Court Opinion

ID: 4436172
Source: CourtListenerOpinion
Date Created: 2019-09-05 22:02:07.225223+00
Date Added: 2024-06-11T13:42:43.864237
License: Public Domain

Filed 9/5/19
Opinion following transfer from Supreme Court
                                 CERTIFIED FOR PUBLICATION

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                 THIRD APPELLATE DISTRICT
                                                (Yolo)
                                                 ----

COUNTY OF BUTTE,

                Plaintiff and Appellant,                           C071785

        v.                                                  (Super. Ct. Nos. 144283,
                                                                    144282)
DEPARTMENT OF WATER RESOURCES,
                                                                 Butte County
                Defendant and Respondent;

STATE WATER CONTRACTORS, INC., et al.,
         Real Parties in Interest and Respondents.

COUNTY OF PLUMAS et al.,
                                                                (Super. Ct. No.
                Plaintiffs and Appellants,                      CVCV091258)

        v.                                                       Yolo County

DEPARTMENT OF WATER RESOURCES,

                Defendant and Respondent;                        OPINION ON
                                                                 TRANSFER
STATE WATER CONTRACTORS, INC., et al.,
         Real Parties in Interest and Respondents.

                                                  1
      APPEAL from a judgment of the Superior Court of Yolo County, Daniel P.
Maguire, Judge. Dismissed with directions.

       Bruce Alpert, County Counsel; Rossmann and Moore, Antonio Rossmann,
Roger B. Moore, and Barton Lounsbury; Law Office of Roger B. Moore and Roger B.
Moore; and Shute Mihaly & Weinberger, Ellison Folk for Plaintiff and Appellant County
of Butte.

       R. Craig Settlemire, County Counsel; Law Office of Roger B. Moore and
Roger B. Moore; and Law Offices of Michael B. Jackson and Michael B. Jackson for
Plaintiffs and Appellants Plumas County and Plumas County Flood Control and Water
Conservation District.

       E. Robert Wright for Friends of the River and the California Sportfishing
Protection Alliance as Amici Curiae on behalf of Plaintiffs and Appellants.

       Kamala D. Harris and Xavier Becerra, Attorneys General, Robert W. Byrne,
Senior Assistant Attorney General, Randy L. Barrow and Tracy L. Winsor, Supervising
Deputy Attorneys General, and Deborah L. Barnes and Matthew J. Goldman, Deputy
Attorneys General for Defendant and Respondent Department of Water Resources.

      The Sohagi Law Group, Margaret M. Sohagi and Philip A. Seymour; Duane
Morris, Thomas M. Berliner, Paul J. Killion, and Jolie-Anne S. Ansley; and Downey
Brand, David R.E. Aladjem for Real Parties in Interest and Respondents Alameda County
Flood Control & Water Conservation District, Zone 7, Kern County Water Agency, San
Bernardino Valley Municipal Water District, Santa Clara Valley Water District, The
Metropolitan Water District of Southern California, and State Water Contractors, Inc.

       The Department of Water Resources (DWR) applied to the Federal Energy
Regulatory Commission (FERC or Commission) to extend its federal license to operate
Oroville Dam and its facilities as a hydroelectric dam.1 The project subject to relicensing
is referred to as the Oroville Facilities Project (sometimes also Project or Settlement
Agreement (SA)) by which the affected parties agree to the conditions for the extended
license. “The SA includes Appendix A, which incorporates all of the . . . measures that

1      The action does not concern the construction, repair, or replacement of the dam
spillways, the need for which occurred during the pendency of this case.

                                             2
the Settling Parties believe to be under FERC’s jurisdiction.”2 The objective of the
Project is the continued operation of the Oroville Facilities for water and power
generation and the implementation of conditions for the extended license.
       DWR filed a programmatic (informational) Environmental Impact Report (EIR) as
the lead agency in support of the application pursuant to the California Environmental
Quality Act (Pub. Resources Code, § 21000 et seq.; hereinafter CEQA). Plaintiffs
challenged the sufficiency of the EIR, the failure to consider the import of climate
change, in the state courts and sought to enjoin the issuance of an extended license until
their environmental claims were reviewed.3 The trial court denied the petition on
grounds the environmental claims were speculative.
       In an earlier opinion we held that the authority to review the EIR was preempted
by the Federal Power Act (16 U.S.C. § 791a et seq.; hereinafter FPA), that the superior
court lacked subject matter jurisdiction of the matter, and ordered that the case be

2     Throughout this opinion, all quotations are to the Draft Environmental Impact
Report (DEIR) unless otherwise indicated.
3      The plaintiffs brought this action on the premise the environmental effects of
relicensing the dam concern the operation of the dam and that jurisdiction to review the
matter lies in the state courts pursuant to CEQA. They claim that a CEQA document
offered to support the DWR’s application to FERC failed to consider the impact of
climate change on the operation of the dam for all the purposes served by the dam. The
superior court dismissed the complaint on the ground that predicting the impact of
climate change is speculative. The plaintiffs appealed.

        The plaintiffs rely on CEQA case authority to stay the relicensing procedure
pending state judicial review of the DWR’s approval of the project. (Santiago County
Water Dist. v. County of Orange (1981) 118 Cal. App. 3d 818, 829 (Santiago County).)
Plaintiff Butte County requested that the state court “[e]njoin DWR’s project until and
unless respondent [DWR] lawfully approves the project in the manner required by
CEQA . . . .” Plaintiff County of Plumas requested that: “Respondents and real parties in
interest . . . suspend all activity under the certification that could result in any change or
alteration in the physical environment until respondent has taken actions that may be
necessary to bring the certification into compliance with CEQA.”

                                              3
dismissed. Plaintiffs petitioned for review in the Supreme Court, review was granted,
and the matter was transferred to us with directions to reconsider the case in light of
Friends of the Eel River v. North Coast Railroad Authority (2017) 3 Cal.5th 677 (Eel
River). We do so.
       In part E of the Discussion, post, we have reviewed Eel River and determined that
the Interstate Commerce Commission Termination Act (ICCTA), at issue in Eel River, is
materially distinguishable from the FPA. We shall conclude that Eel River does not
apply in this case. Eel River did not involve the FPA. At issue was whether the ICCTA
preempted the application of CEQA to a project to resume freight service on a stretch of
rail line owned by the North Coast Railroad Authority. The Legislature created the North
Coast Railroad Authority and gave it power to acquire property and operate a railroad, to
be owned by a subsidiary of the state. The Supreme Court found the purpose of the
federal law was deregulatory and the state as the owner of the railroad was granted
autonomy to apply its environmental law. For that reason, the federal law did not
preempt the application of CEQA to the railroad.
                                    INTRODUCTION
       Oroville Dam was completed in 1968 as part of the State Water Project (SWP). It
blocks access to 66.9 miles of high-quality habitat for anadromous fish (salmon &
steelhead). FERC licenses are conditioned on the adoption of a plan for the “adequate
protection, mitigation, and enhancement of fish and wildlife . . . and for other beneficial
public uses, including irrigation, flood control, water supply, and recreational and other
purposes . . . .” (16 U.S.C. § 803(a)(1).) The Feather River Fish Hatchery was built to
compensate for the loss of spawning grounds resulting from the construction of Oroville
Dam.
       A federal license is required by the FPA for the construction and operation of a
hydroelectric dam. The license is issued by FERC. As we explain, with one relevant
exception the FPA occupies the field of licensing a hydroelectric dam and bars review in

