Court Opinion

ID: 9443600
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:25:42.761014+00
Date Added: 2024-06-11T17:29:32.938752
License: Public Domain

BAZELON, Circuit Judge
(dissenting).
Petitioner is required by § 10(d) of the Federal Power Act1 to maintain a surplus amortization reserve account, a percentage of which is applied to reduce the amount of its net investment. Such net investment provides the basis for the Government’s liability in the event it exercises its option to take over petitioner’s licensed project under the recapture provisions of § 14.2 In computing this reserve account, petitioner, in effect, diminished it by the amount of certain charges made by others for use of their state created private water rights. Because the Commission viewed such charges as unallowable in computing the Government’s liability, it ordered petitioner to increase the required reserves by the amount of such charges. It is that order we review.
All private riparian rights acquired under state law to the use of water in a navigable stream are subject to the preemptive rights of the State and of the United States.3 And whenever the United States asserts its paramount preemptive right in. the exercise of its power to regulate commerce, “[i]t is liable to no one for its use or nonuse,”4 except to the extent and in the manner Congress “expressly" saves private rights.5 I dissent here because in my view the Federal Power Act does assert the preemptive right of the United States in the exercise of *209its power to regulate commerce and does not save the private rights in question.
In United States v. Appalachian Power Co., the Supreme Court held that the Federal Power Act was an assertion of United States rights under the commerce power.6 The impact of this view upon the relationship between state and federal law was amplified in First Iowa Co-op v. Federal Power Comm.7 The Court there pointed out that “in those fields where rights are not * * * ‘saved’ to the states, Congress is willing to let the supersedure of the state laws by federal legislation take its natural course.”8 In a later case, Grand River Dam Authority v. Grand Hydro, the Court refused to apply the principle of superse-dure because “the United States, or its licensee as such,” was not a party.9 I read these cases as formulating this rule: At least as applied to the United States or its licensee as such, the Federal Power Act is an assertion of the commerce power which constitutes a taking ,by the United States without compensation of all water rights affecting navigable streams except to the extent and in the manner that the Act expressly saves certain rights created under state law.
Applying this rule to the present case, no charge for state created water rights would be allowed against the United States unless the Act expressly saves these rights. It is said that such rights are saved by § 14 because it provides that “the values allowed for water rights” in determining the licensee’s net investment for purposes of recapture by the United States shall not “be in excess of the actual reasonable cost thereof at the time of' acquisition by the licensee.” 10 But this section does not save *210any water rights from supersedure. It merely provides, a standard of compensation for rights saved. It is only § 27 which “expressly ‘saves’ certain state laws relating to property rights as to- the use of water, so that these are not superseded by the terms of the Federal Power Act.”'11 That section provides in pertinent part:
“That nothing herein * * * shall be construed as affecting * * * 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.”12
“The effect of § 27, in protecting state laws from supersedure, is limited to laws as to the control, appropriation, use or distribution of water in irrigation or for municipal or other uses of the same nature.”13 The words “ ‘other uses’ * * * are confined to rights of the same nature as those relating to the use of water in irrigation or for municipal purposes.”14 And the phrase “any vested right acquired therein" limits the “property rights” saved to- those related to such purposes.15
Since no claim is made that the proprietary water rights here are related to such purposes, I conclude that they have not been saved from supersedure by the Act.16 *211Hence they are not compensable under § 14, and any charges for their use are not deductible in computing the reserves required by § 10(d). I would, therefore, affirm the Commission’s order.

. 41 Stat. 1069 (1920), as amended, 49 Stat. 843 (1935), 16 U.S.C.A. § 803(d): “That after the first twenty years of operation, out of surplus earned thereafter, if any, accumulated in excess of a specified reasonable rate- of return upon the net investment of a licensee in any project or projects under license, the licensee shall establish and maintain amortization reserves, which reserves shall, in the discretion of the Commission, be held until the termination of the license or be applied from time to time in reduction of the net investment. Such specified rate of return and the proportion of such surplus earnings to be paid into and held in such reserves shall be.set forth in the license.”

. Section 14 provides in pertinent part: “Such net investment shall not include or be affected by the value of any lands, rights-of-way, or other property of the United States licensed by the Commission under this Act, by the license or by good will, going value, or prospective revenues; nor shall the values allowed for water rights, rights-of-way, lands, or interest in lands be in excess of the actual reasonable cost thereof at the time of acquisition by the licensee.” 41 Stat. 1071 (1920), as amended, 49 Stat. 844— 845 (1935), 16 U.S.C.A. § 807 (emphasis supplied).

. United States v. Chandler-Dunbar Co., 1913, 229 U.S. 53, 62-65, 69, 33 S.Ct. 667, 57 L.Ed. 1083; Long Sault Development Co. v. Kennedy, 1914, 212 N.Y. 1, 105 N.E. 849, 852, writ dismissed, 1916, 242 U.S. 272, 280, 37 S.Ct. 79, 61 L.Ed. 294.

. United States v. Appalachian Power Co., 1940, 311 U.S. 377, 424, 61 S.Ct. 291, 307, 85 L.Ed. 243.

. First Iowa Co-op. v. Federal Power Comm., 1946, 328 U.S. 152, 175, 66 S. Ct. 906, 90 L.Ed. 1143.

