental harm here. On page 106 of the petition appendix, it makes note that these types of activities did cause environmental harm. With regard to the penalty assessment, I would look to the fact that the... the district court considered the seriousness of the violation, the bad faith activities--
Stephen G. Breyer: You haven't quite answered the question.
Jeffrey P. Minear: --I'm sorry.
Stephen G. Breyer: The question was think only of that little bit where the plow blade is taking a bit of muck and turning it over. Now, in respect to that they're saying, one, it's a small amount. Two, the redeposit of it has nothing to do with the harm. The harm is caused by the hole. Now, as to that bit, if I have to answer the question, what's your response to that argument?
Jeffrey P. Minear: My response is that deposit, that turning over material that's in place, can still cause environmental harm that subjects them to a penalty. Imagine if in that muck, in that material, there are entrained heavy metals, arsenic, the types of materials that are filtered out through the normal wetland process.
Antonin Scalia: And they have added those to the wetlands.
Jeffrey P. Minear: They... they have added those to the wetland if they've in fact been released from a situation where they're--
Antonin Scalia: They were in the wetland before, and they're still... and they're still in the wetland.
Jeffrey P. Minear: --But as the Fourth Circuit explained in Deaton, that when you take material and you physically change its situation, if you change it from an aerobic... an anaerobic environment to an aerobic environment, if you change its reduction oxidation potential, these are the reasons why we have a permit because we're concerned about these types of activities--
Antonin Scalia: I understand. It's well to be concerned about it, but... but Congress did use the term addition... addition... to the wetlands. I mean, don't words mean anything?
Jeffrey P. Minear: --Yes, they do, Your Honor. And as I said before, they must have contemplated that an addition included a redeposit because otherwise the idea of... of regulating dredging and the placement of dredged material wouldn't have made any sense. Congress was aware of... chose its terms quite carefully. It's just that it understood that--
Antonin Scalia: Well, it could have meant dredged from elsewhere, couldn't it?
Jeffrey P. Minear: --That is... that is possible, but that is very unusual.
Antonin Scalia: Well, if it's possible, it... it would mean addition--
Jeffrey P. Minear: It seems--
Antonin Scalia: --if it was dredged from elsewhere.
Jeffrey P. Minear: --It seems unlikely that Congress would have enacted provisions regulating dredged and fill material that excluded the most common form of dredging, which is to take material from one area of the water body and move it elsewhere. In any event, it's important to remember that the pollutants we're talking about here include sand, gravel, rock, and biological material. These are materials that are defined within the statute as pollutants. Clearly Congress recognized the dangers of moving these materials about--
Stephen G. Breyer: What about the raking the beach? You know, there are people here worried about what you're going to do next and say they can't rake the beach in front of their house on the shore of the lake. What about that?
Jeffrey P. Minear: --The answer again is found in the agency's regulations which make clear that de minimis disturbances simply do not rise to the level of a violation.
Stephen G. Breyer: Well, I mean, but they're saying we go out every morning. We like a neat beach and we... we rake it. And I don't know. Are you going to say that's de minimis or not? They like to rake their beach. They... they see a lot of muck washed up from the lake. So they go out there and they... they go rake the beach, and they throw away all the muck. It might be like an oil spill. I don't know. It could be terrible. They clean up the beach, and they say on your definitions what you're going to do is you're going to subject them to permits every time they want to stop... clean up some environmental disaster.
Jeffrey P. Minear: I think, Your Honor, the question is have they been subjected to that type of... of regulation, and the answer is no.
Stephen G. Breyer: Well, they're worried that they might be. My question is, if we decide the case the way you want, are we, in fact, making their worry justified?
Jeffrey P. Minear: I do not think so, Your Honor. And again, I think it's important to remember that what the agency is fully concerned with are those types of serious violations that cause real environmental harm.
Antonin Scalia: Well, I don't think Congress wanted the homeowner to have to worry about raking. I don't think they wanted to place the... the homeowner at the... at the mercy of this benign agency who will say, well, there, there, don't worry. We won't get you for raking.
Jeffrey P. Minear: Your Honor--
Antonin Scalia: I doubt whether raking was intended to be covered.
Jeffrey P. Minear: --I think, Your Honor, then if they had not intended that there would be enforcement discretion exercised by an agency, they wouldn't have prohibited the addition, any addition, of any pollutant from any point source. They made the net that was covered here quite broad because they realized there's a vast variety in the types of environmental harm that might be caused--
Antonin Scalia: Maybe they didn't think a rake was a point source as I don't.
Jeffrey P. Minear: --Your Honor, they... they have had ample opportunities to change the regulations... or to change the... the terms of the statute. The statute has been revised three times, and they've been quite specific in what they've done. The normal farming exemption is a good example. Congress could have simply exempted all farming activities from coverage under section 404 or the Clean Water Act itself. Instead, it drew a very specific line in this case and it said that we are only restricting normal farming activities and we're subjecting them to a recapture provision. That recapture provision applies whenever the activity, even if it's simply plowing, results in the change in use of the property and also results in a diminishment of the waters of the United States, if it actually fills--
Ruth Bader Ginsburg: Mr. Minear, are you saying that an... an ordinary plow too, like this deep ripper, would be a point source, but what takes that activity out is that it would come under the normal farming exemption?
Jeffrey P. Minear: --That's exactly right.
Ruth Bader Ginsburg: But it is a point source.
