Environmental considerations in hydroelectric licensing: California v. FERC (Dynamo Pond).

I. Introduction

The Ninth Circuit's decision in California v. FERC (Dynamo Pond),(1) is representative of the continuing conflicts between the Federal Energy Regulatory Commission (FERC) and state and federal natural resource agencies within the hydroelectric licensing process.(2) Hydroelectric licensing has been, for all practical purposes, FERC's exclusive domain. However, environmental legislation enacted over the past three decades has attempted to alter the balance of power to insure that environmental concerns are addressed during the licensing process. The litigation surrounding Henwood Associates' application for a minor hydroelectric license at Dynamo Pond on Green Creek in Mono County California exemplifies the power struggles between FERC, acting under the Federal Power Act (FPA), and resource agencies, acting under independent statutory authority.

Section II of this Chapter briefly reviews the historical context of the power struggles in hydroelectric licensing. Section III describes Henwood's application for, and ensuing litigation over, a license for a proposed hydroelectric project at Dynamo Pond. Section IV addresses the consultation and negotiation procedures of section 10(j) of the FPA, and the conflict engendered between FERC, the California Department of Fish and Game (Cal Fish), and Henwood during the negotiations. Section V analyzes the California State Water Resources Control Board (Cal Water) challenge to FERC's application of new regulations under the waiver provision of section 401 of the Clean Water Act(3) in which Cal Water argued that FERC improperly applied its 1987 rule regarding CWA certification waivers. Section VI examines Henwood's challenge to FERC's sudden reversal of its longstanding policy rejecting Bureau of Land Management (BLM) authority under the Federal Land Policy Management Act (FLPMA)(4) to require rights of way for FERC-licensed projects. In a short-lived stroke of judicial activism, the Ninth Circuit reversed FERC, but was itself trumped by the 1992 Energy Policy amendments(5) which codified the BLM's right-of-way authority over BLM lands. Finally, Section VII concludes that congressional attempts to infuse the hydroelectric licensing process with environmental sensitivity have largely failed, and FERC, which has traditionally subordinated environmental concerns to power production, has retained almost complete control over hydroelectric licenses.

II. Background

The predecessor of the FPA, the Federal Water Power Act of 1920, consolidated the authority of three federal government agencies over hydroelectric licensing into a newly created Federal Power Commission (FPC).(6) One goal of the consolidation was to ensure that a "common policy" would facilitate a "national program of intelligent, economical utilization of [the nation's] power resources."(7) The consolidation of authority in the FPC has influenced court decisions in the resolution of power conflicts between states and FERC, and between federal agencies and FERC. For example, in First Iowa Hydroelectric Cooperative v. Federal Power Commission," the U.S. Supreme Court rejected the State of Iowa's challenge that the FPC must comply with state permit requirements prior to licensing a federal hydroelectric project.(9) Similarly, the Supreme Court rejected state authority to condition the instream flow rates of federal hydroelectric projects in California v. FERC (Rock Creek)."o

The first case to indicate that FERC must acknowledge the expertise of other federal agencies during the hydroelectric licensing process was Udall v. Federal Power Commission."(11) In Udall, the U.S. Supreme Court upheld the Secretary of Interior's argument that he be allowed to protect the Northwest anadromous fisheries.(12) The Court cited section 10(a) of the FPA, which requires that hydroelectric projects be "best adapted" to "developing a waterway . . . and . . . other beneficial public uses, including recreational purposes."(13) The Court held that the FPC must consider the alternative of not developing a project if it threatens to render extinct a recreational resource such as anadromous fish.(14)

Federal environmental legislation since the 1960s has enhanced the role of natural resource agencies in the hydroelectric licensing process. For example, prior to licensing a hydroelectric project, FERC must comply with the procedural requirements of the National Environmental Policy Act (NEPA),(15) the consultation requirements of the Fish and Wildlife Coordination Act (FWCA),(16) and water quality requirements under the Clean Water Act (CWA).(17) Moreover, the Electric Consumer Protection Act of 1986 (ECPA)"(18) requires FERC to consult with state and federal fish and wildlife agencies, and negotiate conflicts with those agencies' recommendations.(19) In October 1992, Congress enacted the Energy Policy Act, which amended FLPMA's definition of "public lands" clarifying the BLM's authority to require rights of way for hydroelectric projects on BLM lands.(20) The Energy Policy Act also altered FERC's definition of "fishway," expanding the authority of state and federal fish and wildlife agencies to prescribe conditions for fish passage.(21)

III. The Dynamo Pond Project

Henwood Associates contemplated constructing a small hydroelectric project on Green Creek in Mono County, California. The project and corresponding facilities would occupy 8.4 acres of BLM land.(22) The Dynamo Pond Project was designed to operate in a run-of-the-river mode(23) and to help offset the California-Southern Nevada region's projected need for power.(24) In December 1985, Henwood requested that Cal Water certify, under section 401 of the Clean Water Act,(25) that the project would not impair the creek's water quality.(26) Henwood also consulted with state and federal resource agencies in compliance with section 10(j) of the FPA.(27) Before receiving the section 401 certification, Henwood filed a license application with FERC under subchapter I of the FPA.(28)

