Court Opinion

ID: 3029093
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:42:14.322828+00
Date Added: 2024-06-11T09:11:15.623327
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 01-1071
                                 ___________

The Coalition for the Fair and          *
Equitable Regulation of Docks on the    *
Lake of the Ozarks,                     *
                                        *
      Petitioner,                       *
                                        * Petition for Review of an Order of the
      v.                                * Federal Energy Regulatory
                                        * Commission.
Federal Energy Regulatory Commission,*
                                        *
      Respondent,                       *
                                        *
Union Electric Company, doing           *
business as AmerenUE,                   *
                                        *
      Intervenor - Intervenor on Appeal.*
                                  ___________

                            Submitted: November 14, 2001

                                Filed: July 24, 2002
                                 ___________

Before BOWMAN, JOHN R. GIBSON, and STAHL,1 Circuit Judges.
                          ___________

JOHN R. GIBSON, Circuit Judge.

      1
       The Honorable Norman H. Stahl, United States Circuit Judge for the First
Circuit, sitting by designation.
       The Coalition for the Fair and Equitable Regulation of Docks on the Lake of
the Ozarks petitions for review of a Federal Energy Regulatory Commission decision
denying its challenge to user fees assessed on docks at the Lake. The Lake is part of
a hydropower project on the Osage River that is owned and operated by Intervenor
Union Electric Company under a license from FERC that authorizes Union Electric
to allow certain uses of the Lake for the benefit of the public and to recoup its costs
of doing so, subject to oversight by FERC. Union Electric established a program
requiring owners of docks extending into the Lake to obtain permits for the docks and
to pay user fees. The Coalition, a group of lake-front property owners, filed a
complaint with FERC contending that FERC could not delegate to Union Electric the
power to impose the fees; that the fees constituted an illegal tax or toll; that FERC
should order discovery and a hearing on the Coalition's complaint; and that the fees
were unreasonable. FERC denied the Coalition's complaint and its request for
rehearing. The Coalition now petitions for review of FERC's decision, reiterating the
arguments it made before FERC as well as some additional ones. We deny review.

      The Federal Water Power Act of 1920 authorized the Federal Power
Commission (now the Federal Energy Regulatory Commission) to issue licenses to
public or private licensees to build hydropower projects on navigable waters of the
United States. 16 U.S.C. § 797(e) (2000). The Water Power Act was

      the outgrowth of a widely supported effort of the conservationists to
      secure enactment of a complete scheme of national regulation which
      would promote the comprehensive development of the water resources
      of the Nation, in so far as it was within the reach of the federal power to
      do so, instead of the piecemeal, restrictive, negative approach of the
      River and Harbor Acts and other federal laws previously enacted.

First Iowa Hydro-Elec. Coop. v. Fed. Power Comm'n, 328 U.S. 152, 180 (1946).
Congress later added the requirement that FERC, in considering whether to license
a project, take into account not only the "power and development purposes for which

                                         -2-
licenses are issued," but also "the purposes of energy conservation, the protection,
mitigation of damage to, and enhancement of, fish and wildlife (including related
spawning grounds and habitat), the protection of recreational opportunities, and the
preservation of other aspects of environmental quality." 16 U.S.C. § 797(e) (as
amended by Pub. L. No. 99-495, § 3(a) (1986)) (emphasis added).

       To promote recreational use of hydropower projects, FERC has adopted a
regulation placing responsibility on project licensees to develop their project's
recreational resources and permitting licensees to recruit the help of public agencies
and private interests in this endeavor. 18 C.F.R. § 2.7 (2001). Specifically, the
regulation states: "The Commission will not object to licensees and operators of
recreational facilities within the boundaries of a project charging reasonable fees to
users of such facilities in order to help defray the cost of constructing, operating, and
maintaining such facilities." Id.

       Article 41 of Union Electric's license for the Osage Project allows Union
Electric to grant permission for certain uses of the project lands and waters without
prior Commission approval, if the use is "consistent with the purposes of protecting
and enhancing the scenic, recreational, and other environmental values of the
project." That authority, however, comes with the concomitant responsibility to
"supervise and control the uses and occupancies for which [Union Electric] grants
permission." Under subsection b of Article 41, Union Electric can allow such uses
as "non-commercial piers, landings, boat docks, or similar structures and facilities."
At the same time, Union Electric is charged with the responsibility of making sure
that any such structures are of suitable design and are well-maintained. The license
provides: "To implement this paragraph (b), the Licensee may, among other things,
establish a program for issuing permits for the specified types of use and occupancy
of project lands and waters, which may be subject to the payment of a reasonable fee
to cover the Licensee's costs of administering the permit program." FERC reserved
the right to require Union Electric to file its standards, guidelines, and procedures for

                                          -3-
implementing the land-use article, and FERC also retained the right to require
modifications of these instruments.