Jeffrey P. Minear: That is correct. The... the plow would be a point source. And this is the reason why Congress enacted the normal farming exemption. It realized it defined these terms quite broadly, and it wanted to provide sensible exemptions. But it drew limits on those exemptions to avoid covering situations like we have here where we're not talking about a yeoman's plow, but rather we're talking about a 100,000 pound bulldozer pulling a 7-inch... 7-foot long shank through a wetland area. I think it's important to remember too that this lawsuit could have easily been avoided. The... the parties were... were... discussed this issue on a number of occasions, and the Corps made quite clear that they were not subject to a permit provided they simply avoided these small wetland areas, what's... in the case of the parcels at issue here are about 1 percent of the property. It was easy enough to simply mark these areas and have the contract rippers who came through avoid those areas. The petitioners in this case decided not to do that. They decided to disregard the law and the fact is that this suit and 10 years of litigation... excuse me... 8 years of litigation is the result. The fact is that this is a quite sensible program. The Corps and EPA have applied it quite sensibly, and I think that their actions in this case, if you look at the record, were really quite reasonable. Now, I would like to touch back, since we've covered a lot of material here, just to go over--
Antonin Scalia: Excuse me.
Jeffrey P. Minear: --Yes.
Antonin Scalia: What... what farming exception is there? Is there just one or are there several of them?
Jeffrey P. Minear: There's one normal farming exemption. That is contained in section 404(f) of the statute, and that is found on pages 2a and 3a of our--
Antonin Scalia: Okay. But, you see, that's... that's not an exception for... for normal... it's an exception from the discharge of dredged or fill material. Right?
Jeffrey P. Minear: --That's correct. And so what this does is it exempts the party from having to get a section 404 permit for activities that would otherwise constitute dredge or fill activities. And the fact that Congress has chosen to exempt activities, including specifically plowing, indicates that Congress understood that plowing could result in a point source addition of pollutants. Now, what Congress additionally did is it... it states on the carryover... there's a number of other matters that are exempted as well. It indicates that these activities are not regulated under section 301 or section 404 or section 402, for that matter. But then on the paragraph on page 4a, it recaptures those provisions when they result in a change of use, when someone, such as in this case, decides to take a ranch and subdivide it and sell it as farmettes. And it... and even that recapture provision only applies when it reduces the reach of waters, which is what happened in this case. As the district court found, these waters were filled. They are no longer wetlands, and the idea that these areas are going to be resealed finds no support in the record. The district court found here that what were once wetlands are now orchards. These are not areas that include wetland... or have wetland characteristics any longer. I would simply like to touch on... since we... we have bounced around among the three issues here quite a bit, I'd like to simply say a few more words about the civil penalty provision because I think it's important. The legal issue that's before the Court on the civil penalty is... is whether a penalty ought to be assessed in terms of determining the maximum penalty on a per-day basis or on the basis of the number of violations per day. And the Congress made... made quite clear that it wanted the latter to be the basis for determining the maximum civil penalty. It amended the statute in 1987 to eliminate any ambiguity that might exist with regard to the... to that provision, and it's quite clear that it does apply to every violation each day. Now, it takes into account that some violations can be continuing and go on for a long period of time. And those are treated as receiving a $25,000 a day penalty. But in the case of the violations we have here, they all occurred in one day on the basis the district court analyzed the... the problem. Finally, I'd like to make the point that the district court needs to have a great deal of discretion in determining how to apply the penalty provisions that are involved here. There are different ways to calculate violations, determine what is the appropriate measure of violations, but ultimately the fairness turns on the district court's judgment of the individual penalty factors that are considered here. In this case, the court took into account all those factors, including the economic benefits that the party received by avoiding its legal obligations in this case. It's important to remember there are land developers, ranchers, and farmers out there that do comply with the statute, that do comply with the regulations, and they are, in effect, penalized if in fact people who ignore the law are allowed to go forward and not be subject to a substantial penalty in cases in which they have violated the law. In this case the penalties are less than what actually would be necessary to recoup the economic benefit that they received according to the... the facts that the district court put forward. The court of the... or excuse me... the... the Government put forward. The district court recognized there was some uncertainty with regard to determining economic benefit, but nevertheless I think chose a very reasonable approach here in terms of requiring both a mitigation remedy and also a substantial civil penalty. If there are no further questions.
John Paul Stevens: Thank you, Mr. Minear. Mr. Bishop, you have 4 minutes left.
Timothy S. Bishop: I think it's a shame that the Government has chosen to insert at this level for the very first time this idea that soil came in from outside the wetland. On page 36 of the petition appendix, the... the district court, in describing what the plowing here did, said that it broke up, mixed, turned over material already in the pools, swales, and intermittent streams. If you turn to page 86 through 91, where the court describes in detail factual findings after hearing the evidence on the impacts on waters, on only three... as to three of the jurisdictional features does the court say that there is any fill coming in from outside, and that is where there is upland plowing parallel to a drainage that pushes a small amount of material into the very margins of the wetland. And the reason that the court didn't need to get into this is, A, that it had made a legal finding to begin with that soil disturbed within a wetland was a discharge, and B, that there was a factual dispute here about the extent to which we have pulled up the plows before we entered across from the upland to the... to the wetland. And the court didn't want to deal with... with that. And it didn't have to under this notion that if you disturb soil within a wetland, that's an addition. Second, I'd like to point out on page 8a of the... of the Government's addendum the regulation about plowing. Plowing means all forms of primary tillage including moldboard, chisel, and wide-blade plowing, discing, harrowing, and similar means utilized on the farm to break up, cut, turn over, or stir the soil to prepare it for the planting of crops.