In December 1987, FERC issued Henwood's license and published an environmental assessment (EA) on the project, concluding that its construction and operation would produce no significant environmental impacts.(29) The EA stated that Cal Water had waived section 401 certification because more than a year had passed since Henwood's initial request for certification.(30) The EA detailed conflicting instream flow recommendations for the by-pass reach; Cal Fish recommended that nine to fifteen cubic feet per second (cfs) of water be diverted around the dam to protect fish passage while Henwood suggested that five cfs would be sufficient. FERC found that Henwood's recommendation was sufficient to mitigate the adverse impact the development would have on Green Creek's water and fishery resource.(31)

Cal Fish appealed the issuance of the license, but FERC issued an administrative order denying the appeal because the agency was not a party or an intervenor in the original license proceedings. FERC also rejected Cal Water's appeal of the waiver of water quality certification.(32)

Pursuant to the terms of license, Henwood requested the BLM's comments on a draft erosion and sedimentation plan. In addition to commenting on the plan, the BLM informed Henwood that, under FLPMA,(33) Henwood must obtain a right-of-way before construction could occur on BLM administered lands.(34) Henwood filed a motion asking FERC to declare that the BLM had no authority to require a right-of-way. In response to Henwood's motion, FERC declared that the BLM did not have the authority to require Henwood to secure a right of way.(35) FERC also rejected the BLM's assertion that it could condition the minimum instream flows in the bypass reach.(36)

In May 1989, FERC denied BLM's request for rescission of FERC's earlier finding on the right-of-way issue.(37) However, as a result of an intervening FERC order(38) which permitted fish and wildlife agencies to have limited interventions in licensing appeals, FERC granted Cal Fish party status and reopened negotiations regarding the minimum instream flows in the bypass reach under section 10(j) of the FPA. Henwood appealed this decision, and in February 1990, FEPC rejected Henwood's appeal and established a new minimum stream flow in the bypass reach of seven cfs.(39) In the same order, FERC abruptly reversed its earlier decision and held that the BLM had the authority to require rights-of-way across BLM land, but again denied Cal Water's request for rehearing.(40)

In a final and unsuccessful appeal before FERC, Cal Fish argued that seven cfs was not adequate to protect Green Creek's fishery resource.(41) Cal Fish, Cal Water, and Henwood each appealed FERC's holdings to the Ninth Circuit.

IV. Section 10(j) of the Federal Power Act

Section 106) requires that every hydroelectric license issued by FERC include measures to "adequately and equitably protect, mitigate damages to, and enhance, fish and wildlife (including related spawning grounds and habitat) affected by the development, operation, and management" of hydroelectric projects.(42) Section 10(j) further requires consultation with state and federal fish and wildlife agencies during the license application process.(43) If FERC finds that fish and wildlife agency recommendations made during the section 100)(1) consultation process are inconsistent with the FPA or other law, section 100)(2) triggers negotiations between FERC and that agency.(44) Section 10(j)(2) requires that FERC attempt to resolve any such inconsistency prior to issuing a hydroelectric license.(45)

As noted above, two separate challenges to FERC's decision arose under section 106) of the FPA. First, Henwood challenged FERC's reopening of section 10(j) alleging that Cal Fish did not have party status and that it was inappropriate for FERC to stay Henwood's license pending negotiations with Cal Fish.(46) Second, Cal Fish challenged FERC's rejection of the agency's minimum stream flow recommendations, claiming that FERC failed to give fish and wildlife protection equal consideration with power production as required under section 10(j).(47) FERC's decision to allow Cal Fish to intervene and to reopen section 10(j)(2) negotiations with the agency exemplifies a new recognition of the process prescribed by section 10(j).(48) However, FERC's rejection of Cal Fish's stream flow recommendations, and the Ninth Circuit's affirmance of FERC stream flow conditions, demonstrates the limits of section 10(j)'s substantive impact.

A. FERC's Interpretation of Section 10(j)

The combined effect of three factors convinced FERC to reopen negotiations with Cal Fish. First, in 1989, FERC issued a policy statement which allowed nonparty fish and wildlife agencies to appeal a license within thirty days if FERC rejected or materially altered recommendations submitted by the agency during section 10(j) consultations.(49) Second, FERC found that the initial section 10(j)(2) negotiations with Cal Fish had been conducted improperly because FERC had not given the agency notice of its finding that the recommendations would render the project infeasible, and because FERC found that had the conflict might have been resolved if such notice had been given.(50) Finally, FERC noted that its staff had improperly triggered the section 10(j)(2) negotiations because its staff had relied on a determination that Cal Fish's recommendations were inconsistent with FERC's recommendations, while the statute requires section 10(j)(2) negotiations only when an agency's recommendations are inconsistent with the FPA or other applicable law.(51) FERC held that these procedural errors forced the reopening of section 10(j)(2) negotiations.(52)

After the second round of section 10(j) negotiations, FERC raised the required instream flow from five to seven cfs. FERC rejected the agency's recommendations of nine to fifteen cfs, arguing that such flows would reduce the project's annual generation of power and its internal rate of return, "making it unlikely that the applicant could attract investors and proceed with the development of the project."(53) FERC noted that "a Commission finding that adoption of a fish and wildlife recommendation would block development of a project must be accompanied by a finding that this result would be contrary to applicable statutory policies."(54) Because of a generalized need for power in the California-Southern Nevada region, FERC characteristically subordinated fish and wildlife concerns to what FERC perceives as its primary mandate - developing hydroplectric projects - and found that not developing the project would be contrary to the policies of section 10(a).(55) FERC rationalized that the agency's conditions would improperly favor the fishery resource of Green Creek over the recreational resources of Dynamo Pond.(56)