                                              4
the state courts of matters subject to review by FERC. (See, e.g., First Iowa Hydro-
Electric Cooperative v. Federal Power Com. (1946) 328 U.S. 152 (First Iowa).) The
reason is that a dual final authority with a duplicate system of state permits and federal
licenses required for each project would be unworkable. In this case the duplicate
authority involves the separate NEPA (National Environmental Protection Act) and
CEQA reviews of the SA. (Ibid.)
       The exception to preemption lies with the state’s authority to impose more
stringent water quality conditions on the license than federally required pursuant to
section 401 (33 U.S.C. § 1341; hereinafter section 401) of the Clean Water Act4 (33
U.S.C. § 1251 et seq.).5 In California the authority to establish the conditions is vested in
the state water pollution control board (now State Water Resources Control Board
(SWRCB)). (Wat. Code, § 13160 et seq.) The conditions must be set forth in a
certificate to be incorporated in the license.6 The environmental predicate for the
certificate is set forth in Appendix A of the SA in both NEPA and CEQA reviews of the
conditions for the license. To avoid duplication of federal and state environmental
reviews, the jurisdiction to review the environmental conditions lies with FERC.

4       The Clean Water Act provides: “Any applicant for a Federal license or permit to
conduct any activity including, but not limited to, the construction or operation of
facilities, which may result in any discharge into the navigable waters, shall provide the
licensing or permitting agency a certification from the State in which the discharge
originates or will originate, or, if appropriate, from the interstate water pollution control
agency having jurisdiction over the navigable waters at the point where the discharge
originates or will originate, that any such discharge will comply with the applicable
provisions of sections 301, 302, 303, 306, and 307 of this Act [33 U.S.C. §§ 1311, 1312,
1313, 1316, 1317].” (33 U.S.C. § 1341(a)(1).)
5      The formal name of the Clean Water Act is the Federal Water Pollution Control
Act.
6       References to a certificate is to the law generally, references to the “Certificate”
are to the SWRCB certificate issued December 15, 2010. (State Water Resources
Control Board, Order WQ 2010-0016 (Dec. 15, 2010).)

                                               5
       The DWR proposes, in fulfillment of the environmental requirements of section
803 of title 16 of the United States Code, that new measures be taken to improve the
conditions of fish and wildlife affected by the presence of the dam. The measures include
a commitment by DWR to develop plans to enhance, protect, restore, and/or create
habitat within the FERC boundary to be set forth in a certificate. These environmental
plans, referred to as the “New Project License,” are subject to CEQA environmental
review when implemented.7 The DWR has selected a federal alternative procedure, an
SA, for the fulfillment of its obligations. The SA involves the agreement of the parties
affected by the extended license.
       We shall conclude that the plaintiffs cannot challenge the environmental
sufficiency of the SA in the state courts because jurisdiction to review the matter lies with
FERC and plaintiffs did not seek federal review as required by 18 Code of Federal
Regulations part 4.34(i)(6)(vii) (2003). Moreover, the plaintiffs did not challenge and
could not challenge the SWRCB Certificate in their pleadings because it did not exist at
the time this action was filed. The extended license issues upon the filing of a certificate
and that cannot be delayed beyond one year from the date of a request for the certificate.8

7       A project under CEQA involves a physical change in the environment. Public
Resources Code section 21065 defines one required element of “ ‘Project’ ” as: “an
activity which may cause either a direct physical change in the environment, or a
reasonably foreseeable indirect change in the environment . . . .” Because the CEQA
document is programmatic it is a plan only. The implementation of the plan involves the
construction of new environmental facilities required by the program, such as new
spawning grounds. It is these implementations that may require review under CEQA.
8       “Section 401(a)(1) requires that a State ‘act on a request for certification[] within a
reasonable period of time (which shall not exceed one year) after receipt of such request,’
or else ‘the certification requirements of this subsection shall be waived . . . .’ ” (Alcoa
Power Generating Inc. v. FERC (D.C. Cir. 2011) 643 F.3d 963, 972.) It is only after the
issuance of the license that the plan in the Certificate may be implemented.

                                              6
       Accordingly, this court has no jurisdiction of the cause tendered. We shall return
the case to the trial court with an order to dismiss the complaint for lack of subject matter
jurisdiction.9
                                         FACTS10
       The Oroville FERC Project No. 2100 is located on the Feather River in the Sierra
Nevada foothills in Butte County, California. The Oroville Facilities were constructed
between 1961 and 1968 as part of the SWP, a water storage and delivery system of
reservoirs, aqueducts, power plants, and pumping plants designed to provide flood
control and to store and distribute water to supplement the needs of urban and agricultural
water users in both Northern and Southern California. The Oroville Dam is the largest
earthen dam in the United States. The Oroville Facilities Project is operated for power
generation, water quality improvement in the Sacramento–San Joaquin Delta, recreation,
fish and wildlife enhancement, and flood management. The dam is designed to access

9       The court advised the parties that its tentative view was that the relicensing of the
Oroville Dam and Oroville Facilities Project is preempted by the FPA and implementing
regulations (e.g., 18 C.F.R. §§ 4.34, 385.602 (2003)) and that jurisdiction over a
challenge to the issuance of the license lies with FERC. Accordingly, we advised that the
case should be returned to the superior court with directions to dismiss the action for lack
of federal subject matter jurisdiction. We invited the parties to submit supplemental
briefs in response to our advice.

         They did so and agreed that the case was subject to federal law except for the
environmental program contained in a certificate prepared by the SWRCB. The plaintiffs
then sought to challenge the environmental predicate for the Certificate setting forth the
state’s more stringent water quality provisions on the ground it also fails to consider
climate change. The challenge cannot succeed because the Certificate did not exist at the
time the case was filed and the program required by the Certificate cannot be challenged
until it is implemented by the DWR. That has not occurred because implementation is
dependent upon the filing of the Certificate. Accordingly, there is no issue regarding the
implementation of the Certificate to review on appeal.
10     The facts and procedure regarding the subject of jurisdiction appear at relevant
points in the Discussion.

                                              7
the waters of Lake Oroville at different depths to allow control of the temperature of the
water discharged from the dam. The only physical change to the existing dam is the
opening of a water valve to access the cold water at the bottom of Lake Oroville.11
       The Oroville Facilities include facilities and operations to help protect and
enhance fish and wildlife species and their habitat. Many of the existing environmental
programs implemented within the Oroville Facilities Project boundary are cooperatively
managed or are based on agreements with other agencies such as the Department of Fish
and Game and the United States Fish and Wildlife Service. This includes operation and
maintenance of facilities such as the Feather River Fish Hatchery and the Oroville
Wildlife Area and implementation of measures developed in consultation with interested
parties to protect species that are listed under the Federal Endangered Species Act and/or
the California Endangered Species Act.
       As an integral part of the SWP, water stored in Lake Oroville is released from the
Oroville Facilities to meet a variety of statutory, contractual water supply, flood
management, and environmental commitments. These contractual, flood management,
fishery, water quality, and other environmental obligations are defined in numerous
operating agreements that specify the timing, flow limits, storage amounts, and/or
constraints on water releases. The relicensing of the operation of the dam is consistent
with these existing commitments and no changes to the contractual obligations or to the
general pattern of these releases are anticipated.
       The Oroville Facilities are also important components of the Sacramento River
Flood Control Project, the flood management system for areas along the Feather and
Sacramento rivers downstream of Oroville Dam. The Oroville Facilities provide flood
protection benefits to Oroville, other portions of Butte County, Marysville, Yuba City,

11      The water valve permits access to cooler water from the bottom of Lake Oroville
that is fed by the Feather River, which flows through a tunnel built during the
construction of the dam to convey water from the river around the site of the dam.