David H. Souter: What does primary mean?
Timothy S. Bishop: Primary I think means just preparation. If you... you have to go to the end and... and see... it's soil... to prepare the soil for the planting of crops. Primary is the initial preparation of the soil. You might contrast that, for example, with... even though harrowing is mentioned here, farmers understand that harrowing is actually a secondary form of land preparation. It's like a large rake that... that clears the seed bed for... for seeding. Primary is the first movement that prepares the soil for accepting the crops.
Antonin Scalia: Why do you need the exception for it? That's what puzzles me.
Timothy S. Bishop: Well, you don't need an exception for it. Our... our position is that it's not a discharge and so... and that Congress, if you read the 1972 legislative history... I'm sorry to mention it, Justice Scalia. [Laughter] But it's clear that they did not intend to reach agricultural activity. The Corps in a dispute with the EPA made noises between '72 and '77 about, well, we're... we're going to start regulating stock ponds and... and ordinary farming activities. And Congress reacted to that by, as one commentator has said, a provision that reflects the fact that it didn't think that one stake through the heart of the vampire was enough. This is a belt and suspenders provision. But what it does, as you remarked Justice Scalia, is to provide an exemption for agricultural activities that are discharges. It doesn't change the definition of point source, fill material, dredged material, addition in any way. It doesn't change any of the operative terms in the statute that we think mean this activity is not a... a discharge to begin with. And the exemption also mentions other activities, seeding and cultivation and harvesting, that just are not... I mean, these are not discharges. These do not result in the addition of fill and dredged material from... to the... to the wetland. And... and that is why this structure is what's reflected in the regulations. The regulation on page 8a. It says plowing, as described above... I mean, they purport to exclude what we did from the definition of plowing, but plowing, as described above, will never involve a discharge. It's not a discharge to begin with. You don't get into the 404(f) exemption.
John Paul Stevens: Thank you, Mr. Bishop.
Timothy S. Bishop: Thank you.
John Paul Stevens: The case is submitted.


William H. Rehnquist: We'll hear argument now in number oh oh five sixty-eight, New York versus Federal Energy Regulatory Commission and the companion case, oh oh eight oh nine Mr. Malone.
Lawrence G. Malone: Mr. Chief Justice, and may it please the Court. From nineteen ten until the issuance of the FERC decision under review, all fifty States regulated transmissions of electricity to retail customers. You didn't see the rates, terms, and conditions of that regulation, with a few exceptions, because the rates were bundled in bills that charged customers for all of the elements of retail service which are basically the energy itself, or the commodity, its delivery over transmission high voltage and distribution low voltage lines, and metering and billing. The issue in this case is whether the nineteen thirty-five Congress intended the Federal Power Commission, now FERC, to displace the State laws that required that regulation from nineteen ten until nineteen ninety-six if the commodity, the energy not the transmission, but the commodity is unbundled from the retail customers' bills. The FERC, while conceding that unbundling was never contemplated by the nineteen thirty-five Congress, nonetheless has taken the position that if the commodity comes out of the bill, in order to give the customer knowledge to effect a choice to buy energy from a utility or a non-utility, then the transmission, although it still remains bundled with other elements and is never shown on the bill, except in the State of California, becomes a new and separate service and that that transmission is subject to preemption so that the States have to leave the scene...
Lawrence G. Malone: for only FERC... What if there, what if there...
Sandra Day O'Connor: were no statute at all? And , do you think that under the Commerce Clause, with today's multi-state grids for transmission of power, that the States could have directly regulated energy transmission as a separate service?
Lawrence G. Malone: I don't think there's any question, Your Honor, that under today's Commerce Clause jurisprudence, the States would be able to regulate retail deliveries over transmission facilities, particularly within their own States.
William H. Rehnquist: But the statute does give the FERC jurisdiction over the transmission of electric energy in interstate commerce.
Lawrence G. Malone: Exactly.
Speaker: attempting to fill...
Sandra Day O'Connor: we didn't have these interstate grids, and isn't it conceivable that you could have a power company producing power within a State and distributing it to customers within the State, everything totally intrastate? That may have been a common occurrence at the time the statute was passed.
Lawrence G. Malone: Well, Your Honor, the rate of interaconnection[:interconnection] from nineteen twenty to nineteen thirty-five was actually greater than the rate of interconnection that we have seen since.
Speaker: Now that, that...
David H. Souter: are you saying o- one o- either of these two things? Either transmission regardless of the rate at which it is billed is is not essentially interstate commerce, or are you saying that you simply cannot read the act to pick up that activity in interstate commerce?
Lawrence G. Malone: I'm saying that the l- the latter with with one caveat.
David H. Souter: So, you, w- do you admit then that th- that it is interstate commerce.
Lawrence G. Malone: It clearly is subject to regulation by Congress if it wants to.
David H. Souter: Okay.
Lawrence G. Malone: We don't need th- the States do not need to get into the question of which transmissions are in interstate commerce and which aren't in order to preserve its jurisdiction over retail transmissions because Congress wanted the States to be able to continue to regulate retail transmissions.
Antonin Scalia: w- w- This is what I don't understand.
Speaker: Why isn't...
Antonin Scalia: why isn't that the way to look at it rather than...
Lawrence G. Malone: Be- Because the th- a- as the Colton case held, there's a there's a bright line here between retail and wholesale.
Speaker: said.
Lawrence G. Malone: All right.
Antonin Scalia: But you you seem to concede and I don't see why you do it that the right to regulate transmission includes the right to regulate sale.