       Pursuant to Article 41, after public notice and comment, Union Electric
adopted permit requirements for use and occupancy of project land and waters.
Anyone desiring to build or modify structures, including docks, on project property,
was required to apply for a permit. Effective January 1, 1999, Union Electric adopted
two "User fees," one covering all permits for new docks and modifications to existing
docks, and the other being a user fee applicable to docks occupying more than 3000
square feet of water space. The fee for new construction and modification was set at
a single payment of $400 for docks of between 1800 and 3000 square feet and $250
for docks less than 1800 square feet. For docks larger than 3000 square feet, the fee
was a recurring annual fee of $.045 per square foot. Union Electric's permit
instructions stated: "Total fees collected by [Union Electric] will be applied to
[Union Electric's] shoreline management costs at the Lake of the Ozarks."

       The Coalition wrote FERC, asking it to rule that FERC itself had no authority
to allow Union Electric to charge dock user fees at all because they amounted to a
"tax for the use of public waterways," and further, that the actual fees on the Osage
project were unreasonable because they exceeded the cost of reviewing the permit
applications and inspecting the docks.

        The Director of FERC's division of Licensing and Compliance responded with
a letter dated August 5, 1999, generally affirming that Union Electric was authorized
under Article 41 of the Osage project license to charge a reasonable fee to cover costs
of administering the permit program and concluding that Union Electric's costs of
administering the permit program exceeded the fees it collected. The Director did,
however, advise Union Electric that certain expenses it claimed--its shoreline
cleaning, fish stocking, and mosquito spraying costs--were not properly includable

                                         -4-
as costs of administering the permitting program and therefore should not be
supported by dock permit fees.

       Not satisfied with the decision articulated in the Director's August 5 letter, the
Coalition filed a complaint with FERC, which the agency denied. FERC first
considered the argument that the Federal Power Act does not authorize FERC to
impose user fees or to allow Union Electric to do so. FERC reviewed the Act, and
found that Congress expressly contemplated the use of hydropower projects for
recreational purposes and that Congress gave FERC "wide latitude and discretion in
the performance of its licensing and regulatory functions." Union Electric Co., 90
FERC 61,249, 2000 WL 280769, at *3 (March 16, 2000) (citing 16 U.S.C. § 803(g)
and quoting Metro. Edison Co. v. Fed. Power Comm'n, 169 F.2d 719, 723 (3d Cir.
1948)). It is FERC's policy to encourage development of recreational facilities at
licensed projects, and as part of that policy, to allow the licensee to recoup the
resulting expenses. An example of this policy is found at 18 C.F.R. § 2.7: "The
Commission will not object to licensees and operators of recreational facilities within
the boundaries of a project charging reasonable fees to users of such facilities in order
to help defray the cost of constructing, operating, and maintaining such facilities."
FERC concluded that Congress has granted it the power to issue the kind of license
it granted to Union Electric and to permit Union Electric to recoup certain expenses
through user fees. 2000 WL 280769, at *4-5.

       The Coalition further argued that the user fees amounted to a tax, to which
FERC responded that money charged in return for a benefit of which the beneficiary
has voluntarily availed itself is not a tax, but a fee. FERC reasoned that Union
Electric "is not taxing the private property of the dock owners, but imposing a fee for
allowing the dock owners to extend their facilities onto project property." Id. at *6.

                                          -5-
       The Coalition argued that Article 41 of the license gave Union Electric
authority to recover only the cost of issuing permits, but not any other shoreline
management expenses. Putting aside the expenses the Director had already excluded
(fish-stocking, mosquito-spraying, and adopt-a-shoreline programs), FERC concluded
that the remaining categories of expenses claimed by Union Electric (property
management, permit processing and enforcement, derelict dock removal, and lake
survey expenses) were of the sort Union Electric could recoup as "cost[s] of
administering the permit program." Id. at *7. Union Electric reported allowable
expenses of $945,000 for 1999, whereas its projected fees from the permit program
would only come to $615,000. This shortfall led FERC to conclude that the permit
program fees were not excessive. Id. at *8.