B. Ninth Circuit's Findings Regarding Section 10(j)

The Ninth Circuit upheld FERC's reopening of the 10(j) negotiations, stating, that as a "general rule, we show great deference to an administrative agency's interpretation of the law which it is charged with administering."(57) The Ninth Circuit next reviewed FERC's decision to reject Cal Fish's instream flow recommendations."(58) The court did not object to profitability as a gauge for FERC's consideration of fish and wildlife agency recommendations(59) and held that FERC "properly weighed the evidence and balanced the beneficial public purposes specified in sections 4(e) and 10 of the FPA."(60) The court found that section 10 of the FPA grants FERC broad authority to weigh the "salient" factors and to impose conditions on hydroelectric projects.(61)

In dicta, the court attempted to define and limit section 4(e)'s requirement that power development and fish, wildlife, and other issues be given "equal consideration" when license conditions are set. The court noted that, as originally proposed, section 4(e) mandated that power and environmental considerations be given "equal treatment."(62) The legislative history of section 4(e) contains references to the Pacific Northwest Electric Power Planning and Conservation Act wherein the concept of equal treatment sought to "ensure that non-power values are, to the greatest extent possible, as healthy and as abundant after licensing and development as before."63 Despite legislative history indicating that "equal consideration" in section 4(e) was intended to impose substantive requirements, the Ninth Circuit seized this opportunity to limit the section 4(e) mandate to a procedural nicety.(64)

The Ninth Circuit also rejected Cal Fish's assertion that FERC's stream flow conditions were not based on substantial evidence and would not support the fishery resource.(65) The court was satisfied with the validity of FERC's stream flow methodology and found that Cal Fish had not demonstrated that FERC's conclusion was not based on substantial evidence.(66)

Thus, despite the apparent procedural "generosity" which FERC now affords fish and wildlife agencies under section 10(j), there is no indication that agency recommendations win be given the substantive impact that legislative history surrounding the enactment of 10(j) seemed to anticipate.(67) The Ninth Circuit not only affirmed FERC's traditionally restrictive interpretation of section 10(j), but went to great lengths to ensure that section 10(j) did not afford fish and wildlife agencies additional power over the hydroelectric licensing.(68)

V. Water Quality Certification under The Clean Water

Act

Section 401 of the Clean Water Act (CWA) affords state water resource agencies the power to deny FERC licenses where the state agency finds that "the construction or operation of facilities" may result in "any discharge into the navigable.waters" of the state.(69) State water quality certification, in effect, preen2pts the federal hydroelectric licensing process.(70) Furthermore, effluent limitations set by the state regulatory agency in accordance with the CWA and "any other appropriate requirement of state law" become conditions of the hydroelectric license.(71) The imposition of state water quality standards on the federal hydroelectric application process is viewed by proponents of hydro development as one of the chief obstacles to realizing the nation's "hydroelectric capacity."(72) Such concerns are unfounded, however, in light of the limitations which have been placed on water quality certification under section 401.

Although the certification requirement does afford states substantive impact on federal hydroelectric licenses regarding water quality issues, the scope of the impact has been limited. For example, in California v. FERC (Rock Creek), the U.S. Supreme Court held that the state water resources agency could not impose minimum stream flow requirements which conflicted with FERC stream flow conditions.(73) In National Wildlife Federation v. FERC, the D.C. Circuit held that section 401 only requires FERC to obtain water quality certification from the state in which the discharge originates, not from states affected upstream or downstream.(74)

The limitation at issue in the Henwood case was FERC Order No. 464, which waives state water quality certification when an agency fails to grant or deny water quality certification within one year of an applicant's request for certification.(75) Cal Water denied Henwood's water quality certification on April 30, 1987, more than a year after the application was received. FERC rejected Cal Water's attempt to avoid application of the waiver provision.(76) Cal Water appealed to the Ninth Circuit and issued a post waiver certification which included stream flow conditions. FERC and the Ninth Circuit denied Cal Water's appeals.(77)

A. FERC's Interpretation of the CWA Waiver Provisions

In the administrative proceedings before FERC, Cal Water raised several objections to the application of Order No. 464. First, Cal Water argued that FERC misinterpreted the order's language when FERC deemed Cal Water's certification waived because Cal Water's April 30, 1987 rejection of Henwood's water quality certification occurred prior to the effective date of the order. FERC rejected Cal Water's interpretation, stating that Order No. 464 was intended to be retroactive as to projects for which one year had passed prior to the February 11, 1987, when it was issued.(78) Cal Water also argued that application of the order as of the date of its publication was improper because there was no notice and comment, and also because it violated section 553(d) of the Administrative Procedure Act(79) (APA) regarding publication of service. FERC rejected these arguments, finding that its original notice of rulemaking in 1985 was adequate notice of the retroactive effect, and that Order No. 464 was an interpretive rule and thus excepted from the requirements of section 553(d) of the APA.(80)

