On December 20, 2022, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) in Waterkeepers Chesapeake, et al. v. FERC vacated a FERC order approving the relicensing of the Conowingo Dam because FERC did not have the authority to issue the license under section 401 of the Clean Water Act (“CWA”). Specifically, the court found that FERC may only issue a license if the state issues a water quality certification for the dam or waives its right to do so. Here, the court emphasized that when the Maryland Department of Environment (“Department”) rescinded its water quality certification for the project subject to a settlement agreement, the recission did not constitute a waiver, and thus FERC did not have the authority to issue the dam’s new license under the act.
Conowingo Dam is located near the Chesapeake Bay on the Susquehanna River in Maryland and is operated by Constellation Energy Generation, LLC (“Constellation”). In 2014, Constellation submitted a certification request to the Department to obtain its CWA certification for the project. The Department issued the certification in 2018, and “required Constellation to develop a plan to reduce the amount of nitrogen and phosphorous in the dam’s discharge, improve fish and eel passage, make changes to the dam’s flow regime, control trash and debris, provide for monitoring, and undertake other measures for aquatic resource and habitat protection.” Constellation challenged these conditions, arguing that the conditions were “unprecedented” and “extraordinary” and requested review of the Department’s certification with the Department, Maryland federal and state court, and FERC. During the pendency of these proceedings, the Department and Constellation arrived at settlement: The Department would conditionally waive all rights it had to issue a water quality certification for the project only if FERC incorporated certain proposed license articles, which were developed as part of the settlement, into the project’s license.
In 2021, FERC issued a license for the project that adopted the settlement’s proposed license articles, but not the Department’s original 2018 water quality certification conditions. In response to FERC’s issuance of the license, environmental groups including Waterkeepers Chesapeake, Lower Susquehanna Riverkeeper Association, ShoreRivers, and Chesapeake Bay Foundation, (collectively, “Waterkeepers”), filed a petition for rehearing, arguing that the Department had no authority to retroactively waive its 2018 certification, and that FERC exceeded its authority under the CWA by issuing a license that failed to incorporate the conditions of the 2018 certification. In that proceeding, FERC held that the settlement agreement “makes clear” that the Department intended to waive its section 401 authority and nullify its 2018 certification if FERC approved the settlement and incorporated its proposed terms into the final license. FERC explained that the CWA does not prevent a state from affirmatively waiving its authority to issue a water quality certification. Thereafter, Waterkeepers filed a petition for review of FERC’s order with the D.C. Circuit.
The D.C. Circuit found in favor of the Waterkeepers and vacated FERC’s new license for the Conowingo Project. The court explained that under section 401(a)(1) of the CWA, FERC may only issue a license to a hydroelectric project if the state where the project is located certifies that the project will comply with the state’s water quality standards or waives its authority to do so. The D.C. Circuit found that under section 401(a)(1), a state may only waive its section 401 authority by (1) failing or (2) refusing to act on a request for certification within a reasonable period of time. Here, the court explained, the Department did not waive its section 401 authority before FERC issued the new license, nor did it fail or refuse to act. To the contrary, the Department issued the 2018 certification. Further, the court emphasized that the Department’s “backtracking” in the settlement agreement did not constitute a failure or refusal to act and thus did not qualify as a section 401 waiver.
Regarding remedy, FERC requested that the court remand the case without vacating the order to avoid the “disruptive consequences” of vacating a dam license. The D.C. Circuit disagreed and determined that vacatur was appropriate, explaining that the license was seriously deficient given that FERC had no statutory authority to issue the license. The court reasoned that while the vacatur may disrupt the current license, such disruption could be avoided through the issuance of interim annual licenses. As such, the court remanded the case to FERC to determine whether (1) the 2018 certification is invalid, which would require Constellation to request a new certification, or (2) the 2018 certification is valid, which would require FERC to issue a license incorporating the conditions of the 2018 certification. The Court concluded that either result would be in line with the CWA’s major goal of making the states the “prime bulwark in the effort to abate water pollution.”
A copy of the opinion can be found here.