       The Coalition also argued that the user fees were a toll, prohibited by 33 U.S.C.
§ 565 (2000). FERC rejected this characterization, since the money was not collected
for navigating the river. Id. at *6.

       FERC also rejected the Coalition's argument that the permit program interfered
with dock owners' property rights: "The permit program does not assess property
owners for structures placed on their own property but for the privilege of extending
their structures into the Lake of the Ozarks, which is project property." Id.

      Because FERC found it possible to decide on the existing record the issues the
Coalition raised, it declined to assign the matter to an administrative law judge for a
hearing, as the Coalition requested. Id. at *8.

       The Coalition sought rehearing. It contended that FERC had erred by refusing
to order a formal evidentiary hearing. However, FERC reasoned that an agency has
discretion to deny an evidentiary hearing where a dispute can be resolved on written
submissions. Union Electric Co., 93 FERC 61,158, 2000 WL 1701202 (Nov. 13,
2000). FERC concluded that the Coalition had not raised any factual disputes that

                                          -6-
required an evidentiary hearing. The questions concerning FERC's authority to allow
Union Electric to impose permit fees were legal ones, not dependent on the resolution
of factual disputes. As for the propriety of the particular fees imposed, on rehearing
FERC obtained from Union Electric a more detailed accounting for the expenses it
claimed to be recouping through permit fees. After reviewing the detailed expense
submissions, FERC concluded, "The types of expenses that [Union Electric] has
described seem to us, on the whole, to be related to the granting of permission to
other entities or individuals to place structures on project lands or in the project
reservoir, or otherwise to obtain uses or interests in the project lands and waters, and
to the enforcement of the program established for granting these types of permission."
Id. at *5. FERC determined that the Coalition had not shown that the permit program
fees are discriminatory or unreasonable, and therefore it denied the request for
rehearing. Id. at *6. The Coalition filed this petition for review.

                                           I.

       The Coalition raises five questions for review, some of which include subparts.
As a threshold issue, FERC and Union Electric object to this court considering
contentions that the Coalition failed to raise in its application for rehearing before
FERC. The three arguments in question are the Coalition's contentions (1) that the
Army Corps of Engineers, not FERC, has authority over the construction of docks on
the Lake of the Ozarks; (2) that FERC's decision violates 16 U.S.C. § 821 and
Missouri riparian rights; and (3) that the permit program violated the Coalition's
constitutional right to equal protection of the laws. The Coalition concedes that only
arguments raised in the rehearing application should be reviewable in this court under
16 U.S.C. § 825l(b) (2000) (with exception for cases in which there was reasonable
ground for failure to raise objection), but contends it raised the arguments adequately.
However, the Coalition's brief does not show that it raised the first two arguments in
any recognizable form and only arguably shows that it raised the equal protection
argument by using the word "discriminatory." Therefore, we will decline to exercise

                                          -7-
jurisdiction over the arguments concerning the Army Corps of Engineers and state
riparian rights, but will entertain the equal protection argument.

       FERC's findings of fact are conclusive if they are supported by substantial
evidence. 16 U.S.C. § 825l(b). As for legal questions, FERC's interpretation of the
Federal Power Act, the statutory scheme it is charged with administering, is entitled
to considerable weight under the principles of Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 844-45 (1984). We will defer to an
agency's interpretation of such a statute if that interpretation is consistent with the
plain meaning of the statute or is a permissible construction of an ambiguous statute.
See Escudero-Corona v. INS, 244 F.3d 608, 613 (8th Cir. 2001). Similarly, we
accord substantial deference to an agency's interpretation of its own regulation, which
we are bound to uphold unless it violates the Constitution or a federal statute, or
unless the interpretation is "plainly erroneous or inconsistent with the regulation."
Univ. of Iowa Hosp.s and Clinics v. Shalala, 180 F.3d 943, 950-51 (8th Cir. 1999)
(internal quotation marks omitted). However, we review de novo constitutional
questions, such as the Coalition's equal protection and due process claims. Escudero-
Corona, 244 F.3d at 614.

                                          II.

