Opinion ID: 460174
Heading Depth: 1
Heading Rank: 2

Heading: the commission's denial of an exemption to phoenix

Text: 5 Petitioner first contends that the Commission improperly denied it an exemption. Phoenix's principal argument is that the Commission had previously granted exemptions to two small hydroelectric facilities on the same stretch of the Seneca River. According to Phoenix, these exemptions, Niagara Mohawk Power Corp., 19 FERC p 62,372 (May 28, 1982) (NiMo), and Seneca Hydroelectric Company, Inc., 18 FERC p 62,227 (Feb. 17, 1982) (Seneca), were granted to builders whose water and property interests were identical to those of Phoenix. Yet, Phoenix argues, the Commission ignored the precedential value of the NiMo and Seneca proceedings in denying Phoenix an exemption from licensing requirements. 6 Phoenix's claim raises two related, although separate, questions. First, did the Commission abuse its discretion in interpreting its regulations in a way that denied Phoenix an exemption? Second, regardless of the Commission's present interpretation of the applicable law and regulations, did the Commission's issuance of two prior exemptions, which the Commission now regards as erroneous, bind the Commission to issue the exemption to Phoenix? 7 The Federal Water Power Act, 16 U.S.C. Sec. 791a et seq. (1982), requires those who seek to construct a hydroelectric project to obtain a license from the Commission. 16 U.S.C. Sec. 817. Certain small power projects, however, are allowed to bypass the licensing proceedings and obtain an exemption. Section 408 of The Energy Security Act of 1980, 16 U.S.C. Sec. 2705(d), gives the Commission discretion to exempt projects at the site of existing dams which meet certain environmental requirements. In making these exemptions available, Congress intended to expedite the development of hydroelectric facilities and to shorten licensing procedures where possible. H.Conf.Rep. No. 96-1104, 96th Cong., 2d Sess. 276, reprinted in [1980] U.S.Code Cong. & Ad.News at 1743, 2171-72. To achieve this congressional purpose, the Commission has issued regulations which provide that: 8 If real property interests in any non-Federal lands would be necessary to develop and operate the proposed small hydroelectric power project, any person who has all of the real property interests in non-Federal lands necessary to develop and operate that project, or an option to obtain those interests, may apply for exemption of that project from licensing. 9 18 C.F.R. Sec. 4.103(b)(2)(ii). 10 The Commission has interpreted project, as used in this regulation, to include the impoundment and any associated dam, intake, water conveyance facility, power plant, primary transmission line, and other appurtenant facility, if ... a man-made impoundment is used for power generation. 18 C.F.R. Sec. 4.101(h)(i). Thus an applicant for an exemption at an existing dam must either own, or hold an option to obtain ownership interests in, the dam and the reservoir, as well as in the land for the proposed power plant. To demonstrate these possessory interests, the applicant must submit documentary evidence of the status of the applicant's property interests. Id. at Sec. 4.107(a). 11 Under these regulations, we cannot say that the Commission erred in refusing to grant Phoenix an exemption. Phoenix did not own or have an option to purchase all property interests necessary for the development and operation of its proposed project. Phoenix's application stated that it owned the principal property rights, existing facilities, and water rights necessary to develop its project. However, the dam and impoundment are properties owned by the New York State Department of Transportation. As Phoenix admitted, it would have to negotiate a final price with NYSDOT for the use of a small portion of the state's water rights. Phoenix had only the assurances of NYSDOT that the state agency's policy was to provide successful applicants with any New York State-owned real property or water rights necessary for the licensing of the project. 12 We find no error in the Commission's denial of an exemption under these circumstances. Phoenix's understanding with NYSDOT that the state would grant it any necessary state-owned real property or water rights is inadequate to satisfy the Commission's requirements for an exemption. Far from possessing or having an option to the dam and reservoir, Phoenix would have to pay consideration for an easement from the state to use these facilities. 13 The Commission's finding that this inchoate and unenforceable promise to convey an easement did not rise to a property interest necessary for the exemption was well within the exercise of its discretion. As the Commission explained, the extension of the ownership requirement to the dam and impoundment allows the Commission to enforce the regulatory scheme of exemptions mandated by the Energy Security Act. First, it favors for exemptions those applicants more immediately capable of capitalizing on exemptions--those with immediate possession of sufficient property interests; second, it enables the Commission to enforce the exemption holder's compliance with all exemption conditions pertaining to land; and third, it enables the Commission to conduct an enforcement action without having to join third parties over which the Commission may lack jurisdiction. 14 It is clear that Phoenix did not have an option or any similar rights in the property owned by the New York State Department of Transportation. NYSDOT had only indicated its willingness to negotiate with Phoenix. NYSDOT had made no promises or commitments about the outcome of any negotiations with Phoenix, nor about the length of time that these negotiations would require to reach an agreement. On these facts, the Commission properly found that Phoenix did not meet the requirement for an exemption that it have a property right or an option in all lands necessary to the proposed project, including dams and impoundments. 15 Phoenix also contends that, regardless of the Commission's interpretation of the statute and regulations at the time that it revoked its acceptance of Phoenix's application, the Commission is bound by its previous acceptance of similar exemption applications. Phoenix maintains that the Commission had granted exemptions to the NiMo and Seneca projects, which were located only a few miles downstream from Phoenix's proposed site. In rejecting this argument, the Commission acknowledged that the two successful applicants possessed no greater property interests in the respective dams that Phoenix Hydro had in the dam it would utilize. However, the Commission concluded, the result in those two cases was in direct conflict with the Commission's regulations and body of case precedent. 16 An agency is entitled to change its interpretation of a statute. As this Court held in Chisholm v. FCC, 538 F.2d 349, 364 (D.C.Cir.), cert. denied sub nom. Democratic Nat'l Committee v. FCC, 429 U.S. 890, 97 S.Ct. 247, 50 L.Ed.2d 173 (1976), an administrative agency is permitted to change its interpretation of a statute, especially where its prior determination is based on error, no matter how longstanding. See also Columbia Broadcasting System, Inc. v. FCC, 454 F.2d 1018, 1026 (D.C.Cir.1971) (We do not challenge the Commission's well established right to modify or even overrule an established precedent or approach ...). The Commission's refusal to follow the two previous grants of exemptions is precisely such a correction of error. The previous two exemptions had been granted by the Director and were unreviewed by the Commissioners; they did not conform to the regulations. The Commission, in reviewing the Director's determination, properly corrected his error by rescinding his acceptance of Phoenix's application.