B. Ninth Circuit Review of the CWA Waiver

The Ninth Circuit upheld FERC's finding that Cal Water's "substantive challenges to the rule [did] not demonstrate that FERC had acted arbitrarily and capriciously in denying Cal Water's request for rehearing."(81) The court found that FERC's interpretation of the new waiver rule was reasonable and noted that Cal Water had failed to make recommendations when offered the opportunity, thus undercutting its claim that application of Order No. 464 as of February 11, 1987 was unjust.(82)

Cal Water's failure to take advantage of the thirty day comment period offered by FERC and the agency's struggle to evade application of Order No. 464 were critical, but understandable, mistakes in light of the order's dramatic impact. The order waived water quality certification for some 227 projects nationwide including Henwood's.(83) However, the court expressed no hesitation at accepting the validity of the waiver provision despite its traumatic effect on state water quality control agency section 401 authority.

VI. FLPMA Right-of-Way Authority and the Federal

Power Act

Subchapter 5 of FLPMA invests in the BLM the power to require rights of way for activities which traverse public lands, including "[s]ystems of generation, transmission, and distribution of electric energy" which cross public land.(84) Despite the statute's plain wording, FERC originally disputed whether the BLM had the authority to require rights of way from hydroelectric projects.(85)

At the heart of the right-of-way issue in the Henwood case was another power struggle, this time resulting from the application of independent federal statutory schemes. Hanging in the balance was the BLM's authority to require Henwood to obtain a right of way for its project at Dynamo Pond. Although FERC ultimately recognized BLM authority to require rights of way when hydroelectric projects involve BLM-administered lands, FERC left the question to the courts whether the denial of a FLPMA right-of-way gave the BLM a de facto veto over FERC projects.(86) The Ninth Circuit, reversed FERC'sfinding that BLM could require rights of way from hydroelectric licensees.(87) However, the Energy Policy Act of 1992 amended FLPMA's right-of-way provisions, overruling the reasoning of the Ninth Circuit.(88)

A. FERC's Interpretation of FLPMA's Right-of-Way

Authority

At the time the Henwood application was before FERC and the Ninth Circuit, section 501(a) of FLPMA authorized the Bureau of Land Management

to grant, issue, or renew rights-of-way over, upon, or through [public lands] for . . . systems for generation, transmission, and distribution of electric energy, except that the applicant shall also comply with all applicable requirements of the Federal Power Commission under the Federal Power Act of 1935 (49 Stat. 847; 16 U.S.C. 791).(89)

In early 1988, the BLM notified Henwood that development of the Dynamo Pond project could not begin without a FLPMA section 501 right-of-way.(90) The BLM also asserted that it could stipulate instream flows for fishery purposes.(91) In May 1988, Henwood sought an order from FERC declaring that BLM did not have the authority to require Henwood to obtain a right-of-way from the BLM.(92)

In its July 1988 order, FERC set forth several grounds to justify its initial resistance to BLM right-of-way authority over FERC-licensed projects on BLM lands.(93) FERC's broadest attack on the BLM's interpretation of its FLPMA right-of-way authority was based on FERC's perception of the congressional purpose in enacting the FPA.(94) Under Part I of the FPA, FERC stated "|the Commission is plainly made the guardian of the public domain' . . . and the authorization of hydroelectric projects using public lands of the United States |is within the exclusive jurisdiction of' the Commission."(95) In FERC's opinion, it would have been unreasonable to assume that Congress, in enacting FLPMA, "intended, sub silentio, to repeal [FERC's] exclusive jurisdiction over non-federal hydroelectric projects on federal lands and to reestablish the very duplicative regulatory scheme it eliminated with the enactment of the Federal Water Power Act in 1920."(96)

FERC claimed that it had the exclusive responsibility "to evaluate and balance all aspects of the public interest, including those related to fishery resources and the use of lands by a proposed project, to determine if licensing of a project would be consistent with the comprehensive development of the associated waterway."(97) FERC found support for its rejection of the extension of BLM's right-of-way authority in section 701 of FLPMA, which provides that "nothing in [FLPMA] shall be deemed to repeal any existing law by implication,"(98) and further states that nothing in FLPMA shall be construed "as superseding, modifying, or repealing, except as specifically set forth in this Act, existing laws applicable to the various Federal agencies which are authorized to develop or participate in the development of water resources, or to exercise licensing or regulatory functions in relation thereto."(99) FERC evidently reasoned that these savings provisions in FLPMA undermined the BLM's attempt to apply FLPMA's definition of public lands in the context of an FPA hydroelectric licensing process.