       The Coalition's principal argument is that the Federal Power Act does not
confer on FERC the power to regulate the use of project lands by anyone other than
Union Electric, the licensee. This argument flies in the face of the Supreme Court's
assessment in First Iowa Hydro-Electric Coop. v. Federal Power Commission, 328
U.S. 152, 180 (1946), that Congress intended to enact "a complete scheme of national
regulation, which would promote the comprehensive development of the water
resources of the Nation, in so far as it was within the reach of the federal power to do
so, instead of the piecemeal, restrictive, negative approach of the River and Harbors
Acts and other federal laws previously enacted." The Act commands FERC to see to

                                          -8-
it that projects are developed to serve various public needs, including recreation. 16
U.S.C .§§ 797(e), 803(a)(1). Congress gave FERC the means to accomplish its tasks
through statutory provisions vesting FERC with power and discretion. See 16 U.S.C.
§§ 799, 803(g), and 825h; Niagara Mohawk Power Corp. v. Fed. Power Comm'n, 379
F.2d 153, 158-59 (D.C. Cir. 1967). FERC has discharged its duty by adopting
regulations encouraging licensees to develop recreational uses of the project lands,
placing on them the responsibility to assure that such uses are consistent with federal
law and policy, and allowing them to charge reasonable user fees to defray the costs
they incur in constructing, operating, and maintaining recreational facilities. 18
C.F.R. § 2.7. Similarly, FERC's ruling in this case allows Union Electric to recoup
expenses it incurs in making available project lands for recreational use. A holding
that FERC could not take any action that would regulate the conduct of anyone other
than the licensee, no matter how directly other persons' conduct might affect a hydro-
power project, would deprive FERC of the power to effectuate the goals it was
directed to accomplish and would negate the broad grants of power and discretion in
the Federal Power Act. The Coalition's argument finds no support in the Federal
Power Act or in cases interpreting it and we therefore reject it.

      As part of the argument that FERC has no authority to regulate the public's use
of project lands, the Coalition briefly argues that the user fees are a tax, which can
only be levied by Congress. A tax is a general charge not correlated to a particular
benefit, whereas a fee is a charge exacted in exchange for a benefit of which the payor
has voluntarily availed itself. See Nat'l Cable Television Ass'n v. United States, 415
U.S. 336, 340-41 (1974). A fee may properly be based on the cost of providing a
benefit to the recipient. Neb. Trails Council v . Surface Transp. Bd., 120 F.3d 901,
905-07 (8th Cir. 1997). The fees in this case were imposed as a result of the dock
owners' choice to avail themselves of the privilege of having a dock on project land,
and the fees subsidized a permit program that benefitted the dock owners. There is
no basis for characterizing the charges in this case as a tax.

                                         -9-
                                          III.

      The Coalition argues that Article 41 of the license violates the non-delegation
doctrine of A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935),
because there is no intelligible statutory principle to which Union Electric is required
to conform. To the contrary, 16 U.S.C. § 803(a)(1) (2000) guides FERC's
administration of projects by requiring FERC to assure that the project be adapted

      to a comprehensive plan for improving or developing a waterway or
      waterways for the use or benefit of interstate or foreign commerce, for
      the improvement and utilization of water-power development, 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 referred to in
      section 797(e) of this title.

There is thus no grant of decision-making authority to FERC without an intelligible
guiding principle. See Whitman v. Am. Trucking Ass'ns, 531 U.S. 457, 472 (2001).
Furthermore, FERC retains authority to require the modification of the project and its
plans and specifications, to accomplish the outlined goals. 16 U.S.C. § 803(a)(1).
Therefore, the license represents no real delegation of power to Union Electric,
because FERC retains the right to require modification of Union Electric's program.
In fact, in this case, FERC reviewed the expenses Union Electric claimed and rejected
some of those expenses as ineligible for recoupment.

                                          IV.

       The Coalition challenges the permit program as a violation of its constitutional
right to equal protection. Fifth Amendment equal protection claims are analyzed in
the same way as equal protection claims brought under the Fourteenth Amendment.
United States v. McClinton, 815 F.2d 1242, 1244 n.3 (8th Cir. 1987). If a
classification does not burden a fundamental right or target a suspect class, it will be

                                         -10-
upheld if it bears a rational relationship to a legitimate end. Weiler v. Purkett, 137
F.3d 1047, 1051 (8th Cir. 1998) (en banc). The classification the Coalition complains
of is Union Electric's distinction between docks larger than 3000 square feet, which
are subject to the annual fee, and docks 3000 square feet and smaller, which are
subject to the one-time assessment of $400 or $250, depending on size. The expenses
which Union Electric seeks to recoup include inspection expenses, and it is rational
to expect that Union Electric would incur greater expenses in connection with larger
structures and that owners of larger structures would enjoy greater benefits from
being allowed to use project lands for their docks. The classification therefore passes
the rational basis test.