                                              8
other portions of Yuba and Sutter counties, and many smaller communities downstream
to Sacramento. The use of the dam to control floods is governed by federal regulations
issued by the U.S. Army Corps of Engineers. The Oroville Facilities also provide
protection to 283,000 acres of developed agricultural lands and a variety of transportation
and other public utility infrastructure. Pursuant to section 204 of the federal Flood
Control Act of 1958, flood control operations at Oroville are governed by the rules and
regulations prescribed by the Secretary of the Army. The Proposed Project is consistent
with existing U.S. Army Corps of Engineers flood management objectives.
                                       DISCUSSION
A.     The Federal Relicensing Procedure
       In order to view the case in the proper light we start with the federal administrative
procedure invoked by DWR. Under provisions of the FPA the federal and state license
procedures have been melded into a single procedure called an alternative license process
(ALP). It combines the federal and state environmental review process into a single
process by which the affected parties, federal and state agencies, local entities (including
the plaintiffs) and affected private parties,12 agree to the terms of relicensing in a SA.
The SA combines the “pre-filing consultation process, the environmental review process
under the National Environmental Policy Act and administrative processes associated
with the Clean Water Act and other statutes.” (18 C.F.R. § 4.34(i)(2)(i) (2003).) The
procedure includes “[t]he cooperative scoping of environmental issues (including
necessary scientific studies), the analysis of completed studies” and “[t]he preparation of
a preliminary draft environmental assessment [PDEA] or preliminary draft environmental
impact statement . . . .” (18 C.F.R. § 4.34(i)(4)(ii) & (iii) (2003).) Some 52 parties

12      The settling parties include not only DWR but also the United States Department
of the Interior on behalf of its component bureaus, real parties State Water Contractors,
the Department of Fish and Game, and numerous local government and environmental
organizations.

                                              9
including the plaintiffs and the United States Department of the Interior, representing all
interested federal agencies, participated in the process. However, the plaintiffs withdrew
as parties and subsequently brought this case in the state court challenging inter alia the
adequacy of CEQA treatment of global climate change.
       The federal law provides for an ALP. We note that the federal administrative
regulation does not refer to CEQA. (See 18 C.F.R. § 4.34(i)(6)(vii) (2003).) The
purpose of the ALP is to “resolv[e] all issues that have or could have been raised by the
Parties in connection with FERC’s order issuing a New Project License . . . .” The SA
provides that these requirements are incorporated in the license as conditions of the
license.
       The ALP substitutes the environmental report, normally required in an application
to FERC, with a “Preliminary Draft Environmental Assessment (PDEA).” “The ALP is
intended to expedite the licensing process by combining the prefiling consultation and
federal and State environmental review process into a single process.” After DWR
submitted its draft license application and draft PDEA the stakeholders continued to
negotiate and ultimately developed the SA, which was signed by 52 parties and adopted
by DWR as the Proposed Project and submitted to FERC.
       The SA includes “[t]he cooperative scoping of environmental issues (including
necessary scientific studies), the analysis of completed studies” and “[t]he preparation of
a [PDEA] . . . .” (18 C.F.R. § 4.34(i)(4)(ii) & (iii) (2003).) The purpose of the SA is to
“resolve[] all issues that may arise in the issuance of all permits and approvals associated
with the issuance of the New Project License, including . . . Section 401 Certification,
[National Environmental Policy Act] and CEQA.” The SA includes two appendices
which mark the line between federal (Appendix A) and state (Appendix B) jurisdiction.13

13     Appendix B contains agreements by the parties that are not required by federal law
including the contribution of money to construct the new facilities. No issue regarding
Appendix B has been tendered.

                                             10
In its federal NEPA environmental impact statement for the Project, FERC evaluated
only Appendix A of the SA.
       Thus, in keeping with First Iowa, Appendix A of the SA sets out the matters
subject to federal jurisdiction. The potentially confusing aspect of the procedure is the
presence of a lengthy CEQA document. It serves two purposes. It provides the
underlying environmental studies supporting both the FERC application (PDEA) and the
state’s (SWRCB) more stringent clean water law. The environmental matter set forth in
the SA is reviewable by FERC for purposes of the PDEA and by the SWRCB as a
predicate for the state’s more stringent water quality conditions. Thus the program in
Appendix A fulfills two functions: (1) It provides the state’s environmental information
to meet FERC’s requirements (PDEA); and (2) it supplies the environmental information
from which the SWRCB develops the state’s clean water law in a certificate.
       That is all that is required for issuance of the FERC license. As noted, the
implementation of the clean water rules is potentially subject to further CEQA review.
The program contained in the Certificate provides for further studies and implementation
of the state’s more stringent clean water law rules after the issuance of the FERC license.
       “[T]he SA was submitted to FERC on March 24, 2006, as supplemental
information to support the license application that DWR filed in January 2005 for
consideration as future license conditions to the Oroville license for the next 50 years.”
       “The objective of the Proposed Project is the continued operation and maintenance
of the Oroville Facilities for electric power generation, including implementation of any
terms and conditions [(adopted by the SWRCB)] to be considered for inclusion in a new
FERC hydroelectric license.” (Italics added.)
       In this case “[t]he SA includes a commitment by DWR to develop, in consultation
with stakeholders, a number of plans to enhance, protect, mitigate, restore, and/or create
habitat within the FERC Project boundary. It also requires that DWR complete a number
of studies and conduct monitoring to guide future decisions and activities. While these

                                             11
. . . will likely lead to future actions that would be subject to CEQA environmental
review prior to implementation . . . [they] do not result in a physical change to the
environment and thus are not ready for project-specific CEQA analysis at this time.”14
       “The SA includes Appendix A, which incorporates all of the protection,
mitigation, and enhancement . . . measures that the Settling Parties believe to be under
FERC’s jurisdiction in Proposed License Articles, and Appendix B, which includes all of
the PM&E measures and other agreements that the Settling Parties believe to be outside
of FERC’s jurisdiction or that are commitments made by parties other than DWR.”
       “In general, SA Appendix A includes a commitment by DWR to develop, in
consultation with stakeholders, numerous environmental plans and programs. These
environmental plans and programs would improve fish spawning and rearing habitat to
complement FESA anadromous fish species recovery programs, support the Feather
River Fish Hatchery, provide additional habitat for waterfowl, provide protection for
terrestrial FESA species, monitor water quality in project waters, improve habitat for
warmwater fish species and improve the coldwater fishery in Lake Oroville, and provide
new management direction for the [Oroville Wildlife Area].”
       A dispute concerning “required [environmental] studies,” tendered by an entity
“participating” in the ALP, is subject to federal administrative review before FERC. (18
C.F.R. § 4.34 (i)(6)(vii) (2003).) Plaintiffs, as participants in the SA, tendered a dispute
regarding “required studies” but failed to seek relief before FERC. Accordingly, they
failed to exhaust their federal administrative remedies. The SA also contains Appendix
B, which sets forth agreements by the parties not required by federal law. No such
agreement is at issue in this case.

