Opinion ID: 889492
Heading Depth: 1
Heading Rank: 10

Heading: The Federal Preemption and AsโApplied Challenges to the HRA

Text: ถ 129 In response to summary judgment motions filed by PPL, the District Court ruled that ง 77-4-203, MCA, of the HRA was preempted by federal law, see Opinion, ถถ 16-17, but nonetheless held that the remaining provisions of the HRA were not federally preempted and that the State/Land Board was permitted to seek compensation from PPL. After trial, the District Court also rejected PPL's as-applied preemption challenge to the HRA. PPL argues the District Court erred in these rulings. PPL claims that the HRA is in irreconcilable conflict with the FPA and FERC licensing requirements. Specifically, PPL maintains that the HRA's limitation of a 50-year lease in งง 77-4-201 and-209, MCA, conflicts with the FPA's requirements that the lands affected by a FERC-licensee must be held by that licensee in perpetuity. See Opinion, ถ 68. ถ 130 Furthermore, PPL notes that the FPA invests FERC with the sole discretion of choosing the operator for a hydropower site. 16 U.S.C.A. งง 797(e), 800(a) (West 2010). The FPA's implementing regulations also invest FERC with the sole discretion regarding the transfer of a license. 16 U.S.C.A. ง 801 (West 2010); 18 C.F.R. งง 9.1-9.3 (2010). PPL argues that the HRA contains several provisions, in addition to Section 203โwhich was stricken by the District Courtโthat invest the Land Board with precisely the type of licensing discretion reserved solely to FERC. For instance, ง 77-4-204, MCA, allows the Land Board to conduct a preliminary examination as to the value of the power site, as to the plans of development submitted by the applicant, and of all other matters relating to the proposed development as it deems necessary for the proper disposition of the business. Sections 77-4-205 through -207, MCA, describe the bidding process the Land Board is required to follow prior to granting a lease, including a provision to give preferences to municipalities. PPL contends that the application of these provisions is in conflict with the discretion granted to FERC under the FPA. PPL also asserts that the HRA's 50-year lease limitation and bidding/examination provisions stand as an obstacle to the FPA's objectives and are federally preempted. ถ 131 In this connection, PPL argues that the HRA cannot survive a severability analysis because the core of this act is regulatory in nature. As we stated in Finke v. State, 2003 MT 48, 314 Mont. 314, 65 P.3d 576, [w]hen a law contains both constitutional and unconstitutional provisions, to determine whether the unconstitutional provisions are severable, we examine the law itself for the existence of a severability clause. If there is no such clause, we must determine whether the unconstitutional provisions are necessary for the integrity of the law or were an inducement for its enactment. Finke, ถ 25. PPL notes that the HRA does not contain a severability clause. It furthers contends that Sections 203 through 207 demonstrate that the core of the HRA is regulatory in nature. As such, the core of the HRA is in direct conflict with the regulatory authority given to FERC under the FPA. For this reason, PPL argues the operation of the HRA is entirely preempted. ถ 132 The State claims the HRA is not federally preempted by the FPA. In this connection, the State notes that the FPA requires licensees to compensate landowners for the use of their property. Regarding PPL's severability argument, the State contends that the core of the HRA is not regulatory, but rather compensatory in a manner consistent with the Land Board's constitutional obligation to seek recompense for the use of public trust lands. ถ 133 We agree with the State. The core of the HRA is compensatory, not regulatory. The fundamental purpose of the HRA as stated in ง 77-4-201, MCA, is to ensure that the Land Board is able to obtain compensation for the use of state-owned lands which are used by hydroelectric facilities. The FPA permits private landowners, including states, to seek and receive compensation for the use of their land. The core of the HRA is not in conflict with the FPA and survives the federal preemption and severability analyses. While PPL objects that the bidding process described in งง 77-4-204 through -207, MCA, conflicts with FERC's exclusive jurisdiction to issue and/or transfer licenses, the fact is that the State has never resorted to such a process. If the bidding process discussed in งง 77-4-204 -207, MCA, was at some point utilized and ran afoul of FERC requirements, then it would arguably be preempted on an as applied basis. However, no such conflict exists at the present. Moreover, even if such further preemption of the HRA were to occur, it would not alter the fact that the core of the HRA is compensatory, not regulatory, in nature.