                                           V.

      The Coalition contends that FERC's refusal to assign its complaint to an
administrative law judge for discovery and an evidentiary hearing violates the
Coalition's right to due process and is contrary to 16 U.S.C. § 825f (2000).

      Congress provided that FERC itself should prescribe its own hearing
procedures:

      All hearings, investigations, and proceedings under this chapter shall be
      governed by rules of practice and procedure to be adopted by the
      Commission, and in the conduct thereof the technical rules of evidence
      need not be applied. No informality in any hearing, investigation, or
      proceeding or in the manner of taking testimony shall invalidate any
      order, decision, rule, or regulation issued under the authority of this
      chapter.

16 U.S.C. 825g (2000). "[T]he formulation of administrative procedures is 'basically
to be left within the discretion of the agencies.'" Crete Carrier Corp. v. United States,

                                          -11-
577 F.2d 49, 50 (8th Cir. 1978) (quoting Vermont Yankee Nuclear Power Corp. v.
Natural Res. Def. Council, Inc., 435 U.S. 519, 524 (1978)).

       FERC complaint procedures provide that cases can be decided on the
pleadings. 18 C.F.R. § 385.206(g)(2) (2001). FERC stated in its original order:
"Because we find it possible to assess the reasonableness of [Union Electric's] fees
on the existing record, we will not assign the proceeding to an Administrative Law
Judge for a formal evidentiary hearing, as the Coalition requests." 90 FERC 61,249,
2000 WL 280769, at *8. In its disposition of the rehearing application, FERC
rejected the Coalition's contention that its claim could only be clarified by discovery
and a hearing: "While trial-type procedural measures may be used to develop a
record and resolve issues of fact, they are not intended to be used as a cure for a
complaint that fails to inform the Commission completely and clearly as to the issues
and factual disputes that the complainant wishes the Commission to address." 93
FERC 61,158, 2000 WL 1701202, at *3. The Coalition's complaint focused primarily
on the issue of whether FERC was authorized to allow the imposition of the user fees,
which is a legal, not a factual, issue. The Coalition also alleged that the amount of
fees was not reasonable; FERC concluded it was reasonable, because the fees
generated were substantially less than Union Electric's expenses associated with
allowing the docks to be constructed and maintained on project lands. The Coalition
did not present FERC with any reason to doubt the accuracy of the information it
received from Union Electric regarding its expenses. FERC's decision to deny a
hearing on the ground that there were no material factual disputes was within its
discretion and did not violate the Coalition's constitutional rights.

                                         VI.

      Finally, the Coalition contends that FERC's determination was not supported
by substantial evidence. In particular, the Coalition attacks FERC's conclusion that
Union Electric's allowable expenses exceeded the fees generated. FERC's conclusion

                                         -12-
was based on Union Electric's August 16, 2000 submission detailing its expenditures
for property management, permit processing, and enforcement; derelict dock removal;
and lake survey. In 1999, those expenses totaled $1,228,344, whereas fees generated
from the permit program totaled $615,000. The Coalition attacks the labor costs
listed by Union Electric, which should have been decreased to show that the
employees performed other duties that would not be attributable to shoreline
management. However, FERC's brief demonstrates that, even reducing those labor
costs to reflect time the Coalition contends was spent on other duties, Union Electric
still has allowable labor costs of $534,099, which, with $58,413 in derelict dock
removal costs, $28,965 for shoreline inspection, $18,424 for lake survey, and $79,685
for legal fees, would still exceed the fees generated. FERC's factual finding was
supported by substantial evidence.

      We have reviewed the Coalition's various subsidiary arguments and conclude
they do not merit individual discussion.

       We deny review of the FERC order, and we grant Union Electric's motion to
strike the Coalition's post-argument letter brief of November 16, 2001.

      A true copy.

             ATTEST:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                        -13-