On November 20, 2015, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) rejected the Federal Energy Regulatory Commission’s (“FERC”) holding that Federal Power Act (“FPA”) Section 7(a) limits the municipal preference in original licensing for hydroelectric projects to municipalities located in the vicinity of the water resource to be developed. The D.C. Circuit case, Western Municipal Power Agency v. FERC, No. 14-1153 (issued Nov. 20, 2015), was filed on appeal of FERC orders refusing to grant a municipal preference to Western Minnesota. The D.C. Circuit granted Western Minnesota Municipal Power Agency’s (“Western Minnesota”) petition for review, vacated the Commission’s underlying orders, and remanded the proceeding to FERC.
The underlying FERC proceeding commenced in February of 2013 when Western Minnesota and FFP Qualified Hydro 144, LLC (“FFP”) simultaneously submitted separate applications for a preliminary permit for a hydroelectric project in Polk County, Iowa. Under FERC’s adopted timing rules, where two hydroelectric permitting applications are filed on the same date at the same time, and are found to be equally “well adapted” to the development of the region’s water resources, FERC will break the tie by means of a lottery. By Congressional statute however, FERC is required to give preference to preliminary permit applications of municipalities over those of private developers, so long as the municipal application is equally well adapted to the development of the region’s water resources. While FERC acknowledged that Western Minnesota qualifies as a municipality within the meaning of the statute, FERC did not apply the municipal preference to Western Minnesota’s permit application.
On December 19, 2013, FERC issued FFP Qualified Hydro 14, LLC, 145 FERC ¶ 61,255 (2013), granting FFP a preliminary permit and denying Western Minnesota’s competing application. In the order, FERC stated that Section 7(a) provided “no guidance as to the scope of the municipal preference,” and held that “the best reading of the statute is that municipalities should be accorded preference only with respect to the development of water resources that are located in their vicinity.” FERC found that Western Minnesota was not entitled to a municipal preference and therefore its plan was not better adapted than FFP’s plan. FERC awarded the preliminary permit to FFP as a result of a lottery. Western Minnesota appealed.
The D.C. Circuit relied on the plain meaning of the statute in holding that Section 7(a) unambiguously requires FERC to grant the municipal preference to Western Minnesota’s application. The D.C. Circuit rejected FERC’s finding that the municipal preference only applied when the water resource to be developed was within the vicinity of the municipality. The D.C. Circuit also rejected the notion that Congress had delegated authority for FERC to “pick and choose favored municipalities to advance [FERC’s] policy.”
The D.C. Circuit opinion is available here.