On March 6, 2018, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied Duke Energy Carolinas, LLC’s (“Duke Energy”) petition for review of FERC’s grant of a forty-year license for the Catawba-Wateree Project (“Project”).  FERC had found that, despite Duke Energy’s requested fifty-year term for the license renewal, the measures required by FERC in issuing the license were only “moderate,” and thus warranted the forty-year term.  Duke Energy argued that FERC acted arbitrarily and capriciously by not granting the fifty-year license.  The D.C. Circuit deferred to FERC’s analysis in granting a forty-year license.

Duke Energy’s original license had been for a fifty-year term.  Prior to the expiration of that license, Duke Energy filed an application for a new license with another fifty-year term.  During the application process, Duke Energy entered into a relicensing agreement with seventy entities, which required Duke Energy to satisfy certain measures and conditions to relicense the Project.  The Commission determined, upon staff recommendations, that the new license required a “moderate” amount of new construction and new environmental mitigation and improvement measures.  Under the Commission’s then-applicable standard analysis for determining the length of new license terms for projects at non-federal dams, the Commission would grant a licensee a fifty-year license term only if the new license required “extensive” measures.  Here, the Commission found that because the new license would not require substantial new facilities, significant capacity or compliance with stringent environmental measures (i.e., only moderate measures were involved), a forty-year license term, instead of a fifty-year term, was warranted.

Duke Energy petitioned FERC for rehearing of its license application.  Duke Energy argued that FERC failed to address all of the license measures and their costs, totaling $111 million in implementing re-licensing measures, in FERC’s determination of new license terms.  Duke Energy provided FERC precedent indicating that the Commission previously considered project costs when it granted other parties a fifty-year license.  As a result, Duke Energy claimed that the Project was similarly-situated and therefore warranted similar treatment.  The Commission denied rehearing, and Duke Energy sought an appeal in the D.C. Circuit.  On appeal, Duke Energy contended that FERC’s grant of a forty-year license, rather than a fifty-year license in light of precedent, was arbitrary and capricious.

The D.C. Circuit denied Duke Energy’s petition for review and instead deferred to the Commission’s “substantive agency expertise” in re-licensing hydroelectric projects.  The D.C. Circuit accepted FERC’s rationale that while the Commission has used cost as a part of its re-licensing analysis, FERC’s precedent does not treat cost as dispositive.  The D.C. Circuit agreed with the Commission that hydroelectric project licensing is fact intensive and that the Commission’s analysis of “moderate” versus “extensive” measures is the type of resolution that warrants agency deference by the court.  Finally, the D.C. Circuit responded to Duke Energy’s argument that FERC failed to explain why it had not relied on precedent by concluding that reliance on long-standing policies does not require an agency’s explanation.  As a result, the D.C. Circuit denied Duke Energy’s petition for review.

A copy of the D.C. Circuit’s decision is available here.