14     The review of the proposed implementation of the changes made by the SWRCB
in the Certificate is the only point at which CEQA applies to the licensing procedure.

                                             12
B.     Federal Preemption
       Federal preemption is based on the supremacy clause, which states that federal law
“shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any
State to the Contrary notwithstanding.” (U.S. Const., art. VI, cl. 2.) There are three types
of preemption: (1) express preemption, (2) field preemption, “ ‘when the scope of a
[federal] statute indicates that Congress intended federal law to occupy a field
exclusively[,]’ ” and (3) conflict preemption in which “ ‘state law is naturally preempted
to the extent of any conflict with a federal statute.’ ” (Kurns v. Railroad Friction
Products Corp. (2012) 565 U.S. 625, 630.) The FPA contains aspects of all three.
       The FPA states: “Nothing herein [16 USCS §§ 791a et seq.] contained shall be
construed as affecting or intending to affect or in any way to interfere with the laws of the
respective States relating to the control, appropriation, use, or distribution of water used
in irrigation or for municipal or other uses, or any vested right acquired therein.” (16
U.S.C. § 821.) “The Supreme Court has read the broadest possible negative pregnant into
this ‘savings clause.’ [(First Iowa, supra, 328 U.S. at p. 176.)] The rights reserved to the
states in this provision are all the states get.” (Sayles Hydro Associates v. Maughan (9th
Cir. 1993) 985 F.2d 451, 454 (Sayles Hydro).)
       With one relevant exception, the FPA occupies the field of licensing a
hydroelectric dam and bars environmental review of the federal licensing procedure in
the state courts. (First Iowa, supra, 328 U.S. 152; California v. FERC (1990) 495 U.S.
490; cf. Sayles Hydro, supra, 985 F.2d 451; Karuk Tribe of Northern California v.
California Regional Water Quality Control Bd., North Coast Region (2010) 183
Cal. App. 4th 330.)
       The lead case is First Iowa. A state license issued for a hydroelectric dam
bypassed the federal licensing system and was enforced in the state courts. The Supreme
Court held that the federal law preempted the state law and barred its application in the
state courts. The court explained that under the FPA “there is a separation of those

                                             13
subjects which remain under the jurisdiction of the states from those subjects which the
Constitution delegates to the United States and over which Congress vests the Federal
Power Commission with authority to act. To the extent of this separation, the Act
establishes a dual system of control. The duality of control consists merely of the
division of the common enterprise between two cooperating agencies of government,
each with final authority in its own jurisdiction. . . . A dual final authority, with a
duplicate system of state permits and federal licenses required for each project, would be
unworkable. . . . [For that reason] [s]ection 9(c) [of the FPA] permits the Commission to
secure from the [state] applicant ‘[s]uch additional information as the Commission may
require.’ This enables it to secure, in so far as it deems material, such parts, or all of the
information that the respective States may have prescribed in state statutes as a basis for
state action.” (First Iowa, supra, 328 U.S. at pp. 167-169, italics added, italics omitted,
fns. omitted.) Here that would include the CEQA document in Appendix A of the SA
that is the predicate environmental study for the Certificate. Otherwise, First Iowa says,
the federal law would vest in a state, a veto power over a federal project. “Such a veto
power easily could destroy the effectiveness of the [FPA]. It would subordinate to the
control of the State the ‘comprehensive’ planning which the Act provides . . . .” (Id. at
p. 164.) For the same reasons a state cannot delay a FERC license by issuing a certificate
beyond one year of a request for a certificate.
       The Supreme Court has said that the FPA preempts the field of “power
development and other public uses of the waters.” (California v. FERC, supra, 495 U.S.
at p. 494.) “California v. FERC reaffirms First Iowa, uses the ‘occupy the field’
characterization [of the] ‘broad and paramount federal regulatory role,’ California v.
FERC, at [p.] 499, and plainly states that ‘constricting § 27 [16 U.S.C. § 821] to
encompass only laws relating to proprietary rights’ accomplishes this ‘no sharing’
purpose.” (Sayles Hydro, supra, 985 F.2d at pp. 455-456, fn. omitted.) In Sayles Hydro,
the Ninth Circuit recognized that “Congress has occupied the entire field, so preemption

                                              14
will not depend on whether the state requirements conflict with the federal requirements.”
(Id. at p. 453.) Thus, pursuant to First Iowa, the state review of the environmental
information within the jurisdiction of FERC and contained in the CEQA document
cannot be used to delay the issuance of the license.
       The Supreme Court also has used a conflict preemption analysis in discussing the
supremacy of the FPA. “Even though the ratio decidendi in California v. FERC is
straight ‘occupy the field’ preemption, the State Board correctly characterizes words used
in the last part of the opinion, where the rule is applied to the facts, as conflict preemption
language. The dichotomy between the two types of preemption is not so sharp in
practical terms as the legal categorization makes it appear, so the mixed language has
little significance.” (Sayles Hydro, supra, 985 F.2d at p. 456.)
C.     The Clean Water Act Exception
       The exception to federal jurisdiction is found in section 401 of the Clean Water
Act. (33 U.S.C. § 1341.) FERC requires that every application for a federal license that
may result in the discharge of pollutants into navigable waters, including pollutants from
the discharge of water from a dam, must provide FERC with a certificate that the Project
has complied with the state law that regulates the pollution of water. (33 U.S.C. § 1341;
S.D. Warren Co. v. Maine Bd. of Environmental Protection (2006) 547 U.S. 370; Wat.
Code, § 13160 et seq.). The term pollution includes the temperature and flow of water
that impacts the lives of fish in the water below the dam. Thus, “[a]lthough ‘the FPA
represents a congressional intention to establish “a broad federal role in the development
and licensing of hydroelectric power,” ’ the [Clean Water Act] ‘has diminished [the
FPA’s] preemptive reach by expressly requiring [FERC] to incorporate into its licenses
state-imposed waterquality conditions.’ [Citation.] FERC’s hydroelectric licenses are
thus subject to, among other conditions, the requirements of section 401 of the [Clean
Water Act].” (Alabama Rivers Alliance v. FERC (D.C. Cir. 2003) 325 F.3d 290, 292-
293.) Before FERC can issue a new license to DWR, the SWRCB must first issue a

                                              15
water quality certificate pursuant to section 401 of the Clean Water Act and the Porter-
Cologne Act, Water Code section 13160 et seq. However, as noted, the state, including
its courts, cannot delay the issuance of a certificate beyond one year from the date of a
request to issue a certificate. In issuing its water quality certification, the SWRCB
certifies that the Proposed Project will comply with specified provisions of the Clean
Water Act, including water quality standards that are developed pursuant to state law and
in satisfaction of Clean Water Act section 303 (33 U.S.C. § 1313). Preparation and
certification of an EIR under the terms of CEQA and directed to the environmental
effects of the state’s more stringent water quality law is required before the SWRCB can
take action. This DEIR is intended to fulfill that purpose, and considers three
alternatives: the No-Project Alternative, the Proposed Project (SA), and the FERC Staff
Alternative described in the FERC Draft Environmental Impact Statement (DEIS).
       The SA contains appendices. It provides that the CEQA “program” in Appendix
A is subject to amendment by the SWRCB to comply with the state’s more stringent
clean water law pursuant to section 401 of the federal Clean Water Act. The “amended
program” is set forth in a certificate issued by the SWRCB as conditions to the FERC
license to be implemented when imposed after the license is issued. “Preparation and
certification of an EIR under the terms of CEQA is required before the SWRCB can take
action.” The DEIR provides that when the “amended program” in the Certificate is
implemented (i.e., constructed) the implementation may be subject to CEQA review in
the state courts.
       In this case the Certificate includes an amendment to set water temperature
requirements for the fish hatchery as required by a 1983 agreement between DWR and
the Department of Fish and Game. It mandates that the water temperature of discharged
water be lowered by a specified amount “[a]fter facility modifications [required by the
Certificate], but no later than 10 years after [issuance of the] license.” “Because of the
importance of the river valve [(that permits taking water from the deepest and coolest