Finally, despite the clear language of section 501 of FLPMA regarding BLM's authority to issue rights of way over lands for "systems for generation, transmission, and distribution of electric energy,"(100) FERC argued that the section gave the BLM authority over only "the sale and transmission of energy vested in the Commission by Part II of the FPA."(101) In other words, BLM's right-of-way authority over systems of generation and transmission facilities was limited to nonhydroelectric projects.(102)

Upon the BLM's second appeal, FERC dramatically reversed its earlier holdings,(103) accepting that the plain meaning of "systems of electric generation" under section 501(a)(4) encompassed hydroelectric generation,(104) and holding that BLM lands were public lands despite the provisions of section 24 of the FPA. Thus, "non-federal hydro-power developers wishing to operate on BLM . . . lands [were] required by section 501(a)(4) to obtain both FLPMA right-of-way permits and Federal Power Act licenses."(105) Furthermore, FERC found that narrowly construing the savings provisions of section 701 of FLPMA was inconsistent with the BLM's explicit authority in section 501 to issue rights of way for systems of electric generation.(106) FERC reiterated these points when Henwood appealed FERC's new position favoring BLM's right-of-way authority.(107) FERC, citing express exemptions within FLPMA from application of the right-of-way provisions, added that "if Congress intended that FLPMA not apply to FPA hydroelectric projects, it would have explicitly exempted them from FLPMA."(108)

B. Ninth Circuit Analysis of FLPMA Right-of-Way Authority

Despite FERC's reinterpretation of the overlap of FLPMA right-of-way authority and the FPA, the Ninth Circuit revived the theory that because the FPA consolidated hydroelectric licensing power in FERC, it was unreasonable to assume that Congress intended FLPMA to afford the BLM duplicative authority over hydroelectric licenses.(109) Rather than deferring to FERC's reinterpretation of FLPMA right-of-way policy, as it had with regard to FERC's interpretation of the fish and wildlife consultation procedures, the court reviewed in depth FERC's acceptance of BLM's FLPMA right-of-way authority.(110)

In concluding that BLM's right-of-way authority did not extend to hydroelectric projects on BLM-administered lands, the court relied on its interpretation of the term "public lands."(111) The court upheld its earlier definition of public lands from Columbia Basin Land Protection Association v Schlesinger.(112) Columbia Basin involved the authority of the BLM to issue a right-of-way for land-based transmission lines across private lands in which the federal government retained mineral rights. The owners of the land claimed that because the BLM administered the mineral rights on their lands, their lands were public lands under section 103(e) of FLPMA and subject to the right-of-way provisions in section 501 of FLPMA.(113) The Columbia Basin court rejected this position, and found that public lands "means lands which are subject |to sale or other disposal under general laws.'"(114)

Analogizing to Columbia Basin, the Ninth Circuit in Dynamo Pond rejected the application of FLPMA's definition of public lands to BLM administered lands subject to a hydroelectric application.(115) The 8.4 acres of land surrounding Dynamo Pond are public lands under FLPMA because they are "owned by the United States within the several States and administered by the Secretary of Interior through the Bureau of Land Management, without regard to how the United States acquired ownership."(116) However, the court relied on Columbia Basin's definition of public lands, which includes only those subject to sale or disposal under federal law. The Ninth Circuit cited section 24 of the FPA,(117) which states that upon application to FERC, the lands subject to the application are "reserved from entry, location or other disposal" and are therefore reservation lands, not public lands.(118) Consequently, the court reasoned, FLPMA right-of-way authority does not exist within the boundaries of FERC projects because that land is reserved from entry and not subject to sale or disposal.(119)

The Ninth Circuit also found that the specific reference to Part II of the FPA in section 501(a)(4) limited the scope of section 501(a)(4) to activities encompassed by Part II of the FPA.(120) The court reasoned:

Given the history of how the specific reference to Part II of the Federal Power Act came to be included in Section 501(a)(4), it is apparent that the reference to Part II was not accidental. If the reference had remained limited to 16 U.S.C. [section] 791, . . . the subsection would have referred specifically to the entirety of FPA, which commences at Section 791a. The statutory citation of Part II of the Federal Power Act, instead of the Act generally, or of Part I, makes it clear that licensing activities of the Federal Energy Regulatory Commission under Part I of the Federal Power Act were not to be affected by the reference in Section 501(a)(4) of FLPMA.(121)

The effort expended by the court to justify its reversal of FERC's reinterpretation of FLPMA right-of-way authority is notable because it indicates that the court is antagonistic to tipping the balance of power in the hydroelectric licensing arena.

C. 1992 Energy Policy Act Amendments to FLPMA Section

501

In October 1992, Congress amended FLPMA section 501(a)(4) by enacting the Energy Policy Act of 1992, clarifying that the BLM has authority to issue rights of way to FERC licensees when their projects involve BLM lands.(122) The amendments insert qualifying language in section 501(a) so that the term public lands includes "public lands, as defined in section 103(e) of this Act, which are reserved from entry pursuant to section 24 of the Federal Power Act (16 U.S.C. 818)."(123)

Congress, in removing the ambiguity regarding the definition of public lands subject to the BLM's right-of-way authority, implicitly overruled the Ninth Circuit's reasoning in the Henwood case. Lands reserved from entry under section 24 of the FPA are not automatically removed from the jurisdiction of the BLM. Congress also amended section 501(a)(4) to encompass "systems for generation, transmission, and distribution of electric energy" under both Parts I and II of the FPA,(124) resolving the ambiguity upon which the Ninth Circuit based its assertion that section 501(a)(4) only applied to part II of the FPA. Although the Ninth Circuit's reasoning on the FLPMA right-of-way issue is reversed by the 1992 Energy Policy Act, Congress did not alter the legal results of the case.

