United States Court of Appeals, District of Columbia Circuit
September 25, 2017
Petition for Review of Orders of the Federal Energy
N. Lavinbuk argued the cause for the petitioner. Roy T.
Englert Jr. and Peter B. Siegal were with him on brief. John
A. Whittaker, IV entered an appearance.
Elizabeth E. Rylander, Attorney, Federal Energy Regulatory
Commission, argued the cause for the respondent. Robert H.
Solomon, Solicitor, was with her on brief.
Frederick A. Brodie, Assistant Solicitor General, Office of
the Attorney General for the State of New York, argued the
cause for the intervenor. Eric T. Schneiderman, Attorney
General, Barbara D. Underwood, Solicitor General, and Victor
Paladino, Assistant Solicitor General, were with him on
Before: Henderson and Millett, Circuit Judges, and Ginsburg,
Senior Circuit Judge.
LECRAFT HENDERSON, CIRCUIT JUDGE
hydroelectric dispute arises from the banks of the Sacandaga
and Hudson Rivers and the ripples of our decision in
Albany Engineering Corp. v. FERC, 548 F.3d 1071
(D.C. Cir. 2008) (Albany). The petitioner is Erie
Boulevard Hydropower, LP (Erie), which operates a series of
dams that lie downstream from the Conklingville Dam (Dam) in
the Hudson River basin. The Dam is operated by the Hudson
River-Black River Regulating District (District), which
appears as an intervenor herein. The respondent is the
Federal Energy Regulatory Commission (FERC or Commission).
our Albany decision, parallel federal and New York
state regulatory regimes required downstream hydroelectric
facilities (e.g., Erie) to reimburse their headwater
counterparts (e.g., the District) for certain costs.
Albany changed that dual-track regulatory scheme by
holding that the New York State assessment regime is
preempted by section 10(f) of the Federal Power Act (FPA),
which entitles the District to recover only "interest,
maintenance, and depreciation" costs. Id.;
see 16 U.S.C. § 803(f). In the wake of
Albany, Erie petitioned FERC to credit it for costs
the District had assessed it in excess of the federally
mandated costs. In 2015, after a lengthy administrative
process, the Commission denied Erie's request and denied
rehearing. In doing so, the Commission relied on the fact
that Erie and the District had formally settled their state
law dispute over headwater charges in 2006. Erie then
petitioned this Court to vacate the Commission's orders.
For the reasons set forth below, we deny Erie's petition.
early twentieth century, the State of New York built the Dam
on the Sacandaga River. The Dam flooded the upstream river
plain and created the Great Sacandaga Lake (Lake). New York
established the District to operate the Dam, which it has
done from 1930 to the present.
prohibits the unlicensed construction, operation or
maintenance of any "dam, water conduit, reservoir, power
house, or other works incidental thereto across, along, or in
any of the navigable waters of the United States." 16
U.S.C. § 817(1). In 1993, Erie's predecessor,
Niagara Mohawk Power Corporation, applied to FERC for a
license to operate the E.J. West power facility immediately
downstream from the Dam. During the application process, FERC
determined that the Dam and the Lake were part of the same
hydroelectric "project" as the E.J. West facility
and that the FPA therefore required the District to license
them as well. See 16 U.S.C. § 796(11). After
almost a decade of administrative proceedings, in 2002, FERC
granted licenses to Erie (for the E.J. West project) and to
the District (for the Dam and the Lake).
operates four FERC-licensed projects downstream from the Dam:
(1) E.J. West (Project No. 2318); (2) Stewarts Bridge
(Project No. 2047); (3) Hudson River (Project No.
2482); and (4) Feeder Dam (Project No. 2554).
Since the Commission issued the District's license in
2002, the interaction between Erie and the District has been
contentious. Their conflict has played out in state court, in
federal court and before FERC.
world of hydroelectricity, "[a]n upstream dam typically
will render the downstream flow more even and predictable,
enabling downstream hydropower plants to operate at a higher
capacity." Albany, 548 F.3d at 1072. When a
downstream FERC licensee benefits from the regulated flow
caused by an upstream dam (headwater benefits), the FPA
authorizes the upstream FERC-licensed dam operator (upstream
operator) to collect reimbursement for certain costs. 16
U.S.C. § 803(f). Specifically, section 10(f) of the FPA
provides that the Commission "shall require"
downstream licensees that benefit from an upstream
operator's "reservoir or other improvements" to
reimburse the upstream operator "for such part of the
annual charges for interest, maintenance, and depreciation
thereon as the Commission may deem equitable."