Lawrence G. Malone: No, we we we don't.
Speaker: We don't concede that.
Lawrence G. Malone: What what I'm saying is that when unbundles when one unbundles transmission, the States don't lose it, even if it's out there by itself, if it's part of retail.
Speaker: L- Let Let me give an example.
Ruth Bader Ginsburg: depend on what sale means? If it's sale of the commodity, it says, sale of such energy at wholesale in interstate commerce.
Lawrence G. Malone: Because when le- le- let's go back to nineteen thirty-five, Your Honor.
Antonin Scalia: bill, you mean the bill that the customer gets.
Lawrence G. Malone: Yes.
Antonin Scalia: Okay.
Lawrence G. Malone: Now now, now this Court has said many time, Your Honor, your, times, Your Honor I know, Justice Scalia, you don't like reference to legislative history, but you do accept ref- reading provisions in harmony.
Speaker: Those prov-
William H. Rehnquist: Where do we find these?
Lawrence G. Malone: They ar- they are I'm sorry, Your Honor.
William H. Rehnquist: And whereabouts? Is i- do we Starting with six fifty-two A?
Lawrence G. Malone: The I d- I don't have the the the page reference off the top of my head.
William H. Rehnquist: Well, you're you're summarizing a st- a series of statutory provisions in those words?
Lawrence G. Malone: No.
Speaker: over...
Antonin Scalia: give us the USC cites of those things? I, It's crazy when you people who spend your whole life in this one statute use the old the old numbers instead of the United States Code numbers.
Speaker: You're talking about sixteen USC eight twenty-four A and B. Right?
Lawrence G. Malone: That's correct.
William H. Rehnquist: You're talking now about section A?
Lawrence G. Malone: Yes, Your Honor.
Stephen G. Breyer: Well, just on that, is it the case that if in nineteen thirty-five Duke Power owns generating facilities in West Virginia, owns lines from West Virginia to North Carolina, and owns a distribution company in North Carolina, all one company, does the FPC have any jurisdiction at all in your opinion?
Lawrence G. Malone: If there's a sale for resale...
Stephen G. Breyer: No, no no.
Speaker: No.
Stephen G. Breyer: you're saying.
Lawrence G. Malone: The the, there is a case in nineteen thirty-four at two PUR second, where it's it's almost your iden- your hypothetical.
Stephen G. Breyer: All right.
Lawrence G. Malone: That's correct.
Stephen G. Breyer: That's your argument.
Lawrence G. Malone: Yes.
Stephen G. Breyer: Okay.
Antonin Scalia: Mist-, Mr.
Speaker: Malone, it...
Antonin Scalia: would seem to...
Speaker: is that you're done?
Lawrence G. Malone: I just wanted to add, Justice Breyer, that if you look at two oh six D, that calls on FERC to provide costs in your hypothetical...
Speaker: from West Virginia to the North Carolina...
Stephen G. Breyer: Then I would say if that's your argument, the response to that argument will be this is an unforeseen case in thirty-five, the possibility of Enron supplanting Duke, and it's close enough to wholesale sales.
Lawrence G. Malone: If Enron supplants Duke and sells directly to a retail customer, it's going to be purchasing electricity, selling retail, over a delivery system that Enron does not own.
Speaker: May I ask you one...
Antonin Scalia: question about the words in the statute? The statute uses an and.
Lawrence G. Malone: Not quite, Your Honor.
Speaker: Mr. Malone, could I come back...
Antonin Scalia: to Justice Ginsburg's earlier question...
Speaker: which...
Antonin Scalia: focused on section eight twenty-four B two, which says that the provisions shall not apply to any other sale of electric energy.
Lawrence G. Malone: Including the transmission.
Antonin Scalia: Including the transmission.
Speaker: Your Honor, I think...
Lawrence G. Malone: that is a valid reading of the statute.
Antonin Scalia: It's up to you.
Lawrence G. Malone: Your Honor, we have situations in New York State, for example, where we have, FERC has regulated ha- curtailments u- over transmission systems.
William H. Rehnquist: Very well, Mr. Malone.
Louis R. Cohen: Thank you, Mr. Chief Justice, and may it please the Court.
Speaker: from the rules of the road.
William H. Rehnquist: just chose, in its discretion, not to regulate them?
Louis R. Cohen: It said that the transmissions should not be considered within the interstate transmission clause giving FERC jurisdiction over interstate transmissions, but rather, in the case of transmissions bundled with retail sales, should be considered part of the bundled retail sale.
Speaker: said...
Antonin Scalia: Which means that it doesn't have jurisdiction.
Speaker: When you say should be...
Antonin Scalia: considered part of, you mean discretionarily should be...
Speaker: considered or must be...
Louis R. Cohen: called it a permissible policy choice, and but...
Speaker: And you agree with that?
Antonin Scalia: You agree it was a policy choice and not a jurisdiction...
Louis R. Cohen: I think FERC made a jurisdictional mistake and I think the DC Circuit...
Speaker: It misconstrued its statute. It didn't simply withdraw its hand. It misconstrued the act.
Louis R. Cohen: Yes.
Speaker: transmission and that it should, therefore,
Louis R. Cohen: solve the problem that it foun-
John Paul Stevens: In your view, if FERC does have jurisdiction of this this part of the problem, must it exercise that jurisdiction or can it allow the States to regulate?
Louis R. Cohen: What it must do under section two oh six, which is section eight twenty-four E, is cure the undue discrimination that it found.