. 311 U.S. 377, 424, 61 S.Ct. 291, 85 L.Ed. 243. The Supreme Court specifically found that §§ 10(d) and 14 of the Act, inter alia, “have an obvious relationship to the exercise of the commerce power.” Id., 311 U.S. at pages 420, 427, 611 S.Ct. at page 308. And it expunged the argument that the^ touchstone of commerce control lies in as restricted a concept of navigation as “no more than operation of boats and improvement of the waterway itself.” Id. 311 U.S. at page 426, 61 S.Ct. at page 308. It plainly enunciated a broader concept: “Mood protection, watershed development, recovery of the cost of improvements through utilization of power are likewise parts of commerce control.” Ibid. Thus, the Court concluded that because “the Commission is willing to give a license for a power dam only is of no significance in appraising the type of conditions allowable.” Ibid.
For present purposes we need not ponder whether United States rights under the commerce power were first asserted by the enactment of the Rivers and Harbors Act of 1899, 30 Stat. 1151; or the Burton Act of 1906, 34 Stat. 626; or the series of enactments which preceded the Federal Power Act.

. 1946, 328 U.S. 152, 66 S.Ct. 906, 90 L.Ed. 1143.

. Id. 328 U.S. at page 176, 66 S.Ct. at page 917; and see Niagara Falls Power Co. v. Federal Power Comm., 2 Cir., 1943, 137 F.2d 787, 790. But cf. Schwartz v. State of Texas, 1952, 73 S.Ct. 232, and cases cited therein.

. 1948, 335 U.S. 359, 373, 69 S.Ct. 114, 121, 93 L.Ed. 64.

. See note 2, supra. Other sections of the Act are said to indicate an intention to save the water rights involved here. But none are saving clauses:
Section 3 defines the meaning to be given certain words for purposes of the Act. Subsection (11) merely defines “project” to include water rights.
Section 4(b) only authorizes the Commission to obtain certain information, including “the price paid for water rights,” to aid in determining “the actual legitimate original cost of and the net investment in a licensed project.” It does not purport to fix either the method or items for such a determination. The purely information-gathering character of this provision is strikingly similar to that of § 9(b) and is in no sense a recognition of any rights.
Section 9(b), as construed by the Supreme Court in First Iowa Co-op. v. Federal Power Comm., 1946, 328 U.S. 152, 66 S.Ct. 906, 90 L.Ed. 1143, is not a saving clause:
“Section 9(b) does not resemble § 27. It must be read with § 9(a) and (c). The entire section is devoted to securing adequate information for the Commission as to pending applications for licenses. * * * § 9(b) calls for legal information. This makes § 9(b) a natural place in which to describe the evidence which *210the Commission shall require in order to pass upon applications for federal licenses. This makes it a correspondingly unnatural place to establish by implication such a substantive policy as that contained in § 27 * * Id., 328 U.S. at page 177, 66 S.Ct. at page 918, 90 L. Ed. 1143.
“ * * * The directness and clarity of § 27 as a ‘saving’ clause and its location near the end of the Act emphasizes the distinction between its purpose and that of § 9(b) * * *. In view of the use by Congress of such an adequate ‘saving’ clause in § 27, its failure to use similar language in § 9(b), is persuasive that § 9(b) should not be given the same effect as is given to § 27.” Id., 328 U.S. at page 175, 66 S.Ct. at page 917.
Section 10(c), making a licensee “liable for all damages occasioned to the property of others” resulting from the construction or operation of the project, significantly provides that “in no event shall the United States be liable therefor.” Cf. Ford & Son v. Little Falls Co., 1930, 280 U.S. 369, 50 S.Ct. 140, 74 L.Ed. 483.
Section 20 deals with project valuation for rate making purposes and provides, inter alia, that “no. value shall be claimed or allowed for the rights granted by the commission or by this Act.” Since petitioner’s right to the water power in question here is derived from a license issued under the Act, this provision is consistent with rather than contrary to my view.
Section 21 confers the power of condemnation upon a licensee to acquire “an unimproved dam site or the right to use or damage the lands or property of others.” The absence of any reference to water rights, despite the obvious care for mentioning them throughout the • Act, discounts the notion that water rights were intended to be embraced by the words “or property.” Instead it suggests congressional awareness that rights in “waterways for the use * * * of interstate or foreign commerce” depend not upon condemnation of private rights by a licensee but only upon a grant by way of license under the Act. And even if water rights were meant to be included, there is nothing to indicate that they are saved for purposes of compensation.
Section 23 provides in effect that net investment shall be allowed at fair value, rather than actual reasonable cost, for projects constructed prior to the Act under permits “heretofore granted.” In Niagara Falls Power Co. v. Federal Power Comm., 2 Cir., 1943, 137 F.2d 787, 790, the court held (1) that the permits referred to in this section were indefeasible grants issued by federal authorities and (2) that petitioner did not have such a permit.

. 1946, 328 U.S. 152, 175, 66 S.Ct. 906, 917, 90 L.Ed. 1143 (emphasis supplied).

. 41 Stat. 1077, 10 U.S.C.A. § 821 (emphasis supplied).

. 1946, 328 U.S. 152, 175-176, 66 S.Ct. 906, 917, 90 L.Ed. 1143 (emphasis supplied).

. Id., 328 U.S. at page 176, 66 S.Ct. at page 917.

. Ibid, (emphasis supplied). To the extent that this court’s decision in Alabama Power Co. v. McNinch, 1937, 68 App.D.C. 132, 147, 94 F.2d 601, 616, is in conflict with this more recent ruling of the Supreme Court, it cannot be followed here.

. If the alleged private water rights are ultimately held to be valid as between *211the private parties, it “is the price which [petitioner] must pay to secure the right to maintain [its project].” Fox River Co. v. Railroad Commission, 1927, 274 U.S. 651, 657, 47 S.Ct. 669, 71 L.Ed. 1279, quoted with approval in United States v. Appalachian Power Co., 1940, 311 U.S. 377, 427-428, 61 S.Ct. 291, 85 L.Ed. 243. And see Grand River Dam Authority v. Grand Hydro, 1948, 335 U.S. 359, 374, 69 S.Ct. 114, 93 L.Ed. 64.