Congress weakened BLM land managers' newly affirmed power over hydroelectric projects traversing BLM lands with the addition of a grandfathering provision. The Energy Policy Act of 1992 adds a new subsection to FLPMA section 501, which reads:

With respect to any project or portion thereof that was licensed pursuant to, or granted an exemption from, part I of the Federal Power Act which is located on lands subject to a reservation under section 24 of the Federal Power Act and which did not receive a permit, right-of-way or other approval under this section prior to enactment of this subsection, no permit, right-of-way, or other approval shall be required for continued operation, including continued operation pursuant to section 15 of the Federal Power Act, of such project unless the Commission determines that such project involves the use of any additional public lands or National Forest lands not subject to such reservation.(125)

As a result of this provision, BLM's right-of-way authority apparently only extends to new hydroelectric licenses, and not to the hundreds of relicensings pending in the coming decades.(126) Relicensing should subject existing licenses to the same level of review as occurs in initial licensing.(127) However, the grandfather clause eliminates the value of the BLM's right-of-way authority with respect to relicensing, unless "the Commission determines that [a] project involves the use of any additional public lands."(128)

Furthermore, the grandfather clause is incongruous with section 4(e) of the FPA,(129) which affords federal reservation managers the authority to condition hydroelectric licenses even if FERC objects to the conditions.(130) There is no clear reason why federal reservation managers should have greater authority over hydroelectric licenses than FLPMA land managers. One possible, but unarticulated, reason for the grandfather clause might be that Congress felt a hydroelectric license represents some sort of property right. However, hydroelectric licenses are by their nature impermanent; all licenses are subject to relicensing and may ultimately be denied.(131)

VII. Conclusion

Henwood will have its Dynamo Pond project despite the strong objections of three state and federal resource agencies. Each agency objected pursuant to independent statutes enacted by Congress in response to growing concern for the impact of hydroelectric development on the nation's rivers. Despite the attempted integration of the Fish and Wildlife Coordination Act, the Clean Water Act and the Federal Lands Policy and Management Act in hydroelectric licensing, only minor substantive in roads have been made into FERC's control.