Speaker: Well, then it's...
William H. Rehnquist: pretty much a Pyrrhic victory for you if you persuade us that the the s- CADC was wrong in saying it was just a policy choice, it was a jurisdictional decision.
Louis R. Cohen: I'm hoping that what I had was a Pyrrhic defeat in the in the in the DC Circuit and that and that FERC, once told that it has jurisdiction, and having recognized that it has the obligation to cure undue discrimination, will exercise that jurisdiction properly.
Anthony M. Kennedy: We we usually have cases in which the agency is alleged to go too far.
Louis R. Cohen: Well, actually in the Louisiana Power and Light case, which we cite a- and think is very much in point here, which arises under the same parallel provisions of the Natural Gas Act, FERC's initial position was that it I believe FERC's initial position was that it did not have jurisdiction to regulate bundled direct retail sales of o- o- of gas and that that included u- u- a a lack of jurisdiction over the transportation of that gas.
Stephen G. Breyer: I guess th- what would , suppose FERC says or suppose I read it as saying, since you're whipsawing them between you and New York, look, in nineteen thirty-five yours is the case where Congress would have never dreamt they had jurisdiction.
Louis R. Cohen: What happened in nineteen thirty-five was that, recognizing that interconnection was coming, Congress granted FERC jurisdiction over transportation of electric energy in interstate commerce without limitation.
Antonin Scalia: It gave them, without limitation, authority over transportation of energy, but not without limitation authority over sale of energy.
Speaker: Isn't that an essential part of your argument? Well, where does it where does it...
Louis R. Cohen: the States have plenary power to regulate who may serve their retail customers and at what rates and at what and on what other terms and conditions.
Speaker: What do you mean sa-
Antonin Scalia: take into account? I thought you're saying that that FERC has the power to determine a a a component of the retail sale.
Speaker: It has the power to...
Louis R. Cohen: determine the the cost of transmission of electricity insofar as that and and and and that may be one of the costs that the retail utility i- incurs for which the retail utility has the right under State law to recover.
Antonin Scalia: That's right.
Speaker: the transmission...
Antonin Scalia: has authority to regulate the the wholesale sale.
Speaker: sale. I mean, yeah, but transmission...
Antonin Scalia: by the statute, as I read it, is separated from sale.
Speaker: Where are you reading f-
Antonin Scalia: I'm reading from B one.
Louis R. Cohen: It's eight twenty-four...
Speaker: Six, sixteen. Yes.
Antonin Scalia: The provisions of this chapter shall apply to the transmission of electric energy in interstate commerce.
Louis R. Cohen: That's...
Antonin Scalia: drawing a dichotomy between transmission and sale.
Louis R. Cohen: And we have stressed whereas the s- the the the nine States have tried to blur this distinction, we have stressed the distinction between FERC's jurisdiction over transmission and FERC's jurisdiction over wholesale sales.
Antonin Scalia: Must be taken into account.
Louis R. Cohen: is i- i- is, n- does not encroach upon the States' retail sale authority, but it is something that the States must respect in setting retail rates, so FERC's regulation of the cost of transmission.
Antonin Scalia: But FERC's regulation of the cost of of of interstate transmission at wholesale comes about not because of its authority over the transmission of el- of electric energy, but because of its authority over the sale of electric energy at wholesale.
Speaker: to take that into a-
Speaker: I, Yes. I don't I don't agree with that. that that...
Louis R. Cohen: that is that is the statutory...
Speaker: Yeah. The statute...
Sandra Day O'Connor: says, shall apply to transmission of electric energy in interstate commerce.
Speaker: Well it says, doesn't it?
Speaker: and, two,
Sandra Day O'Connor: the sale of electric energy at wholesale in interstate commerce, which you take to be a second grant of authority.
Speaker: Yes, and the basic...
Louis R. Cohen: The basic structure of our argument is that just as your opinion for the Court, Justice O'Connor, explained in Nantahala, that m- the States must take into account the wholesale cost of energy, so the States can be required to to take into account FERC's regulation of transmission...
Sandra Day O'Connor: What difference does it make whether the transmission component is bundled or unbundled at retail sale?
Louis R. Cohen: We don't think it should make any because transmissions , whether for wholesale or retail, whether bundled or unbundled, compete for use of the interstate grid.
Speaker: Can you sell at...
Anthony M. Kennedy: retail in States which are which are un- bundled?
Louis R. Cohen: Absolutely not.
Speaker: What we want...
Anthony M. Kennedy: then why is there then why is there a problem?
Louis R. Cohen: Because what we want the right to do is to use the transmission system through those States without the retail the traditional monopoly utility that owns the facilities in those States being able to hog those facilities for its own use and keep us off the road.
Speaker: let me try an example.
Anthony M. Kennedy: trying to reach retail...
Louis R. Cohen: Even though we're not trying to reach retail customers, we may be trying to sell e- energy to the utility in Minneso- in in in in in Wisconsin.
Speaker: The traditional...
Anthony M. Kennedy: then that wholesale sale can be regulated.
Louis R. Cohen: The wholesale sale can be regulated, but the traditional utility in Minnesota, which owns the facilities and mostly makes bundled retail sales to its customers in Minnesota, can say, our bundled retail sales are not subject to FERC's OATT.
Speaker: I'm...
Stephen G. Breyer: very surprised that FERC is saying that they have no jurisdiction over that.
Speaker: of this statute, isn't it?
Stephen G. Breyer: And if B puts something up on those lines that blocks the transmission, I'm very surprised that FERC would say they don't have jurisdiction to stop...
