On March 13, 2009 the United States Court of Appeals for the District of Columbia Circuit (“DC Circuit”) upheld FERC’s decision to grant a new 50-year license to the New York Power Authority’s (“NYPA”) Robert Moses Niagara hydroelectric project (“Niagara Power Project”). The Niagara Power Project, located just downstream of Niagara Falls in western New York, began operating in 1961 and is currently the largest source of electricity for the state of New York.

In August of 2005 NYPA filed an application with FERC to relicense the Niagara Hydro Project before its license expired in 2007. FERC granted a new 50-year license in March of 2007. FERC’s decision to grant the new license was based in part on several settlements between NYPA and numerous interested parties. Two of the settlements were included in the new license while two others were exempt from FERC’s jurisdiction (“off-license agreements”). After FERC denied all requests for rehearing, the Eastern Niagara Public Power Alliance and the Public Power Coalition (collectively, “Appellants”) appealed to the DC Circuit.

Writing for the court, Circuit Judge Brett Kavanaugh determined that none of the Appellants’ arguments, which claimed that FERC’s decision was arbitrary and capricious, were persuasive. First, Judge Kavanaugh discussed FERC’s decision to integrate two of the settlements into the new license. He concluded that the 50-year license was not too long and was actually customary for licenses that impose larger costs. The court found that FERC also acted reasonably when it used the average of peak and off-peak rates to value the project’s output instead of attempting to predict a more accurate rate ratio. Finally, the court pointed to FERC’s correct conclusion that the Niagara Power Project impact on shoreline erosion would be insignificant and that NYPA should not have to mitigate certain adverse environmental impacts.

Judge Kavanaugh also addressed FERC’s actions with the off-license agreements. Appellants claimed that these settlements were unlawful and that FERC erred when it did not consider some of the benefits promised to certain groups if NYPA was granted a new license. Judge Kavanaugh, however, ruled that the off-license agreements were irrelevant to FERC’s authority and that FERC rightfully ignored them. Additionally, any claims that the off-license agreements were illegal must be brought against NYPA since FERC did not execute those agreements.

A copy of the DC Circuit’s decision can be found under No. 07-1472 at http://www.cadc.uscourts.gov/internet/home.nsf.