                                             16
parts of Lake Oroville)] for temperature control” the Certificate also requires that “a
timeline be submitted within six months of license issuance that includes the steps
necessary to finalize the repair or refurbishment of the river valve.”
D.     The New Project License
       Although the Oroville Facilities Project that is subject to licensing is the SA, the
project subject to environmental review is referred to in Appendix A as the “New Project
License.” It is subject to review before FERC because the applicants of the SA
“participat[e] in the alternative pre-filing consultation process.”15 As the CEQA
document explains, this project, does “not . . . include any annual license extending the
original license” for the dam. Rather, it sets forth the environmental proposals that
physically condition the new license. For this reason, it does not include the
environmental effects of the operation of the dam but only the environmental effects of
the projects encompassed by the New Project License, i.e., the projects listed in the
Certificate.
       A source of confusion is the classification of the overall project subject to the
FERC license as the Oroville Dam and Oroville Facilities Project. However, the project
subject to environmental review in this case is not the existing dam and facilities but the
project to further mitigate the loss of habitat caused by the construction of the dam, and
that is referred to as the New Project License. This project would increase the habitat
along the lower reaches of the Feather River, open a water valve to access colder water at
the bottom of Lake Oroville to meet hatchery temperature requirements, improve the
spawning of fish by channel and gravel improvement plans, and regulate the flow of

15     Title 18 Code of Federal Regulations part 4.34(i)(6)(vii) (2003) provides in
relevant part: “Any potential applicant, resource agency, Indian Tribe, citizens’ group, or
other entity participating in the alternative pre-filing consultation process may file a
request with the Commission to resolve a dispute concerning the alternative process
(including a dispute over required studies) . . . .” (Italics added.)

                                             17
water from the dam.16 Only the implementation of the conditions set forth in the
Certificate relating to the state’s clean water law, some of them to be completed years
after the license is issued, is subject to independent CEQA review in the state courts.
       There is an extensive CEQA document (DEIR) in the record and it is this
document that the plaintiffs rely on in their CEQA challenge. As noted, it serves two
purposes. First, it satisfies the state’s obligation to provide environmental information to
FERC. Second, it is used “to evaluate the potential effects of implementing the SA as
new license terms and conditions for the continued operation of the hydroelectric
component of the Oroville Facilities.” That, however, is reviewable before FERC as
general conditions for the operation of the dam.
       The federal law has its own means of review of contested issues in the settlement
process. Under 18 Code of Federal Regulations part 385.602(h)(1)(i) (2003), if FERC
determines that any offer of settlement is contested by any party, the Commission may
decide the merits of the issues if the record contains substantial evidence upon which to
base a reasoned decision or it determines there is no genuine issue of material fact.17 (18
C.F.R. § 385.602(h)(1)(i) (2003).)
       Second, the DEIR provides an analysis for the preparation of a “water quality
certification for the Proposed Project from the [SWRCB] under Section 401 of the
[federal] Clean Water Act.” The primary purpose of the DEIR is “to identify . . . any

16     Insofar as the implementation of the changes made by the SWRCB to the “New
Project License” (Appendix A) are subject to CEQA analysis it is programmatic. (Pub.
Resources Code, §§ 21093, 21094.) The CEQA “program” is set forth in Appendix A as
the environmental predicate for the Certificate. As noted, the CEQA “program” set forth
in Appendix A is subject to federal administrative review before FERC pursuant to
NEPA. (18 C.F.R. § 4.34(i)(6)(vii) (2003).)
17    If the Commission determines that the record does not contain substantial
evidence, the Commission has the option to take other action which the Commission
determines to be appropriate. (18 C.F.R. § 385.602(h)(1)(ii)(B) (2003).)

                                             18
potential . . . environmental impacts that may result from implementation of” the New
Project License. It provides for environmental studies that support the changes made by
the SWRCB in the Certificate. To the extent that CEQA applies to the Certificate it is to
the proposed implementation of the changes by the SWRCB. (See 33 U.S.C. § 1341(d).)
Appendix A also functions as a PDEA, an “analysis required under [the federal] NEPA in
support of relicensing.”
       In this respect the state laws are not a part of relicensing and cannot be used to
delay relicensing by resort to the state courts. The SA is clear that the purpose of the SA
is to “resolv[e] all issues that have or could have been raised by the Parties in connection
with FERC’s order issuing a New Project License . . . .” “[I]t is the Parties’ intention that
this [SA] also resolves all issues that may arise in issuance of all permits and approvals
associated with the issuance of the New Project License, including but not limited to . . .
CWA [Clean Water Act] Section 401 Certification, NEPA and CEQA.”
       Although “[t]he DEIR analyzes the potential impacts of implementing the SA
including all its appendices, as DWR’s proposed project,” the matters subject to
environmental review by the state required to obtain an extended license include only the
matters in Appendix A. The state’s environmental information provided in Appendix A,
which is expressly made subject to federal jurisdiction, satisfies the state’s environmental
obligation with respect to the federal license. It also provides the environmental
information in support of the programmatic portion of the New Project License which is
the environmental predicate for review of the “program” by the SWRCB for compliance
with the state’s more stringent clean water law.
       The program set forth in the “New Project License” was submitted to the SWRCB
for its review pursuant to the California Clean Water Act. (Porter-Cologne Act, Wat.
Code, § 13160 et seq.) The changes made to the program are set forth in a Certificate
(adopted December 15, 2010, two years after the filing of this action). The Certificate

                                             19
has not been filed with FERC because of the pendency of this action.18 The CEQA
document asserts only that the changes made to the program by the SWRCB in the
Certificate are subject to CEQA review in the state courts when implemented after the
Certificate is submitted to FERC and the license issued.
       Neither the program subject to the SWRCB review, nor the Certificate by which
SWRCB exercises its section 401 authority to implement the provisions of Appendix A
are the subject of plaintiffs’ petition. Because the plaintiffs’ petition was filed in the state
court two years before the SWRCB adopted the Certificate, no issue is tendered
concerning the changes the Certificate makes to the program, and no action under CEQA
to review the changes can be filed in a state court until after the license is issued and the
changes implemented. As a consequence, they have not tendered a question of how the
CEQA part of the section 401 review meshes with the non-CEQA part of the licensing
process.
E.     Eel River
       As indicated, the Supreme Court has directed us to vacate our prior decision and
reconsider the case in light of Eel River. Having done so, we hold once again that this
court has no jurisdiction because federal law preempts CEQA under the circumstances
presented.
       The issue in Eel River was whether the ICCTA preempted the application of
CEQA to a project to resume freight service on a stretch of railroad line owned by the
North Coast Railroad Authority. (Eel River, supra, 3 Cal.5th at pp. 692, 700, 702.) The
California Legislature created the North Coast Railroad Authority and gave it the power
to acquire property and to operate a railroad. (Id. at p. 692.) Thus, the railroad was to be
owned by a subsidiary of the state.