Speaker: Well, we were a...
Louis R. Cohen: little surprised too.
Stephen G. Breyer: But that's what this case is about in your view.
Louis R. Cohen: From our s- from our standpoint, that's what our side of this case is about.
Speaker: They said...
Antonin Scalia: that would be an interference with the transmission, not with the sale.
Speaker: authority over that because they have...
Antonin Scalia: have authority over...
Speaker: transmission,
Antonin Scalia: both interstate and intrastate.
Louis R. Cohen: All that I'm asking the Court to say is that FERC has the ability to a-, the jurisdiction to apply its general open access transmission tariff not only to our sales a- f- at wholesale and to s- but but also to the bundled retail sales that compete with us for use of the o- of the transmission grids.
Anthony M. Kennedy: Well, if if the , FERC can regulate your transmissions and you go to FERC and say, you know, our transmissions are being blocked, why can't they say, we will exercise jurisdiction over y- y- your transmission and we will unblock you?
Louis R. Cohen: Justice Kennedy, the the answer to that i- is, first of all, that it's it's not just blockage.
Speaker: transmission.
Stephen G. Breyer: thought you wanted the particular reg there's a particular reg that New York has been talking about, and I thought you wanted that applied to the , a- bundled sales as well.
Louis R. Cohen: e- Particular regulation.
Stephen G. Breyer: Yeah.
Louis R. Cohen: Yes.
Stephen G. Breyer: And and and and that seems to me a different issue than somebody climbing up a pole, for example, and cutting the wire so that you can't get your electricity between State A and State...
Speaker: C.
Louis R. Cohen: the ideal example is the curtailment example.
Speaker: customers, and that's...
Antonin Scalia: Government to determine which which will be the emergency users and the preferred users in each State and locality.
Speaker: We want the Federal Government...
Louis R. Cohen: to regulate the transmission of electric energy in interstate commerce, and that has become a more complicated problem than it was in nineten thirty-five.
Antonin Scalia: There's always been a product.
Speaker: It's it's it's a lesser percentage now than it used to...
Louis R. Cohen: on average it's now about it's now about ten percent.
Sandra Day O'Connor: I don't know about you, but when I look at my utility rate, it's a very small amount for transmission and a substantially larger amount for the energy.
Louis R. Cohen: It is.
Stephen G. Breyer: I don't even see how this works.
Louis R. Cohen: Well, in order to have the the the electricity flows...
Speaker: the the the power flows generally over the system, but...
Louis R. Cohen: but in order to have the right to turn on, to ramp up your generator to to produce some additional electricity which your customer a- a- a- at a time when your customer is going to take electricity off the system at some other point, y- you need to have a contractual arrangement or other right to do that.
Speaker: Justice.
William H. Rehnquist: Mr. Kneedler, we'll hear from you.
Edwin S. Kneedler: Thank you, Mr. Chief Justice, and may it please the Court.
Antonin Scalia: Mr. Kneedler, it it if I understand it correctly, it is i- the position of the agency hinges on the proposition that the the power conferred by by section eight twenty-four to regulate the transmission of electrical energy includes includes the power to regulate the sale of the transmission of elec- electrical energy.
Speaker: Isn't that what...
Edwin S. Kneedler: the sale of the transmission,
Speaker: The sale of the transmission.
Edwin S. Kneedler: does not in- what it does not include is the retail sale.
Antonin Scalia: Now, if that were true, it seems to me that eight twenty-four B one, instead of reading the way it does, should read this way, The provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce which would include the sale of that transmission, right? And to the sale of the commodity portion of electrical energy at wholesale in interstate commerce.
Edwin S. Kneedler: Well th-
Speaker: And but...
Antonin Scalia: so, it should have gone on to say, and to the sale of the of the commodity at wholesale in interstate commerce.
Speaker: But th- but that is what it says I believe because...
Edwin S. Kneedler: electric energy is the commodity.
Speaker: FERC, that's been...
Edwin S. Kneedler: I'm sorry.
William H. Rehnquist: B one?
Edwin S. Kneedler: B one, yes.
Speaker: And and and you think...
Antonin Scalia: that that sale of electric energy at wholesale in in the first portion of it, in in one, only referred to the sale of regulating the sale of the commodity at wholesale.
Edwin S. Kneedler: Well, yes, but it, but for example, in setting a wholesale cost or excuse me a wholesale rate, FERC could take into account the costs of transmission...
Speaker: Because...
Edwin S. Kneedler: wholesale rate, just as the State could.
Speaker: Because of its...
Antonin Scalia: authority over the transmission of energy.
Edwin S. Kneedler: Either one.
Speaker: transmission service.
Antonin Scalia: very unrealistic reading of what Congress thought it was doing when it wrote this thing, that that when it when it spoke of the sale of electric energy at wholesale in interstate commerce, it had in mind only only the sale of the the the commodity and not the sale of, you know, the transmission and the entire cost.
Edwin S. Kneedler: Yes, absolute-.
Speaker: part of it.
Antonin Scalia: can't say that because if if you say that that that that that that the reason you have that authority is because of the phrase, the sale of electric energy at wholesale, you would also have to say that in the very next phrase, the sale of elect- electric energy any other sale of electric energy, sale at retail, would also include the transmission component.
Speaker: Okay, and if I can...
Antonin Scalia: to exclude the transmission component from both of...
Speaker: them it seems to me.
Edwin S. Kneedler: if if I could answer that.
Speaker: I don't think...
