Opinion ID: 147418
Heading Depth: 2
Heading Rank: 2

Heading: Implied Surrender

Text: We turn to Lichoulas's challenge to FERC's termination of his license via the implied surrender doctrine. We review a FERC order under the familiar arbitrary and capricious standard. Wis. Pub. Power, Inc. v. FERC, 493 F.3d 239, 256 (D.C.Cir.2007); see 5 U.S.C. § 706(2)(A). Under this deferential standard, we must affirm the Commission's orders as long as it has `examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.' Wis. Pub. Power, 493 F.3d at 256 (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)) (alterations in original) (internal quotations omitted). In applying this standard, we defer to the Commission's reasonable application of its precedent but will not approve an unreasoned departure therefrom. Williams Gas Processing-Gulf Coast Co. v. FERC, 373 F.3d 1335, 1341 (D.C.Cir. 2004). FERC regulations and the standard articles of Lichoulas's license provide for implied surrender. Specifically, 18 C.F.R. § 6.4 [3] provides that if a licensee shall cause or suffer essential project property to be removed or destroyed, or become unfit for use, without replacement, or shall abandon, or shall discontinue good faith operation of the project for a period of three years, the Commission will deem it to be the intent of the licensee to surrender the license. Article 16 of the license contains language virtually identical to section 6.4 and, in addition, provides for implied surrender if the licensee shall ... refuse or neglect to comply with the terms of the license and the lawful orders of the Commission. 54 F.P.C. at 1888; see Order Issuing License, 36 F.E.R.C. ¶ 62,047, 63,134 (license subject to the articles set forth in Form L-15 (October 1975) ... except Article 15). FERC's application of implied surrender has evolved over time. In 1993 it noted that it had only rarely had to resort to the implied-surrender procedure to address a licensee's failure to live up to the obligations of its license. Mont. Power Co., 62 F.E.R.C. ¶ 61,166, 62,143, 1993 WL 88967 (1993). In a footnote, it elaborated that [s]uch cases have included situations where licensees had abandoned project operation a number of years earlier, had sold the project without prior Commission approval and then been dissolved as a corporate entity, or had otherwise abandoned the project facilities and could not be located. Id. at 62,143 & n. 41. Those examples proved to be less than comprehensive, however, when in 1999 the Commission applied the doctrine in Fourth Branch Assocs. (Mechanicville) v. Niagara Mohawk Power Corp., 89 F.E.R.C. ¶ 61,194, 61,597-98, 1999 WL 1063786 (1999), reh'g denied, 90 F.E.R.C. ¶ 61,250 (2000), pet. for rev. denied, 253 F.3d 741 (D.C.Cir.2001). In that case, two FERC licensees were at loggerheads after the collapse of several agreements regarding their joint hydropower project. Id. at 61,596. Niagara Mohawk Power Corporation (Niagara Mohawk) wanted to transfer or surrender the license. Id. Fourth Branch Associates (Fourth Branch) wanted to continue as a licensee and restore the project to full operation. Id. at 61,592. FERC found implied surrender. Id. at 61,598. It first noted that [t]he doctrine has typically been invoked when the licensee, by action or inaction, has clearly indicated its intent to abandon the project, but has not filed a surrender petition. Id. at 61,597. But it also made clear that the key element is the licensee's failure to live up to the obligations of its license. Id. at 61,597-98. It noted that Fourth Branch lacked financing, did not own the project property and had been evicted from the site. Id. at 61,593. Thus, FERC concluded that, because Niagara Mohawk d[id] not want to operate the project, and [Fourth Branch's] desire to continue as a licensee [wa]s evidently not matched by an ability to carry out the license terms, implied surrender applied. Id. at 61,598. FERC recently reaffirmed this expanded application of the doctrine, stating the key element [of implied surrender] is the licensee's failure to live up to the obligations of its license, and we have implied surrender even where the licensee has expressed an interest in continuing to operate the project. John C. Jones, 123 F.E.R.C. ¶ 61,053, ¶ 13 (Jan. 23, 2008). Here, FERC determined that Lichoulas's actions andmore important inaction manifested that he had abandoned good faith operation of his project and thus impliedly surrendered his license. Termination Order, 124 F.E.R.C. ¶ 61,255, ¶ 25; see 18 C.F.R. § 6.4; Article 16, 54 F.P.C. at 1888; Order Den. Reh'g, 125 F.E.R.C. ¶ 61,195, ¶ 14. It cited over a decade of project dormancy as well as Lichoulas's consistent failure to meet his repair schedules or even timely respond to the Commission's inquiries. Termination Order, 124 F.E.R.C. ¶ 61,255, ¶ 20; Order Den. Reh'g, 125 F.E.R.C. ¶ 61,195, ¶ 14 n. 19. It also noted that the City's taking of the Project property makes any possibility of repairing the project and resuming operations even less likely. Termination Order, 124 F.E.R.C. ¶ 61,255, ¶ 21. Lichoulas counters that his inchoate efforts to repair the Project do not reveal intent to abandon it but instead reflect a series of obstacles beyond his control, including fire, demolition, asbestos abatement and the City's exercise of eminent domain. According to him, the vast weight of the record evidence is that [he] very much wishes to retain the Project, and is fully capable of returning it to operation (as he has done in the past) if permitted to do so. Pet'r's Br. 37. In response, FERC maintains that it considered the obstacles Lichoulas identified but they fail to negate the conclusion that [his] inaction demonstrated a clear intent to abandon the project. Order Den. Reh'g, 125 F.E.R.C. ¶ 61,195, ¶ 15. In light of the foregoing, we conclude that FERC's application of the implied surrender doctrine here was not arbitrary and capricious; the Commission examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a `rational connection between the facts found and the choice made.' State Farm, 463 U.S. at 43, 103 S.Ct. 2856 (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). The orders reflect reasoned application of FERC's precedent, which makes clear that the key element for implied surrender is the licensee's failure to live up to the obligations of its license, Fourth Branch, 89 F.E.R.C. ¶ 61,194, 61,597-98, [4] and that the implied surrender doctrine may be applied even where the licensee has expressed an interest in continuing to operate the project, John C. Jones, 123 F.E.R.C. ¶ 61,053, ¶ 13. Given Lichoulas's consistent unwillingness or inability to meet his own repair schedules or timely respond to FERC, it reasonably concluded that he had abandoned good faith operation of his project. Termination Order, 124 F.E.R.C. ¶ 61,255, ¶ 25; see 18 C.F.R. § 6.4; Article 16, 54 F.P.C. at 1888; Order Den. Reh'g, 125 F.E.R.C. ¶ 61,195, ¶ 14. And while it is true that the Project suffered unforeseen setbacks, the correspondence between Lichoulas and FERC reveals that it was not those setbacks as much as Lichoulas's repeated failure to follow through on his commitments that led to the termination. See supra Part I. Thus, on these admittedly unusual facts, we do not believe that FERC's application of the implied surrender doctrine was arbitrary and capricious.