18     The plaintiffs rely on CEQA case authority to stay the relicensing procedure
pending state judicial review of the DWR’s approval of the project. (Santiago County,
supra, 118 Cal.App.3d at p. 829.)

                                              20
       The ICCTA contained an express preemption provision, which stated in pertinent
part: “ ‘The jurisdiction of the [Surface Transportation Board] over—[¶] (1)
transportation by rail carriers . . . [,] and [¶] (2) the construction, acquisition, operation,
abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or
facilities, even if the tracks are located, or intended to be located, entirely in one State, [¶]
is exclusive. Except as otherwise provided in this part, the remedies provided under this
part with respect to regulation of rail transportation are exclusive and preempt the
remedies provided under Federal or State law.’ ” (Eel River, supra, 3 Cal.5th at p. 706.)
Accordingly, the Supreme Court acknowledged that as to privately-owned railroads, the
ICCTA preempted CEQA. (Id. at p. 703.)
       Significantly, in spite of the express preemption provision, Eel River looked to the
purpose and history of the ICCTA, to conclude that although the preemption of state
regulation of rail transportation had a long history, more recent enactments sought to
achieve broad deregulation. (Eel River, supra, 3 Cal.5th at p. 708.) The court opined that
the purpose of the ICCTA was “deregulatory.” (Id. at p. 691.) Because of this
deregulatory purpose, the state was left with an area of autonomy in which it could
choose to self-govern on matters of the environment. (Id. at p. 704.)
       Eel River recognized that federal remedies preempt state remedies “ ‘with respect
to regulation of rail transportation.’ ” (Eel River, supra, 3 Cal.5th at p. 711.) Central to
Eel River’s analysis was “whether application of CEQA to the rail carriers in this case
would constitute regulation of rail transportation within the terms of the ICCTA.” (Ibid.)
The case held that application of CEQA to private rail carriers would be a regulation
preempted by federal law. (Id. at p. 720.) However, the court reasoned that while
CEQA’s restriction of a private party’s ability to develop property is plainly regulatory,
when the state or a subdivision of the state is the property owner, CEQA operates not as a
regulation, but as a form of self-government. (Id. at p. 723.) Thus, CEQA is not a

                                               21
preempted regulation when applied to state-owned projects, or projects owned by a
subdivision of the state.
       Eel River stated that because of the deregulatory purpose of the ICCTA, private
railroad owners have the “freedom to plan, develop, and restore rail service on market
principles but within the framework of modest federal regulation[,]” such that “the
[private] owner may carry out its activities according to its own corporate goals and in
response to market forces.” (Eel River, supra, 3 Cal.5th at p. 724.) The court reasoned
that as private owners are accorded the freedom to make decisions based on their own
internal guidelines, so too must the state as owner be able to make decisions based on its
own guidelines, CEQA being one of those guidelines. (Ibid.) Thus, in the case of the
ICCTA, which purpose is to deregulate the railroad industry, CEQA is not a preempted
regulation when applied to a state-owned project, but is merely an expression of self-
governance.
       Eel River also relied on two presumptions in reaching its decision. The first is the
presumption that when Congress adopts a preemption provision, it does not intend to
deprive a state of its sovereign authority over its internal governance without a clear
statement of intent. (Eel River, supra, 3 Cal.5th at p. 725.) However, as we explain
below, the United States Supreme Court has rejected this presumption with respect to the
FPA. The second presumption the court relied on was the market participant doctrine.
(Id. at p. 734.) The court described this doctrine as the circumstance where states act,
“not as regulators of others, but as participants in a marketplace who themselves need to
deal with private parties to obtain services or products.” (Ibid.) In this capacity states
should have the same freedom as private actors in the market. (Ibid.) As discussed
further, the doctrine does not apply here.
       1.     FPA Does Not Have a Deregulatory Purpose
       Critical to Eel River’s conclusion that the ICCTA did not preempt CEQA was “the
deregulatory aspect of the ICCTA and the different way in which deregulation affects

                                             22
public and private rail lines.” (Eel River, supra, 3 Cal.5th at p. 734.) The ICCTA
expressly provides that it is the policy of the federal government, inter alia, “to allow, to
the maximum extent possible, competition and the demand for services to establish
reasonable rates for transportation by rail[,]” “to minimize the need for Federal regulatory
control over the rail transportation system[,]” and “to reduce regulatory barriers to entry
into and exit from the industry.” (49 U.S.C. § 10101.)
       Eel River reasoned that because of this deregulatory feature of the ICCTA, private
railroad owners were free to make market-based decisions without an undue level of
regulation of any kind, relying instead on their own internal corporate rules and bylaws to
guide market-based decisions. (Eel River, supra, 3 Cal.5th at p. 691.) The court
reasoned that a government-owned railroad must have the same “sphere of freedom of
action[,]” and that state laws are the state’s expression of its decisions, similar to
corporate rules and bylaws. (Ibid.) “This is how the deregulatory purpose of the ICCTA
necessarily functions when state-owned, as opposed to privately owned, railroad lines are
involved.” (Ibid.)
       By contrast, there is no deregulatory feature of the FPA. Instead, the “purpose,
structure, and legislative history of the [FPA]” shows that it “envisioned a considerably
broader and more active federal oversight role in hydropower development . . . .”
(California v. FERC, supra, 495 U.S. at p. 492 [comparing the FPA to the Reclamation
Act].) FERC’s planning authority over hydropower development is “comprehensive.”
(Id. at p. 506.) The Ninth Circuit has stated that the FPA, read in its entirety, was
intended “to vest final authority for the regulation of hydroelectric power projects in
federal hands.” (State of California ex rel. State Water Resources Bd. v. FERC (9th Cir.
1989) 877 F.2d 743, 746.) The FPA authorizes FERC to issue licenses to construct,
operate, and maintain dams, water conduits, reservoirs, and powerhouses, and to develop,
transmit, and utilize power in any of the streams over which Congress has jurisdiction.
(Id. at p. 747.) FERC has the authority to order any project modified “ ‘for the

                                              23
improvement and utilization of water-power development.’ ” (Ibid.) FERC has “general
planning power,” as well as specific powers “to issue preliminary permits,” “investigate
power development resources,” “mandate prompt construction schedules,” “grant
licenses,” “control the precise terms of the license,” “and to award powers of eminent
domain to licensees.” (Ibid.)
       The rationale behind Eel River is that because of the ICCTA’s deregulatory sweep,
it protects a “zone of autonomy belonging to the state when it is the owner, such that
within the deregulated zone, the state as owner may make its decisions based on its own
guidelines rather than some anarchic absence of rules of decision.” (Eel River, supra, 3
Cal.5th at p. 724.) In this zone of autonomy, the state must have leave to self-govern as if
it were a private owner. However, in the case of the FPA, there is no “zone of
autonomy” because the FPA was not designed with a deregulatory purpose. Without a
zone of autonomy or “sphere of regulatory freedom,” application of CEQA to a public
project is not merely self-governance. Rather, the application of the state law encroaches
on the regulatory domain of the FPA. (See id. at pp. 691, 723.)
       The United States Supreme Court has opined that the field of hydropower
licensing is highly regulated by the FPA. “The detailed provisions of the [FPA]
providing for the federal plan of regulation leave no room or need for conflicting state
controls.” (First Iowa, supra, 328 U.S. at p. 181.) “By directing FERC to consider the
recommendations of state wildlife and other regulatory agencies while providing FERC
with final authority to establish license conditions (including those with terms
inconsistent with the States’ recommendations), Congress has amended the FPA to
elaborate and reaffirm First Iowa’s understanding that the FPA establishes a broad and
paramount federal regulatory role.” (California v. FERC, supra, 495 U.S. at p. 499.)
The Ninth Circuit has agreed. “Congress has occupied the entire field, so preemption
will not depend on whether the state requirements conflict with the federal requirements.