Id. In other words, because the headwater dam
enables the downstream facility to produce additional energy,
the downstream licensee reciprocates by paying for a portion
of the upstream operator's costs. Id.
regulations establish two procedures for calculating
reimbursable headwater benefits costs. See
generally 18 C.F.R. §§ 11.10-11.17. The
preferred method is for the upstream and downstream licensees
to negotiate a settlement and submit it to the Commission for
approval under FERC Rule 602. Id. § 11.14
(incorporating id. § 385.602). Alternatively,
if the parties are unable to settle, they can petition FERC
to conduct a headwater benefits investigation in order to
determine the correct charges. Id. § 11.15. The
cost of the investigation is apportioned equally between the
FERC-licensed headwater project owner and the collective
downstream recipients of the headwater benefits. Id.
§ 11.17(c)(2). After conducting the investigation, the
Commission sets reimbursable costs based on a formula that
balances the energy gains for the downstream licensee against
the specified costs associated with the upstream dam
operator. Id. § 11.11(b).
State Court Litigation and 2006 Settlement
Albany, the District assessed headwater benefits
charges against Erie and other downstream operators on the
Sacandaga and Hudson Rivers pursuant to the New York State
Environmental Conservation Law. See Albany, 548 F.3d
at 1078. In New York State court, Erie challenged the
District's budget, assessment and apportionment used to
determine headwater benefits for each of the six budget years
from 2000-06. The parties eventually settled the state
court litigation and the Fulton County State Supreme Court
approved their settlement agreement (Agreement) in a
Stipulated Settlement and Order (Settlement Order) dated May
30, 2006. Joint Appendix (JA) 349-57.
Agreement provided benefits to both parties. Erie received:
(1) $822, 220 as credits applying to the District's
assessments for the three-year period 2006-09; (2) an
additional $140, 220 "in the form of a reduction in
assessment of $46, 740.00" for each of the budget years
from 2007-09; and (3) the execution of a separate document
entitled "Amendment to Reservoir Operating Agreement and
Letter Agreement, " which gave Erie a beneficial
extension thereto. JA 350-53. In return, Erie agreed to two
broad release clauses:
10. Each of the Parties, on behalf of itself and on behalf of
any person or entity claiming by, through or under it, does
hereby release and forever discharge each of the other
Parties, and their respective officers, directors, trustees .
. . [etc.] from any and all claims, demands, judgments,
liabilities, damages, and causes of action of every kind and
character, whether such claims arise in contract or in tort,
are founded upon statutory or common law, or whether such
claims are known or unknown, at law or in equity . . .
arising out of or in any way related to the District's
budgets, assessments, and apportionments for the budget years
July 1, 2000 to June 30, 2001, July 1, 2001 to June 30, 2002,
July 1, 2002 to June 30, 2003, July 1, 2004 to June 20, 2005,
and July 1, 2005 to June 30, 2006, which such Party may now
have against the Released Parties (to the extent that such
claims originated in whole or in part or, based on presently
existing facts, that could have originated in whole or in
part on or before the date hereof).
. . .
13. [Erie] agrees to waive any future challenges or claims
with respect to the District's July 1, 2006 to June 30,
2007, July 1, 2007 to June 30, 2008, and July 1, 2008 to June
30, 2009 budgets, assessments, and/or apportionments and
agrees not to bring any lawsuit or legal action of any kind
challenging, contesting or disputing the District's
budgets, assessments and/or apportionments for the period
July 1, 2006 to June 20, 2009.
JA 353-54. In Paragraph 15, the parties further agreed to
make the Settlement Order "inadmissible in any
subsequent action or proceeding before any court of law or
administrative body, except . . . in any action or proceeding
for enforcement of its provisions." JA 354. Finally, the
Settlement Order provides that "the settlement of these
proceedings is hereby approved as just, reasonable and to be
in the best interests of the Parties." JA 355.
Albany Engineering Corporation
displeased with the District's state headwater benefits
assessments, another downstream licensee, Albany Engineering
Corporation (Albany), challenged the District's charges
before the Commission. See Albany, 548 F.3d at 1071.
Albany argued that section 10(f) of the FPA preempts all
state headwater benefits assessments as a matter of law.
Id. at 1073. The Commission agreed in part. It held
that section 10(f) preempts state law "only
insofar as the state authorize[s] charges for interest,
maintenance, and depreciation"; it left states free,
however, to charge FERC licensees for "all headwater
improvement costs not fitting into" those three
categories. Id. (emphasis in original). Albany
petitioned for review and this Court granted its petition.
reviewing the FPA's legislative history, this Court
determined that the FPA "manifest[ed] a deliberate
congressional decision to balance the goal of compensating
upstream owners (and thus encouraging their investment) and
that of protecting downstream ones (and thus encouraging
their investment)." Id. at 1076. We therefore
held that section 10(f) preempts in toto any state
law that authorizes headwater benefits charges. Id. at
1073. On the issue of remedies, however, the Court punted,
We do not reach FERC's decision to neither order refunds
for Albany's past payments to the District nor convene a
settlement conference. FERC reasoned that § 10(f) does
not grant it the authority to address independent actions
taken by an upstream licensee to collect ...