Antonin Scalia: that's unquestionable at all.
Edwin S. Kneedler: But well, it's it's an independent grant of authority.
Anthony M. Kennedy: Well, suppose you have have a condition, as des- described by u- uh counsel for Enron, and they say, we just can't transmit our gas through this State.
Edwin S. Kneedler: Yeah, we, absolutely.
Speaker: FERC's...
Anthony M. Kennedy: discretionary...
Speaker: yeah, Well, there are...
Edwin S. Kneedler: two different things, and I and I think it was maybe you who put the question.
Speaker: been handled so, but but that...
Anthony M. Kennedy: different things.
Speaker: Right. And and as...
Anthony M. Kennedy: that you have that?
Edwin S. Kneedler: Yea- w-, We n-- don't just concede, we affirmatively assert that we do have authority.
Speaker: States...
Anthony M. Kennedy: jurisdiction case.
Edwin S. Kneedler: Not in that respect, no, because I I think that all that,
Speaker: with respect to this order...
Anthony M. Kennedy: objection to our saying and I don't know quite how we'd say it, that the FCC has jurisdiction over transmissions of bundled sales at retail.
Edwin S. Kneedler: Well, l- let me let me just modify that with in in one respect.
Speaker: service...
Anthony M. Kennedy: just a two-step pro- say, you s- say, first, unbundle, and now that you've unbundled,
Speaker: we're going to regulate it. Th- that's...
Edwin S. Kneedler: Exa- and and the court of ap- the, and the, what the cou- the court of appeals analysis in this case essentially looked at the at the at the...
Speaker: transaction...
Anthony M. Kennedy: we can get back to my quest-.
Edwin S. Kneedler: Yes.
Speaker: And that...
Anthony M. Kennedy: jurisdiction is is thought of in in in constitutional terms, I, th- the answer is pretty clear.
Speaker: I believe FERC does. I...
Edwin S. Kneedler: I believe FERC does.
Speaker: I mean, that's essentially what FERC...
Edwin S. Kneedler: ultimately did in the natural gas area.
Speaker: But aren't aren't you...
Edwin S. Kneedler: but l- let me be clear.
Speaker: the traditional...
Speaker: What FERC has...
John Paul Stevens: puzzled because I th- I mu- I must have misread the papers.
Speaker: wants it to take. Yes.
Edwin S. Kneedler: That that may well have been an an an implicit understanding of FERC, but if you look at the order, it actually never says that.
Speaker: permissible...
Stephen G. Breyer: position of the Government is, in respect to Enron's case, not New York's, Enron is right.
Speaker: what happened here. That, is that...
Stephen G. Breyer: is that your position or not?
Edwin S. Kneedler: Th-, I I I cannot speak for FERC on that question because FERC did not address that in this order.
Stephen G. Breyer: But I want to know what I I have an argument in some briefs made by Enron , and perhaps I misread them and I'll go back to them.
Edwin S. Kneedler: Well, i- if there are really two points about FERC's power here, or a- authority here and that that that I would would like to separate.
Speaker: any impediments to use...
Stephen G. Breyer: how do I answer this question from your question presented? Number two, in oh oh eight oh nine, the question presented is whether the court of appeals properly deferred to the commission's determination that it lacks jurisdiction over retail transmission service that is sold together with electric energy in a single bundled transaction, et cetera.
Speaker: properly defer?
Edwin S. Kneedler: did properly defer because the predicate is that there is a single transaction.
Speaker: of the one bundled transaction.
David H. Souter: that i- a- are you drawing this line? You're saying that FERC has the authority to order unbundling.
Edwin S. Kneedler: Yes.
Speaker: and under the...
David H. Souter: saying that you see nothing in the act that would prevent FERC from doing just what Mr. Cohen wants it to do so long as it takes two steps, so long as it orders unbundling first.
Edwin S. Kneedler: I- i- i- Assuming that FERC has this authority as they stated, they didn't disclaim it, but FERC in this order...
Speaker: did not did not stress that. I'm a I'm a I'm a I see...
Edwin S. Kneedler: nothing in in the act in the parallel provisions of the Natural Gas Act...
Anthony M. Kennedy: Well, a- a- again, r- referring to the question presented that you drafted, question two, the question presented is whether the court of appeals properly referred to the commission's determination that it lacks jurisdiction over retail transmission.
Edwin S. Kneedler: i- But the rest of the question is, when it is sold together with electric energy in a single bundled transaction.
Speaker: transaction that exists by...
Anthony M. Kennedy: yes, it lacks jurisdiction.
Edwin S. Kneedler: Yes, yes.
Speaker: In that circumstance. Therefore,
Stephen G. Breyer: when Mr. Cohen put the example that he did of a grid, and the grid covers several States, and there are many sales for wholesales between sales for resale between A and C and D and F, but there's one in the middle, C, where it in fact is all bundled.
Edwin S. Kneedler: Right.
Stephen G. Breyer: And and if in fact they are scheduling deliveries, the State commission, in that C so that the wrong people are getting the energy and so that the wholesales the sales for resale in A, E, and F are all mucked up, the answer is, of course, the commission has jurisdiction...
Speaker: Yes. Yes. Absolutely.
Edwin S. Kneedler: Even even even under Order eight eighty-eight, and a- what Order eight eighty-eight does is decline to extend the plenary rate jurisdi- the plenary jurisdiction of Order eight eighty-eight itself over the transmission component of...
Speaker: bundled sales.