                                            24
Second, occupation of the field implies as a corollary that the state process itself,
regardless of the results, is preempted.” (Sayles Hydro, supra, 985 F.2d at p. 453.)
       The Ninth Circuit even directly addressed the preemption of state environmental
laws, saying, “There would be no point in Congress requiring the federal agency to
consider the state agency recommendations on environmental matters and make its own
decisions about which to accept, if the state agencies had the power to impose the
requirements themselves.” (Sayles Hydro, supra, 985 F.2d at p. 456.) In California, one
court has “recognized that for at least half a century federal law has been supreme when it
comes to the subject of regulating hydroelectric dams operating under a federal
license[,]” and stated that “the FPA occupies the field of hydropower regulation.” (Karuk
Tribe of Northern California v. California Regional Water Quality Control Bd., North
Coast Region, supra, 183 Cal.App.4th at pp. 335, 359.)
       Unlike the ICCTA, which does not specifically indicate that the federal
government has regulatory authority over the preservation of the environment, the FPA
expressly authorizes FERC to consider environmental protection when issuing licenses.19
The FPA authorizes FERC to issue licenses to “any State or municipality for the purpose
of . . . operating, and maintaining dams, water conduits, reservoirs, power houses,
transmission lines, or other project works . . . for the development, transmission, and
utilization of power across . . . any of the streams . . . over which Congress has
jurisdiction . . . .” (16 U.S.C. § 797(e).) Furthermore, FERC, “in addition to the power
and development purposes for which licenses are issued, shall give equal consideration to
. . . the protection, mitigation of damage to, and enhancement of, fish and wildlife

19      With regard to the regulation of solid waste rail transfer facilities, the ICCTA
states that it is not intended “to affect the traditional police powers of the State to require
a rail carrier to comply with State and local environmental, public health, and public
safety standards that are not unreasonably burdensome to interstate commerce and do not
discriminate against rail carriers.” (49 U.S.C. § 10910.)

                                              25
(including related spawning grounds and habitat), the protection of recreational
opportunities, and the preservation of other aspects of environmental quality.” (Ibid.)
       FERC’s published Processes for Hydropower Licenses specifically provides for
environmental analyses.20 FERC Guidelines state that the ALP includes in its
collaborative process the evaluation of the environmental impacts of the Project pursuant
to NEPA. Other federal laws intersect with the hydropower licensing process, which
duplicate the impacts considered in a CEQA review. These include the federal Clean
Water Act, the federal Endangered Species Act, the Fish and Wildlife Coordination Act,
the Magnuson-Stevens Fishery Conservation and Management Act, the National Historic
Preservation Act, and the Wild and Scenic Rivers Act. Legislation amending the FPA
has been passed for the purpose of “assuring adequate environmental protections . . . .”
(H.R.Rep. No. 99-507, 2d Sess., p. 10 (1986).)
       The FPA has occupied the field of regulating hydropower projects, leaving no
sphere of regulatory freedom in which state environmental laws may operate as self-
governance. Instead, such laws directly encroach on the province of FERC under the
FPA.
       2.     Congress’s Intent to Preempt State Law Is Unmistakably Clear
       Eel River concluded that the ICCTA did not preempt CEQA because “Congress
does not intend to deprive the state of sovereignty over its own subdivisions” “in the
absence of unmistakably clear language.” (Eel River, supra, 3 Cal.5th at p. 690.)
Appellants argue this presumption is dispositive here. The United States Supreme Court
has held otherwise. The question before the court in California v. FERC, supra, 495 U.S.
490 was not the environmental consequence of the of the hydroelectric project, but

20     We grant the request of the State Water Contractors et al., to judicially notice the
published FERC Processes for Hydropower Licenses and FERC Guidelines, as well as
the excerpts from the House of Representative Conference Reports relating to
amendments to the FPA.

                                             26
whether section 27 of the FPA (16 U.S.C. § 821) was intended to preempt California’s
laws requiring minimum stream flows. (California v. FERC, at p. 497.) The petitioner
argued that there was a “ ‘presumption against finding pre-emption of state law in areas
traditionally regulated by the States’ and ‘ “with the assumption that the historic police
powers of the States were not to be superseded by the Federal Act unless that was the
clear and manifest purpose of Congress.” ’ ” (Ibid.)
       In response to this argument the Supreme Court stated: “But the meaning of § 27
[16 U.S.C. § 821] and the pre-emptive effect of the FPA are not matters of first
impression. Forty-four years ago, this Court in First Iowa construed the section and
provided the understanding of the FPA that has since guided the allocation of state and
federal regulatory authority over hydroelectric projects. . . . [¶] . . . This Court has
endorsed and applied First Iowa’s limited reading of § 27, [citations], and has employed
the decision with approval in a range of decisions, both addressing the FPA and in other
contexts. [Citations.] By directing FERC to consider the recommendations of state
wildlife and other regulatory agencies while providing FERC with final authority to
establish license conditions (including those with terms inconsistent with the States’
recommendations), Congress has amended the FPA to elaborate and reaffirm First Iowa’s
understanding that the FPA establishes a broad and paramount federal regulatory role.”
(California v. FERC, supra, 495 U.S. at pp. 497-499.)
       As the United States Supreme Court has stated, the preemptive effect of the FPA
has been litigated repeatedly since First Iowa. The exceptions to the FPA’s preemptive
effect are limited and are specified in the statute. There is no exception for the
application of a state’s environmental laws, therefore the presumption employed by Eel
River is not applicable to this case.

                                               27
       3.      Market Participant Doctrine
       Eel River did not find the market participant doctrine “fully on point,” but found
elements of case law concerning the doctrine “instructive.” (Eel River, supra, 3 Cal.5th
at pp. 736-737.) We fail to see how the market participant doctrine applies here at all.
       The United States Supreme Court first articulated the market participant doctrine
in Hughes v. Alexandria Scrap Corp. (1976) 426 U.S. 794 (Hughes). The issue arose
when a Virginia scrap processor brought an action challenging the constitutionality of a
Maryland law by which the state of Maryland would pay scrap processors a “bounty” for
the destruction of old, inoperable automobiles. The purpose of the law was to deal with
the aesthetic problem of abandoned automobiles. (Id. at p. 796.) The law required the
processors to provide title documentation to the state, and the documentation required of
out-of-state processors was more extensive than the requirement for in-state processors.
(Id. at p. 800.)
       The Virginia processor argued the law violated the commerce clause by burdening
the flow of abandoned automobiles across state lines. (Hughes, supra, 426 U.S. at p.
802.) The Supreme Court disagreed. The court reasoned that the purpose of the
commerce clause was to prevent trade barriers between the states so that citizens would
have free access to every market in the nation without embargos, customs, duties, or
regulations. (Id. at pp. 807-808.) But, the commerce clause does not prohibit a state
“from participating in the market and exercising the right to favor its own citizens over
others.” (Id. at p. 810.)
       Where the preemptive law in question prohibits state laws and regulations in the
subject area, a state acting as a participant in the market in a narrow and focused manner
consistent with the behavior of other market participants, does not constitute regulation
subject to preemption. (Cardinal Towing & Auto Repair, Inc. v. City of Bedford (5th Cir.
1999) 180 F.3d 686, 691.)