The lessons learned from the Henwood case and the 1992 Energy Policy Act are disheartening. Section 10(j) guarantees that fish and wildlife agencies will be consulted, but the outcome in Henwood demonstrates the section's substantive impotence. Further, the preemptive power afforded by CWA water quality certification requires diligent and timely attention from state water quality agencies in light of the new waiver provisions. Finally, the grandfather clause awkwardly appended to the 1992 Energy Policy Act's clarification of FLPMA right-of-way authority indicates congressional reluctance to place substantive environmental checks on FERC's authority over hydroelectric relicensing. Consequently, the Henwood case and the provisions of the 1992 Energy Policy Act do not bode well for the nation's already beleaguered rivers. (1.) California v. FERC, 966 F.2d 1541 (9th Cir. 1992) (Dynamo Pond). (2.) Federal Power Act, 16 U.S.C. [sub-section] 791a-828c (1988 & Supp. 1993). (3.) 33 U.S.C. [section] 1341 (1988 & Supp. 1992). (4.) 43 U.S.C. [sub-section] 1701-1784 (1988 & Supp. 1992). (5.) Energy Policy Act of 1992, Pub. L. No. 102-486, [section] 2401, 106 Stat. 2776, 3096. (6.) Federal Water Power Act of 1920, Pub. L. No. 66-280, 41 Stat. 1063. (7.) H. Rep. No. 61, 66th Cong., 1st Sess. 5 (1919). (8.) 328 U.S. 152, 164 (1946). (9.) "To require the petitioner to secure the actual grant to it of a state permit . . .as a condition precedent to securing a federal license for the same project under the Federal Power Act would vest in the Executive Council of Iowa a veto power over the federal project. Sucb a veto power easily could destroy the effectiveness of the Federal Act." Id. at 164. (10.) 495 U.S. 490 (1990). (11.) 387 U.S. 428 (1967). (12.) Id. at 436. (13.) 16 U.S.C. [section] 803(a) (1964). (14.) Udall, 387 U.S. at 444. (15.) 42 U.S.C. [sub-section] 4321-4370a (1988 & Supp. 1992) (FERC must consider and disclose the environmental impact of issuing a license.). (16.) 16 U.S.C. [sub-section] 661-666c (1988) (FERC must consult with fish and wildlife agencies prior to issuing a license and respond to those agencies' concerns.). (17.) 33 U.S.C. [sub-section] 1341-1345. (1988 & Supp. 1992) (FERC licenses must comply with state water quality standards.). (18.) Pub. L. No. 99-495, 100 Stat. 1243 (1986) (codified at 16 U.S.C [section] 803). (19.) 16 U.S.C. [section] 803(j) (1988 & Supp. 1993). (20.) Pub. L. No. 102-486, [section] 1761, 106 Stat. 2776 (1992). (21.) Id. [section] 1701(b). (22.) Henwood Assocs., 41 F.E.R.C. [paragraph] 62,284, 63,605 (Dec. 23, 1987). (23.) Run-of-the-river dams are designed to use the river flow for power generation but are incapable of storage and release of water. (24.) Henwood Assocs., 41 F.E.R.C. at 63,606. (25.) 33 U.S.C. [section] 1341 (1982). (26.) Henwood Assocs., 42 F.E.R.C. [paragraph] 61,187, 61,663 (Feb. 17, 1988). (27.) 16 U.S.C. [section] 803(j) (1988 & Supp. IV 1986). (28.) California v. FERC (Dynamo Pond), 966 F.2d 1541, 1545 (9th Cir. 1992). (29.) Henwood Assocs., 41 F.E.R.C. [paragraph] 62,284 (Dec. 23, 1987). (30.) Id. at 63,607. (31.) 41 F.E.R.C. at 63,608. (32.) Henwood Assocs., 42 F.E.R.C. [paragraph] 61,187. (33.) 43 U.S.C. [sub-section] 1701-1784 (1982 & Supp. IV 1986). (34.) 44 F.E.R.C. [paragraph] 61,076 at 61,212 (1988). (35.) Id. at 61,214. (36.) Id. (37.) Henwood Assocs., 47 F.E.R.C. [paragraph] 61,174 (May 2, 1989). (38.) Order No. 511, 46 F.E.R.C. [paragraph] 61,161 (Feb. 17, 1989). (39.) Henwood Assocs., 50 F.E.R.C. [paragraph] 61,183 (Feb. 15, 1990). (40.) Id. This reversal most likely reflected the influence of a newly appointed member of the Commission. Telephone interview with David Conrad, National Wildlife Federation (Jan. 10, 1993). (41.) Henwood Assocs., 51 F.E.R.C. 9 61,196 (May 21, 1990). (42.) 16 U.S.C. [section] 8030) (1988). (43.) Id. (44.) Id. [section] 803(j)(2). (45.) Id. (46.) California v. FERC (Dynamo Pond), 966 F.2d 1541, 1547 (9th Cir. 1992). (47.) Id. at 1549. (48.) See 47 F.E.R.C. [paragraph] 61,174. See also Regulations Governing Submittal of Proposed Hydropower License Conditions and Other Matters, 55 Fed. Reg. 9894, 9898 (1990) (codified at 18 C.F.R. [sub-section] 4, 16, 375, 380). (49.) 46 F.E.R.C. [paragraph] 61,161 (Feb. 17, 1989). (50.) 47 F.E.R.C. [paragraph] 61,174, at 61,591. (51.) Id. (52.) Id. at 61,593. (53.) 50 F.E.R.C. [paragraph] 61,183, at 61,565-66. (54.) Id. at 61,551 n.35. (55.) Section 10(a) of the FPA provides, in pertinent part: [t]he project adopted . . . shall be such as in the judgment of the Commission will be best adapted to a comprehensive plan for improving or developing a waterway or waterways for the use or benefit of interstate or foreign commerce, for the improvement and utilization of water-power development, for the adequate protection, mitigation, and enhancement of fish and wildlife (including related spawning grounds and habitat), and for other beneficial public uses. 16 U.S.C. [section] 803(a) (1988). (56.) 