Stephen G. Breyer: thing it doesn't have jurisdiction over, in your opinion, is to make this kind of nondiscriminatory order applicable in our middle State C where the transactions are all run from generating to distribution to transmission, everything is run by one company, P G and E.
Speaker: Right. The Right. As long as they...
Edwin S. Kneedler: as long as they are bun- as long as the State hasn't unbundled it, the utility has not unbundled it, and FERC has not exercised whatever authority it would have...
Speaker: to unbundle it...
Edwin S. Kneedler: Even though they are in the grid.
Speaker: See, I didn't know that...
Edwin S. Kneedler: let me let me let me make let make clear.
Speaker: So and your reason,
Stephen G. Breyer: as I interpret it, in a sentence is if we go back to nineteen thirty-five, even if the New York situation was something they never would have dreamt of, the Enron situation is something that they certainly did dream of.
Speaker: They...
Stephen G. Breyer: covering that.
Edwin S. Kneedler: Right.
Stephen G. Breyer: I right? Don't say I'm right if I'm not.
Edwin S. Kneedler: Yes.
Antonin Scalia: Where? Where where where does the statute you you say the statute leaves the retail rates.
Speaker: are you referring to?
Edwin S. Kneedler: in the clause in two oh one B that you were referring to, shall not apply to any other sale of electric energy.
Antonin Scalia: Yeah.
Edwin S. Kneedler: That is leaving to the States the the authority to set the rates for the retail sale of electric energy, which is essentially what was left to them under the Pennsylvania Gas case as a as a matter of the Interstate Commerce Clause.
Ruth Bader Ginsburg: Mr. Kneedler, would you please clarify what FERC has no jurisdiction that is, no authority Congress gave them no authority to do what versus what they can do or decline to do as a matter of policy? As I read Judge Sentelle's portion of the per curiam opinion, those two were put together, and they're two quite different things.
Edwin S. Kneedler: I I think what is no power is where the the transaction remains bundled, FERC may characterize that in the same way that it has always been treated, as as a single retail rate, and that FERC cannot require, as long as the transaction remains bundled, that the that that a separate cost component for retail transmission be stated.
Antonin Scalia: You mean ma-? You say, may characterize it.
Anthony M. Kennedy: Y- Yes.
Speaker: point.
Antonin Scalia: if you're going to say it has no power, you have to say must...
Speaker: characterize it, not may characterize it.
Edwin S. Kneedler: I I don't have to say it depends what you mean by must because the cou- the the co- the court of appeals did not say that was the only way to read the statute.
Speaker: have as a statue of appeal...
Anthony M. Kennedy: you- your your position, and it's it's it's a very odd answer to a question to say that we may say we may have no jurisdiction, I've, we have no jurisdiction.
Speaker: jurisdiction.
Edwin S. Kneedler: point.
Antonin Scalia: If you have the power to characterize it one way or the other, it seems to me you have the power to assert jurisdiction.
Speaker: jurisdiction.
Edwin S. Kneedler: matter, FERC has has concluded has construed the statute not to authorize it to under Chevron, the the the agency...
Speaker: could go either way.
Antonin Scalia: done differently, it could move in to regulate it all.
Edwin S. Kneedler: But but FERC has con- now construed the statute, in a statutorily permissible way, that does not give it jurisdiction over the transmission component of bundled retail sales.
Speaker: May I ask this question?
Ruth Bader Ginsburg: the power on that reading unless Congress gave it to them.
Speaker: Right,
Edwin S. Kneedler: as long as the transaction remains bundled.
Speaker: which...
John Paul Stevens: you this question? If we assume we assume that the commission has said that they do not have jurisdiction when the transaction remains bundled, because it wasn't voluntarily unbundled or compelled to be unbundled by State or Federal authority.
Speaker: jurisdiction?
Edwin S. Kneedler: think I think FERC would have great authority in deciding how to identify discrimination and how to deal with it.
Speaker: It's all at the sufferance of...
Antonin Scalia: FERC, however.
Edwin S. Kneedler: Well, I I the- there may well be limitations on that because, among other things, the the the act preserves to the States the authority over local distribution systems and over retail rates.
Speaker: power a- allocation...
Sandra Day O'Connor: has has determined, after a hearing, that there is discrimination going on in the allocation of transmission services, must it then order a remedy?
Edwin S. Kneedler: I think if it finds discrimination, it has to order appropriate relief.
Sandra Day O'Connor: And are there still some intrastate electric producers that also transmit their energy totally within the State and FERC has no jurisdiction over...
Speaker: that at all?
Edwin S. Kneedler: if they if you- if a util- if such utility is connected to the grid, it cannot transmit...
Speaker: But probably...
Sandra Day O'Connor: there are some that are not connected...
Speaker: Very, I'm informed...
Edwin S. Kneedler: by FERC that there are virtually none anymore, and that that that while the the act does preserve intrastate transmission to the to the States, there's virtually none that isn't connected to the grid.
Speaker: remain...
Anthony M. Kennedy: regulates a bundled retail sale, it is, in, all, for all practical purposes, in part regulating transmission?
Edwin S. Kneedler: I would say it is not regulating transmission, and and I and I think that that is what the Court said in in Pennsylvania in Pennsylvania Gas.
William H. Rehnquist: Thank you, Mr. Kneedler.
Speaker: [Inaudible]
Lawrence G. Malone: Your Honor, Justice Scalia, in response to your question as to whether FERC has given the authority to the State to decide prioritization of curtailment, the answer is no.
Speaker: Thank you very much.
William H. Rehnquist: Mr. Malone.