                                             28
       Here, the state action in question, i.e., the state act which is arguably subject to
preemption, is not California’s operation of a hydroelectric dam. It is California’s
imposition of CEQA in the FERC licensing process. The CEQA laws are not narrow and
focused actions consistent with the behavior of other market participants. They are
regulatory acts pure and simple, and are subject to preemption.
F.     The Parties’ Status
       The plaintiffs participated extensively in the ALP but refused to sign the SA. As a
consequence, they are not parties to the SA and have no procedural rights pursuant to its
internal review procedures in Appendix B of the SA to dispute the agreement of the
parties.21 Nor did the plaintiffs seek administrative review of the New Project License
before FERC as required by 18 Code of Federal Regulations part 4.34(6)(vii) (2003).
Instead, on August 21, 2008, they filed a CEQA complaint for a writ of mandate in the
superior court challenging the environmental effects of climate change on the operation
of the dam and facilities for all the purposes served by the SWP. It is the propriety of the
appeal from the judgment of the superior court in that action that we consider.
       The plaintiffs argue that the SA applies only to entities that have signed the SA as
parties. That is true, but the source of the plaintiffs’ contractual rights, if any, is the SA.
There is one remedy for which status as a party is not required, and it is a federal remedy
for the violation of the environmental requirements of federal law. “Any . . . entity
participating in the alternative pre-filing consultation process may file a request with the
Commission to resolve a dispute concerning the alternative process (including a dispute
over required studies) . . . .” (18 C.F.R. § 4.34(i)(6)(vii) (2003), italics added.) The
plaintiffs participated extensively in the pre-filing consultation process and tendered
essentially the same climate change argument and supporting data for consideration by

21     The internal review procedures apply to matters agreed to by the parties that are
not subject to FERC review, such as the provision of funds to carry out the agreements.
As noted, no such issue is tendered in this action.

                                               29
the SA in their opening brief as CEQA claims, but refused to sign the SA as a party.
Since the plaintiffs are not parties to the SA and did not utilize its administrative process
they have no rights under the SA and cannot challenge the provisions of the SA relating
to Appendix B.
       The plaintiffs alleged that the SA did not consider the impact of global climate
change on DWR’s continued operation of the existing dam and facilities for the purposes
served by the SWP. They argue that “[c]limate change will almost certainly affect the
project’s ability to meet water supply, water temperature, water quality, flood
management, and recreational requirements, thus severely impacting human populations
and ecosystems.”22 A project subject to CEQA review involves the environmental
consequences of a physical change in the environment. Since no physical changes are
planned for the dam itself,23 other than the reopening of the water valve, the plaintiffs
assume the project subject to environmental review is the DWR’s operation of the dam as
part of the SWP.

22     In their initial briefing, the plaintiffs challenged the project description as
“truncated,” as failing to include all the uses to which water from the dam would be put
pursuant to the SWP. These are referred to as “project operations.” The plaintiffs argue:
“Climate change will almost certainly affect the project’s ability to meet water supply,
water temperature, water quality, flood management, and recreational requirements, thus
severely impacting human populations and ecosystems. DWR’s own report discusses
several impacts but never analyzes them in light of climate change due to the EIR’s
erroneous assumption of stationarity.” (Fn. omitted.) “ ‘[R]eservoirs will likely
experience changes in the rate and timing of inflow. Changes in reservoir operations and
reduced annual storage in snowpack could result in less water being available in the
summer and fall to meet Delta outflow and salinity requirements.’ ”

       It is true that changes in the earth’s climate could affect the temperature or flow of
water to the new environmental project, but as noted, any such argument must be made
when the project in the Certificate is implemented.
23     See footnote 1, ante.

                                             30
       The plaintiffs do not claim that, given climate change, the environmental measures
in Appendix A would cause an environmentally harmful physical change in the
environment, since Appendix A is designed to ameliorate environmental harms caused by
the existing dam. Rather, they claim that the impact of climate change on the continued
operation of the dam would affect the DWR’s ability to carry out the purposes served by
the SWP.
       The respondents reply that the impact of climate change on the operation of the
dam is too speculative to require consideration under CEQA. The superior court agreed
and entered a judgment in favor of the respondents. This is the posture in which the
appellate case was initially briefed.
       The operation of the existing dam and facilities, however, is not the project subject
to environmental review. The project subject to review is labeled the New Project
License and expressly does “not . . . include any annual license extending the original
license . . . .” The New Project License does include new spawning grounds for
anadromous fish and changes in the temperature and flow of water from the dam to
improve the spawning and survivability of the fish. It is subject to review by the
SWRCB for compliance with California’s clean water laws.
       The parties were likely misled by the lengthy CEQA document in the record that
includes a CEQA review of the environmental consequences of relicensing the existing
dam. From this premise the plaintiffs argue that DWR should have considered the
project subject to environmental review as the environmental impact of climate change
on the operation of the dam and facilities, as part of the SWP, and that, as a result, the
DWR failed to consider the consequences of climate change on the operation. It was on
this basis that the plaintiffs claimed the decision to approve the project and issue the
license should be stayed pending a state court resolution of their CEQA claims.
(Santiago County, supra, 118 Cal.App.3d at p. 829.)

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       The plaintiffs’ primary mistake is that the project subject to environmental review
by the state is not the dam and facilities as built, but the project to further mitigate the
loss of habitat caused by construction of the dam in 1967, increasing the habitat along the
lower reaches of the Feather River, opening a water valve to access colder water at the
bottom of Lake Oroville to meet hatchery temperature requirements, improving the
spawning of fish by channel and gravel improvement plans, and regulating the flow of
water from the dam.
       The correct view of the project tenders questions of federal administrative and
substantive law applicable to the relicensing of a hydroelectric dam and its facilities.

                                        DISPOSITION

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        The plaintiffs cannot challenge the environmental sufficiency of the program in
Appendix A because review of that program lies with FERC and they did not seek review
as required by 18 Code of Federal Regulations part 4.34(i)(6)(vii) (2003). The plaintiffs
cannot challenge the environmental predicate to the Certificate contained in the CEQA
document because that is subject to review by FERC. The plaintiffs cannot challenge the
Certificate because it did not exist when this action was filed, and they cannot challenge
the physical changes made by the SWRCB in the Certificate until they are implemented.
For these reasons the parties have not tendered a federal issue over which this court has
state CEQA jurisdiction. Accordingly, we shall dismiss the appeal with directions to the
trial court to vacate its judgment and dismiss the action for lack of subject matter
jurisdiction. Costs are awarded to respondents. (Cal. Rules of Court, rule 8.278(a)(1),
(2).)

                                                    /s/
                                                  BLEASE, J.

We concur:

 /s/
RAYE, P. J.

 /s/
HULL, J.

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