41 F.E.R.C. [paragraph] 62,284, at 63,598. (57.) California v. FERC (Dynamo Pond), 966 F.2d 1541, 1547 (9th Cir. 1990). (58.) Id. at 1549. (59.) Id. (60.) Id. at 1549-50. (61.) Id. at 1550. See supra note 12 and accompanying text. (62.) Dynamo Pond, 966 F.2d 1541, 1550 (9th Cir. 1992). (63.) H.R. Rep. No. 507, 99th Cong., 2d Sess. 30 (1986), reprinted in 1986 U.S.C.C.A.N. 2496, 2517. Under the Northwest Power Planning and Conservation Act (PNPA), 16 U.S.C. [sub-section] 839-839h (1988), "equal treatment" imposes substantive as well as procedural requirements. (One purpose of the PNPA is to place fish and wildlife concerns on an equal footing with power production . . . In this respect, the PNPA supplements the Federal Power Act . . . We have no doubt that if FERC failed its Federal Power Act obligation to consider fishery issues prior to licensing, it concomitantly failed to meet its obligation to give fish "equal consideration" under the [Fish and Wildlife Conservation Act] and "equitable treatment" under the PNPA. Confederated Tribes and Bands of the Yakima Indian Nation v. FERC, 746 F.2d 466, 473-74 (9th Cir. 1984). (64.) The House Conference Report stated "equal consideration must be viewed as a standard, both procedural and substantive, that cannot be satisfied by mere consultation or by deferring consideration and imposition of environmental conditions until after licensing." H.R. CONF. REP. No. 934, 99th Cong., 2d Sess. 22 (1986), reprinted in 186 U.S.C.C.A.N. 2537, 2538. (65.) Dynamo Pond, 966 F.2d 1541, 1551 (9th Cir. 1992). (66.) Id. (67.) H.R. REP. No. 507, supra note 63. (68.) See generally Lydia Grimm, Fishery Protection and FERC Hydropower Relicensing under ECPA: Maintaining the Deadly Status Quo, 20 Envtl. L. 929 (1990). (69.) 33 U.S.C. [section] 1341(a)(1) (1988). (70.) See, e.g., M. Curtis Whittaker, The Federal Power Act and Hydropower Development: Rediscovering State Regulatory Powers and Responsibilities, 10 Harv. Envtl. L. Rev. 135 (1986). (71.) 33 U.S.C. [section] 1341(d) (1988). (72.) James E. Norris, Hydro Update: Obstacles to Capacity Development, 127 Fort. 11, 35 (1991). (73.) 495 U.S. 490 (1990). (74.) 912 F.2d 1471 (D.C. Cir. 1990). (75.) Waiver of the Water Quality Certification Requirements of Section 401(a)(1) of the Clean Water Act, 52 Fed. Reg. 5446, 5449, [section] 4.38(e)(2) (1987) (codified as amended at 18 C.F.R. [section] 4.38(e)(7)(ii) (1992) [hereinafter Order No. 464]. (76.) Henwood Assocs., 42 F.E.R.C. [paragraph] 61,187, at 61,663. (77.) 50 F.E.R.C. [paragraph] 61,183, at 61,557; Dynamo Pond, 966 F.2d 1541, 1533 (9th Cir. 1992). (78.) 50 F.E.R.C. [paragraph] 61,183, at 61,558. (79.) 5 U.S.C. [sub-section] 551-706 (1988 & Supp. I 1989). (80.) 50 F.E.R.C. [paragraph] 61,183, at 61,557. (81.) Dynamo Pond, 966 F.2d 1541, 1553 (9th Cir. 1992). (82.) Id. at 1554. (83.) Robert E. Beck, 4 Water and Water Rights 363 n.257 (1991). (84.) 43 U.S.C. [section] 1761(a)(4) (1988). (85.) 44 F.E.R.C. [paragraph] 61,076, at 61,214. (86.) 50 F.E.R.C. [paragraph] 61,183, at 61,556. (87.) Dynamo Pond, 966 F.2d 1541, 1561 (9th Cir. 1992). (88.) Energy Policy Act of 1992, Pub. L. No. 102-486, [section] 2401, 106 Stat. 2776, 3096. (89.) 43 U.S.C. [section] 1761(a)(4) (1982). (90.) Henwood Assocs., 44 F.E.R.C. [paragraph] 61,076, at 61,212. (91.) Id. (92.) Id. (93.) Id. (94.) Id. [paragraph] 61,076, at 61,213. (95.) Henwood Assocs., 44 F.E.R.C. [paragraph] 61,076, at 61,213 (quoting Federal Power Comm'n v. Idaho Power Co., 344 U.S. 17, 23 (1952) and Federal Power Comm'n v. Oregon, 349 U.S. 435, 446 (1955)). (96.) Id. (97.) Id. (This order was issued prior to FERC's acceptance and articulation of the procedures dictated by [section] 10(j), wherein state and federal resource agencies are provided an opportunity to meaningfully participate in the licensing process). (98.) Federal Land Policy and Management Act of 1976, Pub. L. No. 94-579, [section] 701(f), 90 Stat. 2743 (1976) (codified as amended at 43 U.S.C. [section] 1701(f) (1988)). (99.) 43 U.S.C. [section] 1761(a)(4) (1988). (100.) 43 U.S.C. [section] 1761(a)(4) (1988). (101.) 44 F.E.R.C. [paragraph] 61,076, at 61,214. (102.) Id. (103.) 50 F.E.R.C. [paragraph] 61,183. See supra note 40. (104.) Id. at 61,553. (105.) Id. (106.) Id. at 61,554. (107.) 51 F.E.R.C. [paragraph] 61,196, at 61,553. (108.) Id. (109.) Dynamo Pond, 966 F.2d 1541, 1556-57 (9th Cir. 1992) (citing Escondido Mut. Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, reh'g denied, 467 U.S. 1267 (1984)). (110.) Id. at 1554-61. (111.) Id. at 1557. (112.) 643 F.2d 585 (9th Cir. 1981). (113.) Id. at 601. (114.) Id. at 602 (quoting Newhall v. Sanger, 92 U.S. 761 (1876)). (115.) Dynamo Pond, 966 F.2d 1541, 1557 (9th Cir. 1992). (116.) 43 U.S.C. [section] 1702(e) (1988). (117.) 16 U.S.C. [section] 818 (1988). (118.) Dynamo Pond, 966 F.2d 1541, 1557 (9th Cir. 1992). (119.) Id. (120.) "Part II of the Federal Power Act of 1935 had relation solely to extension of Commission jurisdiction over activities of public utilities engaged in interstate transmission of electric energy, whether or not such energy was generated from hydropower sources." Id. at 1559. (121.) Id. (122.) See supra note 82. See also H.R. Rep. 1018, 102d Cong., 2d Sess. 335 (1992). (123.) Energy Policy Act of 1992, Pub. L. No. 102-486, [section] 2401, 106 Stat. 2776, 3096 (to be codified at 43 U.S.C. [section] 1761(a)). (124.) Id. (125.) Id. at 3096-97 (to be codified at 43 U.S.C. [section] 1761(d)). (126.) See Grimm, supra note 68. (127.) Confederated Tribes and Bands of the Yakima Indian Nation v. FERC, 746 F.2d 466 (9th Cir. 1984). (128.) Energy Policy Act of 1992, Pub. L. No. 102-486, [section] 2401, 106 Stat. 2776, 3097 (to be codified at 43 U.S.C. [section] 1761(d)). (129.) 16 U.S.C.A. [section] 797(e) (Supp. 1993). (130.) Escondido Mut. Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, 772-75 (1984). (131.) 16 U.S.C.A. [section] 808 (Supp. 1993).