On March 19, 2020, FERC granted Pacific Gas and Electric Company’s (“PG&E”), licensee for the Kilarc-Cow Creek Hydroelectric, Project No. 606 (“Project”), request for a Declaratory Order finding that the California State Water Resources Control Board (“California Board”) waived its authority to issue a water quality certification under section 401 of the Clean Water Act.  FERC’s recent opinion continues its application of the D.C. Circuit’s opinion in Hoopa Valley Tribe (see December 11, 2019 edition of the WER), which held that section 401 provides one year as the absolute maximum for a state to act on a water quality certification application and rejected an extension of the statutory deadline via a coordinated withdrawal-and-resubmission scheme between an applicant and the state certifying agency.

The Federal Power Act is a comprehensive statute providing FERC exclusive authority over the hydroelectric licensing process; however, section 401 provides a time-limited role for states in an otherwise federal process to certify that a project meets state water quality standards and offer mandatory conditions to be included in the FERC issued license.  However, if the state “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request,” then certification is waived. To circumvent this one year period, for decades states and applicants coordinated to withdraw and resubmit water quality certification applications until the D.C. Circuit’s opinion in Hoopa Valley Tribe held this practice to be impermissible based on the plain language of the statute.

Since Hoopa Valley Tribe, FERC has consistently found waiver by the state when the one-year deadline has been extended by a withdrawal and resubmission scheme, and the PG&E Declaratory Order is the latest opportunity by FERC to apply the D.C. Circuit’s ruling.  PG&E submitted a surrender application for the Project when its license expired in 2007 and has been withdrawing and resubmitting water quality applications in coordination with the California Board since 2010.  As a result of Hoopa Valley Tribe, the California Board issued its water quality certification in 2019, which PG&E contested as void since the California Board had waived its authority in 2010.

In granting the Declaratory Order, FERC reiterated that a formal agreement to withdraw and resubmit a water quality certification between the applicant and the certifying agency is not required.  Following Placer County Water Agency and Southern California Edison Co., FERC reaffirmed that a coordinated scheme to extend the deadline could be inferred from the communications between the applicant and the certifying agency.  Further, following Southern California Edison Co., FERC concluded that the conditions of a late issued water quality certification by the California Board are no longer mandatory license conditions, and may be examined by FERC within its discretion.  Additionally, FERC rejected the California Board’s arguments that the extension of the one-year deadline was necessary due to limited state resources and that the Hoopa Valley Tribe decision should not be applied to projects that are the subject of ongoing proceedings.

Finally, the California Board claimed that the PG&E should have pursued its administrative and judicial options before the state and not FERC.  While applicants are usually required to pursue state remedies to appeal the issuance of a water quality certification, FERC also reaffirmed that such state remedies do not apply to a FERC waiver determination.  FERC concluded that the “issue of whether the California Board waived its certification authority is a federal question correctly before [FERC] in the first instance, and one that must be resolved by reference to federal law, not state procedure.”

The granted PG&E Declaratory Order is available here.