Opinion ID: 460028
Heading Depth: 2
Heading Rank: 2

Heading: Municipal Preference

Text: 65 Even were we to find merit in FERC's arguments with respect to preclusion, however, we would be constrained to reverse. FERC's present interpretation of Sec. 7(a) of the Federal Power Act is unsupported by either the statute's language or its legislative history. Even giving FERC the deference normally accorded an agency's interpretation of its governing statute, the Commission's proffered reading would have to be rejected. In this case, moreover, deference is inappropriate because of FERC's startling departure from its clearly-established prior position based on purely internal discussions held at a closed meeting, without notice to any of the affected parties. Compare Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983); Clark-Cowlitz Joint Operating Agency v. Federal Energy Regulatory Commission, 775 F.2d 359 (D.C.Cir.1985). 66 The relevant section of the statute--7(a)--provides 67 In issuing preliminary permits hereunder or licenses where no preliminary permit has been issued and in issuing licenses to new licensees under section 808 of this title the Commission shall give preference to applications thereof by states and municipalities, provided the plans for the same are deemed by the Commission equally well adapted, or shall within a reasonable time to be fixed by the Commission be made equally well adapted to conserve and utilize in the public interest the water resources of the region.... 68 16 U.S.C. Sec. 800(a) (1982) (emphasis added). Section 808(a) provides: 69 If the United States does not, at the expiration of the original license, exercise its right to take over, maintain, and operate any project or projects of the licensee ... the Commission is authorized to issue a new license to the original licensee ... or to issue a new license.... 70 16 U.S.C. Sec. 808(a) (1982) (emphasis added). 71 FERC seeks to capitalize on the plain distinction between new licensees and original licensees allegedly drawn in the statute. FERC contends that the use of these words clearly and unambiguously establishes that municipal preference applies only when the licensees in question are new and not when they are original. We find FERC's interpretation strained to say the least. At most, the 'new/original' distinction highlights an ambiguity in the statute. When we turn as, under the circumstances we must, to the legislative history, Congress' intent is clear. 72 The Federal Power Act was the result of long years of intense controversy over the proper use and disposition of the nation's water resources. The battle lines between conservationists and public power on the one hand and private power interests on the other were clearly drawn in the early part of the century. The public power advocates saw the private interests as power grabbers who were eager for plunder. Chemehuevi Tribe v. FPC, 489 F.2d 1207, 1218 n. 55, 1214-25 (D.C.Cir.1973) (quoting H.R.Rep. 1050, 62d Cong., 2d Sess. (1912)) (citations omitted). Many wanted the water power projects to be controlled exclusively by state and local governments or other public entities. Others, however, pointed out that few public entities had the financial resources to undertake water power development and that private parties could not be expected to commit substantial funds to projects that might be taken from them at will. The conservationists, led by Gifford Pinchot, battled long and hard against the private power industry. The industry, knowing how much was at stake, fought equally hard. In the words of the chief historian of the struggle, enormous funds were spent to employ talented, persuasive, lobbying attorneys and [f]or ten years, tremendous pressure was brought to bear upon Congressmen by power companies. J. Kerwin, Federal Water-Power Legislation 8 (1926); see generally the extensive discussion in Chemehuevi at 1214-25. The struggle, moreover, was not confined to the substantive issues but became a major testing ground in the ongoing war between the advocates of states' rights and the advocates of centralized federal power. 73 The bill that eventually emerged from what Professor Kerwin has summed up as a heated controversy and a prolonged and bitter conflict (J. Kerwin at 7), was a compromise between the public interest in maintaining control of water power and the private interests in ensuring a reasonable return on investment. 74 In the words of O.C. Merrill, the man who drafted the bill and served as the Commission's first Executive Secretary, the chief purpose of the Federal Power Act was to provide conditions under which capital can be secured [to develop hydropower] while at the same time fully to protect the paramount interests of the public in its last great national resource. O.C. Merrill, Benefits Accruing to Municipalities Through the Federal Water Power Act, The American City, Vol. XXIII, No. 5 (Nov. 1920), reprinted in J.A. at 272. To reassure private investors, Congress authorized long-term licenses (up to 50 years) and provided that if the federal government or any other private entity took over after the expiration of a license, the original licensee would be compensated in an amount equal to its net investment plus severance damages. The evidence is clear that, at the time, both Congress and the private utility industry considered these two provisions adequate to safeguard the legitimate interests of private power. For example, John A. Britton, then Vice President and General Manager of the Pacific Gas & Electric Company of California, testified before the Senate Committee on Public Lands as follows: 75 The CHAIRMAN. Now there will be a number of these--after the period begins to expire there will be a number of them every year; that is, if this bill passes, so many in 1970, so many in 1990--at the end of 50 years there will be a number of these contracts terminating every year; and I think it will be practically impossible to have an appropriation bill or a bill passed through Congress appropriating money to pay for these plants.... 76 Mr. BRITTON. I am quite in agreement with you on that, but I think that at that time, 50 years from now, we will find that the Government itself will be very glad to take it over for the purpose of turning it over to a municipality, ... at the end of the 50 years the Government of the United States will elect to give that to the municipality. If it don't, it can permit Mr. [Henry J.] Pierce [President of Washington Irrigation & Development Company] to continue it or it has the right to give it to someone else.... The Government don't have to take it over ... but I do believe that most of these plants erected under these licenses, where they are applicable to a growing community, will be taken over by municipalities and operated by them, and not by the lessees. 77